Niche Products Ltd v MacDermid Offshore Solutions LLC [2013] EWHC 3540 (IPEC)

Case No CC12 P 03715[2013] EWHC 3540 (IPEC)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
INTELLECTUAL PROPERTY ENTERPRISE COURT
Venue Rolls Building, 7 Rolls Buildings, Fetter LaneDate 14/11/2013
London EC4A 1NL
Before
MR JUSTICE BIRSS(Sitting as an Enterprise Judge)
Between
NICHE PRODUCTS LIMITEDClaimantMACDERMID OFFSHORE SOLUTIONS LLCDefendant
Michael Hicks (instructed by Gateley LLP) for ClaimantAdrienne Page QC (instructed by Addleshaw Goddard LLP) for DefendantHearing Hearing dates: 25th September 2013
JudgmentMr Justice Birss :
[1]The main claim in this action is a claim for malicious falsehood brought by the claimant (Niche) against the defendant (MacDermid). The action is described in my earlier judgment [2013] EWPCC 11 on 7th March 2013 which refused MacDermid’s application to stay the proceedings in favour of parallel proceedings in the United States District Court for the Southern District of Texas, Houston Division.[2]Since that judgment was handed down a number of things have happened. The trial date for this claim was fixed to start on 14th January 2014. On 5th June the High Court (Warren J) dismissed MacDermid’s appeal in relation to the stay ([2013] EWHC 1493 (Ch)). Also on 5th June, MacDermid filed a Part 18 Request for Further Information and on 21st June Niche filed a Response to that Request. Further directions were given on 26th June which included a timetable for statements of case and set a further case management conference to take place in September. MacDermid indicated that it intended to apply to strike out the proceedings and the directions provided that that application should be listed to be heard at the same time as the further CMC. MacDermid filed its defence and a counterclaim on 15th July 2013 and Niche filed a reply on 5th August. The date for the CMC and the hearing of MacDermid’s application to strike out was fixed for 25th September.[3]Having heard the argument on 25th September I informed the parties that I would reserve judgment on MacDermid’s application to strike out. However in the meantime Niche submitted that directions be given to ensure that the trial date in January was not lost. I gave directions in order to ensure that if the proceedings were not struck out, they remained on track for a trial in January. Niche submitted the January trial should consist of a trial of preliminary issues, focussed on the technical dispute between the parties. I accepted that submission and the directions were made accordingly. They are at Niche’s risk as to costs since at the time the directions were made, I had not decided MacDermid’s strike out application.[4]This is my judgment on MacDermid’s strike out application.[5]MacDermid’s application is on the following bases: 1. That the claim in malicious falsehood be struck out: a) Pursuant to CPR 3.4 (2)(a) because the particulars of claim disclose no reasonable grounds for bringing the claim by reason of the failure to complain of any statement that is actionable by the claimant as a statement referring to the claimant or its product, Pelagic 100 in disparaging or adverse terms of a kind likely to cause the business of the claimant pecuniary damage; b) Pursuant to CPR 3.4 (2) (a) and/or(b) and/or(c) because the pleaded case on damage and/or under section 3 of the Defamation Act 1952 in the Particulars of Claim and the Part 18 Response is insufficiently particularised; not in compliance with minimum pleading requirements and incapable of remedy; misconceived as a matter of law; and discloses no reasonable grounds for bringing the claim; c) Pursuant to CPR 3.4 (2) (a) and/or (b) and/or (c) because the pleaded case on malice in the Particulars of Claim and the Part 18 Response is defective as to both substance and pleading requirements; misconceived as a matter of law and discloses no reasonable grounds for bringing the claim; d) Pursuant to CPR 3.4 (2) (a) and/or (b) and/or (c) because the particulars of claim fail to plead a real and substantial tort and to litigate this issue would be pointless, disproportionate and wasteful of the court’s and the parties’ resources in the sense explained in Jameel (Yousef) v Dow Jones [2005] QB 946. 2. […] 3. […] 4. Further, and/or alternatively summary judgment be given for the defendant, pursuant to CPR 24.2 (a) (i) on the whole of the claim, alternatively on the claim for malicious falsehood. Alternatively on the issues of damage and/or likely damage and malice because; a) The claimant has no real prospect of succeeding on the whole claim and/or the issues of damage, likely damage or malice for the reasons set out in 1 (a) –(d) above; and b) There is no other compelling reason why the claim should be disposed of at trial.[6]The action as pleaded also includes a copyright claim and a claim for misuse of confidential information. In paragraphs 2 and 3 of the application, MacDermid seeks to have these struck out or stayed if the malicious falsehood claim is struck out. The confidential information claim is currently stayed following the observation made in paragraph 47 of my previous judgment and the copyright claim was described in my previous judgment at paragraph 15 as ‘clearly secondary and peripheral’. I can see no good reason why the copyright or breach of confidence claims could survive if the malicious falsehood claim was struck out or if summary judgment was given on the malicious falsehood claim in the defendant’s favour. To permit those two claims to continue in that circumstance would not further the overriding objective of dealing with cases justly and in a proportionate manner. The real issue is the malicious falsehood claim.

