Abuse of Legal Process
Cases
Dublin Waterworld Ltd v National Sports Campus Development Authority
[2019] IECA 214 (24 July 2019)
1. This is an appeal against the judgment and order of the High Court (Twomey J.) dated the 10th and 24th May, 2017 respectively
whereby he dismissed the claim of Dublin Waterworld Limited (“DWW”) against National Sports Campus Development Authority
(“NSCDA”) for, inter alia, damages for the tort of malicious abuse of the civil process in pursuing an action to recover VAT in respect
of a lease dated the 30th April, 2003 to DWW of the National Aquatic Centre, Abbotstown, County Meath (“the Aquatic Centre”).
The parties
2. NSCDA, the defendant to the within proceedings, is a statutory authority established pursuant to the National Sports Campus
Development Authority Act 2006. It is the legal successor and transferee of all assets and liabilities of Campus and Stadium Ireland
Development Limited (“CSID”) which was, as a result of that legislation, dissolved and replaced by NSCDA. CSID had been a private
limited company established by the Government in 2000 to develop a sports campus at Abbotstown, County Meath. At that time CSID
was 50% owned by the Minister for Sports, Arts and Tourism, 25% owned by the Minister for Finance and 25% owned by the
Taoiseach. All references in this judgment to CSID should be taken to include NSCDA, unless otherwise stated.
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3. In 2001, DWW commenced negotiations with CSID with a view to entering into a lease in respect of the Aquatic Centre. On the
30th April, 2003 CSID granted a lease (“the lease”) of the Aquatic Centre to DWW for a term of thirty years commencing the 30th
April, 2003. Pursuant to Clause 4.30 of the said lease DWW covenanted to pay to CSID all VAT payable on the grant of the lease.
4. Following advices received as to whether or not VAT was chargeable in respect of the lease, on the 15th May 2003, CSID issued
an invoice to DWW claiming a sum of €10,254,600 in respect of VAT, stating that the sum so claimed had been calculated in
accordance with Regulation 19 of the VAT Regulations of 1979 (S.I. No. 63/79, as amended by S.I. 219/02). The invoice detailed the
relevant calculation.
5. In circumstances where DWW considered that CSID was not entitled to claim VAT on the lease, it refused to discharge CSID’s
invoice with the result that in December 2003, CSID’s solicitors, McCann Fitzgerald, issued a formal letter demanding payment of the
said sum of €10,254,600 in respect of VAT.
6. Notwithstanding the said demand DWW continued to dispute the sum so claimed with the result that on the 26th April, 2005 CSID
issued proceedings (“the primary litigation”) in the High Court ([2006] IEHC 200) which included a claim for payment of the
aforementioned sum in respect of VAT on the lease. Relevant in this regard is the fact that the claim for VAT was pursued in the
context of proceedings brought by CSID to forfeit the lease due, inter alia, to the alleged failure on the part of DWW to comply with
certain covenants in the lease including the assignment of the lessee’s interest in the lease without the prior consent of CSID.
7. In its High Court proceedings CSID maintained that there were three methods of establishing whether VAT might be charged on the
lease. It maintained that Regulation 19(1)(i), which sets out what is commonly referred to as the “rent formula method” of calculating
the open market price of the lease, entitled it to pursue its claim in respect of VAT.
8. Following the issue of the proceedings, DWW brought a motion to have the VAT element of the dispute between the parties
referred to arbitration in accordance with the arbitration clause in the lease. That application was successful and Kelly J. referred the
dispute concerning CSID’s claimed entitlement to VAT to arbitration ([2005] IEHC 201). Mr. Dermot O’Brien, chartered accountant,
was appointed arbitrator. I will return shortly to provide somewhat greater detail concerning the outcome of the arbitration and CSID’s
further efforts to recover the VAT claimed on the lease. Suffice to say at this juncture that the arbitrator decided that CSID was
entitled to charge VAT on the Lease and that decision was later upheld by the High Court on CSID’s application to enforce the award
of the arbitrator notwithstanding the challenge made by DWW to the lawfulness of that award. Ultimately that decision of the High
Court was reversed by the Supreme Court which determined that the arbitrator had made a fundamental error in interpreting
Regulation 19 of the VAT Regulations of 1979 (as amended) so as to find that CSID was entitled to claim VAT on the lease.
Relevant regulations
9. In order to understand the progress of CSID’s claim to VAT on the lease it is necessary to consider the Regulations which, at the
relevant time, determined a lessor’s entitlement to impose such a charge. Furthermore, familiarity with these provisions is essential in
order to fully understand and contextualise the evidence given over the course of the 20 days that the within proceedings, being the
secondary litigation, were at hearing in the High Court. Indeed, absent an understanding of the relevant provisions, it would be
impossible to determine whether or not the High Court judge acted lawfully and in accordance with the evidence in concluding, as he
did, that CSID’s primary litigation did not amount to a malicious abuse of the process of the Court.
10. In circumstances where the High Court judge considered the purpose and effect of Regulation 19 of the VAT Regulations of 1979
(as amended) and neither party takes issue with his analysis, I will gratefully adopt his summary of the said Regulation which appears
at paras. 6-12 inclusive of his judgment:-
“6. The Value-Added Tax Act, 1972 (the ‘VAT Act’) provides that the granting of a lease is a taxable supply of
immoveable goods for VAT purposes if the lease is a long lease, i.e. for a period of 10 years or more. In this case, the
lease of the NAC was signed by DWW as lessee and by CSID as lessor on the 30th April, 2003, for a period of 30 years
(‘the Lease’). Thus, the Lease was one which was capable of being subject to VAT.
7. Section 10(9) of the VAT Act provides that the value of the leasehold interest for the purposes of calculating the VAT
thereon, is the ‘open market price of such interest’. For this reason, section 10(10) of the VAT Act is also relevant, since
it states:-
“the open market price –
(a) in relation to the value of an interest in immovable goods which is not a freehold interest, means the
price, excluding tax, which the right to receive an unencumbered rent in respect of those goods for the
period of the interest would fetch on the open market at the time that the interest is disposed of.”
8. On this basis, the open market price of the lease was the price or value attributable to the right to receive the
unencumbered rent and s. 10 (1) of the VAT Act defined the “unencumbered rent” as the “rent at which an interest
would be let, if that interest was let on the open market free of restrictive conditions.”
9. Section 32(1)(t) of the VAT Act delegated authority to the Revenue Commissioners to make Regulations in relation to
the valuation of leases for the purposes of the VAT Act. Pursuant to this section, the Revenue Commissioners drafted the
Value-Added Tax Regulations, 1979, which were duly passed into law. Regulation 19 of those Regulations set out further
provisions regarding the valuation of leases. Insofar as relevant, Regulation 19 states:-
“(1) Where –
(a) it is necessary to value an interest in immovable goods for the purposes of section 10 (9) of the Act
[…]
the value of such rent to be included in the consideration for the purposes of ascertaining the open market price of
the interest disposed of shall, in the absence of other evidence of the amount of that price, be –
(i) three quarters of the annual amount of the rent multiplied by the number of complete years for which
the rent has been created, or
(ii) the annual amount of the rent multiplied by the fraction of which the numerator is 100 and the
denominator is the rate of interest (before deduction of income tax, if any) on the security of the
Government which was issued last before the date of the creation of the rent for subscription in the
State, and which is redeemable not less than five years after the date of issue (allowance having been
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made in calculating the interest for any profit or loss which will occur and the redemption of the
sec urit y),
whichever is the lower.”
These two methods for the valuation of leases set out at (i) at (ii) above are known as the ‘Formula Method’ and the
‘Multiplier Method’, respectively.
10. Regulation 19 of the 1979 Regulations was amended by the Value-Added Tax (Amendment) (Property Transactions)
Regulations, 2002, and the only change to the 1979 Regulations, which is of relevance to these proceedings, was the
deletion of the words “whichever is the lower” and the insertion of the following wording in its place:-
“However, where the rent payable in respect of the interest so created is less than the unencumbered rent in
respect of that interest, the value of the rent to be included in the consideration for the purpose of ascertaining
the open market price of the interest disposed of shall be calculated using the unencumbered rent.”
