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Article Story:
HOLDING CORPORATION AND LIBEL
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Date: 14/7/2001
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In an important judgment (Multigroup Bulgaria Ltd v Oxford
Analytica (2001) February 1, unreported) concerning the degree to
which the exercise of forum shopping for defamation disputes will
be permitted by the courts of this jurisdiction, Mr Justice Eady
determined that where there was no evidence either that the
claimant corporation had a trading reputation in this jurisdiction,
or that the publication at issue had caused that corporation any
actual loss, its action for libel was unsustainable.
The claimant was a very large Bulgarian corporation with a large
number of subsidiaries. The defendants were (respectively) a
specialist information and research organisation (Oxford Analytica)
which provided subscribers with international economic' and
industrial analysis via (inter alia) the Bloomberg system (the
second defendant) and the proprietor of the first defendant.
Bloomberg had settled the action so far as it was concerned, and
the remaining defendants relied at the trial on a Reynolds-type
([1999] 4 All ER 609 HL) qualified privilege defence.
However, having both during the course of the action and in the
trial skeletons flagged the lack of evidence either of trading
reputation or damage, an application was made at the conclusion of
the claimant's case that the matter should be withdrawn from the
jury on these bases. This was despite the fact that the allegations
at issue were wide ranging and very serious, including bribery and
extortion, leaving little doubt as to the defamatory nature of the
words at issue.
In what appear to have been critical omissions, neither the
managing director of the claimant company, nor any of its trading
subsidiaries were joined as parties to the action. The action
proceeded solely on behalf of the holding parent, and in the
absence of any evidence of management control by the claimant
company over its subsidiaries, or of any trading reputation in the
relevant jurisdictions (including the UK), the following
submissions were made on behalf of the defendants:
- The words complained of were incapable of defaming the claimant
because it played no role in the management of its
subsidiaries.
- The claimant could suffer no damage from publication to its
'actual and prospective clients, investors and competitors' since
as a mere holding company it had none.
- The claimant should not be permitted to sustain an action in
circumstances where it had no actual reputation within the
jurisdiction sued upon.
As to the need on the part of the claimant holding company to
exercise some management function for allegations of impropriety
against it to garner a cause of action in defamation, Mr Eady J
began with the dictum of Lord Keith in Derbyshire County Council v.
Times Newspapers [1992] 1 QB 770, who in turn was referring to the
well-known decision of Brown J. in Bognor Regis Urban District
Council [1972] 2 All ER 61. Lord Keith said:
'The authorities cited above clearly establish that a
trading corporation is entitled to sue in respect of defamatory
matters which can be seen to damage it in the way of its
business.' (Emphasis added.)
Applying that test, Eady J accepted the submission on behalf of
the defendants that there was no evidence that this claimant was
itself engaged in trade because of its lack of management role in
its trading subsidiaries. Consequently, according to Lord Keith's
test, the publications at issue could not be said to have damaged
it in the way of its business.
This accords with the principle set out in Prudential Assurance
v. Newman Industries [1980] 2 All ER 841, and Sheville v. Presse
Alliance [1995] EC 289, ECJ that a mere holding company cannot
recover in respect of allegations about how their subsidiaries
conduct their business.
As to the second submission, it followed from the claimant's
nature as a holding company, and lack of any management role in its
subsidiaries, that it could suffer no damage from publication to
clients, prospective client investors etc, since it had none.
As to the third submission, Eady J appeared to accept the
submissions of Andrew Caldecott QC derived from McDonalds Corp. v
Steel & Morris ((1999) March, unreported), that the appropriate
questions in determining whether a corporate claimant has a viable
action in defamation are: (a) whether the corporate claimant has a
reputation in the jurisdiction in question; and (b) whether the
publication is apt to damage the reputation of the corporation.
In other words, a corporate claimant must prove that it actually
has a trading reputation in its own right within the relevant
jurisdiction. However, Eady J again cited the judgment in Mcdonalds
to differentiate the position where a corporation does have a
reputation within the jurisdiction, in which case damage is
presumed:
' .... where a defamatory publication is apt to damage the
goodwill of a corporation which has a reputation within the
jurisdiction damage is presumed and the court does not have to
inquire into the details of the likely damage. The words complained
of...were, insofar as they were defamatory, obviously apt to damage
the goodwill of a corporation. The corporation does not have to
trade within the jurisdiction provided that it has a reputation
within the jurisdiction, which in this case the first respondents
[the American ultimate holding company] plainly
do.'
The submission on behalf of the claimant that the publication
itself gains for a corporate claimant the necessary
reputation-undoubted where the claimant is an individual-appears to
have been rejected by Eady J on the basis that even though the
matter is not expressly addressed in the Court of Appeal judgment
in Mcdonalds, that case cannot be reasonably construed as
contemplating that 'the reputation in question could be acquired by
the very publication complained of'.
However, Eady J appeared also to reject the proposition that the
mere absence of a previous mention of a hypothetical small trader
in Shanghai whose prospects of hiring bicycles to British tourists
were undermined by a libel of him in this country should rob him of
his right to sue here. This was based on the example given by Lord
Denning in Plato Films v Speidel [1961] 1 All ER 61 of Robinson
Crusoe having a good cause of action in libel in this
country. He may have been drawing a distinction between an
individual and corporate claimant.
In finding that the Claimant had failed to make good its case on
the grounds set out in his reserved judgment, Eady J applied what
were well-established legal principles to a novel situation. The
distinction which he drew between corporate and individual
claimants derived from the McDonalds case seems a sensible one and
may provide some balance to the decision in Beresovsky [2000] 2 All
ER 986 HL, which seemed to have given the green light to any
disgruntled individual with some international profile to sue in
the courts of this jurisdiction.
It is also clear that where a mere holding company adduces no
evidence of a management role in its subsidiaries, the court will
not presume it. The better course for such a prospective claimant
would probably be to sue via a subsidiary or senior member of
management with suitable evidence of reference.
Jonathan Coad
This article was first published in New Law
Journal.
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