Business claims fuel surge in libel actions

The number of reported defamation cases has risen from 59 to 78 in the last 12 months, driven by a surge in actions brought by businesses, which have more than trebled from five to 16.

The figures, from Sweet & Maxwell, a legal publisher, suggest that with the pressures of the credit crunch, companies are reacting more aggressively to stories about them - and countering what they see as adverse and damaging comments.

Emma Woollcott, a libel specialist at law firm Mishcon de Reya, said: “All kinds of litigation increase in a downturn and libel is no different. 

“Business are more likely to sue to protect their reputation when times are tough in the same way as they are more likely to sue to recover money they are owed.”

Business that have sued other companies for libel in the last twelve months include Tiscali, the telecoms group that sued British Telecoms; a sweetener manufacturer that sued Asda and a claim by Stelios Haju-Ioannou against serviced offices group Regus.

But with the vast majority of such cases settling privately before they reach court, Ms Woollcott said the number of business instructing lawyers to examine or threaten libel proceedings was many times higher than the Sweet & Maxwell statistics show.

The overall rise in libel actions was also fuelled by a growth in "new media" cases as online outsets proliferate: these have more than doubled from three to eight in the year up to the end of may 2009.

One in five defamation actions are brought by celebrities but the number has remained stable, down from 19 to 18 over the past year as increasingly they resort to privacy laws.

Jaron Lewis, a media partner at Reynolds Porter Chamberlain, the City law firm, said: "It is almost impossible to get an injunction for libel so some celebrities now try to use privacy laws to try and stop defamatory stories from being published.

He said that the figures, drawn from an archive of 250,000 law reports, showed that companies were starting to make use of the libel courts as part of a wider public relations strategy.

But he added: "It is not always the best way to proceed. Businesses would often be better served by explaining clearly why a publication is wrong, or by using the free complaints procedures operated by the Press Complaints Commission and Ofcom."

In some cases businesses resorted to the libel courts to protect themselves against claims that they might become insolvent, a trend that could rise next year if more recession-related defamation cases come through the courts.

Tiscali's lawsuit against British Telecoms centred on a letter BT sent to Tiscali's broadband customers encouraging them to switch to BT. Tiscali argued that the letter, sent while it was the subject of takeover talks, carried an implicit suggestion that Tiscali's service may deteriorate.

In another action, The Sunday Express paid damages to Pentagon Capital Management over an incorrect story that accused some of the hedge fund’s employees of keeping their investors' money for themselves.

A third involved the magazine Media Week which was successfully sued by Hachette Filipacchi over an article that falsely accused the publisher of struggling financially and being at risk of being dropped by its parent company.

Nigel Tait, a partner at law firm Carter Ruck, said: “Markets are jittery which means investors, banks and customers are all being more careful about where they put their money.

“This makes business focus not just on what is being said about them in the media but also what their competitors are saying.”

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