Malicious Falsehood – The Correct Interpretation of s3(1) of the Defamation Act 1952

In George v Cannell and another [2022], the Court of Appeal has ruled on what a claimant needs to prove to be able to rely on section 3(1) of the Defamation Act 1952, which provides an exception from the need to prove special damages in a malicious falsehood action. The court also considered whether a claimant could recover anything more than nominal damages for injury to feelings, in the absence of actual financial loss.

Background

An action for malicious falsehood takes places where there is a publication of false words in bad faith that refers to the claimant, his property or his business, and gives rise to special damages as a result of their publication, or for which damages can be claimed under section 3(1) of the Defamation Act 1952 (DA 1952) - as set out below:

Section 3(1) DA 1952:

In an action for slander of goods, slander of title or other 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 on by him at the time of the publication.

Initial Decision

In George v Cannell and another the claimant worked as a recruitment consultant for an agency owned and operated by LCA Jobs Limited (“LCA”). After the claimant left LCA and took a job with another agency, LCA spoke to one of the claimant’s clients and sent an email to her new employer, alleging that the claimant had been acting in breach of restrictive covenants in her contract with LCA by approaching LCA’s clients and soliciting business from them. The claimant sued LCA and others for libel, slander, and malicious falsehood.

The presiding judge (‘Saini J’) held that the defamation claims failed because the claimant had not established that either publication caused serious harm to her reputation as required by s1(1) of the Defamation Act 2013. Whereas the malicious falsehood claims were dismissed on the grounds that the claimant had not proved special damage as required by the common law, nor had she shown that her case fell within the exception to that requirement contained in s 3(1) DA 1952.

The claimant appealed against the dismissal of her claims in malicious falsehood. She accepted that she had failed to establish special damage but argued that s 3(1) DA 1952 exception would be applicable and that she was justified to recover more than nominal damages due to the emotional damage caused to her by the defendants.

Judgment

In a unanimous judgment delivered by Lord Justice Warby, the Court of Appeal ruled that Saini J had erred in his interpretation of s 3(1) DA 1952. Critically, Lord Justice Warby noted that there had been no clear judicial authority regarding the interpretation of s 3(1) DA 1952. He therefore set out the Court of Appeal’s interpretation of the exception to special damage for a malicious falsehood claim.

Saini J provided a narrow interpretation of S3(1) DA 1952. Having reviewed the facts of the case, he ruled that the claimant had not suffered the appropriate pecuniary damage to fall within the exception. He reasoned that there was no actual pecuniary damage resulting from the malicious words as the client who received the words had provided evidence that he had already decided not to deal with the claimant for other reasons and, the second party to receive the words, the claimant’s new employer, wanted the claimant to stay in their employment regardless of the malicious statements. Saini J summarised that in order to fall under the S3(1) DA 1952 exception the loss suffered would need to be a “direct and natural result” of the malicious words.

Lord Justice Warby disagreed with this backward-looking test. Having analysed in depth the formation of the original 1952 Act, alongside the Porter Committee Report which preceded and informed the Act, he reasoned that a forward-looking test would be the correct way to interpret s3(1) DA 1952 when ascertaining the “aim and purpose” of the statute.

The malicious statement in question must be “viewed objectively in context at the time of publication”. It is enough for a malicious statement to fall under s3(1) DA 1952 "if financial loss is something that would probably follow naturally in the ordinary course of events”. Consequently, applying a ‘natural meaning’ to the facts of the case the defendants’ allegations to the claimant’s client and new employer that she had broken her contractual commitments to the defendant would cause probable financial loss to someone who is commission-based. Therefore, the threshold of s3(1) DA 1952 would be met even though no actual financial loss resulted from the malicious words.

In a further development, Lord Justice Warby held that the claimant was entitled to an award of general damages to compensate her for injury to her feelings. On the facts of the case this award was liable to be modest but not trivial. It was made clear that it is possible for a s.3 claimant to recover compensation for injury to feelings even if they are unable to establish any actual financial loss.

Comment

Lord Justice Warby stated that despite giving s3(1) DA 1952 a more encompassing meaning he would not be constrained by Article 10 of the Human Rights Act 1998, citing the rarity of claims in malicious falsehood. This seems appropriate when accounting for the other hurdles associated with the tort, most notably the need to prove beyond the balance of probabilities that the false words were published in a malicious manner. Nevertheless, it will be interesting to see whether this claimant-friendly decision, both in the interpretation of s3(1) DA 1952 and in the awarding of damages in the claimant’s absence of actual financial loss, will lead to a noticeable rise in the number of malicious falsehood claims received by the court.