Has the Court of Appeal made malicious falsehood the new libel?


Most of our column inches are normally filled with discussions of libel, breach of privacy, data protection, and perhaps the odd regulatory matter.  However, unusually, this week the spotlight turns to a lesser known topic: malicious falsehood.

Whilst malicious falsehood – which is a tort created by the Common Law and supplemented by the Defamation Act 1952 – has been around for generations, a recent Court of Appeal judgment has provided a significant development.

Malicious falsehood is established when (as the name suggests) someone publishes false words maliciously, which refer to an identifiable individual or business.  To succeed, claimants must also prove that they have suffered “special damage”, which means that they have suffered loss as a direct and natural result of the publication, which can be quantified in monetary terms.

That said, section 3(1) of the Defamation Act 1952, states that “special damage” does not need to be proven if the words which are the subject of the action:

  • are calculated to cause pecuniary damage to the [claimant] and are published in writing or other permanent form”; or
  • are calculated to cause pecuniary damage to the [claimant] in respect of any office, professions, calling, trade or business held or carried on by him at the time of publication”.

The requirements either to prove consequential “special damage” or to satisfy S.3(1) have long been the reasons why claims for malicious falsehood are rarely successful.  The hurdles have been formidable.

However, the recent case of George v Cannell has arguably made it easier for a claimant to satisfy the test contained in S.3(1), and if this is correct, the Court of Appeal could well have opened up an a new area of risk for journalists and publishers, never mind bloggers, tweeters, and other social media posters.

Ms George was a recruitment consultant at LCA, which is a recruitment agency owned by Ms Cannell. Upon Ms George leaving the agency, Ms Cannell contacted one of Ms George’s client’s and her new employer, alleging that Ms George was in breach of her restrictive covenants by making contact with LCA’s clients and forming business relationships with them.

Ms George’s case was that S.3(1) was satisfied because Ms Cannell’s email was “calculated” to cause pecuniary damage by preventing her from obtaining business and therefore from earning commission. In addition to suing Ms Cannell for malicious falsehood, Ms George also sued Ms Cannell for libel and slander, and whilst Ms George was able to prove that she was not in breach of her restrictive covenants as Ms Cannell had alleged, her libel and slander actions failed because she could not overcome the ‘serious harm’ hurdle.

This left her claim for malicious falsehood as the outstanding live issue.  The trial judge, Mr. Justice Saini, found that Ms George had not satisfied S.3(1) because the section required her to prove that some actual pecuniary loss “had probably been caused” by the emails, which she had not managed to do.  Essentially, Saini J. found that there had to be a “backward-looking approach” to the issue.

Ms George appealed his decision, and for the first time ever, the Court of Appeal considered the wording of S.3(1) – which is quite something, given that it has been in force for 70 years!

During the appeal hearing, Ms George’s counsel argued that instead of the “backward-looking approach” taken by Saini J , the wording of the section required the Court to take a “forward-looking approach”, meaning that the Claimant had to prove that it was “inherently probable” that the statements made by Ms Cannell would cause her financial loss, rather than having to prove that they probably had caused such loss.

Lord Justice Warby and his fellow Court of Appeal judges agreed with Ms George’s argument and allowed her appeal in relation to the claim for malicious falsehood.  They found that the “forward-looking approach” was indeed the correct one, and that the statements made by the Defendant satisfied S.3(1) because the allegation that Ms George had was acting in breach of her restrictive covenants would have a natural tendency to cause financial loss to someone whose income is based on commission.  The case was then referred back to the High Court for it to consider the appropriate award of damages.

As an aside, it’s worth mentioning that Warby LJ also said that it is clear from the few judgments on the issue that the word “calculated” in S.3(1) does not mean “intended”, but “objectively likely”.  That in itself is a conclusion which could keep etymologists happily occupied for years!

The second issue for the Court of Appeal to decide was whether Ms George, having made out her case for malicious falsehood, was only entitled to recover nominal damages, or whether she was also able to recover damages for injury to feelings.

The Defendant argued that damages for injury to feelings could not be recovered without the Claimant proving she had suffered actual financial loss.  However, the Court agreed with the Claimant and ruled that an award for injury to feelings could be granted in circumstances where the Claimant was unable to establish actual financial loss.

Naturally, these new points of principle are yet to be applied by the courts of first instance, and in this case itself, the High Court has yet to decide on the appropriate level of damages.  Accordingly, it is too early to discern the judgment’s effect in practice.

That said, it is clear that by adopting the “forward-facing approach” where financial loss only needs to be inherently probable, rather than the “backward-facing approach” where actual financial loss has probably been caused, means that the bar which Claimants have to surpass in order to satisfy S.3(1) is now significantly lower than was previously thought.

Warby LJ, on the other hand, is more sanguine.  He said:

I am not persuaded that giving s.3 its natural meaning is likely to have a significant chilling effect on truthful and honest speech.  Experience suggests that claims for malicious falsehood are relatively rare and that the main brakes upon them are the need to prove falsity and, in particular, malice.  This is notoriously hard to plead (allegations of malice are frequently struck out at the interim stage) and to prove.  There are safeguards against abuse.

In the current climate, where Claimants are keen to explore alternative claims to libel because of the need to meet the strenuous requirements of the serious harm test, is there now a real possibility that this decision will result in more claimants looking to malicious falsehood, in addition to the other more common alternatives (such as breach of privacy and data protection)?  Or will claims for malicious falsehood remain “relatively rare”?

In short, is malicious falsehood about to become the new libel?

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