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	England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Multigroup Bulgaria Holding AD v Oxford Analytica Ltd. & Ors [2001] EWHC 582 (QB) (01 February 2001) URL: http://www.bailii.org/ew/cases/EWHC/QB/2001/582.html Cite as: [2001] EWHC 582 (QB), [2001] EMLR 28

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Folio 1995-M-No.2141 Royal Courts of Justice
		1st February 2001

MR. JUSTICE EADY: In this libel action, the claimant is a Bulgarian company under the name Multigroup Bulgaria Holding AD. The defendants are respectively, (1) Oxford Analytica Ltd.; (2) Bloomberg L.P., who take no further part in the proceedings; and, (3) David Reginald Young.

The claimant company has subsidiaries engaged in a wide range of activities, including, for example, banking, commodity trading and manufacturing, in various parts of the world. By way of example, there is a banking company called Credit Bank, which has correspondent banks in London, Paris, New York and Zurich. Those are all within jurisdictions in respect of which the claimant sues in this action.

The first defendant is a specialist information and research organisation providing, among other things, daily and specialist briefs about world events by reference to country, economic and industrial analyses to subscriber clients throughout the world. The third defendant, Mr. Young, is the founder and managing director of the first defendant and he has overall editorial responsibility for the first defendant's Daily Brief.

On 29th March 1995, the first and third defendants published on-line to their subscribers allegations in their Daily Brief and in their specialist East European Daily Brief under the heading "Power of Nomenklatura Businesses in Bulgaria" and "Bulgaria: Red Conglomerates".

A complaint was made by letter from solicitors in August 1995 on behalf of the claimant and proceedings were eventually commenced on 27th October 1995.

There has been a long history to the proceedings, which I need not go into for present purposes. The matter has been before the court on a number of occasions over the past few years, including before myself, when I have given a number of judgments setting out the background. I do not propose to go into those matters today, because it is not necessary to do so.

The words complained of are set out in what is now the amended statement of claim at para.4. A considerable number of passages are selected for complaint from the Briefs to which I have referred. There are set out a number of publishees, clearly major institutions or companies in the relevant jurisdictions for the purposes of this action, namely England and Wales, France, Switzerland and the United States.

The natural and ordinary meanings pleaded are as follows (and there is an innuendo by way of alternative):

"(a) The plaintiff is a red conglomerate founded, staffed and run by members of the former unscrupulous and favoured ruling group within the communist regime;

"(b) the plaintiff is descended from and linked to businesses established abroad as fronts for espionage work in the 1980s which were responsible for unlawful spying, counter-intelligence and suppression of political dissent; and/or

"(c) the claimant is involved in an exploitative trade whereby the claimant sells imported raw materials to state owned enterprises at inflated prices and buys output from state owned enterprises on the cheap in order to sell it abroad at higher prices, thereby causing the state owned enterprises needlessly to accumulate losses and debts which are ultimately borne by the state and the taxpayers; and/or

"(d) the claimant exploits the state owned enterprises by means of bribery and extortion, as confirmed by the claimant's control of most of the security and protection firms in Bulgaria; and/or

"(e) the claimant improperly manipulated the weak and corrupt Berov Government in order to promote its own illegal and dubious activities; and/or

"(f) the claimant knowingly gave funds in excess of the legal limit to the SDS presidential campaign in order improperly to influence the outcome of the said election; and/or

"(g) the claimant is involved in illegal and dubious activities, including organised crime; and/or

"(h) a symbiosis between the Bulgarian Government and the claimant was a real possibility and was something to be feared; and/or

"(i) the claimant, in order to protect its own vested interests, would stump progress and reform of Bulgaria by preventing the real privatization of Bulgarian enterprises and foreign investment in such enterprises, thereby causing Bulgaria to lag behind all other Eastern European states; and/or

"(j) the claimant was willing to disown and suppress some of its more dubious activities in return for the Government's help in transforming the claimant from an illegitimate conglomerate into a legitimate conglomerate; and/or

"(k) as a result of the matters pleaded above, the claimant was a corrupt and dubious organisation with whom it was dangerous and inadvisable to do business."

There are then set out particulars of innuendo, explaining the two terms used in the Briefs "nomenklatura" and "red conglomerate".

"Nomenklatura" is said to be an expression which connotes those favoured communists from a former communist regime. The term "red conglomerate" is said to connote those people of position in the former communist regime who have banded together in powerful groupings, linked formally or informally with each other in order, illegally, to control and manipulate commercial life after the fall of communism. This word, in such a connotation, would be familiar to the readers of the words complained of, it is said.

