Should companies be able to sue for libel?

Why there should be limits on the rights of “legal persons”.

Earlier this week, Conservative and Liberal Democrat MPs voted down a powerful House of Lords amendment to the current Defamation Bill which would have made it far harder for companies to bring and thereby threaten libel actions in England and Wales.  It may well be that such a provision can be put back in; the minister appears to have made some concession to this effect.  But the vote raises a wider question of principle: to what extent, if any, should the law of libel look at humans and “legal persons” such as companies, and treat them just the same?

Human beings have legal rights, and there are things no person or group can do to human beings, without violating their legal rights.  Human beings also have obligations imposed by statute or the common law.  They can enter into and enforce contracts; they can hold and dispose of property; they can break the criminal law and be punished for doing so.  All this because the law regards human beings as “natural persons” with “legal personality”. And at law, as with dogs, personality goes a long way.

The law, however, does not only recognise natural persons.  It also recognises “corporations” as legal persons.  These entities do not actually exist, at least in any tangible way.  A Martian would not see them from space.  They are abstractions.  In the language of the law, corporations are “legal fictions”, which exist only to the extent that law allows.  In the words of one eminent old judge, corporations have "no soul to be damned, and no body to be kicked".  There may be human beings who hold shares and act as directors, but companies themselves are affairs of the mind.

Nonetheless, corporations are highly convenient legal creatures, and they have been a feature of English law from early times.  For example, a so-called “corporation sole” such as a Bishopric could continue to hold property, separate to the person who happened to be bishop or whether there was a current bishop at all.  A local authority could use its corporate status to employ staff and buy land for houses. 

And corporations also became useful for commercial purposes, and these were usually called “companies”.  Instead of merchants and manufacturers trading on their own accounts, they could form companies to manage and allocate certain business risks.  If a company was unable to pay its debts, then the shareholders of the company could just walk away without personal liability.  It was a legal device to protect commercial interests by limiting the legal exposure of those involved.

For a long time, companies were frowned upon.  Even now the law requires that most companies need to have “Limited” in their name so as to warn others that the liability of the shareholders is limited.  Until Victorian times it was actually quite difficult to form a company for commercial purposes, and it often required a special Act of Parliament. But then the idea took off when new companies legislation was passed, and it was made possible for companies to be formed with ease. Companies swiftly became the norm in business life.

So familiar are we now with companies, it is forgotten just how artificial they are.  They are merely a way of arranging and managing certain legal relationships. That they have legal personality is a means to this end.  Legal personality allows companies to enter into contracts, hold property, and be subject to legal obligations in the same manner as natural persons. But all this is for the purpose of the human beings connected to those companies not personally having those rights, powers and obligations instead.

In respect of defamation, it is entirely true that companies can have reputations, and that those reputations can be adversely affected by things which are said by others. The real question is the extent to which companies should be able to maintain an action for defamation in the way a natural person can. Lots of things have a reputation but which cannot sue for libel: for example, a racehorse or a business technique. These can be disparaged, and loss suffered, but there is no remedy in defamation. Furthermore, the courts have held that “public corporations” cannot sue for defamation, and nor can political parties. So why the exception for private corporations?

Companies already have a formidable range of legal protections for their reputation. They can protect their trade marks and they can sue for “passing off” against counterfeiters and imitators. Companies are protected from inaccurate advertising and unfair business practices of their competitors.  They can bind their former employees to confidentiality. And they can sue in respect of deliberate lies under the tort of “malicious falsehood”. There are even the ancient rights of action in respect of slander to title (ie property rights) and to goods. In many ways, the law protects the reputations of companies far more extensively than it does the reputations of human beings. And, of course, directors and employees can sue for defamation their own names.

So what additional purpose is there in the general law of defamation protecting companies? Why should companies be able to sue for libel? It is certainly convenient for them, as it is easier to threaten a libel claim (where the onus is on the defendant to prove a defence) than it is for malicious falsehood (where the onus is on the claimant to prove both malice and falsity). And, in practice, companies have used defamation to effectively bully and chill their critics. Many City lawyers make their living from promoting “reputation management” to corporate clients. The law says that companies can only sue in respect of their “trading reputations” but, in practice, companies instruct their lawyers to issue libel threats for all sorts of criticism.

Given the range of legal protections already in place, there is a strong argument for the right of companies to sue for libel to be abolished. Any public interest in such a right existing is more than offset by the public interest in ensuring critics of companies not being subject to the chill of libel threats. Those involved in a company, after all, usually get the incredible legal privilege of limited liability; it would only be fair for such a privilege to be offset by the company facing the prospect of frank and uninhibited criticism.

During the recent libel reform debates, such an argument was mounted; but it failed to convince the government. However, the House of Lords passed an amendment making it difficult for companies to sue for libel unless they could convince a court at an early stage that the libel caused (or could cause) serious financial loss. The Lords amendment also made it impossible for private companies performing public functions to bring libel actions at all in respect of criticism of those public functions. This week, despite a spirited and impressive defence of these sensible protections by shadow justice secretary Sadiq Khan, the Lords’ amendment was lost. A watered-down version may still be re-introduced, but no one knows for certain.

Whatever the outcome of what is left of the passage of the Defamation Bill, there remains the issue of corporate power and how it is checked.  That corporations have power, and that this power affects the lives of natural persons – human beings – there can be no doubt.  That the corporations provide legal protections for those who are connected with the ciorporation is also true.  The question is the extent to which the use of corporations can be subjected to the frank scrutiny of others. Even if there is a case for saying corporations should be able to sue for libel, it certainly should not be easy for them to do so, unless they can show actual or potential substantial loss.

