Downtex Plc v Flatley

In a libel action by a trading corporation, actual pecuniary loss need not be proved. Damage is presumed, and a serious allegation of insolvency may justify substantial damages. Relevant factors include the seriousness of the libel, the extent of publication and the relationship between the publishees and the claimant. Publication to a small group of existing business contacts may be particularly damaging. General damages must compensate injury to reputation and vindicate it; a merely symbolic award is insufficient. Where statutory summary disposal applies, the court assesses damages in principle without the statutory cap and then limits the award to the permitted maximum.

The claimant, a wholesale distributor, sued in libel and contract after the defendant circulated two letters to the claimant’s suppliers alleging, in substance, that it was insolvent or close to insolvency and unable to pay its creditors. The Court of Appeal had entered judgment for the claimant on the libel claims and directed that damages, together with any contractual damages, be assessed by a judge sitting without a jury: [2003] EWCA Civ 1282.

The claimant sought no apology or declaration of falsity. The issues were the proper assessment of damages for corporate libel, the effect of limited publication and the claimant’s subsequent corporate restructuring, and the amount of contractual damages without double recovery.

1. Disposition. Damages for libel were assessed at £10,000, the maximum permitted under section 8 of the Defamation Act 1996. Damages for breach of contract were assessed at £10. Any issue as to costs was reserved for further argument.
2. The letters bore the pleaded meaning that the claimant was insolvent or close to insolvency. Such an allegation was a very serious libel of a trading corporation, particularly where it was presented as the result of research and circulated to persons in a trading relationship with the claimant.
3. A claimant in libel need not prove actual damage. Damage is presumed, and a serious libel entitles the claimant to substantial damages: English and Scottish Co-operative Properties Mortgage and Investment Society Limited v Odhams Press Limited [1940] 1 KB 440. The principal assessment factors included seriousness, extent of publication and the relationship between the publishees and the claimant. Limited publication to business contacts could be as serious as, or more serious than, wider publication to strangers.
4. General damages compensate reputational harm and must vindicate the claimant. A symbolic award would not suffice. Corporations may recover for reputational damage but not for humiliation, distress or other injury to feelings. The absence of an apology provided no mitigation in the circumstances.
5. Under section 8(1)(c) of the Defamation Act 1996, the court assessed the damages that would have been appropriate without the statutory limit and then awarded the maximum permitted sum. Without the cap, the appropriate damages would have been at least £30,000.
6. The claimant’s later restructuring and change of name did not extinguish the damage already suffered. They did, however, reduce or remove any continuing element of future vindication, which was taken into account. The contractual award was confined to a nominal sum to avoid double recovery.

• Court of Appeal: Judgment was entered for Downtex on the two libel claims, with damages to be assessed by a judge sitting without a jury: [2003] EWCA Civ 1282.
• High Court (Queen's Bench Division): Damages were assessed at £10,000 for libel and £10 for breach of contract.