Insights Court of Appeal finds that the test for damages under s 3(1) of Defamation Act 1952 in malicious falsehood claims is forward-looking and based on the likelihood of damage flowing from the false words at the time they were made


Fiona George worked as a recruitment consultant for LCA Jobs Ltd, owned and operated by Linda Cannell. After Ms George left LCA and moved to another agency called Fawkes and Reece (F&R), Ms Cannell spoke to one of Ms George’s clients, Mr Butler, and sent an email to her new employer, alleging that Ms George had been acting in breach of restrictive covenants in her contract with LCA by approaching LCA’s clients, such as Mr Butler, and soliciting business from them. Ms Cannell also threatened to sue Ms George. Ms George resigned from F&R, as she felt intimidated into leaving the recruitment sector, and issued proceedings against Ms Cannell and LCA (the defendants) for libel, slander, and malicious falsehood.

At first instance, Mr Justice Saini found that the words published were defamatory of Ms George, that the allegation that she had acted in breach of contract was false, and that the defendants had published that allegation maliciously. However, he dismissed the defamation claim as Ms George had not established that either publication caused serious harm to her reputation under s 1(1) of the Defamation Act 2013. He also dismissed the malicious falsehood claims on the grounds that, while Ms George had shown that some of the statements complained of were false and had been made without any honest belief in their truth, she had not proved special damage under common law, nor had she shown that her case fell within the exception to that requirement contained in s 3(1) of the Defamation Act 1952.

Ms George appealed the decision on malicious falsehood. She accepted that she had failed to establish special damage but argued that she had proved enough to satisfy s 3(1) of the 1952 Act.

Section 3(1) provides: “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.”

The main question was whether Ms George needed to show that with hindsight it could be seen that the false and malicious statement had caused her some financial loss, which Saini J had concluded had not occurred, or whether, as Ms George argued, it was enough to show that the statements were such that it was inherently probable that in the ordinary course of events they would cause her some financial loss.

If Ms George was right, the question was whether she could recover more than nominal damages, i.e., in the absence of actual financial loss whether there was any tenable claim for damages to compensate for injury to feelings.

On s 3(1) of the 1952 Act, Saini J had found that malicious falsehood “is a tort that compensates only for pecuniary loss… Recovery turns on matters of fact as to pecuniary damage”. On that basis, Ms George’s pleaded case on loss failed because the publications complained of had not dissuaded either her client (Mr Butler) or F&R from dealing with her. Mr Butler had provided evidence that he had decided not to commission her before speaking to Ms Cannell, and F&R had decided to ignore the allegations on the basis that there was, in fact, no non-solicitation clause in Ms George’s terms of employment with LCA. Therefore, there had been no actual pecuniary loss.

Giving the lead judgment, with which the other Justices agreed, Lord Justice Warby found that Saini J had fallen into error. Warby LJ held that the aim, purpose and effect of s 3(1) is to relieve a claimant of the need to plead or prove any actual loss on the balance of probabilities as a matter of historical fact. The statutory test is forward-looking, he said, and it is enough for a claimant to prove that publication by the defendant of a false and malicious statement is of such a nature that, viewed objectively at the time of publication, financial loss is an inherently probable consequence; in other words, that financial loss would probably follow naturally in the ordinary course of events. On the evidence, this interpretation of s 3(1) respected the intention of Parliament at the time s 3(1) was introduced, was consistent with authority, and was compliant with the European Convention on Human Rights.

Applying this to the facts, Warby LJ found that the requirements of s 3(1) had been satisfied. The defendants had falsely alleged to Ms George’s new employer and one of her clients that she had broken her contractual commitments to the defendants. Such allegation had a natural tendency to cause financial loss to someone whose income was commission-based. The mechanisms of probable loss were adequately pleaded and, considering the relevant context, the necessary harmful tendency had been established.

As for damages, Saini J had said that even if Ms George had established a claim for general damages under s 3, he would have awarded a nominal sum only. Warby LJ agreed, finding that damages in this context could only be compensatory and Ms George had not identified a recognised type of compensatory injury.

However, Warby LJ said that Ms George could recover for injury to feelings and that an award of substantial, as opposed to nominal, damages could not be ruled out on the facts of the case. Ms George had learned that the defendants had wronged her tortiously by maliciously publishing a falsehood in circumstances that made it probable that she would suffer consequential financial loss. According to her evidence, she found this very hurtful. The prospect of loss and the prospect of distress were both foreseeable by the defendants. Neither Ms George nor the defendants knew that what was inherently likely, i.e., financial loss, would not in fact come to pass. The fact that this later emerged, and Ms George came to know it, would limit but not extinguish her claim.

The appeal was allowed. (Fiona George v Linda Cannell [2022] EWCA Civ 1067 (27 July 2022) — to read the judgment in full, click here).