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Defamation of corporations

07 September 2012
Although the Defamation Bill currently going through Parliament does not address the ability of companies to bring defamation proceedings, a report published on 31 August 2012 shows that the question was debated at Committee Stage.

At present, it is well-established that the property or business of a corporation:

may be injured by defamatory statements whether written or oral. It has a trading character, the defamation of which may ruin it.

(South Hetton Coal Company v North Eastern News Association Limited [1894] 1 Q.B. 133)

For this reason, it has long been established that companies are capable of suing for defamation.  However, there are two caveats to this: first, the damages awarded to companies are likely to be lower than those awarded to individuals because a company's "feelings" cannot be injured (Adelson v Associated Newspapers Ltd [2007] EWHC 3028); and, secondly, certain bodies, such as unincorporated bodies and local authorities, cannot bring defamation proceedings.

A number of high profile defamation claims brought by corporations in recent years have contributed to an increasingly widely-held view that the ability of corporations to bring defamation proceedings should be curtailed.  One such case, which was referred to at Committee Stage, was the notorious defamation claim brought by McDonald's against two individuals who had produced a pamphlet criticising the company.  The case (which became known as the "McLibel" case) lasted for ten years, making it the longest case in British history.  A documentary film, McLibel, highlighted the mismatch between the resources of the claimants and the defendants.

According to the Committee Stage Report, Tom Brake MP argued that the likelihood of a "David and Goliath" scenario in corporate defamation proceedings meant that corporations seeking to initiate proceedings for libel should be required to show "actual or likely serious financial harm and malice, dishonesty or reckless regard for truth". 

Two new clauses were proposed to redress the perceived imbalance between corporations and individuals.  One sought to introduce a "permission stage" (similar to that in judicial review proceedings) and a requirement to show substantial financial harm.  As was recognised by Jonathan Djanogly MP, the Parliamentary Under-Secretary for Justice, these would substantially reduce the ability of large corporations to bring libel proceedings, but would also affect the vast majority of business, which he described as being small, not cash-rich, and often having genuine reputations to protect.   Mr Djanogly also pointed out that a number of other clauses in the Bill – such as the proposed serious harm test in clause 1 – would reduce the ability of corporations (and individuals) to bring defamation proceedings other than in the strongest cases. 

Another new clause would have required all non-natural persons to show that the publication had been published with malice or that the corporation had suffered actual or likely financial harm.  Mr Djanogly noted that this would impinge upon the rights of a wide-range of entities, including charities, nongovernmental organisations and companies operating on a not-for-profit basis. He also said that views had been sought, at the consultation stage, on whether the principle that local authorities cannot sue for libel should be extended to other bodies exercising public functions, but that the majority of responses had been against such a restriction on the right of such organisations to defend their reputation.

Neither of the proposed new clauses has been added to the Bill, which will now move to Report Stage and Third Reading.

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