It is this Regulation 19, as so amended, which is particularly relevant to the issue of whether the Lease was vatable in
this case, in conjunction with s. 99 of the Finance Act, 2002, to which reference will now be made.
Anti Avoidance amendment of legislation regarding VAT on leases:
11. Section 99 of the Finance Act, 2002 amended the VAT Act and inserted a new provision, section 4(3A), into that Act.
This was enacted as an anti-avoidance provision to ensure that leases were not subject to VAT where the value of the
interest in the lease did not equal or exceed the cost of acquiring and developing the property being leased. For a long
lease to be taxable after the date of enactment of s. 99 of the Finance Act, 2002, which was the 25th March, 2002,
section 4(3A) required the value of the interest in the lease to be equal to, or greater than, the cost of acquiring or
developing the property being leased. This test for determining whether leases were vatable is known as the Economic
Value Test (‘the EVT’).
12. The general aim of this provision appears to have been to ensure that if a lessor developed a property then that
lessor could not enter into an artificial lease solely for the purpose of his reclaiming VAT on the development costs of the
property being leased. For example, if a lessor developed a property at a cost of say €10 million and wanted to reclaim
the VAT on his development costs, then that lessor could not enter into an artificial lease which was entered solely for
the purpose of his reclaiming VAT on the development costs by entering into a lease with a related lessee at an artificially
low rent of say only €100 per annum. Prior to the enactment of the anti-avoidance legislation, this approach would have
enabled the lessor to reclaim the VAT from the Revenue on the €10 million of costs incurred in developing the property.
This would have meant that the Revenue would get little or no VAT from the lessee since the rent was only €100, yet the
Revenue would have to repay hundreds of thousands of Euro in VAT to the lessor on the development costs incurred of
€10 million. As noted by two experienced VAT advisers, Dermot O’Brien and Tom Corbett in a conference paper dated 2nd
May, 2002, entitled Section 99 of Finance Act 2002 and subsequently published in the Irish Tax Review:-
“The introduction of Section 4 (3A) into the VAT Act was designed as an anti-avoidance measure. Previously, while
VAT was charged on the capitalised value of a lease, it was possible in certain circumstances that the value of the
lease could be significantly less than the actual cost of development of a property. Therefore, a person who was
not entitled to deduct VAT on expenditure could, by virtue of a lease and leaseback arrangement, incur VAT on a
lower leasehold value than on the higher cost of construction, thereby effecting a significant VAT saving. These
provisions are designed to counter this.”
11. As can be seen from the aforementioned provisions, key to whether or not VAT was chargeable on a long lease was the “open
market price” of the leasehold interest and in particular Regulation 19 which provides two methods by which the open market price
may be calculated “in the absence of other evidence of the amount of that price” [emphasis added]. It is this Regulation and in
particular the words to which emphasis has been added that are core to the claim of DWW in the within proceedings. In this context
it is important to record at this stage of the judgment that CSID had received a report from a Mr Liam Cahill of the Valuation Office on
the 25th October 2002 (“the Valuation Office Report”) which stated that the estimated rental value was €3,376,048 and the
estimated open market price of the lease for VAT purposes was, €35,054,725 i.e. circa €35m.
12. It is not in dispute that in order for a lessor to claim VAT on a long lease, it had to be in a position to establish that the value of
its interest in the lease was equal to or greater than the cost of acquiring or developing the property the subject matter of the lease
(see s. 4(3A) of the VAT Act 1972, as amended by s. 99 of the Finance Act, 2002). Thus, in the circumstances of the present case
VAT could not have been charged unless CSID was in a position to show that the open market price of the lease was above €63m.,
that being the development cost.
13. The Valuation Office Report is of particular importance in the context of the present proceedings in that DWW maintains that the
valuation of the lease in that report of €35m. was “other evidence” of the open market price within the meaning of Regulation 19.
That being so, there was no lawful basis upon which CSID might claim VAT on the lease. Instead of relying upon the open market
price of the lease set out in the Valuation Office Report, as it was obliged to do, CSID had impermissibly calculated the value of the
lease by using the rent formula method. It had taken three quarters of the unencumbered rent i.e. €2,532,000 and multiplied it by the
number of years of the lease i.e. thirty years, a calculation which resulted an open market price for the lease of €75,960,000. That
figure being above the development cost, the lease was vatable at 13.5%.
14. In circumstances where DWW claims that CSID had actual knowledge of the fact that its claim for VAT was unlawful, being
contrary to the clear wording of Regulation 19, it maintains that the primary litigation against DWW was commenced without
reasonable or probable cause.
Key persons
15. For ease of reference, what appears below is a list containing the names of a number of individuals’ material to the decision of the
High Court judge and the positions which they held at the relevant time:
Name
Position
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John Moriarty
Managing Director, Dublin Waterworld Limited
Terry O’Neill
Partner, KPMG
Keith Loughman Director, KPMG
Donagh Morgan
Former Chief Executive of Campus Stadium Ireland
Development Ireland (“CSID”) and its statutory
successor, National Sports Campus Development
Authority (“NSCDA”)
Sean Benton
Former Chief Executive and Director, CSID
John Mulcahy
Former Non-Executive Director, CSID
Michael Walsh
Former Non-Executive Director, CSID
Con Haugh
Former Non-Executive Director and Chairman CSID
David Conway
Former Director of Sport, Magahy & Company (member
CSID’s Executive Services Team) and current Director
of NSCDA
Laura Magahy
Magahy & Company (member of CSID’s Executive
Services Team)
Colm Dunne
Magahy & Company (member of CSID’s Executive
Services Team)
Della O’Donoghue Magahy & Company (member of CSID’s Executive
Services Team)
Fergal O’Rourke Partner, PwC & Tax Relationship Partner for CSID
John Fay
Partner, PwC
Thomas O’Reilly Manager/Senior Manager, PwC
Lonan McDowell Consultant and Former Partner, McCann Fitzgerald
16. Several of the above individuals were members of what is referred to as the Executive Services Team (“EST”) of CSID. Those
individuals, namely David Conway, Laura Magahy, Colm Dunne and Della O’Donoghue, were employed by a company called Magahy &
Company and were contracted to provide executive services to CSID, the board of which they reported to regularly. They were the
core group dealing with the day-to-day operations of the Aquatic Centre, and were involved in the making of decisions regarding its
establishment, including the decision, which was ultimately made by the Board, to pursue the primary litigation which included the
claim for VAT on the lease. Throughout this judgment I shall for the purposes of convenience refer to these individuals as being “of
CSID”, however it should be noted that in strictness they are not employees of CSID but are simply contracted by CSID to act on the
EST. Price Waterhouse Cooper (“PwC”) has been described as being a part of the EST, although it may be more apt to say that they
provided professional advice to the EST and to the Board of CSID, including tax advice in relation to the charging of VAT on the lease.
Procedural history
The primary litigation i.e. the forfeiture proceedings which included the claim for recovery of VAT on the Lease and the High
Court proceedings seeking to enforce the Arbitrators Award
17. As already stated, shortly after CSID commenced its High Court proceedings and these had been transferred to the Commercial
Court, DWW applied to stay that part of the litigation that claimed recovery of the sum allegedly due in respect of VAT on the lease
so that it might be referred to arbitration. It would appear that it was in the course of the exchange of affidavits between the parties
on this application that DWW became aware, for the first time, of Mr. Cahill’s estimation of the market price of the lease as contained
in the Valuation Office Report.
18. The questions posed by the Arbitrator for his determination were as follows:
1. If the valuer has given his opinion as to the market value of the interest to be disposed of, is CSID then entitled to rely
on one of the other formula-based methods of capitalising the lease set out in Regulation 19?
