Injurious falsehood

Injurious falsehood arises where there is a malicious publication of a falsehood concerning a plaintiff's goods or services that leads other persons to act in a manner which causes actual loss or damage to a plaintiff.

However, while acting as a protective mechanism to protect a plaintiff's interest in property or business, careful consideration should be given as to whether the plaintiff is able to establish and prove all of the elements of this cause of action (set out in further detail below) before bringing any proceedings.

Elements of injurious falsehood

In order to bring an action in injurious falsehood the following must be established;

1. A false statement was made about the business’ goods or business.
2. The statement was published.
3. The statement was made maliciously.
4. Actual damage has resulted from the statement.

There must be a causal nexus between the malicious publication of a falsehood and the actual damage suffered to a plaintiff.

False statement

A plaintiff suing in injurious falsehood bears the onus of proving the falsity of the statement or representations published.

The falsity of the statement is a question of fact to be determined objectively and a plaintiff must be able to show that it was more likely than not that a false statement was made.

For example, the following types of statements have been found to give rise to an action in injurious falsehood:

1. That the plaintiff has ceased to carry on or has closed down his or her business.
2. That the plaintiff was not available for future employment.
3. That the plaintiff had copied the defendant’s swimwear designs.[1]
4. A statement of opinion given where the person stating the opinion did not believe in the truth of the opinion, or where the statement impliedly conveyed a representation that the opinion was formed upon reasonable grounds or on the basis of reasonable enquiries.[2]

Publication of the statement to a third person

The statement must have been communicated to a third party and can occur orally or in writing. It must also identify a plaintiff’s business.

The definition of the meaning of ‘publication’ is wide and can occur in many different forms, for example, in spoken conversation, print, televised material, drawings, photographs, social media or can even be inferred.

‘Publication’ becomes even more relevant when assessing any potential award for damages as the court must be able to ascertain that the publication directly caused the loss suffered by a plaintiff.

Malice

Malice in the context of injurious falsehood means an ‘intent to injure another without just cause or excuse’ or ‘some direct, dishonest or improper motive’[3]

Malice can include a wide range of scenarios but usually involves a clear intent to inflict damage on a plaintiff. It is a question of dishonest motive, intention or state of mind.[4]

Malice can be inferred where a false publication causing actual damage is made with an intent to injure without just cause,[5] knowledge of the statement’s falsity or reckless indifference as to the truth of the statement.

It will be sufficient to establish malice if there is evidence showing the defendant knew that the statements were false.

For example, malice has been established where:

1. The defendant knew that the statements were false and calculated and were made to injure the plaintiff in its business[6].
2. Snide insinuations were made by a defendant concerning matters such as the supposed sexuality of one of the directors of the plaintiff, and the circumstances in which he left his former employment were made[7].
3. The defendant knew the statements were false and was recklessly indifferent to their truth or falsity, and where the defendant held grievances with the plaintiff and those grievances were motivating him to publish those statements [8].

Actual damage

Financial loss to a business will generally not be enough and damages are only awarded for loss actually suffered (for example, loss of business or sales) and expenditure actually incurred.

The damage suffered must be caused directly by the publication.

In Mahon v Mach 1 Financial Services Pty Ltd,[9] the Supreme Court of New South Wales held that injurious falsehood could be maintained without proof of actual damage where an early interlocutory injunction had been granted, preventing the very damage which might otherwise have ensued.  However, in a subsequent decision,[10] the Court ordered that the statement of claim be struck out on the basis that the applicant did not provide sufficient particulars to put the respondents on notice as to any reasonably probable actual damage flowing to any commercial or proprietary interests of the applicant.

Similarly, in Kraues v Cash,[11] the Federal Court found that the claimant did not have reasonable prospects of succeeding on his claim in injurious falsehood against the respondents, in part on the basis that the claimant was unable to show that the damage he suffered was the “direct and natural result” or the “natural and probable consequence of” the publication of the alleged representation.

However, it should be noted that if a defendant has attempted to rectify the false publication,  apologise or acknowledges that the statement published to any third party is false, then these are factors a Court may take into account when assessing a plaintiffs’ claim for damages.

Assessment of damages

As set out above, a court must be able to ascertain that the malicious publication directly caused the loss suffered by a plaintiff. Damages are therefore limited to the amount of actual loss proved to have been suffered by a plaintiff.

In determining the extent of damages, the Court may consider:

1. The seriousness of the false statement, including whether there was an intent to cause damage and the malice involved.
2. The extent of the publication, for example the type and number of people the false statement was published to.
3. The extent of the broadcast of the false statement including how widespread the publication is and the size of the business affected.
4. The effect on the damage to a person’s business, trade, property or products.
5. Any attempt by a defendant to remedy the injurious falsehood, as this may impact the amount of damages which may be subsequently awarded.

Lavan comment

Injurious falsehood is an infrequently used action because of the difficulties in establishing all of the elements of the cause of action. It is a particularly challenging cause of action because:

1. The plaintiff bears the onus of establishing falsity, malice and actual damage.
2. Findings of malice by a Court are extremely rare.
3. Proof of actual damage can present a serious impediment. For example, it may be very difficult for a corporation to prove that its share price or goodwill has been affected by a publication.

It can therefore be an expensive exercise in establishing each of the elements and because of the high threshold which must be met in order to prove injurious falsehood.

Careful consideration should be given prior to commencing this cause of action and to the collation and preservation any documents or evidence which can assist the Court in verifying actual loss or damage suffered by a plaintiff.  

If you have any questions or concerns in relation to the tort of injurious falsehood, please do not hesitate to contact Cinzia Donald, Partner, or Kristy Yeoh, Special Counsel, in Lavan’s Litigation and Dispute Resolution team.