The Supreme Court clarifies the law on the recovery of damages for non-pecuniary damage arising out of a maliciously false statement

Background

The Claimant was an employee of the second defendant, LCA, a recruitment agency owned and operated by the first defendant. After leaving LCA, the Claimant was employed by another recruitment agency and began targeting LCA's clients. LCA's owner told two third parties, one of whom was the Claimant’s new line manager and the other a client of LCA, that by doing this the Claimant was in breach of her contract of employment with LCA. In fact, there was no term of that contract (as the owner of LCA knew) which prohibited the claimant from soliciting business from LCA’s clients.

The Claimant brought a claim for defamation and malicious falsehood. Whilst the claimant failed in her defamation claim, her claim for malicious falsehood came before the Supreme Court.

Summary of findings 

The Supreme Court held that the effect of section 3(1) of the Defamation Act is to enable a claimant to establish liability for malicious falsehoods where a falsehood is likely to cause financial loss even if, in fact, it does not. 

However, the Claimant may only recover damages (other than merely nominal damages) for financial loss actually suffered. The majority of the Court also held that compensation for injury to feelings can only be recovered if such injury is consequent on financial loss caused by a maliciously false statement.

Comment

The consequence of the Supreme Court's judgment is that in bringing a claim for malicious falsehood, it is vital for a claimant to be able to demonstrate that he or she has suffered financial loss caused by the maliciously false statement, even though liability can be established without such proof. This may mean that unless a claimant is able to plead such losses in their particular of claim, claims for malicious falsehood are susceptible to being struck out as an abuse of process and/or on Jameel grounds. 

A claimant is also precluded from bringing a claim for distress caused by the malicious publication alone unless they can prove that the distress was caused by the consequent financial losses. It is likely to be a question of fact as to whether any distress caused was in fact consequent on the statement itself or the financial loss caused by the statement. It will be incumbent on claimants to sufficiently prove the causal link through documentary, witness and, potentially, expert evidence. Provided that the financial loss is proximate to the statement, this is unlikely to be a problem in practice, but may be harder to prove where the financial loss does not materialise until some months later. 

It is important to remember that this issue only arose because the Claimant had failed in her defamation claim because she had not satisfied the Court that she had suffered serious harm to her reputation in accordance with section 1 of the Defamation Act 2013. Had she succeeded on this claim, she would have been awarded damages for damage caused to her reputation, and her claim in malicious falsehood would have fallen away. 

It is unlikely in a publication claim that a claim in malicious falsehood would be pleaded without an additional cause of action in defamation. Whilst a claimant may not always be able to show that they suffered financial loss caused by a maliciously false statement, it may be possible to show that the publication was defamatory and caused them serious harm to their reputation (which does not have to be evidenced as a monetary loss in the case of individuals bringing claims). 

Given that the Claimant was only awarded nominal damages, the issue of costs will be of significance to the parties. The general rule under CPR 44.2(2)(a) is that the unsuccessful party will be ordered to pay the costs of the successful party, but the court may make a different order.  The issue may turn therefore as to which party the Court considers has been successful. The Claimant has already failed in her defamation claim with the usual order as to costs likely to follow with the Claimant paying the Defendants' costs. Any offers to settle may also be relevant to the apportionment of costs between the parties. The claimant may therefore find herself in the position of having established liability for malicious falsehood but having to pay the defendants costs because she only obtained nominal damages and failed in her defamation claim.

George v Cannell and another [2024] UKSC 19