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Defamation by investors on social media

Defamation by investors on social media

Defamation against a company and defamation against directors

In a case that is believed to be the first of its kind in the UK concerning online defamation by investors against a company, online defamation and social media specialist solicitor firm Cohen Davis won damages for its PLC client, a gold mining company Red Rock Resources (RRR) after the company was defamed on social media by one of its small yet very vocal investors.

Can a company sue shareholders for defamation

When can a company sue an investor for defamation

Why taking an investor to court be risky

Defamation apology

Can a company sue shareholders for defamation

In the UK, a company might sue a shareholder for defamation if the false allegations or unsubstantiated claims extend to defaming officers of the company. Whilst a company needs to demonstrate serious financial harm in order to succeed in a defamation claim, it is often difficult to argue that decreasing share prices, represent serious financial harm to the company.

This is because it is in the nature of stock that the share prices might go up or down and that the value of stock will inevitably be the subject of speculation. Whilst it might be difficult for a company to demonstrate serious financial harm which is directly linked to defamatory claims, and whilst the real loss is for the investors rather than for the company, there are still circumstances where a company might sue an investor for defamation.

When can a company sue an investor for defamation

A company may successfully sue an investor for defamation, where the defamation extends to allegations of fraud or of maladministration by officers of the company, by the Chairman, the company directors or the company secretary. Under those circumstances, the defamation claim will be brought by the company on behalf of the officers of the company.

In the case of RRR v Carp, Mr Carp was a disgruntled investor. He began a campaign which accused the Chairman of mismanagement and of fraud. This resulted in legitimate investors questioning the integrity of the board of directors and very rapidly the defamatory allegations began to attract a degree of undesirable media attention on investors’ online forums on Twitter and on the national press.

Why taking an investor to court be risky

Taking an investor to court, even following an intensive campaign of defamation, is never desirable. There are risks that are associated with every litigation but also it could upset investors and attracts undesirable media attention. Whilst every efforts should be made to resolve matters amicably, particularly when it comes to a listed company, speed is of the essence and company directors can never afford allowing those type of matters to go on for too long a litigation has a tendency to unsettle investors.

In the case of RRR v Carp, over a period of 3 weeks RRR and its lawyers made every possible attempt to amicably resolve the matter with the disgruntled investor but even this period of time turned out to be too long for some investors. Within days, investors began to complain about potential falls in the value of their investment so the board had no choice but to file a claim for libel defamation in the High Court in London in order to protect the legitimate interests of its investors.

The defaming shareholder, admitted to have used Twitter, online investors’ forum, Proactive Investors and email to spread defamation against the company and its Chairman. He agreed to avoid trial and pay the company undisclosed sum in damages, which the company donated to its chosen charity. The matter was settled within approximately 6 weeks, thanks to the prompt reaction of the board of directors and the important strategic decisions the board has taken.

Defamation apology 

"To whom it might concern,

‎Since October last year I have sent a number of messages via email and on Twitter making a series ‎of allegations of wrongdoing, including criminal allegations, against Red Rock Resources PLC (RRR) ‎and Andrew Bell.‎ Based on assurances issued through their lawyers that Mr Bell, RRR and its Directors are innocent ‎of any wrong doing, which I accept, I wish to retract these statements.

I apologise unreservedly to ‎RRR, its directors (including Mr Bell), and its shareholders for any unwarranted damage I have ‎caused to RRR’s and Mr Bell’s reputation and for the upset and distress my allegations have ‎caused Mr Bell.

I have agreed to pay RRR and Mr Bell a significant sum in damages, which they have said they will ‎donate to the Build Africa charity working in Uganda and Kenya‎

Mr Gary Carp"

Published on behalf of Red Rock Resources PLC

defamation against a company

 

 

 

 

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