A claim based upon injurious falsehood is often considered as an alternative, or in addition, to a claim for defamation. By law, both are claims in tort. Whilst there are some similarities between the two different types of claim, there are also significant differences.
A claim for defamation is founded upon damage to reputation, including hurt and injury to feelings. A claim for injurious falsehood, known in some jurisdictions as a claim for malicious falsehood, is founded primarily upon the basis of damage, specifically financial damage, caused to a plaintiff, or claimant. In defamation, if a plaintiff proves the essential elements of the claim, damage to reputation is assumed by law. No such assumption is made in the case of a claim for injurious falsehood, and any loss or damage must be strictly proved.
Whilst this is not the only circumstance in which a claim for injurious falsehood is considered, usually it is when a claimant is a corporation that employs more than 10 full-time employees, or a corresponding number of part-time employees. The law (section 9 of the Defamation Act 2005) prohibits a claim in defamation by such a corporation, and the test as to the number of employees includes persons employed by a related corporation, as defined by the Corporations Act 2001. In the circumstances, such a corporation cannot bring a claim for defamation and, in that scenario, a claim for injurious falsehood is usually contemplated.
There are three strict requirements for a claim for injurious falsehood:
- Statements were made about the claimant that were false.
- The statements were made with malice.
- The statements have caused financial loss or damage.
In relation to the first of those requirements, whether or not statements were made that were false is a factual matter to be determined according to the evidence. A consideration as to whether or not statements are true or false will also often arise in a defamation claim, as it is a defence to any defamation claim if a defendant can establish that any statements made by the defendant are substantially true.
In relation to the second of those requirements, the claimant needs to establish that the statements were made with malice, which usually requires a claimant to prove that the statements were made by the defendant for an improper purpose or with knowledge of falsity. The consideration of malice will also often arise in a defamation claim, particularly when a defence of qualified privilege is raised. If a defendant can establish, in a defamation case, that statements were made on an occasion of qualified privilege, that defence can only be defeated if it can be established that the defendant made the statements with malice. Establishing malice is often a challenge for a plaintiff because, to establish it, a plaintiff needs to address the state of mind of the defendant at the time of the making of the statements. Frequently, a defendant will allege that any statements made by him or her were made in good faith and the plaintiff will need to satisfy the Court that, despite evidence from the defendant to that effect, that was not the case.
In relation to the third of those requirements, the claimant needs to establish that he or she suffered financial loss or damage as a result of the statements. Frequently, a claimant seeks to establish that by demonstrating that, following the making of the statements, the claimant's earnings or profit were reduced. Direct specific evidence of the loss or damage is preferably to be obtained but, in principle, a claimant may also be able to establish general financial loss or damage. Unlike a claim in defamation, a claimant in injurious falsehood is not entitled to the benefit of any assumptions.
A claim for injurious falsehood can be easier than a claim for defamation because it does not permit for the multitude of other grounds of defence that are available in a defamation claim. For example, in a defamation claim, defences such as qualified privilege and honest opinion can be raised but those defences are not available in a claim for injurious falsehood. A claimant simply needs to be able to establish the three essential requirements that have been identified above.
Injurious falsehood is an effective cause of action for businesses suffering loss as a result of statements made about them, but which are excluded from bringing a claim for defamation due to the 10-employee rule.