Malicious falsehood

[7]The malicious falsehood claim arises as follows. As I mentioned in my previous judgment, MacDermid and Niche are rivals in the oil business. Both companies sell hydraulic fluids for use in subsea production control systems. Niche has a product called Pelagic 100 and MacDermid has a product called Oceanic HW443. They are directly competitive products. MacDermid produced a new formulation of its Oceanic HW443 fluid which I have referred to in my previous judgment as Oceanic HW443 v2. I will use the same description in this judgment. Niche says that MacDermid was telling customers that it was appropriate to consider that Oceanic HW443 v2 had the same characteristics as Oceanic HW443 v1 because none of the chemical performance properties of the product had been changed.[8]Niche conducted comparative tests of the two versions in April/May 2012, and produced a report setting out the results (“the Niche Report”). The Niche Report contends that version 2 is a different product from version 1. The nature of the differences was summarised in my previous judgment. MacDermid accepts that the corrosion inhibitor in version 2 has a different chemical structure from the corrosion inhibitor in version 1, but maintains that the two products are the same in all material respects. It does not accept that the tests conducted by Niche were fair and describes them as ‘misconceived and inappropriate’. Among other things, MacDermid contend that the samples tested had become degraded and/or contaminated through improper handling (I should add that Niche does not accept that this is the case).[9]In any event, since MacDermid did not agree with the Niche Report, MacDermid issued a rebuttal letter on the 18th June 2012 (“the MacDermid Letter”). The MacDermid Letter states that MacDermid has “received notification regarding the distribution of misleading information from a specific competitor on Oceanic HW443 series v1 versus v2”. The MacDermid Letter goes on to state that MacDermid’s position, is that the performance and specifications of Oceanic HW443 are unchanged and there has been no change to the important chemical performance properties.[10]The malicious falsehood claim brought by Niche is based on the MacDermid Letter. Niche contends that the MacDermid Letter is false in that it states that the technical report was “misleading and erroneous”. Niche pleads that the statements are false because the Niche Report is true and is not misleading. In relation to malice, the essence of Niche’s case is that the defendant must have known that the Niche Report was accurate and not misleading. Alternatively, Niche contends that the defendant was reckless as to whether its statement, that the Niche Report was erroneous and misleading, was true or false. As regards damage, Niche contends that the publication of the MacDermid Letter was calculated to cause, and has caused, damage to the claimant’s business. Niche seeks declarations essentially that its position in relation to the Oceanic product is correct, that is to say that version two is different from version one in material respects, and seeks injunctions and damages for malicious falsehoods.[11]The MacDermid letter does not identify the claimant by name. However for the purposes of this application there is plainly a properly arguable basis for alleging that any relevant recipient of the letter would understand who the defendant was alluding to. The specific competitor is obviously Niche. The MacDermid Letter makes no sense otherwise.

The law

[12]The four essential constituents of the tort of malicious falsehood were set out by Glidewell LJ in Kay v Robertson [1991] FSR 67 as follows: “The essentials of this tort are that the defendant has [1] published about the plaintiff, [2] words which are false, [3] that they were published maliciously and [4] that special damage has followed as the direct and natural result of their publication. As to special damage, the effect of s.3 (1) Defamation Act 1952 is that it is sufficient if the words published in writing are calculated to cause pecuniary damage to the plaintiff. Malice will be inferred if it be proved that the words were calculated to produce damage and that the defendant knew when he published the words that they were false or that they were reckless as to whether they were false or not.[13]Section 3 (1) of the Defamation Act 1952 Act provides as follows: (1) In an action for … malicious falsehood, it shall not be necessary to allege or prove special damage – a) if the words upon which the action is founded are calculated to cause pecuniary damage to the plaintiff and are published in writing or other permanent form; or b) if the said words are calculated to cause pecuniary damage to the plaintiff in respect of any office, profession, calling, trade or business held or carried out by him at the time of publication. a) if the words upon which the action is founded are calculated to cause pecuniary damage to the plaintiff and are published in writing or other permanent form; or b) if the said words are calculated to cause pecuniary damage to the plaintiff in respect of any office, profession, calling, trade or business held or carried out by him at the time of publication.[14]Mr Hicks, who appeared for the claimant, referred me to a convenient exposition of the law provided by Tugendhat J, in Cruddas v Calvert [2013] EWHC 2298 (QB) at paragraphs 191-196. In summary, dealing with the 1952 Act, Tugendhat J held:(1) “calculated to cause pecuniary damage” meant “more likely than not to cause pecuniary damage” (Judgment para.195);(2) a claimant who is unable to prove actual damage, and who relies on s.3 may still recover substantial damages and is not restricted to a nominal award (Joyce v Sengupta [1993] 1 WLR337, 347(Judgment para.196)).