It is clear that the words complained of are capable of bearing at least some very serious meanings indeed (in relation to any person referred to).

It is to be noted that no individual has sued over the allegations. In particular Mr. Pavlov, who gave evidence before the jury this week, does not himself bring proceedings, although in the light of the nature of the allegations he perhaps would not have had too much difficulty in establishing reference to himself.

Mr. Andrew Caldecott Q.C., appearing for the defendants, submits at the end of the claimant's case that I should dismiss the claim, in effect, and discharge the jury. He invited my attention to certain passages in the amended statement of claim. I should first refer to para.1 for the description of the claimant, which is said to have been at all material times a holding company incorporated in the Republic of Bulgaria with subsidiaries engaged, inter alia, in banking, commodity trading and manufacturing, including the production of steel pipe and specialist lenses.

Reference was also made to para.8 in the following terms:

"In consequence of the matters pleaded above, the claimant has suffered very serious injury to its commercial reputation and loss of good will."

There are then set out in para.9 various particulars to support the claim for aggravated damages. My attention was invited particularly to the wording of subpara.(b):

"The fact that it can properly be inferred, by reason of the nature of the claimant's business that the words complained of, by which their terms were plainly injurious to the claimant's business, were published to and would have been read by a large but unquantifiable number of the claimant's actual and prospective clients, investors and competitors, including but not limited to those organisations set out in paras.4 and 5 of the amended statement of claim, as the defendants must have known and intended."

The nub of Mr. Caldecott's submissions at this stage may perhaps be summarised as follows:

1. The Brief containing the words complained of was incapable of defaming this claimant at all or, alternatively, in any of the meanings pleaded in the amended statement of claim, since there is no evidence of it playing any role in the management of the trading companies.

2. This claimant cannot suffer any damage for publication to its "actual and prospective clients, investors and competitors" since, as a mere holder of shares, it has none of these.

3. There is no evidence that the claimant has any trading reputation within any of the jurisdictions sued upon.

4. In so far as Credit Bank can be said to have a very limited reputation within the jurisdictions in issue, that is immaterial because there is no evidence that anyone would have taken the Brief to refer to Credit Bank.

Mr. Caldecott has placed very considerable reliance in the course of his submissions on the relatively recent Court of Appeal decision in the unreported case of McDonalds Corporation v. Steel & Morris in March 1999. In the light of that, he submitted that the appropriate questions in determining whether a corporate claimant has a viable defamation claim are:

(a) whether the corporate claimant has a reputation within the jurisdiction in question; and

(b) whether the publication is apt to damage the reputation of a corporation.

In other words, he makes the submission that a corporate claimant's cause of action is incomplete unless it can prove that it actually has a trading reputation in its own right within the relevant jurisdiction. Obviously, that would turn upon the facts of any given case.

I should perhaps refer to a particular passage in the judgment on which both Mr. Caldecott and Mr. Shields Q.C., appearing for the claimant, made submissions. The judgment had just made reference to the case of Shevill v. Presse Alliance [1996] A.C. 959, which had been to the European Court of Justice and then back to the House of Lords. That authority was said to show the law to be that:

"... where a defamatory publication is apt to damage the goodwill of a corporation which has a reputation within the jurisdiction damage is presumed and the court does not have to inquire into details of likely damage. The words complained of in the leaflet in this case were, insofar as they were defamatory, obviously apt to damage the good will of a corporation. The corporation does not have to trade within the jurisdiction provided that it has a reputation within the jurisdiction, which in this case the first respondents plainly do. However much the appellants may for this purpose disclaim it, both the leaflet and the appellants' conduct of these proceedings were in large measure a criticism in this jurisdiction of the reputation of McDonalds and particularly of the first respondents."

The first respondents, I should interpose, were the American ultimate holding company.

Although it is relevant and illuminating, I do not propose to read any more of that judgment for present purposes.

Mr. Shields accepts the proposition in broad terms for which Mr. Caldecott contends, but argues that the necessary reputation within the jurisdiction can be acquired by the publication of the article itself. He points out that it is generally thought that an individual human being can sue for defamation even if having no established reputation within the jurisdiction. I have always understood that to be the case on the basis that one cannot, as it is said, give a dog a bad name and hang him.

Mr. Caldecott submits that a distinction has to be drawn for this purpose between individual human beings on the one hand and corporations on the other. He makes that submission in the light of the Court of Appeal judgment in McDonalds, even though it is not a matter expressly addressed. One cannot reasonably construe the McDonalds case as contemplating that the reputation in question could be acquired by the very publication complained of.