2. Is CSID entitled to rely on the opinion of its appointed valuer or does it need to question his method of valuation?
19. In the course of the arbitration CSID argued that the VAT Regulations provided for three alternative methods of valuing the lease
and that the conditions for VAT liability were fulfilled by the use of the rent formula method. It also argued that there was no clear or
adequately established evidence of the open market value of the lease with the result that the Valuation Office Report, which had
estimated the open market price as €35m., did not constitute “evidence” of an open market value for the purpose of Regulation 19.
20. DWW, on the other hand, contended that VAT was not properly chargeable. It refused to accept Mr Cahill’s valuation either in
respect of the unencumbered rent or his opinion as to the open market price in the sum of €35m. It had engaged the services of
Osborne King, valuers and estate agents, who had given a substantially lower rental figure which if accepted and used on the same
basis of calculation as that proposed by CSID would not yield a figure which would meet or exceed the economic value of €62 million.
21. On the 1st July, 2005, the Arbitrator published his Award which determined, inter alia, that VAT of €10,254,600 was due by DWW
to CSID in respect of the lease. He concluded that the opinion of Mr Cahill of the Valuation Office was not “evidence of an open
market value” for the purpose of Regulation 19 but was merely his estimate of the value of the lease. This was, he concluded,
because the property under consideration was unique and had no close comparison in the State. That being so, CSID was entitled to
apply the rent formula method determine whether VAT was chargeable. Thus it was that the Arbitrator decided that VAT had been
correctly charged.
22. On the 14th July 2005, CSID issued further High Court proceedings seeking an order permitting it enforce the Arbitrator’s Award
(Campus Stadium Ireland Development Ltd. v. Dublin Waterworld Ltd. [2005] IEHC 334). In response, DWW applied under s. 38 of the
Arbitration Act 1954, as amended, to have the Award set aside on the basis that the Arbitrator had misconducted himself. It was
argued on behalf of DWW that if the Arbitrator was intent on discounting Mr Cahill’s opinion as the opinion of a competent valuer for
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the purposes of Regulation 19 because of the unique nature of the property, which would be a radical departure from the ordinary
procedure, he should have flagged that issue at the hearing and allowed DWW the opportunity to address it. In so doing, it was
argued that the Arbitrator failed to answer the very question he had posed for himself as to whether CSID was entitled to rely upon
one of the formula methods if the valuer had given his opinion as to the open market value of the lease. It was further argued that
the approach of the Arbitrator was inconsistent and unfair insofar as he accepted that it would be absurd for him to question the
professional judgment of the valuer in producing the unencumbered rent of the property and yet proceeded to refuse to accept the
evidence of the valuer as to the open market price of the lease. Finally, it was submitted on behalf of DWW that there was an error
of law on the face of the award wherein the Arbitrator stated that the VAT system could not function effectively if a supplier’s VAT
charge was subject to review by his customer in circumstances whereas in fact a customer is entitled by law to question any charge
in relation to VAT.
23. In the High Court, Gilligan J. concluded that the decision of the Arbitrator was one of the possible conclusions that he could have
arrived at having regard to the issues before him. The High Court judge concluded that, contrary to the case advanced by DWW,
CSID had argued before the Arbitrator that the opinion of Mr Cahill did not constitute “evidence” for the purposes of Regulation 19
and that the Arbitrator was entitled to come to the conclusion which he did. He so found notwithstanding his acceptance that the
approach of the Arbitrator had brought about a situation whereby he had not decided the central issue which he had posed for his
consideration, namely, whether in light of Mr Cahill’s opinion as to the open market value of the interest being disposed of, CSID was
entitled to rely upon one of the other formula-based methods of valuing the lease as provided for in Regulation 19. In circumstances
where the Arbitrator had concluded that he did not have evidence of the open market price of the interest to be transferred before
him, it was not, according to the High Court judge, necessary for him to determine that issue.
24. DWW appealed the decision of Gilligan J. to the Supreme Court (Campus Stadium Ireland Development Ltd. v. Dublin Waterworld
Ltd [2010] IESC 25). A judgment was given on 30th April, 2010 wherein the Court unanimously overturned the High Court decision
which had affirmed the Arbitrator’s Award. Hardiman J. concluded that notwithstanding the Revenue’s guidelines and the apparent
Revenue approval for the position adopted by CSID in raising a claim to VAT on the lease, the absence of other evidence of open
market value was a condition precedent to the use of either of the other formulae provided for valuing the lease in Regulation 19.
25. The Court also concluded that neither the Arbitrator nor the Revenue, in publishing their guidance on the issue, had paid sufficient
attention to the presence in Regulation 19 of the phrase “in the absence of other evidence of the amount of that price”. In this case
there was not an “absence of other evidence”. Mr Cahill’s expert opinion as to the open market value of the lease, as contained in the
Valuation Office Report, was evidence of the value of the lease for the purposes of Regulation 19. Thus, CSID was not entitled to use
either of the other methods prescribed in Regulation 19 for the purposes of calculating the value of the interest to be transferred and
thus determining whether the lease was chargeable in respect of VAT. Accordingly, the Court made an order remitting the dispute
back to the arbitrator for his lawful determination. Not unsurprisingly in light of the Supreme Court’s decision, DWW was awarded its
costs of the hearing in both courts. Furthermore, CSID later agreed to pay DWW’s costs in respect of the arbitration proceedings.
Proceedings for the tort of malicious abuse of the civil process
26. At the time it commenced the within proceedings, DWW maintained that the conduct of CSID in seeking (i) to recover VAT on the
lease, (ii) to enforce the Arbitration Award and defend the challenge of DWW thereto and (iii) to defend DWW’s appeal to the
Supreme Court against the High Court decision to enforce the Award amounted to an abuse of the court’s own processes. It claimed
that CSID had at all stages acted maliciously, in bad faith and without probable cause in circumstances where it knew it was not
entitled to charge VAT under the relevant VAT legislation and that the proceedings would result in severe financial and reputational
damage to DWW. Hence the judgment of Twomey J. in the High Court deals with each of these claims in turn. However, by the time
the proceedings were heard in this Court, DWW had confined its complaint to CSID’s conduct in commencing its High Court
proceedings to seek recovery of VAT on the lease. For this reason, this judgment will focus upon the decision of the High Court judge
to the effect that DWW had failed to show that CSID lacked reasonable or probable cause to issue the proceedings which included a
claim for VAT on the lease.
27. Without wishing to oversimplify matters, DWW maintains that it was clear from the evidence that at the time CSID issued its
proceedings to recover VAT on the lease it well knew, from advices that it had received from PwC, that it was not lawfully entitled to
make that claim. This is because it had “evidence” as to the open market price of the interest to be transferred, i.e. the €35m.
valuation contained in the Valuation Office Report. Thus, CSID was precluded as a matter of law from using the mathematical formula
on which it had relied when it issued its invoice claiming VAT and later commenced its proceedings to seek recovery of the sum so
claimed, and had no reasonable or probable cause to rely on that approach.
28. It is not necessary in the course of this judgment to deal with the loss said to arise as a result of the alleged abuse of the court’s
process as the hearing in the High Court was confined to determining the issue of liability with the issue of quantum being postponed
to the outcome of the court’s determination on that issue.
29. Following a 20-day hearing in the High Court, the High Court judge delivered a lengthy and detailed judgment on the 10th May,
2017 which I will now endeavour to summarise.
Judgment of the High Court
30. The judgment of the High Court judge is one which is extremely detailed in terms of its engagement with the law regarding the
tort of malicious abuse of the court’s process, the primary litigation pursued by CSID, and the evidence heard by the court in the
within proceedings.
31. What follows may well appear to be a somewhat overly detailed summary of that judgment and the criticism that it attracted on
this appeal. However, in light of the extraordinarily broad canvas of the grounds of appeal a more skeletal approach would, in my
view, be less than satisfactory.
