What is Injurious Falsehood?

injurious falsehood

Defamation against a company or business (injurious falsehood) is treated differently to defamation against an individual.

Generally, businesses are unable to commence legal action for defamation in relation to defamatory publications made about the corporation. The exceptions to this rule are if the company is a not-for-profit organisation or employs fewer than 10 individuals. These companies can commence legal action for defamation in the same manner as an individual.

In all other cases, where a company’s reputation has been damaged, the company will need to consider whether a claim for injurious falsehood is applicable, as it will not be able to bring any claim in defamation.

To bring a claim of injurious falsehood, the business (known as the Plaintiff) is required to show that:

  • A false statement has been made about the business or its goods and services;
  • The false statement was published to a third party;
  • There was malice (an intent to cause harm); and
  • Actual damage was caused as a direct result of the false statement.

Unlike defamation, injurious falsehood is more concerned with financial loss than reputational damage.

The elements for injurious falsehood are explained below.

1. Publication of False Statement About Business

There must be a communication of false information concerning the goods or services provided by the Plaintiff’s business, their brand, or the operation of their business.

The communication can be verbal, in writing, or even without using words.

Communications about businesses occur in many forms and mediums, such as reviews on social media platforms, news articles and reports, documentaries, advertisements or marketing content, or direct conversations. They are all considered ‘publications’ and the person, company, or organisation who communicated the information is considered the ‘publisher’.

The publication must be communicated to a third party – an individual, business, or organisation other than the Plaintiff. The publication must also identify the Plaintiff’s business. This can be either by specific reference, but also communicated impliedly or inferred by reference to a well-known fact.

2. Malice

Malice is an essential element of injurious falsehood. The Plaintiff business is required to demonstrate that the Defendant publisher intended to cause harm. It can be difficult to prove someone else’s intentions. However, a general presumption considered by the Court is that a person intends the natural or probable consequence of their actions. Therefore, if a Plaintiff can demonstrate that it is reasonable for a person in the publisher’s position to have considered the harmful consequence probable, they will generally be able to demonstrate malice.

For example, if a business suddenly experiences a flood of bad reviews claiming that their products are faulty and it is discovered that the reviews were published by employees of the business’ most direct competitor, the business will generally be able to show malice by arguing that it would have been reasonably probable, in the minds of those employees, that the negative reviews would drive customers away from the business and to their competitor.

3. Actual Damage

Finally, the Plaintiff must prove that economic or financial loss has been suffered, and this was the intention of the Defendant or the probable consequence of the publication. A common complaint is the general loss of business and revenue. This element is dependent on the circumstances at the time of the publication and the nature of the statement itself.

The damage here must be caused by the publication of the statement and not merely coincidental.

For example, a company may not be able to sue a news organisation for falsely alleging that it exploits their workers if it was already experiencing a downturn in business. However, if the news report caused the downturn to occur more quickly, or inflated the size of the downturn this may be actionable.

When determining the damage caused, the Court may take into account the seriousness of the false statement, the extent of the publication, the transmission of the false statement, the likely ‘grapevine effect’ (ie. re-tweets and re-posts on social media, whether the statement is likely to re-surface in future), the size of the business, the impact on the Plaintiff’s personal reputation, and whether the publisher has made any attempt to apologise and rectify the damage.

What if my business is a victim of false statements?

It is important to receive independent legal advice before taking any action. We can help you to assess the merits of your claim and the commerciality of each option available.

Claiming for injurious falsehood involves going to court, which may or may not be appropriate in your situation. To commence an action for injurious falsehood, you will need to prepare and serve a Statement of Claim detailing your claim and quantifying the loss suffered as a result of the false statement.

Injurious falsehood claims are notoriously difficult to establish due to the challenges of proving the essential elements of malice and damage. It is often hard to prove the Defendant’s subjective motive, and the actual damage caused by the statement. However, a failure to satisfy any of these requirements will be fatal to your claim.

In the case of Seafolly Pty Ltd v Leah Madden, Seafolly made a claim of injurious falsehood against a women’s swimwear competitor, Leah Madden, after she had made public statements which suggested that Seafolly had copied her designs. Seafolly failed in its claim, mainly because it could not adduce any concrete evidence that Madden’s false statements had in fact caused actual damage to Seafolly’s business.

Evidence therefore is crucial in ensuring the success of your claim. It is important for you to obtain legal advice on what information, financial statements, or documents will be necessary to successfully claim injurious falsehood.

What if I am accused of injurious falsehood?

Again, it is vital that you receive independent legal advice before taking any action. We can help you to prepare and serve a defence, or assist you in negotiating a settlement with the other party.

You must file a defence with the court within 28 days of being served with the Statement of Claim otherwise the other party may get a default judgment against you.

Is there a time limit on claiming?

Unlike defamation where a claim must be made within 12 months of publication of the defamatory material, injurious falsehood claims must be commenced within six years.