Niche Products Ltd v MacDermid Offshore Solutions LLC

A malicious falsehood claim may be arguable where the defendant’s statement expressly attacks information produced by a competitor, even though it also concerns the defendant’s own products. The statement must have a nexus with the claimant’s economic interests and be calculated to cause pecuniary damage. Under section 3 of the Defamation Act 1952, the claimant must plead the nature of the likely loss and the mechanism by which it is likely to arise. Reputation damage and speculative management time are insufficient, but lost sales may qualify. At the strike-out stage the court should not conduct a mini-trial or resolve conflicting evidence. A properly arguable allegation of malice may be pleaded inferentially, but carelessness or what the defendant ought to have known is insufficient.

The claimant and defendant were competitors supplying hydraulic fluids for subsea production control systems. The defendant circulated a letter stating that information distributed by a competitor about differences between two versions of the defendant’s product was misleading and erroneous. The claimant alleged that the letter referred to it and its report, and brought claims including malicious falsehood.

The defendant applied under CPR 3.4 for strike-out and under CPR 24.2 for summary judgment. It challenged the alleged nexus with the claimant, the pleading of pecuniary damage and malice, and the claim as abusive under Jameel (Yousef) v Dow Jones. The central issue was whether the malicious falsehood claim was properly arguable on the pleaded case.

1. The application was dismissed in relation to the malicious falsehood claim. The copyright and confidential-information claims could not usefully continue if that claim failed.
2. The claim was materially different from a claim based solely on statements about the defendant’s own products. The defendant had expressly described a report emanating from the claimant as misleading and erroneous. That supplied a properly arguable nexus with the claimant and its economic interests. The possible impact on reputation did not exclude an economic claim where the statement was made in a commercial dispute between direct competitors.
3. Under section 3(1) of the Defamation Act 1952, “calculated to cause pecuniary damage” meant more likely than not to cause such damage. The claimant’s pleaded case adequately identified lost sales as the relevant loss and explained the mechanism: the letter was intended to promote sales of the defendant’s competing product, which could displace sales of the claimant’s product. Reputation damage and lost management time were struck out.
4. The fact that the claimant did not complain of every statement in the letter did not make the claim unsustainable. It was properly arguable that an identifiable proportion of lost sales was caused by the statements complained of. The issue required trial and could not be resolved by a mini-trial on conflicting evidence.
5. The malice plea was also properly arguable. The claimant could plead alternative inferences from the defendant’s conduct, including that no proper testing had been undertaken or that testing had demonstrated the relevant difference. However, references to what a reasonable person ought to have known were impermissible because negligence was not malice.
6. The claim was not an abuse under Jameel (Yousef) v Dow Jones. The court declined to permit a bare declaratory claim about the products to proceed if the malicious falsehood claim had been struck out.

The judgment records an earlier refusal of a stay and a subsequent dismissal of the defendant’s appeal against that decision. Those decisions concerned the same litigation and are not appellate decisions from the present strike-out judgment.