The Supreme Court considered whether section 3(1) of the Defamation Act 1952 permits recovery of damages for injured feelings in a malicious falsehood claim where no financial loss was caused. The majority held it does not, awarding only nominal damages of £5, as the tort remains fundamentally economic in character.
Background
The claimant, Fiona George, was employed as a recruitment consultant by LCA Jobs Ltd, owned by Linda Cannell. After resigning, she joined a rival agency, Fawkes & Reece, and began soliciting LCA’s clients. Her contract with LCA contained no post-employment restrictive covenant preventing this. Linda Cannell, knowing that no such contractual restriction existed, nonetheless made false statements to two individuals — Matthew Butler (a client contact) and Graeme Lingenfelder (the claimant’s line-manager at Fawkes & Reece) — asserting that the claimant was acting in breach of her contractual obligations with LCA.
At trial, Saini J found that both statements were false and made maliciously, as Linda Cannell did not honestly believe them to be true. Crucially, however, neither publication caused the claimant any financial loss. Mr Butler had already independently decided not to deal with the claimant, and Mr Lingenfelder quickly ascertained the truth by viewing the claimant’s actual terms of employment.
The Issue(s)
Two principal issues arose before the Supreme Court:
1. Does section 3(1) of the Defamation Act 1952 apply to these publications, and if so, does it render the tort actionable per se notwithstanding that no financial loss was actually caused?
2. Where section 3(1) applies but no financial loss has been sustained, can the claimant recover substantial damages for injury to her feelings, or is she confined to nominal damages?
The Court’s Reasoning
Section 3(1) and its effect
The Court unanimously agreed that section 3(1) of the 1952 Act creates a presumption of financial loss where the words complained of are calculated to cause pecuniary damage, rendering the tort actionable per se in such circumstances. Lord Leggatt, delivering the majority judgment, reached this conclusion by reading section 3(1) together with section 2 of the same Act:
“Unless there is some compelling reason to conclude otherwise, it is to be assumed that language in a statute is used consistently and that the same term bears the same meaning wherever it occurs.”
Both sections use the identical formulation — “it shall not be necessary to allege or prove special damage” — and since section 2 indisputably creates a category of slander actionable per se, the same must be true of section 3(1) for malicious falsehood.
The meaning of “calculated to cause”
All five Justices agreed that “calculated to cause” means objectively likely to cause, assessed on a forward-looking basis from the time of publication. The Court unanimously rejected the defendants’ “historical” approach, which would have required the court to take into account all facts known at trial (including what happened after publication). Lord Leggatt explained:
“Section 3(1) does not say that there is no need to allege or prove special damage if the words on which the action is founded ‘probably have caused’ pecuniary damage. The test is whether the words ‘are calculated’ (ie are likely) to cause pecuniary damage.”
The Court held that the relevant evidence for this assessment is limited to facts known or which ought reasonably to have been known to the defendant at the time of publication. On this test, both publications fell within section 3(1), since Linda Cannell did not know that Mr Butler had privately decided not to deal with the claimant, nor that the claimant had retained a copy of her employment terms that would expose the falsehood.
Damages for injury to feelings — the decisive issue
This was the issue on which the Court divided 3-2. The majority (Lord Leggatt, Lord Hodge, and Lord Richards) held that damages for injury to feelings are not recoverable for malicious falsehood unless the mental distress is causally connected with actual financial damage inflicted by the falsehood. Lord Leggatt reasoned:
“it was neither the intention nor the effect of the 1952 Act to transform an economic tort into one which protects the claimant’s emotional wellbeing.”
He emphasised that section 3(1) impliedly confirms that financial loss remains the only interest the tort is designed to protect, since it applies only where words are calculated to cause “pecuniary damage”:
“Section 3, by dispensing in these cases with the requirement of allegation and proof of specific pecuniary loss for success in the action, thus impliedly confirms the view that for all injurious falsehoods only pecuniary loss will ground the action.”
Lord Leggatt acknowledged that damages for mental distress can in principle be recovered as a consequence of financial loss actually inflicted by a malicious falsehood — using the hypothetical example from Joyce v Sengupta of a business owner suffering acute anxiety because of the financial damage to their livelihood. However, where no financial loss was actually caused, there was no tort-related injury from which mental distress could flow:
“Why should the creation of a risk of financial loss which does not in fact materialise act as a passport to the award of compensation for a different type of harm altogether? Such a result would be irrational.”
The majority also rejected the possibility of aggravated damages on the facts, noting that Linda Cannell’s dishonesty was the minimum required to establish malice and did not amount to “exceptional or contumelious conduct.”
The dissent
Lord Hamblen and Lord Burrows dissented on the damages issue. They agreed that section 3(1) renders malicious falsehood actionable per se but argued that, once the cause of action is established, normal principles require compensation for all loss — pecuniary and non-pecuniary — caused by the tort. They considered it inconsistent to accept that the tort is actionable per se while simultaneously requiring proof of pecuniary loss as a precondition for mental distress damages:
“It would be artificial and arbitrary for the availability of mental distress damages to turn on whether, for example, the claimant can prove that he or she has suffered a small pecuniary loss (say of £10).”
They would have dismissed the appeal and remitted the case for assessment of mental distress damages.
Practical Significance
This decision provides the first authoritative Supreme Court guidance on section 3(1) of the Defamation Act 1952. Its key practical implications include:
- Where section 3(1) applies, malicious falsehood is actionable per se — the claimant need not prove actual financial loss to establish the cause of action.
- The test of whether words are “calculated to cause pecuniary damage” is forward-looking from the date of publication, assessed by reference to facts known or reasonably known to the defendant.
- Where no actual financial loss is proved, only nominal damages (here, £5) may be awarded — the presumption of loss under section 3(1) does not open the door to substantial damages for injured feelings unconnected to financial harm.
- Damages for mental distress remain available in malicious falsehood claims, but only where such distress is causally connected to financial loss actually inflicted by the falsehood.
- The Jameel jurisdiction (abuse of process) and the requirement to prove malice remain significant practical barriers to unmeritorious claims, providing adequate protection for freedom of expression under Article 10 ECHR.
The decision preserves the essential character of malicious falsehood as an economic tort, even where the statutory modification renders it actionable per se, and draws a clear line against using section 3(1) as a vehicle for recovering non-pecuniary damages in the absence of any actual economic harm.
Verdict: The appeal was allowed by a majority of 3-2 (Lord Leggatt, Lord Hodge, and Lord Richards; Lord Hamblen and Lord Burrows dissenting). The Court of Appeal’s order for an assessment of damages for injury to feelings was set aside. Judgment was entered for the claimant for nominal damages only, in the sum of £5.
Source: George v Cannell and another [2024] UKSC 19 (12 June 2024)
