Unjust damage to the reputation of a person can have devasting effects. Untruths told and spread may injure a person's employment, relationships, friendships, and even one's own confidence, self-esteem, and trust of others. For these reasons, the law bears heavily upon those persons who speak falsely about other persons.
Defamation can arise from one of two methods. Libel involves disparagement by written words and slander involves disparagement by spoken words. In Ontario, the common law as well as the Libel and Slander Act, R.S.O. 1990, c. L.12 apply to legal cases involving defamation.
A legal case involving defamation often involves the key question of whether a statement was actually made and if so, whether the statement was defamatory. In law, the definition of defamation is very broad. Accordingly, once shown that a statement was made, a lawsuit then considers whether the statement was defamatory.
The legal test of whether a statement is defamatory is simply based on the question of whether the words were likely, "to lower the plaintiff in the estimation of right-thinking members of society generally" as per Lord Atkin in Sim v. Stretch,  2 All E.R. 1237 at 1240 and accepted in dozens of Canadian cases as per a quick search via the canlii.org website.
It is important to note that the definition of what is defamatory omits the requirement that the words were actually defamatory; accordingly, a successful defamation case may result merely by demonstrating that general members of society would find the words defamatory rather than a need to demonstrate that the actual person, or persons, to whom the words were passed actually believed the words and diminished views of the person whom the defamatory words were about. For this reason, a successful defamation case may arise despite the fact that the words were passed to a person who disbelieves the words and is devoid of any reduction in regard to the reputation of the person about whom the words were spoken. A defamation case is without need of actual harm as per O'Malley v. O'Callaghan, 1992 CanLII 6090 (AB QB). Additionally, an intent to cause harm to the reputation of another is unnecessary to a defamation lawsuit per Stopforth v. Goyer, 1979 CanLII 1661 (ON CA).
With the above said, one must bear in mind that not all untrue and unflattering words are deemed defamatory. In a defamation case, the context of the situation in which the words were passed in addition to the words themselves are considered. A heated debate wherein one person states that the another person is an "idiot" while in the presence of other persons is unlikely to found a successful legal case as 'right-thinking members of society' would likely recognize the inflamatory nature of the debate with a corresponding disregard to the statement and therefore lack of any lowering of reputation (Klar, Lewis: Tort Law (3d) at 675).
As it is nearly impossible to accurately ascertain an exact monetary value for damage to reputation, awards in defamation cases are generally 'at-large', meaning at the discretion of judge or jury (Klar, Lewis: Tort Law (3d) at 710). Further, where the defamation was malcious and harmful, significant aggravated damages and punitive damages may be awarded per Hill v. Church of Scientology of Toronto,  2 S.C.R. 1130.