My Lords, in speaking to this Motion, I shall speak also to Motions B1 and B2, tabled by the noble Baroness, Lady Hayter of Kentish Town, and Motion B3, tabled by my noble friend Lord Lester of Herne Hill.
Amendment 2 concerns two distinct but related issues which have already featured extensively in debates in both Houses during the passage of this Bill. These are whether there should be restrictions on the right of bodies corporate and other non-natural persons to bring an action in defamation, and whether any non-natural person which is performing a public function should be prevented altogether from bringing a claim in relation to a statement concerning that function. I shall focus my comments on government Amendment 2B and the other amendments that have been tabled, rather than on Amendment 2 in its original form.
Amendment 2B amends Clause 1 to make clear that a body trading for profit will satisfy the serious harm test only if it is able to show that the statement complained of,
"has caused or is likely to cause the body serious financial loss".
In speaking to Lords Amendment 2 in the other place, the Government made it clear that although we were opposed to that amendment, we recognised the strength of feeling that exists on the issue of whether there should be a specific provision in the Bill requiring non-natural persons trading for profit to show financial loss, and that we would consider the point further. This amendment reflects the outcome of those considerations.
As I have explained at earlier stages of the Bill, we amended what was initially a "substantial harm" requirement to one of "serious harm" in order to raise the bar for bringing a defamation claim. The amendment therefore refers to "serious" financial loss to reflect that aim, and now links explicitly to the serious harm test. The use of the phrase "serious financial loss" makes it absolutely clear that the financial loss required to meet the serious harm test must itself be serious. By contrast, the reference in Lords Amendment 2 to "substantial financial loss" could inadvertently have had the effect of weakening what has to be shown to satisfy the test.
Secondly, the term that we have used to define those who will be subject to this requirement-
"a body that trades for profit"- is a much clearer and simpler definition than that used in Amendment 2. These are the bodies that this House has expressed concern about, so we have phrased the amendment specifically and directly to meet those concerns. A vaguer formulation such as that in Amendment 2 would have risked inadvertently catching other bodies, such as charities, which are not the subject of concern. I believe that this effective and proportionate approach addresses the concerns that have been expressed in this House and elsewhere.
The Government are unable to accept Motions B1, B2 and B3. In relation to Motion B1, as noble Lords are aware, in the case of Derbyshire County Council v Times Newspapers, the House of Lords held that local authorities and central governmental bodies are already prevented from bringing actions for defamation. Motion B1 would add Amendment 2C, which seeks to extend that principle and put an absolute bar on any non-natural person performing a public function from bringing a claim in relation to a statement concerning that function. This would remove completely the right of a wide range of businesses and other organisations to protect their reputation. We consider that to deprive them of this right would be excessive and disproportionate. Although the amendment focuses on criticisms in connection with the exercise of a public function, that criticism could have a wider impact on the reputation of the business more generally. It is important to recognise that unjustified and defamatory allegations can cause considerable damage which affects all those connected to a business, including shareholders and employees.
We believe that a rigid and restrictive statutory provision which would completely remove the right to claim from a wide range of bodies is not a proportionate approach. We are confident that the range of measures included in this Bill will provide effective protection for consumers and others with limited means to ensure that they are not inhibited from criticising bodies exercising public functions. These include the serious harm test, which if government Amendment 2B is accepted will require such bodies to show serious financial loss, the new public interest defence and the steps that we are taking to introduce strong and effective costs protection measures.
Our view is that it is much better to maintain the present common law position as set out in the Derbyshire case and to allow the courts to develop that principle as they consider appropriate and necessary in the light of individual cases. For the avoidance of any possible doubt, I make absolutely clear that the absence of this amendment from the Bill will have no effect on the existing Derbyshire principle, which prevents local authorities and governmental bodies bringing an action. That principle will continue to apply under the common law as it does now.
To reassure my noble friend Lord Lester, who I know has concerns on this point, the Derbyshire principle was established before the passage of the Human Rights Act, and the issue of whether it would extend to a body falling within the definition of a public authority under Section 6 of that Act is not one that has yet been tested before the courts. It is therefore not possible to predict the view that the courts would take were this issue to be raised. However, I can make it absolutely clear that there is nothing to prevent the courts developing the principle if they consider it appropriate to do so in light of changes that continue to take place in the way services of a public nature are provided.
