In the third and final part of our series on defamation claims in an HR context, we look at a recent Supreme Court judgment that shines a light on the often difficult issue of the harm caused – and the damages that may awarded – in defamation and malicious falsehood claims.

Almost all HR Managers will be familiar with the muttered threats of defamation claims which accompany any formal allegation of harassment, bullying, misconduct or poor performance on the part of another employee. Line managers in particular are prone to this, fearful that the employee’s grievance against them may lessen their standing either in the eyes of their employer or externally. There is in fairness a great deal more justification for such concerns than there used to be. The ease with which allegations may be aired via social media and the increasing difficulty which individuals and businesses seem to have in distinguishing between allegation and fact undoubtedly mean that lasting reputational harm can be caused more easily than used to be the case. Against that, of course, most workplace grievances and spats are actually a great deal less interesting than the parties to them believe, and so while the making of some allegation at work might damage the person accused, that is far from necessarily the case. Under those circumstances, what advice should HR be giving to employees who consider themselves defamed in such a process?

Ideally, none. Defamation is a complex area and the costs consequences of getting it wrong can be hideous. You don’t want to take any responsibility for your employees’ decisions in this respect. But if you are cornered and feel that you have to say something, tell them about the new Supreme Court case of George -v- Cannell.

As the Court noted, ‘causing injury to feelings by maliciously publishing false words is not a legal wrong’. I do not have a claim for damages against you merely because you say something false about me. Actual harm needs to be proved, and the question of what compensation might then be awarded is often complex and nuanced.

Ms George was employed by LCA Jobs, a recruitment agency owned and operated by Ms Cannell. Ms George resigned from LCA, got a new job at another recruitment agency and began actively targeting LCA’s clients. Ms Cannell then contacted a client that Ms George had been targeting and Ms George’s new line manager, telling them both that Ms George was in breach of her post-termination restrictive covenants.

So far so usual, but Ms George’s contract with LCA in fact contained no such restrictions. Not only were Ms Cannell’s statements not true, but she knew that they were not true. Ms George sued her for both defamation and malicious falsehood.

The challenge Ms George faced, however, was to prove that she had been caused harm. Her feelings were understandably injured. But the statement made to the client had no adverse effect as it had already decided not to deal further with her due to an unrelated issue, and the statement made to Ms George’s new employer was disregarded by it as soon as it saw Ms George’s LCA contract. 

For a defamation claim to succeed, an individual claimant must show that the statement complained of has caused or is likely to cause serious reputational harm. Ms George could not do so, and so her claim for defamation failed in the High Court. Much the same position will be arrived at if the employer dismisses the grievance against the manager – for practical purposes, no harm is done.

Malicious falsehood is similar to defamation, but there are crucial differences. First, the claimant has the burden of proving a statement is false, whereas in a defamation claim it is for the defendant, the maker of the statement, to prove that it is true. In this case, of course, the falsehood was very clear, so Ms George was over the first hurdle without difficulty. 

The other key difference is that malicious falsehood is designed to protect economic interests, not reputation, and so a claimant is required to prove either that they have been caused actual pecuniary damage (which Ms George could not do) or that the false statements were “calculated” to cause pecuniary damage.

In principle Ms George was therefore entitled to damages for injury to her feelings because the false statement had been intended to cause financial loss to her (through deterring the client and/or getting her into trouble with her new employer), even though no such loss had in fact occurred.

The case went to the Supreme Court to determine whether damages for injury to feelings are recoverable in claims of malicious falsehood and, if so, in what circumstances.

It held that Ms George could establish liability for malicious falsehood where that falsehood was calculated to cause financial loss even if, in fact, no such loss was caused.

That left the question of how much the damages should be. On this question, the Supreme Court was split. The majority concluded that injury to feelings would need to be proved by a claimant to have been caused by some financial loss – as there was no financial loss, Ms George was therefore not entitled to damages for injury to her feelings. She was awarded nominal damages of £5 (probably to make sure that she was seen to have won and so entitled to recovery of costs from Ms Cannell).

It is worth noting that two judges dissented, arguing that if liability was established then the claimant should be compensated for all damages flowing from that liability, i.e. including injury to feelings as a free-standing “harm” unrelated to financial loss. If the Court had applied the same parameters as for injured feelings in discrimination cases, for example, Ms George would have easily have been into four figures, as the degree of malice and dishonesty displayed by Ms Cannell would have counted heavily in her favour. 

A pyrrhic victory for Ms George? Only she can answer that, but what this case perhaps emphasises is that the value of a judgment for defamation or malicious falsehood is generally vastly less than people might think, and in a workplace case, almost never worth the effort. Your disgruntled employee should also keep in mind two other thoughts – first, that a defamation claim in response to an allegation of discrimination or to a protected disclosure will easily be alleged to be unlawful victimisation; and second, that there is nothing like public litigation to generate coverage of something which, by definition, you would much sooner keep under wraps.