A business can suffer from more than the ordinary ups and downs of the market. Sometimes, the damage may come from what someone else says about it. A false statement that a business has closed down, that its products are defective, or that its goods are inferior to those of a competitor can influence customers and commercial partners and, in the process, cause real financial loss.
The law recognises a remedy for this kind of harm through the tort of injurious falsehood, also referred to as malicious falsehood or, in some contexts, trade libel. Unlike defamation, which is primarily concerned with injury to a person’s reputation, injurious falsehood is concerned with false statements affecting another person’s goods, property or business and causing economic harm.
When the elements of the tort are established, the plaintiff may obtain a remedy for the financial loss caused by the false statement.
The Elements of Injurious Falsehood
For a plaintiff to succeed, certain essential matters must be established. A statement being unfavourable or even damaging to a business does not, by itself, make out the tort.
False Statement concerning the Plaintiff’s business, goods or property.
The statement complained of must be false and must concern the plaintiff’s profession, trade, business, goods or property. The plaintiff bears the burden of establishing the falsity of the statement.
In the classic case of Ratcliffe v Evans, a newspaper falsely reported that the plaintiff’s business had ceased trading. The court recognised that a malicious falsehood of that nature could cause loss of trade and was capable of grounding an action.
Proof of malice
Falsity alone is not enough. The publication must have been made maliciously. Malice in this context is not limited to personal spite or hostility. It may arise where the defendant knowingly makes a false statement, acts recklessly without regard to its truth, or publishes it for the improper purpose of causing injury.
The circumstances surrounding the publication will therefore be important in determining whether malice has been established. A defendant who makes a false statement in good faith, without the necessary malicious purpose, will not necessarily be liable merely because the statement turns out to be wrong.
Publication to a third party
The false statement must have been communicated to someone other than the plaintiff. Publication is what gives the falsehood the capacity to affect the plaintiff’s commercial interests.
This requirement is not confined to newspapers and other traditional forms of communication. A false statement published on a website, social media platform or other digital medium may reach a considerable audience and potentially affect a business within a very short period.
Financial loss or damage
The plaintiff must also establish the damage recognised by the law. Injurious falsehood is principally concerned with economic interests, and loss of customers, sales, contracts or other business opportunities may, depending on the evidence, demonstrate the financial consequences of the false statement.
The requirement is important because the tort is not simply concerned with whether a statement was offensive or damaging to reputation. The plaintiff must establish the economic injury contemplated by the law.
Exaggerated Advertising and Actionable Falsehoods
An important qualification arises where the statement is made in the course of advertising. Businesses routinely describe their products in extravagant terms. Claims that a product is “the best”, “the finest” or “second to none” may be understood as ordinary advertising language rather than statements of fact. The law refers to such statements as mere puffs, and they will generally not constitute actionable injurious falsehood.
In White v Mellin, the defendant placed a label on the plaintiff’s infant food recommending another brand as “far more nutritious and healthful than any other preparation yet offered”. The House of Lords treated the statement as advertising puffery rather than an actionable falsehood.
The position may be different, however, where the advertisement contains a specific factual assertion capable of being proved true or false and which is likely to be taken seriously.
In De Beers Abrasive Products Ltd v International General Electric Co of New York Ltd, the defendants circulated a pamphlet containing purported laboratory comparisons of their abrasive product and the plaintiff’s competing product. The material went beyond simply claiming that the defendants’ product was better; it presented detailed comparative results and contained statements denigrating the plaintiff’s product. The court treated such claims as capable of being taken seriously, rather than dismissing them as mere advertising puffery.
The distinction is therefore important. The law does not prevent businesses from praising their own products or engaging in ordinary commercial exaggeration. What may attract liability is a false factual representation, made with the requisite malice, which seriously disparages another person’s goods or business.
Defences Available to the Defendant
A defendant faced with an action for injurious falsehood is not without protection. Since falsity is an essential element of the claim, establishing the truth of the statement will defeat the action.
The defendant may also contest the allegation of malice. Where the evidence shows that the statement was made honestly and without the improper purpose or state of mind required by the tort, the plaintiff may fail to establish this essential element.
A defendant may rely on consent where the plaintiff agreed to the publication of the statement. A person who willingly consents to a publication cannot ordinarily complain of injury arising from that very publication. For the time-honoured maxim of law has been “volenti non fit injuria” to wit, no injury is done to one who has willingly consented.
A defendant may also raise limitation where the action is brought outside the applicable period. Under the Limitation Act, 1972 (NRCD 54), the period within which an action may be brought may be two or six years, depending on the nature of the claim.
Remedies for a Successful Claim
Where the plaintiff succeeds, damages may be awarded for the financial injury established. The remedy is directed at the economic loss resulting from the falsehood rather than injury to feelings or reputation in the manner associated with defamation.
An injunction may also be appropriate where the continued publication or repetition of the false statement threatens further harm. This can be particularly relevant where the offending material remains accessible online.
The extent of any monetary award will ultimately depend on the loss established and the applicable principles governing damages.
Balancing Commercial Competition with Legal Liability
Businesses must be able to compete and advertise their products without the constant fear that every boast or unfavourable comparison will result in litigation. At the same time, competition does not give a trader licence to publish false information about another business, particularly where the statement is made maliciously and causes economic harm.
That is the space occupied by injurious falsehood. The tort provides a means of protecting commercial interests where the requirements of the law are satisfied, while leaving room for legitimate commercial speech and ordinary advertising.
