Defamation Act 2013: not all bad news for companies

Much has been written about the new Defamation Act which came into force on 1 January 2014.  Some commentators have called it a “boost for free speech”, while others have declared it a “missed opportunity”. 

Louise Lambert

The government’s line is that the new Act “rebalances the law on defamation to provide more effective protection for freedom of speech while at the same time ensuring that people who have been defamed are able to protect their reputation.” Clearly a worthy aim, but as there have not yet been any cases under the new Act, it remains to be seen how it will be interpreted by the courts in practice. 

In particular, the new Act contains certain provisions which have the potential to affect companies’ ability to bring claims for defamation.

Section 1(1) of the Act provides that a statement is not “defamatory” (i.e. does not lower a person or company’s reputation) unless its publication “has caused or is likely to cause serious harm.

In addition, under section 1(2), companies are required to establish that the allegation concerned “has caused or is likely to cause […] serious financial loss”. 

Cases dealing with these provisions are likely to be scrutinised carefully. While the new Act to an extent codifies existing case law, there are some important changes. For example, it is clear from the Explanatory Notes to the Act that the new requirement for serious harm “raises the bar for bringing a claim”. This is mirrored in the requirement for companies to show actual or likely financial loss which is serious.

In some circumstances, this may make it more difficult for companies to bring claims for defamation. However, even before the Act came into force, in practice companies already had to show actual or likely financial loss. The better view may therefore be that the effect of section 1(2) is simply to exclude what may be regarded as trivial claims in financial terms. Since companies only tend to issue proceedings for serious allegations in any event, we may not see any material difference in the number of claims by companies which go to court.

Nevertheless, we can expect defendants to rely on the absence of proven financial loss in order to try to defeat claims. Companies should prepare for this by gathering evidence at an early stage to determine the likelihood and degree of harm: for example instructing customer service representatives to keep a detailed log of the reasons for any contract cancellations. 

Companies should consider whether a claim for defamation may be brought by an individual (for example the Chief Executive) as well as the company itself, because the individual will not be required to demonstrate financial loss, just serious harm. Companies should also consider alternative claims – for example claims for malicious falsehood (where there is no need to show damage to reputation and no requirement to prove loss if the allegations relate to a business) or breach of the right to reputation under Article 8 of the European Convention of Human Rights. It may also be possible to make a regulatory complaint (for example to the Press Complaints Commission).

Going beyond section 1, the new Act does also bring some positives for claimants which could benefit corporate and individual claimants alike. The effective abolition of jury trials for defamation claims by section 11 of the Act potentially leaves the way open for more early rulings, where a particular issue – for example the meaning of a statement – is decided by a Judge early on in the claim. This may result in increased costs at the outset, but it could also mean earlier resolution and costs savings overall.

Another provision of the new Act which might benefit companies is section 12, which gives the court the power to order a summary of its judgment to be published. The potential PR value to companies is clear. 

The new Defamation Act is therefore not all bad news for companies. While it may become harder for companies to sue for defamation for relatively trivial matters, they will continue to be able to sue and threaten to sue over serious allegations where financial damage is likely.

Louise Lambert is a senior associate at Olswang.