James v Faddoul [2007] NSWSC 821 | Case summary

JUDGMENT 1 HIS HONOUR: By a second further amended statement of claim (SFASOC) the first plaintiff claims damages for defamation, breach of confidence and injurious falsehood. The second plaintiff claims damages for breach of confidence and injurious falsehood whereas the claim of the third plaintiff is confined to injurious falsehood. 2 The first and second defendants by a notice of motion seek orders that the whole of the claim for injurious falsehood be struck out or in the alternative the claims for injurious falsehood by the second and third plaintiffs be struck out. The defendants contend that paragraphs 38-45 of the SFASOC disclose no reasonable cause of action. Paragraphs 38-45 plead the claims for injurious falsehood. 3 The first and second plaintiff are the two shareholders in the third plaintiff, Bluespark Pty Ltd ( Bluespark). Bluespark carries on the business in Australia of providing training and coaching in the disciplines of neuro linguistic programming, time line therapy, hypnosis and ancient huna under the registered business names Advanced Neuro Dynamics Australia (ANDA) and The Tad James Company. 4 The plaintiffs' causes of action arise from four emails said to have been caused to be transmitted from a personal computer by the first or second defendant on 16 May 2006 to which were attached images of the first plaintiff that portrayed her in states of undress and sexually suggestive poses (hereinafter for convenience collectively referred to as the emails). The first and third emails included the words "Is this the face of NLP?" The reference to "NLP" is claimed to be a reference to neuro linguistic programming which is a training tool used by the plaintiffs. 5 The first and second plaintiffs are the sole persons responsible for the delivery of the training and coaching services by Bluespark and on their own account at locations other than in Australia. They are said to be recognised in the marketplace as the "face" of ANDA and The Tad James Company. 6 The first defendant was previously an employee of ANDA and the second defendant a director and shareholder of Bluespark. They have registered the business name "QC Seminars" which provides training and coaching in skills which are claimed to be the same, or substantially the same, as those in relation to which the plaintiffs provide. At the time the emails were sent there were, the plaintiffs claim, a number of unresolved disputes with the defendants. 7 The defendants' contend that the entirety of the claim for injurious falsehood should be struck out as the claim is in substance one for hurt feelings with which the tort of injurious falsehood is not concerned. Furthermore, there are no allegations that the statements were calculated to interfere with the business of the plaintiffs or that they caused the recipients of the emails to act in a way which caused the plaintiffs loss. The failure to make any allegation that damage was caused by some sort of action or behaviour of any kind on the part of the persons to whom the emails were published is a sufficient reason, the defendants argue, by itself for the entire claim to be struck out. 8 The plaintiffs submit that the claim is not for hurt feelings but a plea in special damage being financial loss to the plaintiffs flowing from the consequences of the defendants' actions. They dispute the defendants' contention that there is a requirement that the plaintiffs formally allege in the pleadings that the emails were designed to interfere with the plaintiffs' businesses or alternatively caused the recipients to act so as to cause loss to the plaintiffs. The question is whether the natural and probable consequences of the falsehood lead, the plaintiffs argue, to the loss claimed. The plaintiffs do not accept that it is the settled law in Australia that damages for hurt and distress taken alone cannot be obtained in the tort of injurious falsehood. 9 As the defendants seek to strike out the plaintiffs' claim for injurious falsehood, they must demonstrate that the plaintiffs' claim is so obviously untenable that it cannot possibly succeed: see General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 per Barwick CJ at 129. 10 The elements of the tort of injurious falsehood were considered in Palmer Bruyn & Parker Pty Limited v Parsons (2001) 208 CLR 388. Gummow J observed at 404: "The elements of the action for injurious falsehood usually are expressed in terms which derive from Bowen LJ's judgment in Ratcliffe v Evans [1892] 2 QB 524, to which further reference will be made. Thus, generally, it is said that an action for injurious falsehood has four elements: (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." 11 The plaintiffs' pleadings, it seems to me, embrace each of these elements. Moreover, reasonable inferences which are capable of being drawn from the nature and content of the emails and from their origin include that they were false statements concerning the plaintiffs' businesses, which were published to third persons maliciously and with the intention of injuring those businesses and actual damage was suffered. 12 The defendants' contention that there are no allegations that the statements were calculated to interfere with the business of the plaintiffs is plainly incorrect. Included in the particulars at paragraph 43 (ii) is the following: "The emails were sent with the intention of injuring the businesses of (sic) Plaintiffs." 13 There is, however, no allegation as the defendants point out that damage was caused by action or behaviour on the part of the persons to whom the emails were sent. This submission, it appears, is founded on what was said by Kirby J in Palmer Bruyn. His Honour identified [114] as one of the elements of the tort as being: "…….that such falsity was calculated to induce others not to deal with the plaintiff or was otherwise likely to damage the plaintiff." 14 As the defendants observe, Kirby J did not say what the "otherwise" refers to. The defendants submit that nothing in his Honour's judgment suggests anything other than something involving the recipients of the publication. It is unnecessary in the present application to consider this issue. 15 By the provision in the particulars of malice that the emails were sent with the intention of injuring the plaintiffs' businesses, the plaintiffs identify that the falsities were calculated to damage the plaintiffs. A reasonable inference which is capable of being drawn from all the circumstances of the publications is that the falsities were intended to induce others not to deal with them. 16 I am not persuaded that the plaintiffs are required to plead (and ultimately to prove) that damage was caused by the impact that the emails had on the persons to whom they were sent. What the plaintiff must prove is that the damage was either the result which the person publishing the falsities intended or the natural and probable result of the publication: Palmer Bruyn per Gleeson CJ at 397 and Kirby J at 425. 17 Proof of actual damage is an essential ingredient of the cause of action. The defendants argue that the claim is in substance for hurt feelings which cannot be recovered in an injurious falsehood action. The claim, in my opinion, is not for an award of "parasitic" damages. The particulars of special damage pleaded in paragraph 45(a) claim "loss of profits from reduced enrolments in seminars and training". Although the financial loss may be said to have arisen from the distress of the first and second plaintiffs, it is a claim capable of being regarded as one for specific money loss and not for injured feelings. 18 In any event, the plaintiffs are entitled to have the opportunity at the hearing of their action to argue that damages may be awarded for injured feelings. Whilst in Bride v KMG Hungerfords (1991) 109 FLR 256 Murray J at 281 was of the opinion that no damages are available in respect of non-pecuniary harm or loss said to flow from an injurious falsehood, the issue was not determined in Palmer Bruyn. There is, as the parties have pointed out, authority to the contrary in the United Kingdom: see Joyce v Sengupta (1993) 1 WLR at 347-348. 19 I conclude that the defendants have not demonstrated that the entirety of the claim for injurious falsehood should be struck out. 20 In the alternative, the defendants seek orders that the claims for injurious falsehood by the second and third plaintiffs be struck out. None of the statements involve, the defendants submit, these plaintiffs and no allegations are made by them which satisfy the requirement of "the making of a false statement about the plaintiff or his/its business". As I have found, reasonable inferences which are capable of being drawn include that the emails were false statements concerning the plaintiffs' businesses which were published to third persons maliciously and with the intention of injuring those businesses. The money loss claimed to have been sustained by the first and second plaintiffs is particularised at paragraphs 45(a) and 30(a) and as to the third plaintiff at paragraph 45(a)(ii). 21 My conclusion is that each of the plaintiffs has an arguable claim for damages for injurious falsehood. 22 For these reasons, I make the following orders:

James v Faddoul

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