Mr. Shields referred to certain submissions which I had made as counsel in the House of Lords in the Shevill case (at p.980). The submission was quoted by the reporters in the following terms:

"There is no provision of English law or practise that the victim of defamation has to demonstrate that he was known before the publication. Where the plaintiff was mentioned by name, that is enough. Indeed, there is no reason to suppose that a plaintiff may not pursue a claim even in a case where he first comes to the attention of readers through the libel itself."

In the light of that, my attention was drawn to the words of Lord Jauncey of Tullichettle at (pp.982-3), where his Lordship said:

"Mr. Eady for the plaintiffs argued that this was precisely the result which the Convention was not intended to achieve. He referred to the general tenor of paragraphs 36 to 41 of the judgment of the court as well as to the following passage at p.59, para.8:

'Since under English law there is a presumption of damage in libel cases, the plaintiffs did not have to adduce evidence of damage arising from the publication of the article in question.'

"It was, he submitted, clear that the Convention was not to be construed as altering the substantive law of contracting states.

"My Lords, I consider that Mr. Eady's submissions are correct."

I do not think that Lord Jauncey was there addressing the submission which I had made earlier, as summarised in the reporter's note, which I read: he was focusing, I believe, on my submissions as to the status of the Convention and its effect. Nevertheless, I do not believe it to be seriously suggested that under English law an individual human being has to surmount a preliminary hurdle in order to bring defamation proceedings by showing an established reputation. Yet, in the light of the McDonalds decision, Mr. Caldecott argues that no evidence has emerged by the close of the claimant's case to the effect that this corporate claimant has a reputation in this jurisdiction. Therefore, he submits, the claim should not be permitted to go forward.

In McDonalds, the Court of Appeal did not address the position of an individual or contrast it with that of a corporation: they did not need to do so. Nor did they regard the United States claimant in that case as having anything other than a well-established reputation. The present point of contention was not argued.

A point was raised in the course of argument based upon a hypothetical small trader in Shanghai. Suppose such a person wished to provide transport services for an influx of English tourists expected for some sporting or cultural event. Suppose further that the company was libelled on English television just before the tourists left, in such a way as to discourage them from using the services contemplated by the Shanghai trader. I am by no means persuaded that such a trader (individual or corporate) would, or should, have no cause of action just because he, or it, had never been mentioned in England before.

Mr. Shields, in this context, placed considerable reliance on the example given by Lord Denning in Plato Films v. Speidel [1961] A.C. 1090, 1138, of Mr. Robinson Crusoe being able to sue in England, an example described by Mr. Caldecott, somewhat tartly, as "homespun". However, I recognise that the McDonalds case would appear implicitly to support a distinction between individuals and corporations, whether it was intended to achieve that result or not.

If that is the law, it creates a real difficulty for the claimant to overcome, because this claimant has not shown that it specifically has any such pre-existing reputation within this country.

Mr. Shields seeks to overcome the problem by pointing to earlier defamatory allegations published within the various jurisdictions, and especially in the United States of America. These refer to "Multigroup" simply, not specifically to this claimant. Thus, argues Mr. Caldecott, those examples contribute nothing to the debate and are merely neutral on the issue of whether this company can show a reputation.

More importantly, I need to address the facts of this case quite apart from any such general principle of law. Mr. Caldecott submits that it is now possible to say that no evidence has been adduced that is fit to be left to a jury. He asks me to focus on Lord Keith's test, identified in Derbyshire County Council v. Times Newspapers [1993] AC 534 at 547. His Lordship was there referring to the earlier well-known decision of Browne J. in the Bognor Regis Urban District Council case. He said:

"It is to be observed that Browne J. did not give any consideration to the question whether a local authority, or any other body exercising governmental functions, might not be in a special position as regards the right to take proceedings for defamation. The authorities cited above clearly establish that a trading corporation is entitled to sue in respect of defamatory matters which can be seen as having a tendency to damage it in the way of its business. Examples are those that go to credit such as might deter banks from lending to it, or to the conditions experienced by its employees, which might impede the recruitment of the best qualified workers, or make people reluctant to deal with it."

Mr. Caldecott suggested, incidentally, that this test might enable the hypothetical Shanghai transport company to sue in England, notwithstanding the apparent implications of the McDonalds case.

It seems to me that I can do no better than apply the test follows by Lord Keith.

