Fiona George v Linda Cannell

Heard on 17 and 18 October 2023

Lord Leggatt ( with whom Lord Hodge and Lord Richards agree):

We are concerned on this appeal with a tort with many names. It embraces actions which have variously been called slander of title, slander of goods, disparagement of goods and trade libel. By the turn of the twentieth century these actions were coming to be seen as examples of a more general wrong, for which Sir John Salmond coined the name “injurious falsehood”: see Salmond, The Law of Torts: A Treatise on the English Law of Liability for Civil Injuries, 1st ed (1907), p 417. That name is still used by many legal writers; but courts in England and Wales have generally preferred the term “malicious falsehood”, which I will use. Whatever name is used, the nature of the wrong is not in doubt. As stated by the Court of Appeal in the leading case of Ratcliffe v Evans [1892] 2 QB 524, 527:

“an action will lie for written or oral falsehoods … where they are maliciously published, where they are calculated in the ordinary course of things to produce, and where they do produce, actual damage …”

Equally clear is that “actual damage” in this context means pecuniary damage — that is, loss that can be estimated in money (rather than merely being compensated by an award of money). A more modern term which I will use to mean the same thing is “financial loss.” Because financial loss is the basis or “gist” of the tort, malicious falsehood is generally classified as an “economic tort”: see eg Hazel Carty, An Analysis of the Economic Torts, 2nd ed (2010), p 1.

In this case the trial judge found that the first defendant maliciously published falsehoods about the claimant to two individuals; but also that neither publication caused the claimant any financial loss. The claimant asserts that the publications nevertheless caused injury to her feelings for which she is entitled to compensation. Admittedly under the common law such a claim cannot be maintained. But the claimant argues that a statutory modification of the tort made by section 3(1) of the Defamation Act 1952 changed this. She contends that this statutory provision applies here and, where it applies, enables damages to be recovered for injury to feelings even when no financial loss has been sustained.

If section 3(1) of the 1952 Act has this radical effect, it had gone unnoticed for 70 years. The Court of Appeal, however, accepted that it does. They decided, first, that section 3(1) applies here but that, as the claimant suffered no financial loss, only nominal damages could be awarded on that account. I agree with this. They then held that it would be open to the judge, on an assessment, to award substantial (as opposed to nominal) damages to the claimant for her injured feelings. With that, I cannot agree. As I will explain, 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.

The second defendant, LCA Jobs Ltd (“ LCA”), is a recruitment agency owned and operated by the first defendant, Linda Cannell. The claimant, Fiona George, was employed by LCA as a recruitment consultant. She resigned after eight months and then got a job at another recruitment agency called Fawkes & Reece. Her contract of employment with LCA did not prohibit her from soliciting business from LCA's clients after her employment ended — although she gave Linda Cannell verbal assurances that she would not do so.

Fiona George started her new job with Fawkes & Reece at the beginning of January 2019. Right away she began actively targeting LCA's clients. Linda Cannell soon found out. On 21 January 2019 Ms Cannell emailed the claimant threatening to take legal action against her for breach of “your post-employment obligations under the terms of your employment, not to solicit business from LCA clients.” Ms Cannell also said that she would be writing to the claimant's employer and contacting LCA's clients “to advise them of your actions and your violation of the terms of your post-employment obligations.”

The trial judge found that, when she sent this email, Linda Cannell knew that the claimant's contract of employment contained no restriction on soliciting business from LCA's clients. But together with her legal adviser she decided to assert that there was such a legal obligation. Linda Cannell believed that Fiona George did not have the handbook containing the terms of her employment with LCA and hoped that she would not discover the reality of the situation.

No claim for defamation or malicious falsehood could be based on the email sent to the claimant because it was not published to any third party. But immediately before and after sending the email, Linda Cannell made similar statements to two other people.

The first such statement was made to an individual called Matthew Butler who worked for a client of LCA. Mr Butler's firm had been approached by the claimant to use her services to search for new staff. During a telephone call Linda Cannell told Matthew Butler that in doing this Fiona George was breaking her contract with LCA under which she had agreed that she would not approach LCA's clients.

Linda Cannell also sent an email to the claimant's line-manager at Fawkes & Reece called Graeme Lingenfelder. The email said that Fiona George had been approaching LCA's clients for new business in breach of “her legal obligations under the terms of her employment with LCA, not to solicit business from our clients and candidates (and Fiona's absolute assurances that this is something she would never do).” Ms Cannell asked for assurances that this would stop immediately.

Very shortly after receiving this email, Mr Lingenfelder spoke to the claimant. They discussed the allegation of breach of contract. Contrary to Linda Cannell's belief, Fiona George did in fact have a copy of the handbook containing her terms of employment with LCA. She showed this to Graeme Lingenfelder so that he could see that, in reality, there was nothing in her contract to prevent her from soliciting LCA's clients. He accepted that this was so.

A few days later, on 27 January 2019, the claimant resigned from Fawkes & Reece, despite efforts by Mr Lingenfelder to persuade her to stay. She did so because she supposed (wrongly, as it turned out) that Linda Cannell had carried out her threat to contact other clients of LCA. Fiona George felt that this made her position untenable. She quickly found another job with a recruitment agency operating in a different sector.

Fiona George sued Linda Cannell and LCA for both defamation and malicious falsehood. The claim for defamation failed at trial because the judge, Saini J, found that the statements made by Linda Cannell to Mr Butler and to Mr Lingenfelder had not caused serious harm to the claimant's reputation, as is now required to establish that a statement is defamatory by section 1 of the Defamation Act 2013: see [2021] EWHC 2988 (QB); [2021] 4 WLR 145, paras 133–136. There was no appeal from that decision.

On the claim for malicious falsehood the judge found that the statements made by Linda Cannell to the effect that the claimant had breached post-employment obligations in her contract with LCA were false and were made maliciously, as Linda Cannell did not honestly believe that they were true: see paras 160–163. He also found that the statements had not caused any financial loss at all to the claimant. What Linda Cannell had said to Matthew Butler had no financial impact because Mr Butler had in fact already decided not to deal further with the claimant due to an unrelated issue (involving a disagreement about commission). Equally, no loss flowed from the email sent to Graeme Lingenfelder because, straight after receiving the email, he saw for himself that the claimant's employment contract contained no relevant legal obligation. Any restrictions that he imposed on the freedom of the claimant to contact LCA's clients were therefore his own decision and were not affected by the false statement: see paras 180–181.

The judge was persuaded that, in the light of his findings that the statements complained of did not cause any financial loss, the claim for damages for malicious falsehood failed under the common law and that section 3(1) of the 1952 Act did not apply. He therefore dismissed the claim.

On appeal the Court of Appeal (Warby LJ, with whom Underhill LJ and Snowden LJ agreed) decided that the claim does fall within section 3(1) with the consequence that the claimant is entitled to a judgment for damages to be assessed: see [2022] EWCA Civ 1067; [2023] QB 117, paras 72–73. They also decided that, even though the publications complained of caused the claimant no financial loss, she is not limited on that account to an award of purely nominal damages but is entitled to recover compensation for injury to her feelings: paras 74–79. The Court of Appeal ordered that the case be remitted to the High Court to assess these damages.

On this further appeal the defendants dispute each step of the Court of Appeal's reasoning. Their case is put in two alternative ways. They first argue that, on the facts found by the judge, and in particular his finding that the two publications caused no financial loss to the claimant, the claim must fail altogether. Alternatively, they argue that, if...