Out-Law News 3 min. read

Corporate defamation claimants will be comforted by court's interpretation of 'serious harm', expert says

It was sufficient for a law firm to show that it had lost out on a single instruction in order to demonstrate that it had suffered "serious harm" that had "caused or is likely to cause … serious financial loss", the High Court has ruled.

The 2013 Defamation Act introduced a new requirement that publication of a statement caused, or is likely to cause, serious harm to the reputation of the claimant before it can be found to be defamatory. In the case of "bodies trading for profit", serious harm is harm that caused, or is likely to cause, serious financial loss.

Litigation law expert Michael Fenn of Pinsent Masons, the law firm behind Out-Law.com, said that a decision on the evidence required by a corporate claimant to demonstrate "serious financial loss" in terms of the Act had been "eagerly anticipated".

"There has been much debate amongst practitioners about how difficult it would be for a company to show serious financial loss," he said. "The general consensus was that it would require extensive evidence demonstrating the actual monetary losses caused by the publication, including the provision of detailed balance sheet information and analysis of the losses."

"This judgment, however, seems to give some comfort to claimants seeking to establish serious financial loss. The claimant only gave one example of losing an instruction. The judge, however, was willing to accept a broader context for the claimant's assessment of loss. In this case, the claimant was a small firm with high value instructions. As such, the loss of even one client would show a likelihood of serious loss."

The judge also considered "more general factors" in coming to his decision on the point, Fenn said. These included the "prominence of the words complained of in a Google search", and the "grapevine effect of an online publication", leading him to acknowledge that "individuals would have read the offending publication and not notified the claimant of their decision not to instruct them", Fenn said.

The claimant in this case, Brett Wilson LLP, was a firm of solicitors that had represented a number of claimants in their 2011 defamation case against Rick Kordowski, the owner of a website called 'Solicitors from Hell'. Although the original website was closed down some years ago, the same name has been used by several websites over the years operated by other individuals, all of which had been used "as a vehicle for denouncing solicitors and other members of the legal profession in the most outspoken terms, for alleged misconduct", according to the judge in this case.

The judge heard that Brett Wilson was now itself the target of a website which was "a simple variant of the original", operated by unknown individuals. The firm said that its inclusion on the website was itself defamatory, but also challenged an item that appeared on the "complaints" section of the website accusing it of "seeking to charge three times the quoted fee for a simple letter and then, when the client refused to pay, unjustifiably threatening legal action and engaging in a campaign of harassment".

The judge said that the meanings of the words used "plainly have a defamatory tendency". However, the firm had to be able to show that the new serious harm condition had been met. The judge said that the fact that the firm was a 'boutique' firm that had "traditionally ... attracted a considerable amount of work from the internet", and that it could provide evidence that a prospective client who had previously indicated that he wished to instruct the firm withdrew his instructions as a result of the publication was enough to meet this test.

"[The] pleaded allegations taken overall are in my judgment sufficient to make out a case of serious financial loss," the judge said. "I need say little to elaborate on that. 'Serious' is an ordinary English word. I would only add that whether loss is serious must depend on the context."

"It is beyond dispute that the words complained of had a clear tendency to put people off dealing with the claimant firm. That was their evident purpose. The allegations are serious, and would be likely to deter anybody unfamiliar with the firm from engaging its services. There is affirmative evidence that in all probability one client was deterred, with probable financial loss," he said.

The judge went on to consider evidence presented by the firm that there had been 276 searches for it online during the two months that it was aware of the existence of the website. Although he said that some of those searches may have been repeats and others may not have been "serious enquiries", the "continued publication during August and September and the 'grapevine' effect of publication including, if not especially, online publication must mean that the numbers to whom the defamatory messages were conveyed are very likely to be substantially larger".

"I have no doubt that others were put off, and that there has been a financially damaging impact on a serious scale," he said.

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