Reachlocal UK Ltd & Anor v Bennett & Ors [2014]

In Reachlocal UK Ltd & Anor v Bennett & Ors [2014] EWHC 3405 (QB) the claims made were for defamation, including both libel and slander, malicious falsehood, breach of confidence and breach of contract. Sir David Eady in an earlier hearing on 28th March 2014 granted interim injunctions against the Defendants meaning that there could not be any further publication of the defamatory words complained of and he ordered that they hand over all the details they had of the Claimant’s Clients and all the information stored by them on their database.

The Judge also gave directions as to how the action would progress which included a quick trial and services of defences by 22nd April 2014, which were subsequently not served by the Defendants, whereupon the Claimants lodged an application at the Court for further directions.

On the 30th April 2014 Mr Justice Tugendhat made an order that the Defendants were to file and serve their defences by the 6th May 2014. However, they still did not serve their defences and the Claimants subsequently applied for judgment which application was heard by Sir David Eady on the 9th June 2014.

At this hearing the First and Third Defendants did appear before Sir David Eady and they informed the Court that they intended to make an application for relief from sanctions. In order for them to make their application the hearing was adjourned to the 23rd June 2014 before Mr Justice Nicol. He refused relief from sanctions on the 3rd July 2014 in respect of the First Defendant but granted relief to the Third Defendant and Mr Justice Nicol gave judgment to the Claimants because of the defences not being served and directions for the hearing in respect of assessment of damages and other final relief.

HHJ Parkes noted on his summing up of the matters that none of the costs orders granted by his colleagues, Justices Tugendhat, Nicol and Sir David Eady had been complied with and also he did not believe the Defendants had complied with Sir David Eady’s order for the Defendants to reveal what Client information they had been holding of the Claimants. The Claimants also believed there had been further publication of the defamatory material by the Defendants despite the injunctions.

The court described as a “cynical and hypocritical campaign of denigration” against ReachLocal in an attempt to steal their customers. This campaign included the Defendants emailed their customers suggesting that the Claimants were scamming or deceiving them and profiting from this deception. They were followed up by blog posts and telephone calls which made similar allegations.

Mr Justice Parkes said that the meanings of the words complained of were that:

  • operate a business, the success of which has been due to the fraudulent deception of customers;
  • are prepared to and do engage in practices which are fraudulent or unethical or contain a level of deception or misrepresentation that amounts to ‘trickery’;
  • are prepared to and do actively conceal from their customers the truth as to how much money is being applied towards obtaining Google AdWords;
  • employ people of no talent who have no digital marketing skills.

The Claimants produced a spreadsheet to the Court. Mr Justice Parkes noted that out of the 71 clients cancelling their business with the First Claimant, 37 cancelled both current and future advertising with an overall loss of £302,431.78.

Mr Justice Parkes observed that the First Claimant had suffered substantial loss because of the defamatory communications. He could not see any reason for the First Claimant not recovering the sums lost above which had resulted because the clients booking their services had cancelled before they were paid for. Mr Justice Parkes ordered a 20% discount of the figure to be recovered so as to make allowance for those clients who had not been affected by the defamatory communications but did not want to proceed with the Claimant for other reasons. The discounted figure in respect of future loss amounted to £241,945.42.

The First Claimant attempted to mitigate their loss and sought to recover special damages in respect of this. Mr Bray told Mr Justice Parkes how he offered credits in the sum of £60,728 to clients swayed by the defendants and were going to cancel. Secondly they gave refunds to unhappy clients leaving ReachLocal in circumstances where the First Claimant was unable to persuade them to stay but wanted them to leave under good terms, to lessen any hostility and do business with ReachLocal again. The refunds totalled £146,576. Thirdly the public relations person hired to minimise damage over 12 months totalling £66,600.

Mr Justice Parkes took the view that the sums paid to customers to encourage them to stay with the company and the public relations consultant were recoverable as reasonable mitigation but he did not feel that the payment of refunds to customers referred to above could be viewed as a reasonable way to mitigate the loss that had occurred. He therefore disallowed that part and allowed the sums of £60,728 and £66,600.

Lord Hailsham LC in the case of Broome v Cassell [1972] said: “Not merely can (the libel plaintiff) recover the estimated sum of his past and future losses, but, in case the libel, driven underground, emerges from its lurking place at some future date, he must be able to point to a sum awarded by a jury sufficient to convince a bystander of the baselessness of the charge.” In McLaughlin v Lambeth BC [2011] EMLR 8 at [112], Tugendhat J observed: “… the main point of defamation proceedings is vindication. Vindication includes preventing, or reducing the risk of, future publications of the words complained of.

The fact that the damage suffered so far may be small (if it is), is no indication of the extent of the damage which is prevented from occurring in the future, when a claimant in a libel action obtains a public retraction or a judgment in his favour from the court.”

Mr Justice Parkes observed that the special damages awarded would give some vindication to the Claimants but he thought that general damages should be enough for the Claimants to demonstrate to others in their area of business that the allegations made by the Defendants were without foundation.

He continued that the Defendants had conducted a sustained campaign against the First Claimant being ReachLocal, to disparage them and their business directed at their clients, whose names and addresses were taken from a list which had been removed from ReachLocal in breach of confidence and been passed to the Defendants. Mr Justice Parkes pointed to that publication which has contributed to the level of special damages suffered. He also noted that Mr Bray in his evidence stated that the Fifth Defendant had published derogatory tweets about ReachLocal which could have reached about 3,780 users and to other accounts reaching 7,300 users. The Fifth Defendant alone had one follower who is followed by some 90,000 users. Further the Fifth Defendant had used its Facebook and LinkedIn pages.

Mr Justice Parkes noted that the First Claimant was only incorporated in the UK in 2008, operating in a new area and he quoted an extract from the case of Jon Richard Ltd v Gornall [2013], “It is not a business that has yet had the opportunity to build up for generations an established standing associated with integrity from which those with whom it is dealing would immediately recognise that any wrongdoing was entirely uncharacteristic of it. In that sense, it was vulnerable, perhaps, to this sort of attack.”

On looking at all the matters, Mr Justice Parkes considered the correct award to the First Claimant for general damages was £75,000 and with regard to the Second Claimant, as they have never operated in this Country, a nominal sum of £100. He continued that the words complained of damaged the ReachLocal Company, the First Claimant.

Further, Mr Justice Parkes ruled that the First Claimant was entitled to a final injunction in accordance with the draft order which was in the same form as that granted by Sir David Eady.

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