[15]There was no dispute before me as to the principles to be applied in relation to the strike out or summary judgment application. The debates were whether the particular aspects of the malicious falsehood claim which were attacked by the defendant on this application satisfied the various requirements of the law. The points made by the defendant related to the following aspects: i) The requirement that the alleged falsehood must relate to the claimant’s goods or business, ii) The requirement for actual or likely pecuniary damage, iii) The requirement to prove the statements were maliciously motivated, iv) “Jameel” abuse.[16]I will deal with each one in turn. i). The requirement that the alleged falsehood must relate to the claimant’s goods or business[17]The defendant submitted that in order to be actionable as malicious falsehoods, the statements complained of must in some way relate to the claimant’s goods or services, or his business and must be of a kind as to cause damage of a pecuniary nature, as opposed to damage to the claimant’s honour or reputation, in the sense protected by the law of defamation. The defendant submitted that neither of these requirements is fulfilled or capable of being fulfilled in this case, whether on the face of the MacDermid Letter itself or on the face of the case pleaded in the Particulars of Claim and in the further information provided.[18]The defendant argued that the claimant does not articulate a case based on any alleged disparagement by the defendant of the claimant’s business as a supplier of hydraulic fluids, or of the claimant’s product, Pelagic 100, the statements complained of by the claimant as malicious falsehoods are statements in which the defendant described information distributed by the claimant as “misleading” and as “erroneous”.[19]The essential argument from the defendant is that the MacDermid Letter was, it contends, purely defensive. It involved no attack by the defendant (intentional or otherwise) upon, and thus no falsehood concerning, either the product of the claimant (i.e. Pelagic 100) or the business of the claimant as a supplier of hydraulic fluids. Not a single word of the MacDermid Letter was directed at the claimant, its business or its product, not even by way of the observations involving a comparison of Oceanic HW443 with Pelagic 100.[20]The defendant contends that the MacDermid Letter said only that the claimant had distributed competitive information about the defendant’s product that was misleading and erroneous. The defendant submitted that the Court should not entertain a claim brought by the claimant for the purpose of investigating whether two versions of the defendant’s products are the same (i.e. not even a comparison between the respective products of the claimant and the defendant). The defendant points out that this is what the claimant wants the Court to determine, i.e. whether version two is materially the same as version one. The defendant referred to the observation of Lord Herschell in White v Mellin (1895) AC 154 HLat 165, deprecating the idea that:
“the Courts of law would be turned into a machinery for advertising rival productions by obtaining a judicial determination of which of the two was better.”
[21]The defendant submitted that a malicious falsehood claim cannot be brought by a claimant to test statements made by a defendant about the defendant’s own products. Statements whereby a businessman is alleged to have misrepresented the qualities of his own products are not actionable by a competitor as malicious falsehoods. They do not fulfil the requirement that they must relate to the products or business of the competitor, and must be of such a kind as to cause damage of a pecuniary nature. The defendant also submitted that the fact that the defendant is aware that his statement is false in such a case will not amount to malice, citing Dunlop v Mason (1904) 20 TLR 579 at 581, Collins MR. In addition to White v Mellin, the main authority relied on by the defendant is Schulke v Mayr UK Limited v Alkapharm UK Limited [1999] FSR 161 (Jacob J as he then was). Jacob J applied White v Mellin, citing Lord Watson at page 166 as follows: “Every extravagant phrase used by a tradesman in commendation of his own goods may be an implied disparagement of the goods of all others in the same trade; it may attract customers to him and diminish the business of others who sell as goods and even better articles at the same price; but that is a disparagement of which the law takes no cognizance. In order to constitute disparagement which is, in the sense of law, injurious, it must be seen that the defendant’s representations were made of and concerning the plaintiff’s goods; that they were in disparagement of his good and untrue; and that they have occasioned damage to the plaintiff (Melin at 166, quoted by Jacob J at 165).[22]Jacob J pointed out that the last requirement in the passage quoted was relaxed by s.3 of the Defamation Act 1952. The Schulke case involved an advertisement issued by the defendant which made certain claims relating to the defendant’s own product which the plaintiff alleged were untrue. Jacob J rejected the claim for an interlocutory injunction on the basis that to do so would involve a very substantial extension of the common law of malicious falsehood. He posed the question of whether the mere publication of false representations by a defendant about its own products without any reference to the plaintiff or its products gave the plaintiff a cause of action in malicious falsehood and he rejected the argument, saying:
“its whole origin [the tort of malicious falsehood] is therefore based on some kind of disparagement of the plaintiffs; ‘knocking’, to use the advertiser’s jargon. I can see nothing in any of the authorities to which I was taken which suggest that the tort goes further than disparaging statements about the plaintiff or his goods […] Accordingly I do not think that it actually matters, as far as the tort of malicious falsehood is concerned, whether or not the statements concerned of are, or are not, untrue.”
