The Defamation Act 2013 includes a new proviso that a statement is not defamatory unless its publication:
(i) has caused; or
(ii) is likely to cause serious harm to the reputation of the claimant.
Further, the Act provides that harm to the reputation of a body that trades for profit is not “serious harm” unless it has caused or is likely to cause the body serious financial loss.
The Explanatory Notes to the Act explain that the new provisions “raise the bar” for bringing a claim so that only cases involving serious reputational harm can be brought. Whilst the draft Bill was moving through Parliament it was said that the intention behind this provision was to ‘discourage trivial claims’. At this stage it is not clear what measure of harm will amount to serious harm: that will fall to be decided in individual cases.
‘Likely to cause serious harm’
The second limb raises some further ambiguity in terms of what a complainant must show when bringing a claim. The use of the phrase “likely to cause serious harm” (our emphasis) is said to cover situations where the harm has not yet occurred at the time the action for defamation is commenced. This suggests that this limb operates in relation to published statements which have not caused any serious harm to the reputation of the complainant, but in respect of which the complainant can persuasively say may later do so.
Bodies which trade for profit: ‘serious financial loss’
As to bodies which trade for a profit, the Explanatory Notes state that the requirement for financial loss is consistent with the new serious harm test outlined above, and reflects the fact that bodies which trade for a profit are already prevented from claiming damages for certain types of harm such as injury to feelings. There is no guidance in the Act and no meaningful debate in Parliament as to precisely what will be sufficient to demonstrate ‘serious financial loss’.
In our view, the Act does ‘raise the bar’ in terms of what a complainant is required to show in a defamation case in comparison with the law as it was. The question is, by what margin?
At the moment it is difficult to anticipate, and unfortunately it is something which will only be decided in individual cases. What we should point out is that it has always been the case that complaints in defamation have needed to demonstrate a ‘threshold of seriousness’, and, should not be brought over trivial matters.
At this stage, we do not expect the requirement to show serious harm changing matters significantly for sophisticated clients. In our experience, the majority of companies and individuals do not tend to use the law in this area without just concern. That said, a change in the law often means that there will be initial arguments as to what the precise position is before the law becomes settled. This means that both complainants and defendants will make attempts to test the boundaries of the new law by arguing over precisely what constitutes “serious harm” when the new Act comes into force. Our view is that media defendants in particular will look for opportunities to test the boundaries of precisely what the limits are. We anticipate that they will do this soon after the Act comes into force. This is likely to impact in terms of the media pursuing angles on a story (even) more tenaciously than they have in recent times.
With regard to for-profit bodies, the requirement to show financial loss requirement is a new hurdle. It will mean that more companies are forced to plead particulars of loss; equally defendants will argue that no financial loss has been suffered, or is likely to be suffered.
Our view is that certain categories of financial loss would appear to be fairly clear, such as a loss of custom or sales. Expenses incurred in mitigating the loss caused by the defamatory statement should in our view also be recoverable. What will be interesting to see is the extent to which the courts treat other categories of financial loss as recoverable, such as damage to goodwill (as a quantifiable asset on a balance sheet as opposed to something less tangible), or diminution in share value.
In terms of how the requirement to show potential financial loss may alter the current position, it is already the case that companies that complain about a defamatory statement often legitimately say that financial loss will be suffered if the allegations are left uncorrected. That position by itself may well be enough to satisfy the requirements of the new Act (and seems to us that it should suffice if the allegations are serious and the publication was widespread). Evidence will be required to support a party’s position in each case. Of course, the more evidence that a body can show which determines the likelihood and the degree of harm, the better placed it will be.
It should be noted that the requirement (to show actual or a substantial likelihood of serious financial loss) only applies to bodies that trade for profit. It does not apply to individuals and it is often the case that allegations made against a corporate body will also impact upon the Board or other senior executives. One consequence of this provision may well be that complaints are made on behalf of senior executives at corporate bodies in addition to, or rather than, the body itself.
Jon Oakley is an Associate in the reputation protection team at Michael Simkins LLP.