32. It is clear that the High Court judge determined the proceedings in favour of CSID on two alternative bases. First, he concluded
that the outcome of the proceedings before the Arbitrator and the decision of the High Court judge to uphold the Arbitrator’s Award
to the effect that VAT was chargeable on the lease was determinative of the issue in these proceedings, namely that CSID had
reasonable and probable cause to issue the proceedings to recover VAT on the lease. Second, he concluded that the evidence “in the
round” was sufficient to establish that CSID had reasonable or probable cause to commence those proceedings.
33. I will now briefly summarise, in turn, how the High Court judge reached the aforementioned conclusions. However, before doing so,
I consider it important to record that it is apparent from his judgment (see para. 27) that the High Court judge was clear in his own
mind that the issue which he had to determine, namely as to whether CSID had maliciously abused the process of the court in
instituting proceedings to recover VAT on the lease, had to be decided based upon the knowledge of CSID when it instituted the
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proc eedings.
The effect of the first instance decisions of the Arbitrator and High Court (Gilligan J.)
34. Notwithstanding the recognition by the High Court judge that he was required to determine the central issue in the proceedings
on the evidence and state of mind of CSID as it existed at the time it commenced the proceedings to recover VAT on the lease, at a
very early stage of his judgment he identified what he stated he considered was a “key issue in the trial”. He described that issue in
the following way at para. 4 of his judgment:-
“A key issue in this trial, and one that does not appear to have been considered by the Irish courts to date, is whether a
plaintiff, who wins his litigation initially before a lower court or tribunal before losing on appeal, can nonetheless be found
by the courts to be someone who should never have litigated in the first place, such that he is guilty of malicious abuse
of court process and therefore liable for the damage caused to the defendant, over and above the plaintiff’s liability for
the legal costs incurred by the defendant.”
35. In addressing this issue the High Court judge referred to a number of authorities concerning the tort of malicious abuse of the
court’s process. In particular, he referred to the decision of Clarke J. in Independent Newspapers (Ireland) Ltd. v. Murphy [2006] 3
I.R. 566 and to his observation concerning the impossibility of a court finding a litigant guilty of malicious prosecution where the court
had found, at the conclusion of the primary litigation, in their favour. This was because the court could not entertain a second set of
proceedings which was predicated upon establishing that the original finding of the court was incorrect.
36. It was as against the backdrop of the decision of Clarke J. in Independent Newspapers (Ireland) Ltd. that the High Court judge
then went on to consider the legal effect of the decisions made by the Arbitrator and the High Court on DWW’s claim that the
proceedings seeking to recover VAT on the lease had been brought without reasonable and probable cause. In so doing, he observed
that whilst both decisions, which supported CSID’s entitlement to claim VAT on the lease, were later established to be fundamentally
flawed, this had only become obvious after the Supreme Court decision of the 30th April 2010.
37. Thus, it was that at para. 116 of his judgment the High Court judge raised the following question for his consideration:-
“In the current case, the application of these legal principles raises the question of whether a litigant could be said to
have taken a case without reasonable or probable cause, where he was successful at first instance, but loses his case on
appeal. No authorities were opened to the Court where a litigant was found to have been guilty of malicious abuse of
court process where that litigant had been successful in this claim at first instance.”
38. Commencing at para. 144 of his judgment the High Court judge carried out what he described as an “analysis of the three
decisions in the primary litigation”, i.e. the Arbitrator’s Award, the decision of the High Court to enforce that Award, and the decision
of the Supreme Court to set aside the Award as fundamentally flawed. In so doing he characterised the outcome of the arbitration
and the High Court proceedings as “wins” for CSID which he could not ignore.
39. In considering the effect of the decision of the Arbitrator upon the claim that CSID had reasonable or probable cause to issue and
maintain its proceedings to recover VAT, the High Court judge attached weight to the qualifications and expertise of the Arbitrator, a
former president of the Irish Taxation Institute and a leading VAT practitioner. He was satisfied that his decision should be given the
same status as a decision of a court when assessing the relevance of that decision in the context of DWW’s claim that CSID had
instituted proceedings to recover VAT on the lease without reasonable and probable cause.
40. As to the effect of the Arbitrator’s decision on DWW’s claim, the High Court judge concluded as follows at para. 156 of his
judgment:-
“It is this Court’s view that the fact that a court, or an arbitrator, found that the Lease was vatable must mean that
there was reasonable or probable cause for a claim that the Lease was vatable. To put the matter another way, the very
fact that on the 1st July, 2005, an independent and experienced arbitrator, with particular expertise in VAT, found that
the Lease was vatable proves to this Court that there must always have been a reasonable chance of such a finding from
the moment when CSID decided to issue the proceedings on 26th April 2005. This is because the very winning of the
primary litigation at first instance, whether before the court or, as in this case, before an arbitrator, must prove that
there was always a reasonable chance that the case would be won, and so establishes that there was reasonable or
probable cause for the proceedings.”
41. A similar view was taken by the High Court judge regarding the significance of the decision of the High Court to uphold the
Arbitrator’s Award, notwithstanding that said decision was not one on the merits of the case. In the view of the High Court judge, the
fact that both decisions had upheld the entitlement of CSID to charge VAT on the lease proved that the proceedings instituted by
CSID always had a reasonable chance of success.
42. Notwithstanding that the Supreme Court later made clear that Regulation 19 did not permit CSID to charge VAT on the lease
having regard to the existence of the Valuation Office Report, the High Court judge went on to conclude that it was his view that “a
determinative factor in deciding whether a litigant has reasonable or probable cause will, in most cases, be the existence of a first
instance decision in favour of the litigant.” Furthermore, he stated that it was difficult to conceive of a better factor for determining
whether a litigant had reasonable or probable cause to litigate than a first instance decision in their favour. This was because the
litigant was not required to establish that they were guaranteed to win the litigation proposed rather only that there was a
reasonable chance they would be successful in their proceedings. In the Court’s view, that reasonable chance of success was
established by a win at first instance even though the litigant might later fail in their claim on the appeal.
43. Concerning the nature and effect of the Supreme Court decision on DWW’s claim, the High Court judge observed that the
Supreme Court had concluded that the legal error made by the Arbitrator concerning Regulation 19 was so fundamental that it
warranted an order to set aside his findings. However, he went on to state that it was equally clear that Gilligan J. at first instance
had not regarded this legal error as obvious or, if obvious, as being so fundamental as to justify it being set aside. In this respect, the
decision of Gilligan J. had demonstrated the unpredictability of the outcome of litigation and why a court should not readily criticise a
litigant, in the sense of finding him guilty of malicious abuse of court process, for failing to exhibit the wisdom of one court, in this
case the Supreme Court, but not the wisdom of the court of first instance, at the time they decided to commence proceedings later
challenged as amounting to an abuse of the court’s process.
44. Thus it was that, based upon the decision of the Arbitrator and the High Court (Gilligan J.), the trial judge concluded that CSID
had reasonable or probable cause for commencing its proceedings to recover VAT on the lease.
page7 ⇓
The evidence “in the round” established that CSID had reasonable or probable cause to commence the proceedings to
recover VAT on the lease
45. Notwithstanding his conclusion as to the determinative effect of the decisions of the Arbitrator and the High Court (Gilligan J.) on
the viability of DWW’s claim of malicious abuse of court process, the High Court judge nonetheless proceeded to consider whether,
regardless of those two decisions in its favour, CSID had reasonable or probable cause for the primary litigation. He stated that it was
necessary for him to review in detail much of the evidence provided to the Court on behalf of CSID concerning its interpretation of
Regulation 19 to the effect that it had a choice of three methods of valuing the lease, and also some of the evidence relied upon by
DWW to support its claim that CSID did not have reasonable or probable cause to interpret Regulation 19 in that manner.
46. Thus it was that the High Court judge considered in great detail a significant number of documents relied upon by the parties in
the course of the hearing. He carried out a like exercise in relation to certain aspects of the oral evidence. This evidence and the
findings of fact made in relation thereto are recorded at paras. 26 to 99 of his judgment.
47. Having regard to his overall assessment of the evidence and in particular those aspects of the evidence highlighted in his
judgment, the High Court judge concluded (see para. 184) that “viewed in the round” that evidence was sufficient to establish that
CSID had reasonable or probable cause for issuing the proceedings.