[23]The Schulke case was also put on other bases which failed. In particular, an attempt to run the case based on passing off was also not accepted.[24]The defendant’s essential submission is that(i) there must be some nexus between the falsehood on the one hand and the claimant, his property or his economic interests on the other and(ii) that falsehood must be of a kind as to cause the claimant economic harm. It is this requirement which has limited the tort to falsehoods about property, trade and business, whereas damage to honour and reputation is protected by defamation.[25]Another way in which the defendant put its case was to consider the nature of the claimant’s business and the potential relationship between that business and the statements the subject of the complaint. As the defendant pointed out, the claimant is not in the business of providing information on products to the market for the relevant fluids. For example the claimant’s business is not and is not said to extend to writing independent technical reports on hydraulic fluids pursuant to third party commissions, neither is the claimant in the position of an industry regulator or as the publisher of a “Which? Guide” and therefore under responsibilities to report accurately, objectively and independently on such fluids. There is no case to be advanced by the claimant that it was motivated to write and distribute the Niche Report for any substantial reason other than for the competitive purpose of promoting sales of Pelagic 100. The claimant’s writing and distribution of the Niche Report was a marketing exercise ancillary to its business as a supplier of hydraulic fluids in general, Pelagic 100 in particular. It follows, submits the defendant, that it is a matter of common sense that the defendant’s expression of disagreement with conclusions of the Niche Report, whether true or false, involve no statement of a kind likely to cause pecuniary damage to the business carried on by the claimant as a supplier of hydraulic fluids for subsea use. The defendant submitted that in this connection it is always vital for the court to be careful to distinguish statements that go to reputation only and which are properly the subject of a defamation claim.[26]Finally the defendant submitted that the statement the subject of complaint, that is to say the MacDermid Letter, was a foreseeable but nonetheless modest and proportionate response to the claimant’s marketing campaign targeting Oceanic HW443 v2. They referred to the observations of Aldous J in Easycare v Brian Lawrence [1995] FSR 597 that the world of commerce has never been a place for the mealy mouthed and that the right to freedom of speech must be maintained. The defendants submitted that free speech and the right to defend its Article 10 rights to freedom of expression are highly relevant considerations and pointed out that the court is under a duty to ensure that restrictions imposed on a defendant’s freedom of expression by the law of malicious falsehood are duly prescribed by law and not disproportionate to the purposes towards which the restrictions are legitimately directed (Marathon Mutual v Waters [2010] EMLR 3 at 9B).[27]The claimant’s submissions were as follows. The claimant did not disagree with the essential legal principle that there must be a nexus between the falsehood and the claimant, his property or his economic interests. The claimant submitted that there was such a nexus in this case, for the simple reason that the falsehood relied on was the assertion by the defendant that the claimant’s report was misleading and erroneous. In other words, the claimant emphasised and relied on the fact that the allegedly false statement was a statement concerning something produced by the claimant, that is to say, its technical report. The fact that the Niche Report might have been produced by the claimant as part of its marketing is neither here nor there. So, following the principle enunciated by Jacob J in Schulke, the requirements were satisfied or at least properly arguably so for the purposes of a strike out application. If the essential nexus existed, then the other aspects of the defendant’s argument on this topic fall away. If the claimant has a properly arguable claim, then characterising the MacDermid Letter as a foreseeable or modest response to the claimant’s acts, even if that is accurate, is irrelevant. Permitting a properly arguable claim for malicious falsehood to go forward is not an infringement of Art 10. i). Assessment[28]The real technical dispute in this case is about the qualities of the defendant’s own products. If the MacDermid Letter had simply asserted that Oceanic HW443 v2 was, in all material respects, the same as Oceanic HW443 v1 and if the claimant was basing its claim for malicious falsehood on that assertion alone, then I would accept the defendant’s submissions and strike this claim out. Such a case would fall squarely within the forbidden territory described by Lord Watson in White v Mellin and Jacob J in Schulke.[29]However that is not the way this claim is constituted. The claim is a claim based on the allegedly false assertion by the defendant that a report issued by the claimant is misleading and erroneous. That is a distinction from the principles articulated by Jacob J (which neither side challenged). The question is whether that distinction is a sufficient one to render the claim properly arguable.[30]In my judgment the distinction is a real one for the following reason. The difference arises from the words the defendant freely chose to use. The defendant could have confined itself to comments related only to the defendant’s own product but it did not. The defendant could even have published a statement along the lines:
“we are aware that a competitor has said our two products are different from each other. We wish to make it clear that we do not agree. Our products do not differ in any material way.”
