Tescos put on the back foot in Guardian libel case

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The Guardian has published the following report this morning. Because of its importance to the work of those who work to stop tax abuse I am reproducing it in full because I suspect that the Guardian has taken considerable care to ensure it is balanced:

Details of elaborate offshore corporation tax avoidance schemes operated by Tesco were yesterday allowed to be introduced into evidence in a libel case the supermarket chain is bringing against the Guardian.

In a preliminary high court hearing, Mr Justice Eady ruled that the paper could file evidence of Tesco's tax avoidance by means of specially created partnerships and holding companies in Switzerland and Luxembourg. One such Tesco scheme was outlawed by the government in this year's budget legislation. The two schemes are alleged to have avoided up to £30m a year in UK tax on Tesco profits.

Tesco has so far refused to accept an apology from the Guardian for errors in an earlier article about the retailers' tax tactics, and has accused the paper and its editor of telling deliberate lies. The paper wrongly said that Tesco was avoiding up to £1bn in a corporation tax avoidance scheme involving windfall profits on sale and leaseback of its UK stores.

Eady also ruled that Tesco must decide by September 15 whether to accept the Guardian's offer of an apology and damages. He ordered a stay on a parallel claim by Tesco against the Guardian and its editor claiming "malicious falsehood". The judge refused Tesco permission to appeal and awarded costs against the company.

Lawyers for Tesco yesterday unsuccessfully argued that the fresh allegations about Tesco tax avoidance were irrelevant. Adrienne Page QC said Tesco did engage in what she called "low level tax planning, tax avoidance" but what the company objected to, she said, was the Guardian's false claim of "massive" avoidance and "plundering the Treasury".

She said the corporation tax avoidance claims and other avoidance by Tesco of up to £63m tax on its land deals, were "a drop in the ocean" compared to the millions spent by Tesco on charitable donations and its computers for schools vouchers. Tesco paid hundreds of millions in corporation tax, and was a major taxpayer compared with some other UK firms.

Tax avoidance was a "grey area", she claimed, and it was now usual to divide companies' avoidance tactics into "aggressive" and "non-aggressive" tax planning behaviour. Tesco "does not engage in highly aggressive tax avoidance".

Eady said he would allow the evidence of the Swiss and Luxembourg schemes, first disclosed in Private Eye, to be introduced into the case for the time being. Andrew Caldecott QC, for the Guardian, had argued it would not be fair to take any decision "in blinkers" on the amount of any damages to be received by Tesco, and claimed that evidence of other corporation tax avoidance schemes Tesco was operating at the time, covered the same ground as the original libel.

The judge also ordered the Tesco board to make a final decision within the next six weeks on whether they intended to push ahead with allegations of dishonesty against the paper and its editor, or whether they were prepared to accept the Guardian's "offer of amends".

Tesco claimed that the wording of the law allowed them neither to accept or reject the offer, and that they could go ahead with a full-scale libel trial regardless. The judge said the 1996 "Offer of Amends" special regime had been introduced by parliament to assist journalists who had made a mistake and were "over a barrel". "It enables them to climb off the barrel". This was a classic case for using the procedure, designed by parliament to achieve a speedy and inexpensive outcome. It was not legitimate, he said, for Tesco to hold up a decision indefinitely whether to accept the offer or not. "It is a tough choice for claimants sometimes, but so it was meant to be."

He ordered Tesco to decide by September 15 whether to accept the Guardian's offer of an apology and suitable damages, or whether to attempt to prove in court that the paper had been deliberately dishonest. Eady also ordered a stay on a parallel claim by Tesco against the Guardian and its editor for "malicious falsehood".

He said the lawyers in the case might wish to press on with the claim "no doubt at great expense", but it would be for no better reason than to establish malice for its own sake. The claim only appeared to serve tactical purposes, and it was inconsistent to keep open the possibility of accepting an offer of amends while going ahead with such a claim. "It is no part of the court's purpose to punish or humiliate the other party, or provide an opportunity for public relations purposes." He added that nowadays "litigation is no longer regarded as a game for lawyers". It was instead, he said, to be "aimed at achieving justice between the parties".

Tesco were refused permission to appeal the rulings and costs were awarded against them. It is open to the supermarket to apply direct to the court of appeal later this year.

I think there are several points here that are of considerable importance:

1) The Judge has made clear that he will not permit legal loopholes to be used to prevent the true nature of Tesco's behaviour to be considered in court;

2) He has, in effect, told Tescos to stop playing games. I am sure that is why he has also awarded costs against them;

3) He clearly thinks the malicious falsehood claim dubious in its nature: it's hard to imagine the Guardian will be found guilty of spreading a malicious falsehood that someone is operating complex offshore tax planning schemes when they very obviously were doing just that;

4) He has set a time limit on Tescos decision: it seemed pretty obvious to me that Tescos wanted this to run almost without time limit to ensure that as many people as possible would be unable to discuss their tax affairs. This option has now been removed;

5) He seems to be saying, pretty clearly, that the Guardian has made a fair offer for whatever mistake it made and Tescos should get on with resolving the matter.

All of which is very welcome news. The Guardian may have made a mistake (but, as is now clear, not so big a mistake) in its original article on Tescos, but the Judge is making clear that Tescos have no right to exploit that, especially when, despite all they said in court the substance of the allegation the Guardian made has been proven to be true.