Partial U-turn as long running malicious falsehood case concludes
26/06/2024
Regular readers might recall a case we covered back in September 2022 – George v Cannell – which concerned a lesser-known media law area: malicious falsehood.
In September 2022 the Court of Appeal had just handed down its judgment which, we said, had theoretically opened up an increased area of risk for publishers.
Well, the Defendant in the case appealed the Court of Appeal’s ruling and following a hearing in the Supreme Court in October 2023, almost two years after the Court of Appeal’s judgment we now have a final ruling from the UK’s highest court.
Please bear with me – this is a longer column than usual – but for completeness it makes sense to meander back through the case’s long history.
The Facts
The Claimant in the case is Ms George, who was a recruitment consultant at LCA, which is a recruitment agency owned by Ms Cannell.
Upon Ms George leaving the agency at the end of November 2018 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.
The Law: Malicious Falsehood
The tort of malicious falsehood arises when someone maliciously publishes false words that refer to the claimant, their property or their business. In order to be successful, a claimant must 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”.
Or, as an alternative to proving “special damage” a claimant needs to show that the malicious falsehood can be actioned under section 3(1) of the Defamation Act 1952, which states that “special damage” does not need to be proven to have a successful action 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 requirement to prove “special damage” or satisfy S.3(1) in order to bring a successful action has long been the reason that claims for malicious falsehood are rarely successful.
The High Court Trial
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.
The trial judge, Mr. Justice Saini, found that Ms George had not satisfied S.3(1) because in order to satisfy that section it was necessary to prove that some actual pecuniary loss had probably been caused to her by the emails. Essentially, Saini J found that there had to be a “backward-looking approach” to the issue.
The Court of Appeal Decision
Ms George appealed the decision and for the first time ever, an appellate court considered the wording of S.3(1).
Two main issues were considered by the Court of Appeal.
On the first issue Ms George’s representatives argued that instead of the “backward-looking approach” taken by Saini, J, the wording of the act required the court to take a “forward-looking approach”, so the Claimant had to prove that it was inherently probable that the statements made by Ms Cannell would cause her financial loss, rather than proving that they probably had caused that loss.
Lord Justice Warby and his fellow Court of Appeal judges agreed with Ms George’s argument and entered judgment in her favour. They found that the “forward-looking approach” was indeed the correct one, and that the statements made satisfied S.3(1) because the allegation that Ms George 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 second issue for the Court of Appeal to decide was whether Ms George, having made out her case for malicious falsehood, was entitled to recover only nominal damages, or whether she was also able to recover damages for injury to feelings.
Lord Justice Warby and his fellow Court of Appeal judges 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.
It was these decisions which, two years ago, led us to conclude that publishers now faced an increased threat from claims for malicious falsehood.
The Supreme Court Decision
Now for an about turn (in part)….
The Defendant, unhappy with the Court of Appeal’s decision, took the case to the UK’s highest court – the Supreme Court. The two main issues remained the same as those considered by the Court of Appeal.
The five Supreme Court Judges were split in parts of their decision, but the majority decision of Lords Hodge, Leggatt and Richards prevails.
On the first issue, the Supreme Court was in agreement with the Court of Appeal: the test created by S.3(1) of the Defamation Act 1952 is a “forward-looking” one, so what matters is whether it is inherently probable that the statement would cause financial loss, rather than being able to evidence that it actually had.
On the second issue, the Supreme Court overruled the Court of Appeal, finding that a claimant cannot recover damages for injury to feelings, unless they could prove:
- they had suffered significant financial loss; and
- that the injury to feelings was caused by the financial loss which had been suffered.
However, the Supreme Court then held that although the Claimant had satisfied the test contained in S.3(1), in the absence of proof that substantial financial loss had been suffered, the Claimant was awarded just £5 in nominal damages. There was no evidence in this case of substantial financial loss which could be recovered by way of compensatory damages, so it followed that damages for injury to feelings could not be recovered either.
Given the enormous legal costs that will have been incurred (which, no doubt, will become the subject of further dispute), some might think this outcome is something of a pyrrhic victory.
Where does it leave publishers?
Well, the crucial test created by S.3(1) remains a forward-facing one, which is undoubtedly a lower bar for claimants to surpass than having to look backwards and prove that actual financial loss has been caused.
Therefore, our analysis from 2022 – that this means claimants might look to Malicious Falsehood as an alternative to libel when they might fail to surpass the serious harm test – still stands.
However, in terms of the damages that can be recovered by a claimant where no significant financial loss is proven, this ruling is more helpful. Without evidence of significant financial loss, a claimant will not be able to claim compensation for injury to feelings, which reduces a publisher’s potential liability significantly.
Time will tell whether this Supreme Court judgment emboldens claimants to look to malicious falsehood, but to make it worthwhile they need to be able to show significant financial loss – or else they risk walking away with only £5….