If that was all that had been said then I doubt the case could fairly be distinguished from Schulke. Merely referring to a competitor would not risk engaging the law of malicious falsehood. However when a trader expressly makes a statement about something emanating from its competitor, it seems to me that the reasons given in the cases why the law of malicious falsehood should not be engaged do not apply. The trader is not then discussing its own products or services, it is addressing what its competitor is doing. For the law of malicious falsehood to apply to such statements does not seem to me to risk infringing the trader’s Art 10 right to freedom of speech.[31]However merely talking about a competitor cannot be sufficient to engage malicious falsehood either. As the defendant points out, a separate question is whether the MacDermid Letter could only have been actionable in defamation. The defendant contends that if anything, it could only have been damaging to the claimant’s reputation. After all the claimant’s business relates to selling hydraulic fluids and not to writing objective technical reports.[32]I do not doubt that assuming everything in the claimant’s favour, the MacDermid Letter could be something damaging to the claimant’s reputation and might have been the subject of a defamation claim. But that does not answer the question I have to decide. The fact that the statement may have an impact on reputation does not mean there is not a nexus between the alleged falsehood and the claimant’s property or economic interests. This question is related to the question of pecuniary damage (see below). If the statement is likely to cause pecuniary damage then there is a nexus between the alleged falsehood and the claimant’s economic interests. A further relevant factor is the context in which the disputed statements have arisen. It is in the course of a public argument between trade rivals, each of whom sells a substitutable competitive product, about the qualities of one party’s product. The customers in this market buy products on their technical performance and technical characteristics. The fact that the claimant’s business is selling products rather than issuing technical reports is not a significant distinction when, as here, the technical qualities of the products in this market are obviously what counts.[33]Accordingly I reject this first basis on which the action should be struck out or summary judgment be awarded in the defendant’s favour on this ground. ii). Actual or pecuniary damage[34]Ms Page submitted that pecuniary damage is an essential ingredient of the cause of action. Unless the claimant proves pecuniary damage or satisfies the alternative test in section 3 of the Defamation Act 1952, liability will not be established. She referred to the words of Lord Robinson in Royal Baking Powder Co v Wright, Crossley (1900) 18 RPC 95 at 99 in which he pointed out that unless the plaintiff has in fact suffered a loss which can be and is specified, he has no cause of action. She also referred to Ratcliffe v Evans (1892) 2 QB 524 at 532 in which Bowen LJ said:
“In all actions…on the case where the damage actually done is the gist of the action, the character of the acts themselves which produced the damage and the circumstances under which these acts are done must regulate the degree of certainty and particularity with which the damage done ought to be stated and proved. As much certainty and particularity must be insisted on, both in pleading and proof of damage, as is reasonable, having regard to the circumstances and to the nature of the acts themselves by which the damage is done. ”
[35]The words in section 3 “calculated to cause pecuniary damage” mean “more likely than not to cause pecuniary damage” IBM v Web Sphere [2004] EWHC 529 (Ch) at 74 where Lewison J, as he then was, noted that Article 10 of the ECHR requires that any restriction on the right of freedom of expression must be justified as necessary. The leading modern authority on section 3 is Tesla Motors Limited v BBC [2013] EWCA Civ 152. Tesla decided that the case on the likelihood of damage must be particularised, which includes identifying “the nature of the loss [which it is said the falsehoods were calculated to cause] and the mechanism by which it is likely to be sustained.”[36]Paragraph 50 of the Particulars of Claim pleads that:
“the publication of the Letter was calculated to cause and has caused damage to the claimant’s business. The full extent and nature of the publication of the Letter is not known to the claimant. At trial the claimant will seek a remedy in respect of all publications of the Letter by the defendant.”
[37]The defendant submitted, and I agree, that this was not adequate. No particulars are given as to the nature of the loss or the mechanism by which it is likely to be sustained (see Tesla above) or otherwise. The Particulars of Claim contains a prayer setting out the remedy sought which included an enquiry as to damages and in its Part 18 Response one of the points the claimant made was that it is seeking an enquiry as to damages. However as the defendant submits and I agree, the claimant cannot evade the requirements to plead a proper cause of action in malicious falsehood by asking for an enquiry as to damages. Liability cannot be established unless the requirement for pecuniary damage is met at the stage when the court is enquiring into liability. If that were all there was in the claimant’s case then it would be struck out. However the Part 18 Response includes further particulars as follows.16.1 The probable damage consists of(a) lost sales of Pelagic 100;(b) lost management time;(c) damage to reputation resulting in the need to expend management time to restore the reputation or lost sales or both.16.2 A purpose of the Letter was to encourage recipients to purchase and specify or to continue to purchase and specify Oceanic HW443v2 by stating that the Technical Report was misleading and erroneous. The defendant’s Oceanic HW443v2 is directly competitive to the claimant’s Pelagic 100 sales of Oceanic HW443v2 are likely to displace sales of Pelagic 100.”[38]The claimant’s plea advances three types of damage(a) lost sales,(b) lost management time and(c) damage to reputation.[39]As the defendant submitted, and I accept, damage to reputation is not pecuniary damage or damage being capable of being estimated in money (as opposed to being compensated in money as in defamation) and cannot be relied on as a head of damage under section 3. The defendant referred to Joyce v Sengupta [1993] 1 WLR 337 at 348. The claimant put forward a draft amended Part 18 Response in which the reference in paragraph 16.1 to reputation was deleted however as the defendant points out, it contains a new proposed paragraph 16.3 which appears to reinstate a claim on the same basis. I will not permit paragraph 16.3 to be added.