George v Cannell and another

Under section 3(1) of the Defamation Act 1952, a malicious falsehood calculated to cause pecuniary damage is actionable without proof of actual financial loss. The provision creates an irrebuttable presumption of financial loss for liability, but substantial compensatory damages require proof of loss.

The likelihood of financial loss is assessed prospectively at publication. The court considers causally relevant facts which the publisher knew or ought reasonably to have known. Damages for mental distress are recoverable only where the distress results from financial loss inflicted by the falsehood. Aggravated damages require exceptional or contumelious conduct beyond the malice inherent in the tort.

The claimant’s former employer falsely and maliciously told a prospective client and the claimant’s new manager that the claimant was breaching post-employment contractual restrictions. The trial judge found that neither publication caused financial loss. He dismissed the claims for defamation and malicious falsehood: [2021] EWHC 2988 (QB).

The Court of Appeal allowed the appeal on malicious falsehood. It held that section 3(1) of the Defamation Act 1952 applied and that damages for injured feelings could be assessed despite the absence of financial loss: [2022] EWCA Civ 1067.

The Supreme Court considered the effect of section 3(1), the meaning of words “calculated to cause pecuniary damage”, and the availability of damages for mental distress and aggravated damages.

1. By a majority, the appeal was allowed. Lord Leggatt, with whom Lord Hodge and Lord Richards agreed, directed that judgment be entered for the claimant for nominal damages of £5. Lord Hamblen and Lord Burrows dissented on the availability of damages for mental distress.

2. Section 3(1) of the Defamation Act 1952 creates a presumption of law that publication caused financial loss where its conditions are satisfied. The presumption is irrebuttable for liability. The cause of action therefore accrues on publication and cannot be extinguished by later proof that no financial loss occurred. Such proof nevertheless prevents an award of substantial compensatory damages, leaving only nominal damages.

3. The statutory words “calculated to cause pecuniary damage” mean objectively more likely than not to cause financial loss. The assessment is forward-looking from publication. It is made by reference to causally relevant facts which the defendant knew or ought reasonably to have known at that time. Relevant matters may include prior publications, other statements in the same publication and steps which the recipient would probably take.

4. On the facts known or reasonably knowable to the first defendant, both false statements were likely to cause the claimant financial loss. Private matters which the first defendant neither knew nor ought to have known could not defeat liability. Section 3(1) therefore applied, although the trial finding that no financial loss resulted restricted the award to nominal damages.

5. Malicious falsehood remains an economic tort. Section 3(1) relaxes the requirement to prove financial loss; it does not convert the tort into one protecting emotional wellbeing. Mental distress may be compensated where it is a consequence of financial loss inflicted by the falsehood. Distress caused merely by learning that false and malicious words were published is not compensable. As no financial loss was caused here, damages for injured feelings were unavailable.

6. Aggravated damages may compensate distress caused by exceptional or contumelious conduct in committing the tort or afterwards. The dishonesty required to establish malice does not itself aggravate the tort. The trial findings disclosed no sufficiently exceptional conduct, malevolence or improper conduct of the proceedings.

• United Kingdom Supreme Court: By a majority, allowed the defendants’ appeal from [2022] EWCA Civ 1067, set aside the order for assessment of damages for injury to feelings and entered judgment for nominal damages of £5.
• Court of Appeal: In [2022] EWCA Civ 1067, allowed the claimant’s appeal and remitted the claim to the High Court for assessment of damages, including damages for injured feelings.
• High Court: In [2021] EWHC 2988 (QB), dismissed the claims for defamation and malicious falsehood after finding no serious reputational harm and no financial loss caused by the publications.