Legal Update 27.01.06

Court 13 at the High Court in London would have been filled with stockbrokers and financial journalists this week had the City firm Collins Stewart not settled its libel action against the Financial Times on the court steps.

The settlement has widely been viewed as a victory for Collins Stewart, with the FT publishing an apology on the front page of its Companies & Markets section as well as paying £300,000 in damages and all Collins Stewart’s costs. I agree with that view, but then I would say that: my firm acted for the brokers.

While the settlement deprived the press and media lawyers of an enjoyable scrap, suggestions that the case was an attack on the freedom of the financial press are wide of the mark.

Firstly, Collins Stewart was not the first corporate libel claimant, and certainly will not be the last. Companies are aware that they can use the laws of libel and confidence to protect their reputations, their share price or relationships with clients or consumers.

Celebrities have known this for years and while not all companies will push a matter all the way to trial like Collins Stewart did, we are increasingly asked to advise companies how to use the law to deal with the media in a crisis.

This is hardly a curtailing of press freedom: no-one in the press would seriously argue that it should be free to publish whatever it wants without regard at all to truth or accuracy. In that respect, all this case does is underline that financial journalists have to be as alive as their tabloid cousins to the dangers of over-exuberance.

Secondly, there is the question of damages. Collins Stewart’s share price suffered a massive drop when these articles were published, and the firm argued that this drop should be used in the FT case as one of the tools to measure its “special damages” – that is, its out-of-pocket loss of business caused by the articles.

This was a novel argument and the FT successfully argued against it saying, among other things, that it would have a chilling effect on the freedom of the press.

However – and this was existing law left unchanged or unchallenged by the FT – the fall in a share price can still be used as evidence to gauge the amount of what is known as “general damage”, that is the damage that was generally done to Collins Stewart’s reputation.

That was the existing law and nothing said in this case has changed that. So again, no curtailing of the freedom of the press.

Thirdly, there is the question of the defences that the FT ran.

These were two-fold. Initially the newspaper relied on what is known as statutory qualified privilege: i.e. the FT claimed that its articles were fair and accurate reports of court documents that were “required by law to be open to public inspection” or made available by a court.

To decide this question, the court would have been asked to rule as a matter of law whether a document that a third party attaches to a writ was such an ‘open’ document.

This might have had ramifications for the press, because there are plenty of articles that the press picks up from such attachments which ordinarily contain the newsworthy meat of a party’s complaint.

However, long before this case came to court – as was reported by Press Gazette at the time – the Civil Procedure Rules Committee, which sets out the relevant court rules that determine which documents are ‘open’, clarified the rules to make it crystal clear that such attachments were not to be treated as open.

The FT’s second line of defence was the so-called Reynolds defence, which, in a nutshell, allows a newspaper to publish untrue allegations if its journalism leading up to the article is responsible and the story is in the public interest.

In order to prove that their journalism is responsible, a newspaper usually has to show that it complied with a 10-step programme laid out by the House of Lords.

The tests are stringent and include requirements such as putting all the allegations to the target, treating the source of the allegations with appropriate weight (does he or she have an axe to grind, for example?) and printing the target’s side of the story.

You can count the numbers of times that Reynolds has worked on the fingers of one hand and it is not now seen by most defendant lawyers as the great catch-all defence that they had once hoped.

Therefore Collins Stewart successfully repelling a Reynolds defence and indeed, ultimately winning at trial, would not have been unexpected by observers, nor would it have been a blow to press freedom.

Rod Christie-Miller is a partner at Schillings

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