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Law Column: New test case on ‘serious financial loss’

footansteylogonewAs my colleagues and I have covered many times in this column, the Defamation Act 2013 created the “serious harm” test, which a claimant in libel has to overcome in order to have a valid claim.

A decision handed down last week in a case involving a firm of solicitors against “Persons Unknown” has added the next chapter to the serious harm tale.

Under S. 1(1) of the 2013 Act, “a statement is not defamatory unless its publication has caused or is likely to cause serious harm to the reputation of the claimant”. S. 1(2) expands on this, and states that in the case of a “body that trades for profit” there is no serious harm unless the publication “has caused or is likely to cause the body serious financial loss”.

Since the creation of the serious harm test, there have been a few key cases which have set the boundaries for the test to be satisfied. But, until now, the court had not made an award of damages in a case where the S. 1(2) definition of serious harm applied – that is, where the claimant is a body that trades for profit.

As a result, last week’s ruling is the first of its kind.

The case involved a listing about the solicitors on the website (“the website”). The website described the firm as a “solicitor from hell”, and also contained a complaint with the heading “Harassment” which accused it of over-charging, threatening legal action unjustifiably and engaging in a campaign of harassment.

The case was complicated by the fact that the operators of the website have done everything possible to hide their true identity, with the domain being registered to ‘Anonymous Speech’ – hence the case being against Persons Unknown. Although all of the relevant court documents were served upon Anonymous Speech via email, the operators of the website did not respond to the claim, or defend it in any way. Mr Justice Warby concluded that the persons in question were trying to “hide” and remain anonymous, and it was therefore appropriate to deal with the case in their absence.

The pertinent question for our purpose is, has the publication caused, or is it likely to cause, serious financial loss?

The case was not contested, so the solicitors’ evidence was not tested by Defence counsel in court. However, Mr Justice Warby still had to be satisfied that the serious harm threshold under S. 1(2) had been met – and he was.

One of the big questions around serious harm has been: what evidence is necessary in order to pass the test?

In this case, the solicitors stated that it believed the defamatory publication “has caused serious harm to its reputation”, and it also “believes that the publication has caused it serious financial harm”. Other relevant statements from the solicitors were:

• That a considerable amount of its work comes from the internet, and when work comes from different sources it is usual for potential clients to carry out a Google search on the firm before instructing them;
• For six months, Google searches for the firm produced the offending website page in the top five results;
• A number of prospective clients had read the publication, and would continue to do so;
• It is inevitable that a number of prospective clients will have read the material and decided not to instruct the firm, or this will happen in the future;
• Losing a single instruction can cost the firm tens of thousands of pounds;
• One prospective client – who had indicated that he would instruct the firm – withdrew his instruction based on the publication;
• It believes that there has been a noticeable drop in the conversion of enquiries into instructions in the last six months; and
• It has suffered financial loss.

Aside from stating the above, the solicitors did not produce evidence or statistics to support its assertions and beliefs, but Mr Justice Warby was satisfied that the serious harm test had been passed.

The outcome of the case was that the solicitors were awarded £10,000 in damages (the most that can be awarded in the circumstances), and injunctions requiring the removal of the publication, as well as a prohibition on further publication in the future.

Given that the Defendant is unknown it is incredibly unlikely that the solicitors will ever receive the money or that the material will be removed – however, what the exercise has achieved is vindication in the eyes of the public. And when you Google the firm now, articles discussing the case will surround the defamatory posting itself. In practical terms – job done.

This case has confirmed that a claimant needs to provide some evidence to substantiate serious harm, which on the face of it, is positive news for publishers. However, in this case the evidence produced was insubstantial and in many respects unspecific, which is not so positive. Having said the above, we need to remember that this was a unique case because of the lack of a participating defendant.

As usual with case law, the bottom line from us is that this case has produced some new grey areas. We now know for certain that a claimant has to produce some evidence as to “serious financial loss”, but this case may not be the final chapter on the issue.

We hope it isn’t, because we’d like to see a higher evidential threshold.