British Judge Gives Journalism a Major Libel Victory

Philip M. Stone November 17, 2004

It was untested libel damages law and some of the Europe’s most famous libel lawyers were clearly worried, some more than they cared to admit. If the plaintiff’s principle had been accepted then it would have opened the door for companies to ask for enormous libel damages with the consequential impact that many publications could be financially destroyed. But a British high court judge ruled for the media, and the media gave a huge collective sigh of relief.
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The case involved that veritable British financial newspaper institution, the Financial Times, which wrote a story in 2003 about stockbroker Collins Stewart. The stockbroker sued for libel damages. As part of the financial damages sought, it asked, in the first action of its type, for EUR 335 million representing its loss of value on the stock exchange, allegedly because of the allegedly libelous article.  If that unique claim had been upheld it is questionable whether the FT could have survived.

But UK High Court Judge Michael Tugendhat, ruling on pre-trial motions, threw out that part of the case. But he did permit the rest of the libel case itself to proceed – including seeking EUR 5 4 million in special damages for loss of sales allegedly caused by the FT article -- and the trial is scheduled for April, 2005.

The judge ruled there are many reasons for a company’s share price to go up or down. “The reasons why a share is traded at a particular price in any given deal are unknown, or, at best, matters of conjecture…In general I take it that a market price is the product of numerous decisions by people who cannot be asked what their reasons were for trading, or, which may be just as important, for deciding not to trade,” he wrote.

A trial on that issue, the judge said, would have been a waste of time.

The stockbroker had argued that the fall in its share price was the best available reflection of its loss of future revenues. 

The judgment is a major victory for financial journalists. The FT editor said, “It would be a very dark day for journalism and for a free press if publishers were to be held liable for a drop in share prices following the publication of an article reporting company events.”

Had the judge ruled otherwise it would have set a precedent that a drop in a company’s value on the stock market could be recovered via a libel action against an alleged defamatory article. Those losses would likely bankrupt any publication and the threat of such possibilities would severely limit journalistic comment on a company.

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FT Apologizes, Pays Costs and Damages in UK Brokerage Firm Settlement – January 17, 2006

It’s a far cry from the original £230 million compensation sought, but brokerage firm Collins Stewart can claim victory on its libel proceedings against the Financial Times under a settlement that costs the newspaper £300,000 in damages plus the brokerage firm’s legal costs, an apology on the front page of the newspaper’s UK edition companies section, and an apology on FT.com.

The case after many delays came to trial this week but was adjourned to allow the settlement talks. Total cost to the FT is thought to be around £4 million with all legal costs included, and it would be usual for a UK national newspaper to have insurance in place to handle such a judgment.

There had been an antagonistic public relationship between the brokerage firm management and FT editor Andrew Gowers after the libel suit was filed in September, 2003. The brokerage firm tried to create new libel law by suing for damages based on the drop in its share price -- and Gowers continually claimed that the FT had done no wrong. But a possible turning point came last November when the FT bounced Gowers and replaced him with Lionel Barber, who no doubt wants to concentrate on the future – like getting the UK edition’s circulation back up over 100,000  -- rather than having a £37 million damage claim pending that could seriously affect editorial spending

Although the court last year threw out the share loss claim, that remaining £37 million claim was still a cloud over the FT’s finances, as it was for Pearson, the FT’s owner, and its share price rose more than 1% in a down market on the settlement announcement yet again confirming how the markets hate uncertainty and greet decisions.