Yesterday (9/9/2014), Quindell announced that the company had won a judgement for libel against Gotham City Research LLP in the London High Court. Gotham simply failed to defend the action or even acknowledge the claim. Gotham had published a 74 page document earlier this year effectively claiming the company was fraudulent but Quindell immediately issued an announcement rejecting the allegations as being “highly defamatory” and “deliberately misrepresentative”. Gotham also made it clear that they had a short financial interest in Quindell and I criticised their modus operandi in a previous blog post (but without commenting on the merits of their claims please note!)
The damages to be awarded to Quindell will be assessed at a later date, but whether they can enforce their judgement against Gotham in the USA where they are based seems unlikely. The US “Speech Act” makes enforcing foreign libel claims somewhat problematic. But at least Quindell have claimed the moral high ground – filing a claim in the UK courts was surely the natural venue for any such litigation as Quindell is a UK registered company, it is listed in the UK and most of the shareholders are probably UK based.
Undoubtedly English libel laws are more onerous than those in the USA – for example, one of the first principles in English libel law is that the defendant has to prove what he says is true. Quindell would not have to disprove Gotham’s claims. But the failure of Gotham to even try and defend their claims in court, when Quindell were obviously willing to have their affairs analysed in such a forum surely indicates something? Perhaps Gotham’s claims could not be substantiated in detail?
Note that Gotham did demonstrate their similar attacks on Spanish company Gowex were well founded where fraud was subsequently admitted, and many people continue to question some aspects of Quindell (the company is currently on a prospective p/e of 3 which tells you something about how it is viewed by many investors).
It will be interesting to see if Quindell do pursue their claims in the USA, or against UK based bloggers who repeated many of the Gotham claims, and made others. Gotham may be able to hide behind US “free speech” laws, but if the FCA were to pursue market abuse claims which is a criminal offence, as many people have suggested, they may find it more difficult.
Meanwhile Blinkx shares have been rising – the company was the subject of a similar attack by another blogger. Is that on the hope they will pursue similar legal actions?
All I can hope for is that companies are more willing in future to pursue legal actions if claims are made by shorters that are not capable of being substantiated with real evidence and a willingness to defend the claims in court. That might deter the worst abuses. Regrettably the FCA has not shown any willingness to look into alleged market manipulation or to investigate the claims against Quindell.