Commencing a Defamation Claim  – Serous Harm Requirement for Bodies that Trade for Profit

Commencing a defamation claim can be a complex legal battleground and understanding the requirements that need to be satisfied to be able to assess the strengths and weaknesses of a potential claim is vital.

What is defamatory?

Courts have established various tests to determine whether a statement is defamatory at common law. The imputation conveyed by the statement must discredit the claimant; or cause the claimant to be shunned or avoided; or expose the claimant to hatred, contempt or ridicule; or lower the claimant in the estimation of right-thinking members of society generally.

Defamation Act 2013:

Section 1 of the Defamation Act 2013 established a threshold of seriousness which must be considered in relation to whether the statement is defamatory. A statement is not defamatory unless its publication has caused, or is likely to cause, serious harm to the reputation of the claimant. For bodies that trade for profit, it is not serious harm unless it has caused, or is likely to cause, that body serious financial loss.

The statement must now meet the common law requirement of defamatory, and the claimant must prove that the publication has caused, or is likely to cause serious harm to their reputation, which for bodies that trade for profit means serious financial loss.

The Supreme Court:

The Supreme Court states that a body trading for profit must satisfy the same serious harm requirements as an individual, but is must also prove financial loss or its likelihood. (Please see a previous article which explains the serious harm requirement for individuals.) The financial loss is not the same as special damage which represents pecuniary loss to interests other than reputation.

The financial loss is the measure of the harm to reputation, and it must exceed the threshold of seriousness. Whether financial loss has occurred and whether it is serious, are questions which cannot be answered by reference only to the inherent tendency of the words.   

The High Court:

The High Court has stated that a body trading for profit must prove serious reputational harm that results from the statement complained of, and financial loss that is serious and consequent on the reputational harm.

What is a body that trades for profit?

The Defamation Act 2013 fails to define the term, body that trades for profit. However, a trading corporation clearly falls within the definition, but what about other types of entities such as charities. The Defamation Act 2013 does not require trading for profit to be the only or main purpose of the body so it could be argued that charities fall within the provision. However, for entities such as charities, trading for profit is only a minor part of what they do.

Attempts were made to exclude charities and other similar entities from the bill which became the Defamation Act 2013, but this did not happen. Lord McNally appeared to suggest that the term is not meant to catch ‘other bodies, such as charities, which are not the subject of concern’. No court has yet ruled on whether a charity, or some other entity which is not a trading corporation, firm or partnership, falls within the definition.

However, the inclusion of the words ‘trades for profit’, implies that Parliament envisaged that there may be some corporate claimants that do not trade for profit. Consequently, if any entity is to be excluded from the requirement to prove serious financial loss, it should be charities.

What constitutes serious financial loss?

Additionally, the Defamation Act 2013, does not define the term financial loss, but the Supreme Court has stated that it is not the same as special damage. The following have been held to fall within the definition:

• A downturn in sales.
• A loss of customers / clients.
• Additional costs of hiring or retaining staff, an increase in the costs of obtaining credit, raising equity, or borrowing.
• The reasonable costs of mitigating damage to reputation, caused by the defamatory statement.

It is important to note that whether financial loss is serious is a relative question. The loss of a single client has been held to be serious, as the claimant was a small, recently established firm, for whom the financial loss of a single client could be considered serious.

Inferring serious financial loss:

The likelihood of serious financial loss can be inferred, although inferences will not be drawn lightly. Whether it is appropriate to infer financial loss will depend on the facts; the gravity of the meaning of the published statement; the person to whom publications were made, or likely to be made; whether the claimant reacted to the publication in a manner consistent with serious financial loss; and the evidence showing the actual impact on the claimant. The nature and scale of the claimant’s trading activities is also likely to be relevant.

Determining whether the publication caused, or was likely to cause serious financial loss is subject to the ordinary rules of evidence of causation, which is applicable to the law of tort generally. The High Court has stated that:

“It is not hard to envisage cases in which a publication demonstrably causes a business serious financial loss, but the defamatory (or actionable) component of the publication, is not serious, or cannot be shown to be causative of that loss.”

High Court

Therefore, in cases where the claim is for general loss of business, it may be difficult to prove that the loss was caused by the publication of the statement.

To conclude:

Bodies that trade for profit have a further hurdle above that required for individuals.

Expert legal assistance from Lawdit Solicitors:

At Lawdit Solicitors, we specialise in defamation law. If you are facing a potential defamation claim, whether as a claimant or  defendant, our expert team is ready to provide the guidance and representation you need.