Have companies lost their legal right to defend their reputations?

Without much fanfare, a new Defamation Act last year introduced what could be a significant obstacle for any business wishing to rely on its legal rights to defend and protect its reputation.

What does the court mean by "serious financial loss", asks David Engel
What does the court mean by "serious financial loss", asks David Engel
A libel is not actionable unless it has caused or is likely to cause "serious harm" to the claimant's reputation.
 
Harm to the reputation of a "body that trades for profit" is not serious unless it has caused, or is likely to cause, "serious financial loss" (Section 1 Defamation Act 2013). 

That raises a number of questions, none of which has yet been fully answered by our courts. 

First, it is predicated on an assumption that damage to reputation can always be measured by reference to financial loss, whether serious or otherwise.  

But is that assumption correct? 

The effect of defamatory allegations against a business is often insidious, hard to track, and even harder to quantify (particularly in purely financial terms).  

Secondly, what is meant by serious?  

So far, judicial guidance has been limited to observing that serious harm means something more than substantial harm, and that serious "is an ordinary word in common usage".  It is not immediately obvious how much further that takes us.

A financial loss that would be serious for an SME would not necessarily be serious for a FTSE 250 company. Does that mean that Marks & Spencer has less legal protection than the corner shop?  

Thirdly, what does a company that has been defamed have to do to satisfy a court that it has been, or is likely to be, caused serious financial loss, and that it is therefore entitled to have the record set straight?

Recent decisions suggest that claimants will not be required to provide evidence of harm to reputation in order to get a claim off the ground; the court would be willing to infer harm from the gravity of the allegation and/or the extent of publication.

The court may therefore also be willing to recognise that it is impossible to ascribe a financial value to the damage caused by broadcast or publication of defamatory allegations.  

It may be willing to accept, perhaps with the assistance of expert evidence, e.g. from a PR professional, that to allow serious and defamatory allegations to stand uncorrected is likely to cause serious harm to a business, even if such harm cannot easily (or at all) be measured financially. 

If, instead, corporate claimants were to be required to provide evidence of actual financial loss, or the likelihood of it, in order to get to first base, in practice companies would have been deprived of the legal right to defend their reputations.    

Even if the legalities are a tad unclear for companies and their advisers, at least until we have more decisions from the judiciary, it should not be forgotten that they will be no more certain for the media and others who would attack the reputation of a corporate.  

Nobody is (yet) free to libel a business with impunity.

David Engel leads the reputation protection team at Addleshaw Goddard LLP

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