14 Feb 2013

Court torpedos pleading injurious falsehood as device to obtain injunction in defamation cases

by Douglas Bishop, Gail Noe

Pleading injurious falsehood in addition to, or in lieu of, defamation, requires proof of four elements.

It seems to be increasingly fashionable to plead injurious falsehood in addition to, or in lieu of, defamation, possibly because an injunction may be granted to restrain injurious falsehoods, whereas an injunction will ordinarily not be available in defamation alone due to the overriding public interest in freedom of speech. However, following this fashion can backfire, as illustrated by Justice McCallum's recent decision in Mahon v Mach 1 Financial Services Pty Ltd (No 2) [2013] NSWSC 10.

Publication stopped by interlocutory injunction

The plaintiff, Mr Mahon, a property developer, wanted to stop the publication of a large number of emails about him and his business dealings on two "wikifrauds" websites. He filed a summons seeking urgent interlocutory relief, which was granted by Justice Garling. The defendants were restrained from maintaining the websites or publishing like material concerning Mr Mahon. They were also ordered to do all things necessary to shut down the websites and cause the removal of the links to the websites from specific internet search engines.

After obtaining the injunction, Mr Mahon filed a statement of claim pleading causes of action in both injurious falsehood and defamation.

Did Mr Mahon suffer any actual damage – and did it matter?

The defendants then tried to have Mr Mahon's pleading struck out, principally on the basis that it did not plead any actual damage sustained by Mr Mahon. Both parties accepted that actual damage is an element of the tort of injurious falsehood. The only pleading of damage in the statement of claim was that the matters complained of “were calculated to cause pecuniary damage to the plaintiff in respect of his business as a property developer”. Mr Mahon acknowledged that no actual damage had been pleaded.

Notwithstanding that, Justice McCallum refused to strike out the pleading in Mahon v Mach 1 Financial Services Pty Ltd [2012] NSWSC 651, holding that a claim in injurious falsehood may be maintained without proof of actual damage where (as in this case) an interlocutory injunction had been granted preventing the very damage which might otherwise have ensued. However, Justice McCallum required Mr Mahon to provide proper particulars of the matters he relied upon to prove that actual damage would have been suffered but for the granting of the interlocutory injunction.

After the particulars were supplied, Justice McCallum heard further argument as to whether, in the face of those particulars, the pleading disclosed any cause of action in injurious falsehood (by the time the particulars were provided the defamation claim had been expressly abandoned).

A defamation claim in disguise?

Underlying the pleading dispute was the defendants' contention that this was a defamation claim masked as injurious falsehood.

In her first judgment, Justice McCallum said that, if Mr Mahon could articulate an arguable basis for establishing the element of “actual loss” (which she held could be done by his proving the probable loss that would have occurred had the injunction not been granted), then:

"the vice of bringing what is truly a claim in defamation under the guise of a different cause of action is relevant to the exercise of the discretionary power to grant injunctive relief but is not relevant to the issue raised by a strikeout application."

Why Justice McCallum struck out the pleading

In her second judgment, having by then seen the particulars relied upon by Mr Mahon to prove the element of actual loss, Justice McCallum felt that the resemblance of Mr Mahon's claim to one in defamation could no longer be ignored.

The alleged injurious falsehoods concerned the Hilton Denarau Resort in Fiji. That was the only property or business identified in the statement of claim as having any connection with Mahon, yet the particulars did not reveal him to hold any direct commercial interest in the Fiji business.

Having closely considered the particulars and the evidence, Justice McCallum concluded that Mr Mahon's claim was "a transparent device to obtain a permanent injunction in what is, in substance if not in form, an action to vindicate the plaintiff's personal reputation with no anchor in any tangible proprietary or commercial interest of his".

Justice McCallum noted that the inhibition upon the use of the injunction to restrain further publication of defamatory material does not apply to injurious falsehood, because injurious falsehood protects proprietary and commercial rather than personal interests. However, she was not persuaded that this action was brought to protect any tangible proprietary or commercial interest of Mr Mahon. In her view, he would not have obtained injunctive relief had the claim been brought in defamation.

Accordingly, the statement of claim disclosed no reasonable cause of action and Justice McCallum ordered that it be struck out. She also indicated that in her view the interlocutory injunction granted by Justice Garling should probably be dissolved and the proceedings be dismissed, but the final result is not known at this point as Justice McCallum gave the parties an opportunity to be heard further before deciding whether to make those orders.


It seems that the fashion for deploying injurious falsehood has led to some proceedings being brought which should not be characterised as injurious falsehood at all.

In order to succeed in an action for injurious falsehood, four essential elements must be proved:

(1) a false statement of or concerning the plaintiff's goods or business;

(2) publication of that statement by the defendant to a third person;

(3) malice on the part of the defendant; and

(4) proof by the plaintiff of actual damage (which may include a general loss of business) suffered as a result of the statement.

Pleading injurious falsehood in the absence of cogent evidence of all of these essential elements is likely to backfire, as failure to prove any one of the essential elements will be fatal.



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