[40]The pleaded claim for lost management time and expenditure seems to me to be wholly speculative and insubstantial, especially insofar as it could add anything to the illegitimate reliance on reputation. It also appears to be an attempt to pull up the claim by its own bootstraps, since any allegedly malicious falsehood by a trade rival could always be said to require some management time to be spent “verifying” whether it was true or not. I will not permit the claimant to rely on lost management time and expenditure.[41]In my judgment the only tenable argument which the claimant can advance is in relation to lost sales of Pelagic 100.[42]I am quite sure that lost sales of a product have the characteristic that satisfies the law as to the nature of the loss. It is plainly pecuniary. The outstanding issue relates to mechanism. The defendant submits that the claim for lost sales is purely speculative.[43]In the course of this application the claimant submitted a witness statement of Mr McKechnie. This was answered by the evidence of Mr Hollinger for the defendant. The defendant submits that it is not possible readily to conceive how sales of Pelagic 100 could be lost as the direct and natural result of the statements complained of.[44]The debate comes down to the following points. First, the defendant says that the speculative nature of the case is unwarranted because the claimant’s strongest claim must be limited to publications of the MacDermid Letter to recipients of the Niche Report; otherwise it says the recipients of the MacDermid Letter could not have identified the claimant as an unnamed competitor. Since the claimant knows to whom it distributed its report, it therefore knows exactly where to look and of whom to enquire in an effort to substantiate its claim for pecuniary loss. The defendant submits that the exercise is so straightforward it has no excuse for falling back on Section 3.[45]I reject that submission. The claimant is entitled to rely on Section 3 as long as it properly articulates a mechanism by which pecuniary damage is more likely. Separately, as regards identifying recipients, I do not accept the inference the defendant seeks to draw necessarily follows. As the claimant points out, at the present time it does not know the names and contact details of all the persons to whom the MacDermid Letter was sent or the persons who downloaded or viewed the letter on the defendant’s website. It does not follow that the only relevant persons are those who were sent the Niche Report directly by Niche. The relevant persons are the persons who read the MacDermid letter and would have recognised the reference to Niche.[46]Next the defendant argues that the mechanism by which the loss is likely to be sustained has not been articulated in the claimant’s pleaded case. I do not accept that. The claimant’s pleaded case is as follows: i) A purpose of the letter was to encourage recipients to purchase or specify Oceanic HW 443 version 2 (or continue to do so) by asserting the Niche Report was misleading and erroneous. ii) The defendant’s Pelagic 100 product is directly competitive with Oceanic HW 443 version 2. iii) Thus it follows that sales of Oceanic HW 443 version 2 are likely to displace sales of Pelagic 100.[47]Therefore the mechanism by which the loss is said to be likely to have been sustained is clearly stated. It is true that the defendant does not agree with it, but that is a matter for trial. It seems to me that the foregoing is a properly arguable mechanism by which pecuniary damage is likely to have been sustained.[48]Finally the defendant contends that the claimant must exclude from its claim any damage resulting from the statements in the MacDermid Letter of which it does not complain. The defendant points out that in the Tesla case Moore-Bick LJ held that the pleading in that case suffered from a fundamental problem namely that it did not attempt to identify what part of the loss was caused by actionable statements as opposed to any effect on the sales of the relevant goods which must have been due to statements which were no longer actionable. The defendant submits that the claimant must perform what it calls an impossible task, of separating out and excluding from its claim any actual or likely pecuniary damage that may be wholly or partly attributable to any statement not complained of and refers to the judgment of Eady J in Abu v MGN[2003] 1 WLR 2201 at 15.[49]The defendant points out that the MacDermid Letter contains explicit commendations of its own Oceanic HW443 product such as stating “the chemical specifications and performance of Oceanic 443 remains unchanged”. The defendant also points out that in his second witness statement Mr McKechnie complains about the defendant giving itself “an unfair lead over Pelagic 100 by claiming that the formulation for Oceanic HW443v2” is unchanged “when in fact the defendant had a new altered technically incompetent fluid which would not be able to compete with properly qualified products such as Pelagic 100”. This explicit commendation by the defendant of its own product was, says the defendant, self-evidently the statement in the letter that was potentially most likely to bring about the pecuniary damage which the claimant identifies as the basis for its claim for lost sales. Nevertheless this statement, about the qualities of Oceanic HW443 v2, has been deliberately excluded from the action and therefore the claimant must exclude from its pecuniary damage claim any damage, actual or likely, caused by such explicit endorsements of the product that were contained in the MacDermidLetter. This deliberate omission to complain of this statement, says the defendant, is fatal to the claimant’s case. ii). Assessment[50]This final aspect of the defendant’s case seems to me to be the defendant’s best point on pecuniary damage. It is perfectly obvious that if the claimant is right that the MacDermid Letter was likely to lead to lost sales of the claimant’s Pelagic 100 product by increasing sales of Oceanic HW443 v2, then the statements in the MacDermid Letter which commend the Oceanic HW443 v2 product will be a significant cause of that effect. And yet those statements are not relied on as being actionable. The way Mr McKechnie puts the matter in his witness statement does not face up to the difficulty faced by the claimant.