Recoverable damages for malicious falsehood when no financial loss suffered

Supreme Court
Published August 12, 2024
George v Cannell and another
Before Lord Hodge, Lord Hamblen, Lord Leggatt, Lord Burrows and Lord Richards
[2024] UKSC 19
Judgment June 12, 2024
In an action for malicious falsehood section 3(1) of the Defamation Act 1952, where it applied, created a presumption of law that the publication of the words complained of had caused financial loss. The presumption was irrebuttable as far as liability was concerned. Where the malicious falsehood had not in fact caused any financial loss a claimant would not be entitled to damages for financial loss or damages for injury to feelings, other than nominal damages.
The Supreme Court so held (Lord Hamblen and Lord Burrows partly dissenting) in allowing in part the appeal of the defendants, Linda Cannell and LCA Jobs Ltd, from the decision of the Court of Appeal (Lord Justice Underhill, Lord Justice Warby and Lord Justice Snowden) (The Times November 10, 2022; [2023] QB 117) which allowed the appeal of the claimant, Fiona George, from the dismissal by Mr Justice Saini ([2021] 4 WLR 145) of her claim for malicious falsehood.
Section 3(1) of the Defamation Act 1952 provides: “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 on by him at the time of the publication.”
David Price KC and Jonathan Price for the defendants; William Bennett KC and Godwin Busuttil for the claimant. Media Defence intervened by way of written submissions only.
LORD LEGGATT, with whom Lord Hodge and Lord Richards agreed, said that the claimant was employed by the second defendant, an agency owned and operated by the first defendant, as a recruitment consultant. She resigned and took a new job with another recruitment agency. Her contract of employment with the second defendant did not prohibit her from soliciting business from their clients after her employment ended, although she gave the first defendant verbal assurances that she would not do so.
The claimant started her new job and began actively targeting the second defendant’s clients. The first defendant called one of the claimant’s clients and emailed her new employer alleging that the claimant had been acting in breach of restrictive covenants in her contract with the second defendant by approaching its clients and soliciting business from them.
The claimant sued the defendants for malicious falsehood, claiming damages for injury to her feelings caused by the publications complained of.
The judge found that the statements made by the first defendant were false and were made maliciously, as the first defendant did not honestly believe that they were true, but dismissed the claim on the ground that the statements complained of had not caused any financial loss and therefore 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 as contained in section 3(1) of the 1952 Act.
The Court of Appeal decided that the claim did fall within section 3(1) with the consequence that the claimant was entitled to a judgment for damages to be assessed. They also decided that, even though the publications complained of caused the claimant no financial loss, she was not limited on that account to an award of purely nominal damages but was entitled to recover compensation for injury to her feelings. The Court of Appeal ordered that the case be remitted to the High Court to assess those damages.
In the present appeal the defendants disputed each step of the Court of Appeal’s reasoning. First they argued that, on the facts found by the judge, and in particular his finding that the two publications caused no financial loss to the claimant, the claim had to fail altogether. Alternatively, they argued that, if the claimant was entitled to a judgment in her favour, it could only be for nominal damages and not for damages for injured feelings.
The first of those arguments turned on the proper interpretation of section 3(1) of the 1952 Act. The clear underlying ­purpose of section 3(1) was to make it easier for claimants to recover damages in actions for malicious falsehood, by dispensing with the requirement under common law to allege and prove loss with certainty and ­precision.
The effect of section 3(1), where it applied, was to create a presumption of law that the publication of the words complained of had caused financial loss. That presumption was irrebuttable as far as liability was concerned but did not necessarily lead to an award of substantial damages.
In determining whether the words complained of “are calculated to cause pecuniary damage” to the claimant, the appropriate test was to ask whether, on the facts known or which should reasonably have been known to the defendant at the time of publication, it was objectively likely that the words published would cause financial loss. Applying that test in the present case, the first defendant’s false statements were calculated to cause financial loss to the claimant and the publications fell within section 3(1).
In principle if a tort had been committed, the claimant should be entitled to compensation for all pecuniary and non-pecuniary loss caused by the tort, subject to normal rules concerning remoteness etcetera.
As to damages for injury to the claimant’s feelings — also known as damages for “mental distress” — the defendants had not sought to argue that damages for injured feelings could never be awarded in an action for malicious falsehood. Their contention was that such damages were only available where significant financial loss had been caused and the distress related to the infliction of such loss. That was in principle the correct approach.
In respect of the common law tort of malicious falsehood the interests protected were purely economic interests and pecuniary damage/financial loss was an essential element of the cause of action. Although section 3(1) created a presumption of law that the publication complained of had caused financial loss, if the court concluded that no financial loss had actually been caused the claimant would only be entitled to nominal damages.
The statutory modification of the tort by section 3(1) had not transformed the tort from an economic one into a psychological one. The tort as modified was still not designed to afford protection against non-pecuniary harm and in cases where section 3(1) applied it remained necessary, if an award of damages for injury to feelings was to be ­justified, to show that financial damage had been suffered which had caused such injury to feelings.
It had been found as a fact in the instant case that no financial loss was actually caused by the publications and although section 3(1) applied the presumption that the words published caused financial damage to the claimant was purely notional and attracted only token ­damages.
There was no financial loss that could have given rise to injury to feelings for which compensation might be awarded. The claimant’s emotional distress was not a matter for which the defendants could be held responsible because it was not suffered as a consequence, foreseeable or otherwise, of the tort of malicious falsehood.
There was nothing in the circumstances of the present case which could reasonably be said to justify an award of aggravated damages.
The Court of Appeal’s order for an assessment of damages for injury to feelings would be set aside and judgment entered for the claimant for nominal damages in a sum of £5.
Lord Hamblen and Lord Burrows delivered a judgment dissenting as to whether damages for mental distress could be awarded for the tort of malicious falsehood to a claimant who was relying on section 3(1) even though the claimant had suffered no pecuniary loss.
Brabners LLP, Liverpool; Thomson Heath & Associates.