Mr. Caldecott developed his submissions in the light of the claimant's pleaded case, disclosure of documents in the background, and the evidence which has been adduced in support of it in the course of the trial this week. He advanced a number of propositions in the light of those matters:

The claimant does not itself trade.

Mr. Shields countered this by saying that the argument elevates form over substance and that the company which is the claimant is truly to be regarded as trading through the medium of various subsidiaries. Mr. Caldecott responded that this will not do: in the light of Lord Keith's test, the burden lies squarely on the claimant company to show by evidence that the publications complained of have a "tendency to damage it in the way of its business". No such evidence has been adduced, submits Mr. Caldecott: in particular, there has been no disclosure or evidence to show that the claimant has acted other than as a holding company. What is more, it is one holding company within a shifting group structure. It is not, and was not, the ultimate holding company (as was the case, for example, with the United States corporation in McDonalds v. Steel).

Mr. Shields took a point also on the pleaded case of the defendants. He said that it had never before been denied that the words were capable of referring to this claimant. Very often, of course, in defamation actions the concept of reference (i.e. reference to the claimant) and the concept of meaning merge into one another. In this case meaning has always been in issue. It has been denied by the defendants that the words bear any of the pleaded meanings of and concerning this claimant. Furthermore, Mr. Caldecott has drawn my attention to a number of passages in a rather long ruling I gave in this case on the issue of disclosure of documents as long ago as 30th June 1999. Much of that was predicated upon the proposition that the precise role played by this corporate entity had to be covered in disclosure because it had been at issue from the start (see in particular pp.1-2, 3, 4, 5, 10 and 14 of the transcript).

The claimant does not claim, says Mr. Caldecott, that it enjoys any distinct trading reputation in its own right in England and Wales, the United States, France or Switzerland.

It is true that a subsidiary, Credit Bank, has correspondent banks in those jurisdictions, but, says Mr. Caldecott, that is not the same thing.

There is no evidence, he argues, that the claimant corporation exercises any management role in any of its so-called subsidiaries as opposed to merely owning shares in them.

In re-examination, just at the end of his evidence, and after various submissions had been made in the course of questioning, Mr. Pavlov did say words to the effect that Multigroup controls a number of subsidiaries, not only in the sense of shareholding but also in the sense of management. Mr. Caldecott submitted, however, that this somewhat throw-away line at the very conclusion of his evidence should not be permitted to fill what appeared to be a hole at the heart of the claimant's case. There had, in particular, been no disclosure showing a management role.

It is said that there is no evidence that the claimant founded the four businesses which are now said to be run by its "subsidiaries".

Some of them, at least, pre-date the founding of this company in July 1992. In the claimant's skeleton submissions for the trial, it was asserted that the claimant had set up a subsidiary called Credit Bank in 1991. That obviously cannot be right. The assertion was made by way of example to illustrate the range of activities carried on by subsidiaries. But it also tends to illustrate that careful analysis needs to be brought to bear on exactly what is the nature of this corporation's trading or business reputation, if any.

Mr. Caldecott points to the proposition, which I have already mentioned, that the claimant is not the ultimate holding company in the sense of being at the apex of shareholder control for the entire chain of Multigroup trading companies.

As at the time of publication in March 1995, the ultimate holding company was a Swiss company, apparently, Multigroup Zug (Switzerland) AG, which was itself owned by r. Pavlov, members of his family and certain employees. This matter was explored in evidence with him on day 2 of the trial on p.53 of the transcript.

Furthermore, reference was made to the fact that in relation to a number of the companies the claimant does not claim to hold 50 per cent. or more of the shares.

Mr. Caldecott referred to Sofia Insurance (23.33%), Grand Hotel Varna (39%), Balkan Tourist (41%), Overgas (41%), Balkan Machinery (31%) and Nefto Import/Export (25%).

In the light of those propositions, Mr. Caldecott went on to submit that the claimant company cannot be damaged in the eyes of investors for the simple reason that its shares were controlled at the time of publication by the true holding company in Switzerland; and that the claimant itself cannot be said to have any competitors; and that the claimant itself cannot be said to have any customers. It will be recognised, of course, that this wording reflects the pleading at para.9(b) of the amended statement of claim.

Mr. Shields submitted, in response to that, that it is, in effect, beside the point because the particular paragraph in question is framed in terms of a plea of aggravated damages.