[51]For present purposes I have no difficulty with the idea that the MacDermid Letter was intended by its authors to be taken seriously by its recipients. As the claimant points out there was no point in writing and extensively publishing the MacDermid Letter if it was not intended to have an effect on the market. The claimant and the defendant are direct competitors in this market. Sales of Oceanic HW443 v2 are likely to displace sales of Pelagic 100.[52]It is true that at this stage in this action the claimant has not attempted to state what quantity of the sales which are likely to have been displaced would have been caused by the statements in the MacDermid Letter which were not complained of, as opposed to which proportion of those sales are likely to have been caused by the statements which are complained of. Nevertheless that alone does not seem to me to be a reason to strike out these proceedings, provided there is a properly arguable claim that some real proportion of the likely lost sales were more likely than not to have been caused by the statements complained of.[53]As I say, it is obvious that the purpose of the MacDermid Letter was to influence the market and in my judgment at this stage it is impossible to say that this influence was not supposed to derive from all the elements of the letter and therefore to all the statements made it in. In other words the defendant must have intended all the statements in the letter to have an effect on the market, otherwise why make them. I also remind myself that at this stage in the proceedings it is not appropriate to conduct a mini-trial of the affidavit evidence and to resolve the conflicts between Mr McKechnie and Mr Hollinger. It seems to me that without a trial, I cannot say that there is no properly arguable claim that a real, as opposed to fanciful, proportion of lost sales of Pelagic 100 would be likely to be caused by the statements complained of. Like all the other statements in the letter, the alleged falsehoods were stated with the objective of influencing the market for these products. To strike out a claim at this stage would be to assume in the defendant’s favour that the defendant had failed in its own objective.[54]I therefore reject this ground on which to strike out the entire claim. However, the claims based on reputation and management time should be struck out. iii). Malicious motivation,[55]In the Court of Appeal in Spring v Guardian Assurance [1993] 2 All ER 273 it was confirmed that the test for malice is the same whether it arises in the context of libel or malicious falsehood. On that basis the defendant referred to Eady J’s explanation in Khader v Aziz [2009] EWHC 2027 QB at 31-32 that there are stringent requirements imposed for the pleading of malice because it is recognised as being tantamount to an accusation of fraud or dishonesty. It must not be made on a merely formulaic basis. It is necessary to plead and prove the facts from which malice is to be inferred and will not suffice to plead only facts which are equally consistent with the absence of malice as with its presence. Mere assertion will not do. A claimant may not proceed simply in the hope that something will turn up if the defendant chooses to go in the witness box, or that he or she will make an admission in cross-examination. The defendant also submitted that it is not sufficient to plead that the defendant ought to have known certain facts; negligence is quite different from malice: see Thompson v James [2003] EWHC 515 QB per Tugendhat J at paragraph 16. I accept these submissions.[56]The claimant’s plea is that the defendant must have known or at least a reasonable person in the position of the defendant would have known, that the Niche Report was accurate and not misleading, alternatively the defendant was reckless as to whether its statements that the Niche Report was “erroneous” and “misleading” were true or false. In support of this plea the claimant’s case comes down to alleging that the defendant must know the composition of its own products, and, unless the defendant had conducted its own tests, it could not say that the Niche Report was erroneous or misleading. If the defendant had conducted its own tests it would have known that the Niche Report was accurate and not misleading in all material respects. Alternatively, if no proper tests were conducted to ascertain whether the statements made in the report were true or false, by not conducting its own tests before commenting, the defendant was at least reckless as to whether the statements regarding the report were true or false.[57]The first point made by the defendant is that its own “defensive” reiteration of its own claim that its own products have not changed, whether true or false, is not capable of grounding an allegation of malice. I agree, but that is not how the claimant puts its case.[58]Next, the defendant argues that the plea in relation to whether or not the defendant has conducted tests reveals that the claimant has no idea whether the defendant conducted tests and if so what those tests comprised. The defendant describes this as a speculative pleading in which the claimant is trying to cast its pleading net wide enough in the hope of catching the defendant one way or another and that this is impermissible. I do not agree. Self evidently the claimant cannot know everything the defendant did internally. However the claimant’s case is that either no tests were conducted in which case the Letter was plainly malicious or, if tests were conducted then, since as a matter of underlying technical fact the products differ in a material way (says the claimant), the tests must have demonstrated that the difference existed. If that latter point is the true position then the MacDermid Letter was not merely reckless but deliberately false. I do not see that there is anything wrong with a pleading of this kind which seems to me to advance a properly arguable case. If the defendant in fact conducted tests which were and which it had reasonable grounds for believing were reasonable tests which justified the comment in the MacDermid Letter then no doubt the claimant’s case on malice will fail. But that cannot be decided at this stage.[59]The real point at the heart of the defendant’s objection to the malice plea is the argument that it has said nothing to disturb the obvious inference to be drawn from the terms of the MacDermid Letter that the defendant’s own self-interest was its only or dominant motivation. The defendant referred to Collins MR in Dunlop v Maison Talbot (1904) 20 TLR 579 at 581 “it [is] not malice if the object of the interference was to push his own business…to make the act malicious it must be done with the direct object of injuring that other person’s business”.