I turn now to Motion B2. This would add Amendment 2D to introduce a requirement that, in order to bring a claim, a body that trades for profit would first have to obtain the permission of the court. Permission would be granted only if the prospective claimant could show that the publication of the statement complained of had caused or was likely to cause the claimant serious financial loss. As we have said throughout our debates, we believe that a permission stage for this purpose is wholly undesirable as it would create unnecessary duplication and additional costs for both parties. If the claimant were required to show serious financial loss in order to get permission to bring a claim, this would effectively mean that the court would be deciding at that point whether the serious harm test was satisfied. This is not a matter well suited to a permission stage. It would mean that the defendant would in many cases want to be involved and would need to submit evidence in order to challenge the claimant's position. In these circumstances, an oral hearing would almost certainly be required. In cases where the claim then proceeded, this would cause unnecessary additional costs for both parties. There would also be a need to provide an appeal mechanism, which could potentially add further to those costs.
As I have said before, we do not consider that there is any need for a permission stage. The amendment we have tabled today will make perfectly clear what the serious harm test means for bodies trading for profit. The Civil Procedure Rules already allow the defendant to apply at any point after the claim is served for it to be struck out. When the Bill is implemented, the defendant will continue to be able to do this at a very early stage on the basis that it does not satisfy the serious harm test. The addition of a permission stage would therefore add little or nothing as any case where the existence of serious harm was disputed could have that issue resolved at a very early stage in any event.
Under the proposals which we are discussing with the Civil Procedure Rule Committee, either party will also be able to apply for an early ruling on other key aspects of the claim, such as the meaning of the words complained of and whether they were statements of fact or opinion. An additional permission stage on serious harm would mean that two sets of applications and hearings could often be needed where otherwise one would be sufficient.
As well as ensuring that key issues can be resolved at as early a stage as possible, we will also introduce measures to give cost protection to parties with limited means to enable them to bring or defend a claim against an opponent with substantially greater resources. As I have explained, we are currently considering very carefully the recommendations of the Civil Justice Council that were recently submitted to the Secretary of State so that we can ensure that measures are put in place which provide effective protection in all cases involving an inequality of arms. It is our firm view that building in an extra procedural layer through a permission stage would simply add to the costs and delay involved for no appreciable benefit.
Finally, I will address the issue raised by my noble friend Lord Lester of Herne Hill in his Motion B3. This relates to a concern that the general powers given to local authorities in Section 1 of the Localism Act 2011 may have overturned the Derbyshire principle in relation to local authorities. This point was raised by the noble Lord, Lord Browne of Ladyton, in Committee and I am happy to reaffirm what I said then.
It is our firm view that if a case were to be brought on the basis that Section 1 of the Localism Act had overturned the bar on local authorities suing in defamation, the courts would still find that local authorities cannot bring an action. We consider that the public policy grounds on which the Derbyshire judgment was reached-namely, that it would be contrary to the public interest for organs of government to be able to sue in defamation and that it would be an undesirable fetter on freedom of speech-remain compelling and that these have been bolstered by the Human Rights Act, which was enacted after Derbyshire.
As I explained in Committee, in the very unlikely event that a court were to hold otherwise, the situation could be promptly remedied without any need for primary legislation by way of a statutory instrument under Section 5(3) of the Localism Act. This allows the Secretary of State to prevent local authorities using Section 1 powers to do anything specific in the order. In this case, an order could be made preventing any action being brought in defamation. I hope that putting these matters clearly on the record will provide the reassurance that my noble friend is seeking.
To conclude, for the reasons I have explained, I urge the House to support Motion B tabled by the Government and to reject Motions B1, B2 and B3. I beg to move.
Moved by Baroness Hayter of Kentish Town
As an amendment to Motion B, after "2B" insert "and 2C".
2C: After Clause 1 insert the following new Clause-
"Non-natural persons performing a public function
Non-natural persons performing a public function do not have an action in defamation in relation to a statement concerning that function."