48. For the sake of completeness, it is important at this stage of the judgment, particularly in light of the submissions made to this
Court on behalf of DWW, to record that the High Court judge reached the aforementioned conclusion notwithstanding his finding of
fact that CSID, both at board level and at EST level, had been advised and was aware of the distinction between the wording of the
Regulation and Revenue practice. He was nonetheless satisfied as a matter of fact that CSID and its advisors PwC believed that the
lessor had the choice of three methods of valuing the lease and that the intended claim for VAT on the lease was lawful. Furthermore,
he was also satisfied that this had been the advice of CSID’s professional advisers at the time, particularly PwC.
The evidence relied upon by the High Court judge to support his conclusion that CSID had reasonable and probable cause to
issue the primary proceedings
49. I will now refer to some aspects of the evidence relied upon by the High Court judge to support his conclusion that CSID had
reasonable and probable cause to commence proceedings against DWW to recover VAT on the lease.
50. The High Court judge identified a number of documents which he considered lent support to the claims of CSID and its professional
advisers, PwC, that they believed the lessor had the choice of three methods of valuing the lease.
51. He first identified documentation which established that Revenue was of the opinion that the lessor had the choice of three
methods of valuing the lease. Apart from other exchanges between PwC and Revenue evidencing Revenue’s approval of CSID’s
intended imposition of VAT on the lease and to which I will later refer, the High Court judge relied upon a document issued by
Revenue’s VAT Policy and Legislation Branch on the 6th June 2002 entitled “Notes for Guidance of Inspectors” which includes the
following statement concerning the relevant Regulations :-
“The Value-Added Tax (Amendment) (Property Transactions) Regulations 2002 provide that a taxable person may now use
any of the three methods of valuation provided for even where an increase in the rent is due to take effect within five
years of the date of the creation of the interest.”
52. According to the High Court judge, this guidance established that Revenue, who had drafted the Regulations, believed that
Regulation 19 should be interpreted as permitting the use of any of the three methods of valuation. Of particular importance in this
regard is the fact that Revenue’s interpretation of Regulation 19 as provided for in the Notes for Guidance of Inspectors was not only
known and relied upon by PwC but was transmitted to CSID in emails dated 27th November 2002 and 19th June 2003.
53. The High Court judge next relied upon the fact that there was significant evidence to show that the professional view within the
VAT community at the relevant time was that the lessor had a choice of the three methods of valuing the lease for the purpose of
establishing whether or not VAT was chargeable. Whilst the documentation to which I am about to refer was not known to CSID when
it made its decision to commence its VAT proceedings against DWW, it is evidence which the trial judge clearly relied upon to support
his conclusion that the advice given by PwC was that CSID might lawfully claim VAT on the lease, regardless of the wording of
Regulation 19.
54. Commencing at para. 29 of his judgment the High Court judge relied upon the following documents which may be summarised as
follows: –
(i) Revenue booklet entitled “VAT and Property Transactions” dated October 2001, concerning the interpretation of
Regulation 19 and how the “open market price” of a long lease might be ascertained.
(ii) The leading textbook VAT on Property (June 2006, Irish Taxation Institute), authored by Mr Fergus Gannon who gave
evidence supporting the three-way choice of valuing a long lease for VAT purposes.
(iii) An article authored by Mr Fergus Gannon in the Irish Tax Review (May 1995).
(iv) An article by Mr Jim Somers published in May 1998 in the Irish Tax Review, which again stated that the landlord had
the right to choose any of the three methods for calculating the “open market price”.
(v) A joint seminar paper dated the 2nd May, 2002 authored by Mr Dermot O’Brien and Mr Tom Corbett, both experienced
tax advisors, which opined that the changes to the VAT Regulations 1979 introduced in the Finance Act 2002 continued
to permit a landlord to use any of the three methods earlier identified for the purposes of determining whether a lease was
taxable.
55. The High Court judge also relied upon the fact that Mr Terry O’Neill, a partner in KPMG who gave evidence for and tax advice to
DWW, accepted that the professional views identified in the aforementioned documents corresponded with Revenue’s own
interpretation of Regulation 19 to the effect that the lessor had a choice of three methods of valuing a lease for VAT purposes.
56. Likewise, the High Court judge considered it material that DWW’s own tax advisors, Andersen, prior to their merger with KPMG in
2002, had advised DWW that there was a choice of three methods for valuing the lease. He referred to a draft report prepared by Mr
Keith Loughman of Andersen which had been sent to Mr John Moriarty of DWW on the 1st July, 2002 and a subsequent memo dated
the 6th August, 2002, both of which made clear his opinion that the lessor had a choice of three methods of valuing the lease.
page8 ⇓
57. Thus it was that the High Court judge concluded that CSID’s interpretation of Regulation 19 was shared by DWW’s own advisors
at one stage, even if that had changed by June 2003.
58. The High Court judge also relied upon the fact that Mr O’Neill, when under cross examination, had not been prepared to state that
in his view CSID had no reasonable basis for its view that the lease was vatable. While he had protested that he had not read all of
the PwC advice and thus could not furnish an opinion on the question posed by counsel for CSID, the High Court judge was satisfied
that on the basis of the documents which had been put to Mr O’Neill in the course of cross-examination, he should have been in a
position to answer what was, in effect, a straightforward question. In the view of the High Court judge, Mr O’Neill had refused to
state that CSID had no reasonable basis for its view that the lease was vatable at a time when as DWW’s witness he would have
expected him to have been able to support to DWW’s claim in those terms.
59. The High Court judge next moved to consider the evidence which established that Revenue had confirmed that VAT was
chargeable on the lease. He referred in this regard to the fact that Revenue had been furnished with a copy of the Valuation Office
Report on the 27th November, 2002 which showed the open market price of the lease as €35m. and an unencumbered rent of
€3.376m. The High Court judge considered the furnishing of this document to Revenue to be consistent with PwC’s confident opinion
that the lessor was entitled to choose any of the three methods for valuing the lease.
60. The High Court judge observed that the letter to Revenue enclosing the Valuation Office Report referred to CSID’s intention to
value the lease for VAT purposes by using the unencumbered rent as determined by the Valuation Office and by applying the formula
set out in Regulation 19(1)(i) and had asked Revenue to “confirm that our understanding set out above is correct.” He relied also
upon the fact that, by fax dated the 1st May, 2003, Mr Michael Kelly of Revenue had confirmed to Mr John Fay of PwC that the
methodology CSID proposed to use to value the lease was satisfactory, albeit that he commented that he was not aware that DWW
had accepted the valuation of the unencumbered rent as determined by the Valuation Office.
61. The High Court judge also referred to a number of further documents to which CSID was privy, and which confirmed that it was
the opinion of Revenue that the lease was vatable. The first was an email received by Mr Colm Dunne, a member of the EST on the
7th July, 2004, which referred to a meeting with a number of Revenue officials wherein it had been confirmed that the VAT due had
been determined in accordance with the VAT legislation. A further confirmation by Revenue that the lease was vatable was, according
to the High Court judge, contained in an email dated the 7th January, 2005 to Mr Fay of PwC. It had confirmed that, as per the earlier
email of the 7th July, 2004, “the VAT due has been determined in accordance with the VAT legislation and any revision in VAT liability
must also be carried out in accordance with the legislation”.
62. The High Court judge also relied upon what he described as a fourth and final confirmation from Revenue that the lease was
vatable. This was to be found in a letter dated the 26th September, 2011 from Revenue to Mr O’Rourke of PwC. Whilst postdating the
Supreme Court judgment, it was, the High Court judge concluded, relevant to demonstrate that at the relevant time when CSID had
sought to recover VAT on the lease it was the Revenue’s view that Regulation 19 permitted a lessor to choose between the valuation
methods outlined in that Regulation and that this was apparent from its published guidelines on VAT and Property Transactions.