[60]Clearly the defendant’s self-interest was a substantial part of the defendant’s motivation but I do not accept that I can decide now that the defendant’s self-interest was the only or dominant motivation of the letter. That would have been true if the MacDermid Letter had not referred to the claimant’s report but only to the properties of the Oceanic products. However as I have said before, the MacDermid Letter goes out of its way to allude to, and characterise as misleading, information which had been promulgated by the claimant. That is not simply a defensive move, it is an offensive move in which the defendant took the argument to the claimant. Ms Page QC for the defendant referred to legitimate self-defence in the context of a defamation claim, when statements are made bona fide in reply to an attack upon the publisher. I can see that if the MacDermid Letter was simply a statement or reiteration of the defendant’s position that the two versions of the product were materially the same then that would be one thing, however it is not, for the reasons I have already explained. Accordingly I will not strike out the claim on this ground.[61]Separately the defendant contends that the claimant should remove all references to a reasonable person, based on Thompson v James (above). The claimant refuses to do so on the ground that it does not contend that the test for malice is objective (which would be incorrect), the claimant’s case is that the relevant individuals it has identified in its draft amended Part 18 Response (Mr Hollinger and Mr McManus) knew that the relevant statements in the MacDermid Letter were or were likely to be incorrect. The references to a reasonable person are deployed in its contentions made in support of that inference. I do not accept the claimant’s argument. The point made by Tugendhat J in Thompson v James is that malice cannot be inferred from matters it is alleged a defendant ought to have known because carelessness is not malice. The claimant’s pleaded case supports an allegation of malice without reference to what a reasonable person would have known and in that respect there is no reason to strike it out on this ground. However the references to a reasonable person should be removed. I will strike out the words shown below in italics in the first sentence of paragraph 49 of the Particulars of Claim:
“The defendant must have known or at least a reasonable person in the position of the defendant would have known, that the Technical Report was accurate and not misleading.”
I will not permit the amended Part 18 Response to be served in its current form. The references there to the reasonable person should be removed.[62]Subject to the point on Thompson v James, I reject the defendant’s submission that the malice plea should be struck out. iv). “Jameel” abuse.[63]The defendant contends that the claim is an abuse of process in the sense described in Jameel of “the game not being worth the candle”. The defendant submits and I accept that Jameel is not confined to defamation cases but would include malicious falsehood.[64]The defendant characterises the main cause of action as one which is highly contrived and petty and one in which the court should not dignify with further court resources nor leave the defendant with the burden of defending the claim. I reject that submission. At the heart of this claim is the fact that in response to the claimant’s publication of the Niche Report, the defendant did not simply maintain its position that the new version of its product was materially the same as the original one. The reason this claim exists is because the MacDermid Letter makes clear and, it is contended, maliciously false assertions that information produced by the claimant was erroneous and misleading. The claim is neither contrived nor petty. Apart from anything else, the same essential dispute albeit couched under US law, was commenced by the defendant in the Texas court. It undermines the suggestion that these proceedings should be struck out on the Jameel ground when the defendant itself brought essentially the same claim in reverse form in another jurisdiction.

Declaratory relief

[65]The claimant had a fallback position in relation to the strike out application. It argued that even if the claim for malicious falsehood should be struck out the claimant had a free-standing action for a declaration in relation to the technical qualities of the products concerned. Since I have decided not to strike out the malicious falsehood claim it is not necessary to rule on that matter, however I will say that I am far from satisfied that it would have been appropriate to leave behind a claim for such a declaration in this case, even on the basis of the authorities cited by the claimant (FSA v Rourke[2001] EWHC 704 and the summary of the law by Floyd J in Interdigital Technology v Nokia Corporation [2008] EWHC 504 at).[66]The claimant also referred to the decision of Kitchen J in Kingspan v Rockwell [2011] EWHC 250 Ch in which although the court dismissed the claim for malicious falsehood, the learned judge made declarations about the alleged misrepresentations which had been the subject of the claim. However that case was not one in which the court had to decide whether the action should go to trial purely for the declaratory relief. To exercise the court’s undoubted discretion to grant such a declaration having heard the trial of a properly constituted claim is not the same as permitting a bare claim for declaratory relief to proceed in the first place.[67]If I had struck out the malicious falsehood claim, it seems to me that there is a convincing argument that to allow the declaratory claim to go to trial would undermine the principles set out in White v Melin, Schulke and Easycare and might well engage Article 10.

Conclusion

[68]For these reasons the application to strike out the malicious falsehood claim or for summary judgment in the defendant’s favour is dismissed, albeit some aspects of the claimant’s pleadings will need to be addressed. I will allow in part the amendments to the claimant’s Part 18 Response in the terms described in the judgment.[69]When this case was heard, it was in the Patents County Court. Since then the court has been reconstituted as the Intellectual Property Enterprise Court and this judgment is headed accordingly.

Cited in 9 later judgments