It is true that para.9(b) appears in the context of damage, but Mr. Caldecott referred to it simply to illustrate his more general proposition that this claimant has been put forward to fulfil a role as claimant when it is unable to satisfy any of the criteria required of a corporate libel claimant. In particular, a mere holding company cannot recover in respect of allegations about how subsidiaries conduct their business (see, for example, Prudential Assurance Co. v. Newman Industries [1982] 1 All E.R. 345 366 to 368, Chevel v. Presse Alliance [1992] 1 All E.R. 409, C.A.)

Mr. Caldecott argues that the relevance of these points is that the claimant's case on damages is based on publication to the claimant's actual and prospective clients, investors and competitors, and it might be thought to reflect a misconception as to the claimant's actual role. He argues that, in the light of the evidence, it is not the only or the overall holding company but one in a chain (or so it appears).

He went on to argue that the issues of meaning and reference are inextricably intertwined. The claimant's pleaded defamatory meanings are wholly inapposite for a holding company unless that company is alleged to have a managerial or directorial role of a true parent running a business or businesses at the top of a trading conglomerate's shareholding pyramid. He thought it appropriate to compare the claimant's position, as it has emerged in evidence, with that of the McDonalds Corporation, the American parent company, in the Court of Appeal case. It was described in the judgment of Bell J. at first instance (unreported, 19th June 1997), of which I was helpfully supplied with a copy. Here, the claimant was described by Mr. Caldecott as being merely an intermediate owner of shares in a variety of companies within the Multigroup conglomerate. He says that, in the light of this, there is no reason why any reasonable reader of the words complained of should regard such a company as responsible for any misconduct alleged in the defendants' Brief. Furthermore, the allegations in the Brief are wide-ranging and go back in some cases over a considerable period of time, including prior to the date of the foundation of this corporation.

No particular evidence has been adduced, as might have been admissible, to the effect that any one person within the four jurisdictions (or any of them) would have known either of the existence of the intermediate holding companies within the Multigroup conglomerate, generally, or of the claimant's existence as one of them in particular.

It is submitted, too, that there is no evidence that anyone within any of the jurisdictions who had dealings with Credit Bank would have known that, as at March 1995, any Multigroup company was the majority shareholder in Credit Bank. It would follow, therefore, that there is no evidence of any such readers having thought the less of Credit Bank by reason of the contents of the Brief. As a result, the argument goes, the suggestion of inferential reference or damage to the claimant because of ostensible injury to Credit Bank's reputation would break down.

Even if there had been any publishees who understood the Brief to refer to Credit Bank by reason of its Multigroup connection, Mr. Caldecott argues that the logical consequence of such evidence would be a defamation claim brought by Credit Bank, relying on a reference or meaning innuendo. He developed some subsidiary points in this context:

That the role of a correspondent bank is merely to facilitate the processing of international documentary credit transactions involving buyers and sellers in different countries: it is not in any sense a joint venture between the banks concerned. There was no evidence to suggest that the role of the correspondent banks was anything more than administrative.

There is no evidence that any of Credit Bank's correspondent banks within the jurisdictions in issues sought or obtained details of Credit Bank's place in the Multigroup corporate structure, assuming they knew about it, as a condition of having dealings with it.

Similar points could be made with reference to other trading companies described by Mr. Pavlov. In their case, of course, there is no evidence adduced at all to link their activities to any of the jurisdictions in issue. The contrast is once again drawn with the facts in the McDonalds case because Credit Bank, Intersteel, Sofia Insurance, Balkan Tourist and so on all happen to have distinct names and trading identities which reflect their different commercial activities. It is not the case, for example, as is the case with McDonalds that the name of the group (in this case Multigroup) appears as part and parcel of the title of their subsidiary companies.

It is probably correct to say that earlier judicial statements, to the effect that allegations of corruption cannot be taken as reflecting upon a corporate entity's business reputation, were too widely expressed. Normally of course they would be taken as reflecting upon one or more human beings rather than upon corporations; but there could be circumstances in which Lord Keith's test in Derbyshire could be satisfied if such allegations had a tendency to damage a corporation's business reputation. Yet the court does need to examine such contentions very carefully in those cases where it might be thought that the allegations reflect primarily upon human beings.

The analysis conducted in this case has led me to the conclusion that, in the light of the evidence adduced and the submissions of law addressed to me, it would not be right to leave this matter to the jury (tempting though that option often is). I have decided that no reasonable jury, properly directed, could conclude that this particular corporate claimant was defamed, or damaged, with regard to any trading or business reputation, in the eyes of reasonable readers of the words complained of, within any of the relevant jurisdictions. I accordingly, therefore, accede to Mr. Caldecott's submission.