63. Thus it was that the High Court judge concluded that, notwithstanding its knowledge of the existence of an open market price of
€35m., Revenue had confirmed that CSID’s interpretation of Regulation 19, and that of its tax advisor, PwC, was correct.
64. Commencing at para. 62 of his judgment, the High Court judge analysed a number of the documents relied upon by DWW in
support of its contention that the primary proceedings were brought without reasonable or probable cause. He referred, inter alia, to
three particular emails dated the 27th November, 2002, the 28th November, 2002 and the 17th June, 2003. I pause here to observe
the use by the trial judge of the words “inter alia” in introducing this section of his judgment in circumstances where it is contended
on the appeal that he excluded from his consideration two other emails dated 20th December, 2002 and 23rd December, 2002 to
which I will later return.
65. The first email, of the 27th November 2002, was from Mr Fay of PwC to Mr Conway and Ms Magahy of CSID and Mr O’Rourke and
Mr O’Reilly of PwC wherein he enclosed a copy of the letter he proposed to send to Mr Michael Kelly of Revenue concerning CSID’s
intended claim and calculation in respect of VAT on the lease. In the course of his email Mr Fay stated that “there are three valuation
methods permitted under the VAT Regulations”. He went on to advise that the Regulation provided that the mathematical methods of
valuing the lease (including the method proposed by CSID) could only be used in the absence of other evidence and that CSID had
other evidence, namely the €35m. value in the Valuation Office Report. However, he also advised that Revenue had stated in their
Notes for Guidance to Inspectors that any of the three permitted methods might be used in practice. Nonetheless, he anticipated
“some pushback from Michael Kelly” of Revenue because they intended to disregard the valuation of the open market price. He
enclosed with his email the Valuation Office Report. In this regard it is relevant to note that one of the principal submissions advanced
by DWW on this appeal was that no advice was ever later furnished to CSID which contradicted this clear statement regarding the
lawfulness of the proposed claim for VAT. According to DWW, this email establishes that PwC knew and had advised CSID that it was
not lawfully entitled to charge VAT on the lease.
66. The second email, dated the 28th November, 2002, was sent by Mr O’Rourke to Mr Fay and was copied to Mr Conway and Ms
Magahy and Mr O’Reilly. In it, Mr O’Rourke states that he had agreed the text of the letter drafted by Mr Fay which was intended to
be sent to Mr Kelly of Revenue. He also advised that the methodology proposed in the letter was “not ‘perfect’” but that it should,
nonetheless, prove acceptable. It is perhaps relevant to observe at this point that the letter to be forwarded to Mr Kelly, which
included the Valuation Office Report containing the valuation of €35m., was also copied to three senior members of Revenue namely
Ms Betty Collins, Ms Clodagh Ní Eidhin and Mr Oliver Curran. This, the High Court judge concluded, demonstrated confidence on the
part of PwC that VAT might lawfully be charged on the lease.
67. The third email of the 17th June, 2003 was sent by Mr Tom O’Reilly, to Ms O’Donoghue and was copied to Ms Magahy, Mr Conway,
Mr Fay and Mr O’Rourke. In his email which enclosed a draft reply to a letter received from Mr Moriarty of DWW of the 16th June,
2003, Mr O’Reilly stated as follows:-
“…You should note that use of any one of three methods is an extra statutory practice only. In strictness, CSID should
use the valuation (circa €35M) determined by the Valuation Office.”
68. Notwithstanding these advices, the enclosed draft letter addressed to Mr Moriarty contended that Regulation 19 provided three
methods for valuing long leases and that, having applied the rent formula method, the capitalised value of the lease was €75,960,000.
The letter also advised that Revenue had confirmed that the methodology used by CSID was satisfactory and he asked Mr Moriarty to
note that “it has always been the practice that the lessor can choose whichever method he wishes and this is confirmed in the
Revenue Commissioners ‘VAT and Property Transactions’ booklet published in October 2001”.
page9 ⇓
69. In the course of his judgment, the High Court judge noted that Mr Conway had forwarded Mr O’Reilly’s email of the 17th June,
2003 to Mr Lonan McDowell, solicitor with McCann Fitzgerald, who had stated that he was happy for the proposed letter to be sent
but that a meeting might be advisable in light of Mr O’Reilly’s views. Mr McDowell considered that a difficulty might arise as a result of
differences between tax practice and legislation and that “the full tax and legal implications of this for CSID will have to be worked
through and understood before steps are taken to enforce recovery of the VAT.”
70. The High Court judge proceeded to place each of the aforementioned emails in the context of a raft of other documents to which
he made reference (see para. 71 onwards). I will summarise these as follows:-
• Letter of the 6th January, 2003 sent by Mr Fay to Mr Conway and copied to Mr O’Rourke and Mr O’Reilly wherein he
states his view that CSID was entitled to use the rent formula method of valuation.
• Email of the 31st January, 2003 from Mr Fay to Mr O’Rourke and Mr O’Reilly of PwC and copied to Mr Conway and Ms
Magahy which states that the onus rested with CSID to put a value on the taxable supply of the property to DWW and
that it had a basis for valuing the lease in such a way as to make it chargeable to VAT. He states “[a]s I see it, there is
no basis for KPMG/Dublin Waterworld to contend that the lease is not subject to VAT”.
• Email of the 19th February, 2003 sent by Mr Fay to Mr O’Reilly and copied to Mr O’Rourke and Mr Conway. With
reference to a proposal by DWW that the issue as to whether VAT was chargeable on the lease be referred to an
independent expert, Mr Fay expressed the view that he did not believe this would be of any benefit. Neither did he
consider it would be appropriate “given that the matter has been referred to the Revenue Commissioners. If the Revenue
holds that the lease is taxable, that is it and no matter what any other advisor may say CSID will have to charge VAT.”
• Email of the 14th May, 2003 sent by Mr O’Rourke to Mr Conway, Mr Dunne and Ms Magahy of CSID and copied to Mr Fay
and Mr O’Reilly wherein he states:-
“I think the Revenue are really out of the loop now as far as we are concerned. They agree that VAT should be
charged and the methodology is as provided by law, so they really have no further role to play in this.”
• Letter of advice of the 11th September, 2002 from PwC to Mr Sean Benton, acting CEO of CSID, referring to the fact
that CSID could determine the open market value of the lease either “by reference to the formulae contained in the VAT
Regulation or by a professional valuer”.
• Letter of advice of the 19th June, 2003 sent by PwC to Mr Morgan, CEO of CSID, in response to Mr Moriarty’s letter of
the 16th June, 2003 which claimed that the VAT charge was incorrect and that the “rent formula” or “multiplier” methods
could only be used in the absence of other evidence as to the value of the lease. In its letter of advice, signed by Mr
O’Reilly, PwC advised CSID that the VAT charge outlined in its invoice dated the 15th May 2003 was correct.
• Draft report of the 30th April, 2003 sent by Mr O’Reilly to Mr Conway, Mr Dunne and Ms Magahy. The draft report was
re-issued in June 2003 in substantially the same terms. That report refers to the valuation of the lease for VAT purposes.
The three possible methods of calculating the capitalised value of the lease is set out. The report refers to the valuation
received from the Valuation Officer which shows the capitalised value at €35,540,725 and given that that valuation did
not pass the economic value test it is stated that PwC advised that the unencumbered rent of €3,376,048 be used in one
of the mathematical valuations permitted by the VAT Regulations. Of relevance in the context of the submissions
advanced on behalf of DWW is that it does not advise CSID that this method was only permissible “in the absence of
other evidence” regarding the value of the lease.
71. The High Court judge then proceeded, commencing at para. 87 of his judgment, to consider the emails referred to earlier in this
judgment at paras 64-66, in the context of the oral evidence heard by the Court. He referred to the evidence given by members of
the EST and directors of CSID to the effect that it was their understanding of the advice received that VAT was chargeable. In
particular, he referred to the unchallenged evidence of Mr Walsh and Mr Mulcahy that CSID had received highly competent
professional advice from a tax expert and on foot of which the Board had acted. Furthermore, the High Court judge noted that the
evidence of Mr Walsh and Mr Mulcahy was consistent with the evidence of Mr Conway of CSID who, notwithstanding that he
accepted that he was made aware of the dichotomy between the Regulation and Revenue practice, was found by the High Court
judge to have understood the advice of PwC to be that VAT could be lawfully charged and to have, as a non-expert, relied upon that
advic e.