And corporations should never be regarded as analogous with natural persons; they are simply legal fictions – albeit useful ones - and should always be treated as such.

 

David Allen Green is legal correspondent of the New Statesman and a media lawyer.  He also writes the Jack of Kent blog.

 

(Legal) personality goes a long way. Photograph: Miramax Films

David Allen Green is legal correspondent of the New Statesman and author of the Jack of Kent blog.

His legal journalism has included popularising the Simon Singh libel case and discrediting the Julian Assange myths about his extradition case.  His uncovering of the Nightjack email hack by the Times was described as "masterly analysis" by Lord Justice Leveson.

David is also a solicitor and was successful in the "Twitterjoketrial" appeal at the High Court.

(Nothing on this blog constitutes legal advice.)

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What it’s like to fall victim to the Mail Online’s aggregation machine

I recently travelled to Iraq at my own expense to write a piece about war graves. Within five hours of the story's publication by the Times, huge chunks of it appeared on Mail Online – under someone else's byline.

I recently returned from a trip to Iraq, and wrote an article for the Times on the desecration of Commonwealth war cemeteries in the southern cities of Amara and Basra. It appeared in Monday’s paper, and began:

“‘Their name liveth for evermore’, the engraving reads, but the words ring hollow. The stone on which they appear lies shattered in a foreign field that should forever be England, but patently is anything but.”

By 6am, less than five hours after the Times put it online, a remarkably similar story had appeared on Mail Online, the world’s biggest and most successful English-language website with 200 million unique visitors a month.

It began: “Despite being etched with the immortal line: ‘Their name liveth for evermore’, the truth could not be further from the sentiment for the memorials in the Commonwealth War Cemetery in Amara.”

The article ran under the byline of someone called Euan McLelland, who describes himself on his personal website as a “driven, proactive and reliable multi-media reporter”. Alas, he was not driven or proactive enough to visit Iraq himself. His story was lifted straight from mine – every fact, every quote, every observation, the only significant difference being the introduction of a few errors and some lyrical flights of fancy. McLelland’s journalistic research extended to discovering the name of a Victoria Cross winner buried in one of the cemeteries – then getting it wrong.

Within the trade, lifting quotes and other material without proper acknowledgement is called plagiarism. In the wider world it is called theft. As a freelance, I had financed my trip to Iraq (though I should eventually recoup my expenses of nearly £1,000). I had arranged a guide and transport. I had expended considerable time and energy on the travel and research, and had taken the risk of visiting a notoriously unstable country. Yet McLelland had seen fit not only to filch my work but put his name on it. In doing so, he also precluded the possibility of me selling the story to any other publication.

I’m being unfair, of course. McLelland is merely a lackey. His job is to repackage and regurgitate. He has no time to do what proper journalists do – investigate, find things out, speak to real people, check facts. As the astute media blog SubScribe pointed out, on the same day that he “exposed” the state of Iraq’s cemeteries McLelland also wrote stories about the junior doctors’ strike, British special forces fighting Isis in Iraq, a policeman’s killer enjoying supervised outings from prison, methods of teaching children to read, the development of odourless garlic, a book by Lee Rigby’s mother serialised in the rival Mirror, and Michael Gove’s warning of an immigration free-for-all if Britain brexits. That’s some workload.

Last year James King published a damning insider’s account of working at Mail Online for the website Gawker. “I saw basic journalism standards and ethics casually and routinely ignored. I saw other publications’ work lifted wholesale. I watched editors...publish information they knew to be inaccurate,” he wrote. “The Mail’s editorial model depends on little more than dishonesty, theft of copyrighted material, and sensationalism so absurd that it crosses into fabrication.”

Mail Online strenuously denied the charges, but there is plenty of evidence to support them. In 2014, for example, it was famously forced to apologise to George Clooney for publishing what the actor described as a bogus, baseless and “premeditated lie” about his future mother-in-law opposing his marriage to Amal Alamuddin.

That same year it had to pay a “sizeable amount” to a freelance journalist named Jonathan Krohn for stealing his exclusive account in the Sunday Telegraph of being besieged with the Yazidis on northern Iraq’s Mount Sinjar by Islamic State fighters. It had to compensate another freelance, Ali Kefford, for ripping off her exclusive interview for the Mirror with Sarah West, the first female commander of a Navy warship.

Incensed by the theft of my own story, I emailed Martin Clarke, publisher of Mail Online, attaching an invoice for several hundred pounds. I heard nothing, so emailed McLelland to ask if he intended to pay me for using my work. Again I heard nothing, so I posted both emails on Facebook and Twitter.

I was astonished by the support I received, especially from my fellow journalists, some of them household names, including several victims of Mail Online themselves. They clearly loathed the website and the way it tarnishes and debases their profession. “Keep pestering and shaming them till you get a response,” one urged me. Take legal action, others exhorted me. “Could a groundswell from working journalists develop into a concerted effort to stop the theft?” SubScribe asked hopefully.

Then, as pressure from social media grew, Mail Online capitulated. Scott Langham, its deputy managing editor, emailed to say it would pay my invoice – but “with no admission of liability”. He even asked if it could keep the offending article up online, only with my byline instead of McLelland’s. I declined that generous offer and demanded its removal.

When I announced my little victory on Facebook some journalistic colleagues expressed disappointment, not satisfaction. They had hoped this would be a test case, they said. They wanted Mail Online’s brand of “journalism” exposed for what it is. “I was spoiling for a long war of attrition,” one well-known television correspondent lamented. Instead, they complained, a website widely seen as the model for future online journalism had simply bought off yet another of its victims.