72. The High Court judge also relied on the oral testimony of Mr O’Rourke which he clearly considered to be credible (see paras. 97 –
99) noting that he had said, inter alia, that CSID had been informed of the divergence between the language of the Regulation 19 and
the Revenue practice. Thus, at para. 99 of his judgment the High Court judge found as a fact that CSID, both at board level and EST
level, was aware that there was a dichotomy between the law and practice concerning Regulation 19. However, he went on to state
that he also accepted as fact that “it was PwC’s advice to both the board of directors and the EST that the Lease was vatable”.
73. It is apparent from the judgment of the High Court judge that he considered that much of the aforementioned documentation
established that PwC’s view of its own advice was consistent with how that advice had been understood by CSID both at EST and
board level.
74. Thus it was that the High Court judge was satisfied first, that when “viewed in the round” the evidence received by CSID from
PwC was that whilst the claim for VAT on the lease could not be guaranteed, because of the dichotomy earlier referred to, it was
nonetheless PwC’s professional opinion that the lease was vatable. Second, he was satisfied that CSID had accepted PwC’s advice in
this regard. Third, CSID had also been advised by its solicitors, McCann Fitzgerald, that it was arguable that DWW was legally obliged
to accept CSID’s decision that the lease was vatable and, finally, that counsel had advised that the claim for VAT should be included
in the forfeiture proceedings. All of these factors weighed in favour of concluding that CSID had reasonable or probable cause to issue
the proceedings.
The appeal
75. In its notice of appeal dated 4th April 2018, DWW advanced to some sixteen grounds of appeal. As these were reduced to 6 by
the time the appeal was heard in this court I will confine my summary to these more focused submissions.
DWW’s submissions
page10 ⇓
76. In respect of the first basis upon which the High Court dismissed its claim, DWW submits that the High Court judge erred as a
matter of law in concluding that CSID’s success before the Arbitrator and before the High Court (Gilligan J.) was determinative in
CSID’s favour. In particular, he erred in concluding, as he did at para. 156 of his judgment, that “the very winning of the primary
litigation at first instance… must prove that there was always a reasonable chance that the case would be won, and so establishes
that there was a reasonable and probable cause for the proceedings.” DWW disputes this statement of the law which it claims is both
unsupported by legal authority and defies logic. If the proceedings were issued without reasonable and probable cause, the party that
issued those proceedings could not later be absolved of that wrongdoing merely because of the happenstance that an Arbitrator or
judge incorrectly decided some leg of their case in their favour, such as has happened here.
77. DWW also contends that the trial judge erred in his reliance upon the decision of the Arbitrator in favour of CSID to
retrospectively attribute reasonableness to its earlier decision to bring proceedings. DWW maintains that there were a number of flaws
with the High Court judge’s analysis in this regard. It queries how could it be said that a decision at first instance, which was later
found to be fundamentally flawed (and the Arbitrator’s decision in this case was found to be so), could have the effect of
retrospectively providing a party with reasonable and probable cause in law for initiating those proceedings. Either a party did or did
not have reasonable or probable cause to issue the proceedings. This had to be assessed at the time that the proceedings are
issued. A subsequent decision by a court of first instance, or an Arbitrator, cannot impact upon the assessment of whether there was
or was not cause at that earlier time.
78. Counsel further submits that the High Court judge’s decision was in any event, wrong as a matter of principle. In its proceedings
to recover VAT, CSID contended that Regulation 19 allowed for three methods of valuing the lease. It did not succeed in that
proposition either before the Arbitrator or before the High Court. In both instances the decision in CSID’s favour was reached on the
basis that the Valuation Office Report was not “other evidence” with the result that CSID had been found entitled to use the rent
formula method to value the lease. The only determination as to the entitlement of CSID to claim VAT on the lease was that made by
Hardiman J. in the Supreme Court when he concluded that the Arbitrator had gravely misled himself concerning Regulation 19. The
Valuation Office Report was “other evidence” and that being so CSID was not permitted the option of using one of the alternative
formulae therein provided.
79. Furthermore, DWW submits that as a matter of law the High Court judge was not entitled to determine the proceedings on the
aforementioned basis as CSID had never advanced this point in the High Court. Neither in its oral or written submissions had CSID
sought to argue that because it had succeeded before the Arbitrator and later before the High Court it followed that the proceedings
could not have been an abuse of the court’s process. DWW maintains that the decisive reliance by the trial judge on this point was a
total surprise. If it had been forewarned as to the importance that this novel proposition of law was to have in deciding the case, it
would have taken the opportunity to address it.
80. In respect of the alternative basis upon which the High Court judge had rejected DWW’s claim, namely his conclusion at para. 184
of his judgment that when “viewed in the round” CSID had reasonable or probable cause to issue the proceedings, counsel for DWW
submits that this conclusion was not supported by the evidence. It was based upon an incomplete and erroneous assessment of the
evidence and in particular the documentary evidence.
81. First, counsel submits that the High Court judge made a fundamental error when, for the purposes of determining whether CSID
had reasonable and probable cause to issue proceedings claiming VAT, he relied upon the documentation identified earlier at paras.
53-54 of this judgment. Whilst that documentation was available to what he described as the “VAT community” there was no
evidence that CSID was aware of any such documentation or its contents. Thus, whether tax or VAT practitioners considered there
was a choice of three valuation methods available under Regulation 19 at the time CSID issued its proceedings was irrelevant as it
was not within the knowledge of CSID at the time it commenced the VAT proceedings. For the same reason that it could not have
operated on the mind of CSID when it made its decision to initiate proceedings, DWW submits that it was impermissible for the High
Court judge to rely upon, as he did, the advice which DWW’s own tax experts had at one time provided which was to the effect that
a lessor could choose between the three methods of valuation of the lease. By reason of these errors alone, counsel submits, the
subsidiary basis upon which the High Court judge rejected DWW’s claim is flawed with the result that a retrial is warranted.
82. Second, as to the High Court judge’s conclusion that CSID had been advised by its tax advisers that the lease was vatable, that
finding was not supported by the evidence. The evidence established that CSID had been apprised of the reality that the Regulations
did not permit a free choice between the three methods of valuation where “other evidence” was available. And in this case CSID had
other evidence of the open market valuation of the interest in the lease by virtue of the Valuation Office Report.
83. In particular, DWW relies upon the email of 27th November, 2002 wherein Mr Fay had advised CSID and the EST that there was a
problem with CSID charging VAT on the lease because the Regulation only permitted the use of the mathematical methods of
valuation “in the absence of other evidence” and wherein he went on to state that “we have other evidence (the valuation from the
Valuation Office which gives a value of the open market price of €35m).”
84. DWW also laid emphasis upon an email sent in reply by Mr O’Rourke the following day, which was copied to the same two directors
of CSID, and in which he concurred with the view earlier expressed by his colleague, Mr Fay, that the proposed methodology, i.e. the
use of the multiplier method, was “technically… not perfect”.
85. Particular reliance was also placed upon a third email sent by Mr O’Reilly on the 17th June, 2003 to Ms O’Donoghue and copied to
Mr Conway and Ms Magahy as well as Mr Fay and Mr O’Rourke, wherein Mr O’Reilly stated as follows:
“You should note that use of any one of three methods is an extra statutory practice only. In strictness, CSID should use
the valuation (circa €35M) determined by the Valuation Office.”
86. DWW maintains that in these emails, quite apart from any others, PwC clearly expressed the view, confirmed as correct by the
Supreme Court some years later, that the use by CSID of the mathematical formulae was not permitted by the Regulations, which
advice must have been understood by the directors of CSID. Indeed, DWW submits that the High Court judge himself, having
considered at length these emails, their context and the oral evidence offered in respect of them, found at para. 99 of his judgment
that CSID was in fact “both at board level and at EST level, aware that there was a dichotomy between what Regulation 19 stated
and the practice”. Given this finding, DWW argues that it was not open to the trial judge to subsequently conclude that CSID had
been advised or had actually believed that the lease was vatable. At most, according to DWW, CSID could have understood the
advice to mean that the lease was vatable in practice. However, what was required was that it was vatable in law. In this respect
his judgment was internally inconsistent. According to DWW, it could avail CSID nothing to rely on evidence that established that PwC
had advised that their intended approach to the valuation of the lease was acceptable in practice, as this could provide no basis in
law for the proceedings which they later initiated. Counsel for DWW stressed that the directors of CSID were very experienced
page11 ⇓
professionals who would have appreciated the distinction between law and practice and would have been aware that their choice to
pursue a course of action which was extra statutory entailed forfeiting the protection of the law.
87. According to counsel, there was no evidence of any advice furnished by PwC that stated that the claim for VAT under the
Regulation was in accordance with law. The only advice provided was that the Regulation did not permit the charging of VAT on the
lease but that Revenue “would run with it”. PwC had made clear that CSID had no case to make for VAT under the Regulation and its
advice was unequivocal in this respect. Yet, CSID had commenced proceedings on the basis that it was entitled to make that claim.
Accordingly, there was no basis upon which the High Court judge could have concluded that CSID had reasonable and probable cause
to bring the VAT proceedings on foot of advice it had received from PwC.
88. Objectively assessed, counsel submits that the reasonable actor in the shoes of CSID at the time, and receiving the advice that it
did, would have understand that there was a fatal problem with CSID claiming VAT on the lease due to the existence of the Valuation
Office Report of the 25th October 2002 which rendered the approach proposed unlawful.
89. Counsel for DWW further submits that CSID was not entitled to rely upon the fact that its solicitors and counsel lent their support
to the claim made in respect of VAT insofar as CSID had not sought any legal advice from McCann Fitzgerald or from counsel on its
entitlement to claim VAT on the lease. It had taken its advice from PwC. Neither was there evidence to demonstrate that McCann
Fitzgerald was privy to those advices which, counsel submits, were to the effect that the claim for VAT on the lease could not
lawfully be made under Regulation 19.
90. Third, counsel for DWW submits that the High Court judge, in general, failed to engage with the evidence. In particular, he had
ignored and failed to attach any weight to DWW’s heavy reliance upon two emails dated the 20th December, 2002 and 23rd
December, 2002.
91. In the first of these emails, Mr O’Reilly recommended that CSID postpone giving the Valuation Office Report to DWW/KPMG in
advance of an upcoming meeting between the parties because it “shows a valuation of the lease of circa €35m. which does not suit
our requirements”. DWW submits that this email is evidence that CSID could not but have been aware that the Valuation Office
Report made its claim in respect of VAT unlawful, yet it had been ignored by the High Court judge in his assessment of the evidence.
92. The second email, of the 23rd December, 2002, is relied upon as further proof that CSID did not actually believe it had reasonable
or probable cause to bring the proceedings. Sent by Mr Fay to Mr Conway, the email sets out that the approach which was being
adopted “while in accordance, we believe, with Revenue guidelines” was “not ‘perfect’ when read with the actual Regulations”. It
further expressed a need for CSID and their advisors to “stick to [their] guns re the method of valuation [they] had used”. DWW
argues that this email again demonstrates that while CSID may have viewed its approach as consistent with practice, Revenue or
otherwise, it well understood that it was not in accordance with the actual law. As experienced professionals it is said that the
executives privy to this correspondence would have understood that “guidance” or “practice” was not the same as law, even when
issued by Revenue, and thus that they could not rely on it to bring their actions into line with the Regulations.
93. Once again DWW submits that the failure of the High Court judge to refer to this email in his judgment, and weigh its content in
his assessment, is striking given the reliance that DWW placed on it for the purposes of proving that CSID did not actually believe it
had a case in law when it commenced its proceedings to recover VAT on the lease. His omission was sufficient to undermine the
validity of his conclusion on the issue of reasonable and probable cause because, in the submission of DWW, reasonable and probable
cause cannot exist absent an actual belief in the validity of the proceedings.
94. Third, counsel submits that the clear inference to be drawn from the conduct of CSID in withholding the Valuation Office Report,
was that it well knew that it was not entitled to claim VAT under the Regulation because the report contained a valuation of the
lease at €35m., thus rendering its purported reliance upon the rent formula method to calculate the value of the lease as without
foundation in law. Despite the fact that this was a key part of the case made by DWW, the trial judge had failed to address the
adverse inferences which he had been asked to draw from this conduct. His failure to do so undermined the validity of his judgment
that CSID had reasonable and probable cause to issue the VAT proceedings.
95. The only reasonable conclusion that the High Court judge could have drawn from the evidence was that the executives in CSID,
and in particular the EST team, were fully aware that VAT was not chargeable in accordance with law and in accordance with
Regulation 19, particularly in light of the advices received concerning the consequences of the Valuation Office Report, and thus they
did not in fact believe that they had reasonable and probable cause to bring the proceedings.
96. Fourth, in its closing submissions in the High Court, DWW had asked the trial judge to draw adverse inferences from the fact that
certain witnesses, who could have given direct evidence regarding critical issues, including the decision made by CSID to commence
proceedings to recover VAT, had not been called to give evidence. These were Mr O’Reilly of PwC and Ms Magahy, Mr Dunne, and Ms
O’Donoghue of the EST. DWW point to the fact that a great part of its submissions before the High Court focused on the argument
that the Court should infer, having regard to the failure of CSID to call these witnesses, that they would not have been in a position
to rebut assertions made by DWW in relation to the key events in which they were involved, which would go some way to proving
that CSID did not have reasonable and probable cause to bring the proceedings that they did. The High Court judge did not address
this issue in his judgment and this omission on his part was, according to counsel, sufficient to cast in doubt the validity of the
decision and warrant a retrial. Counsel relied upon the decision of Laffoy J. in Fyffes plc v. DCC [2009] 2 IR 417.
97. Accordingly, whilst CSID had maintained that it was sufficient to present witnesses from each “category” (i.e. the Board, EST and
PwC) to avoid such adverse inferences being drawn, DWW argues that in the absence of a finding by the trial judge it cannot be said
he engaged with this crucial aspect of DWW’s submissions with the unfortunate result that a retrial is warranted.
98. Fifth, counsel submits that the judgment of the High Court judge should be set aside as one which is inherently inconsistent.
Having found that the dichotomy between Revenue practice and Regulation 19 had been explained to and understood by the
executives of CSID, they must have known from the outset that they were not entitled to charge VAT. Once aware of the difference
between the Regulation and Revenue practice there was no basis upon which the court could have concluded that CSID had
reasonable and probable cause to issue the VAT proceedings particularly in circumstances where that claim was made pursuant to
Regulation 19.
99. Without prejudice to its submissions that the evidence did not support the High Court judge’s conclusion that CSID actually
believed it had reasonable and probable cause to issue the VAT proceedings, DWW further submits that such a belief would in any
case, objectively assessed, have been unreasonable. That is to say that the reasonable actor in the shoes of CSID would not have
considered that they had reasonable and probable cause to bring the proceedings. It was obvious that VAT was not chargeable on
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the lease. The Supreme Court decision in 2010 had merely confirmed the advice CSID had earlier received, which in turn reflected the
plain words of the Regulations. It was readily apparent that CSID was not permitted to use the mathematical methods of valuation
where they had “other evidence” of the value of the interest in the lease. CSID had been explicitly advised that it was acting outside
of the Regulations. Further, insofar as the High Court judge concluded that CSID had in fact received advice that VAT was
chargeable, DWW submits that the trial judge erred in finding that such advice was a complete defence – another proposition in law
for which DWW say there is no foundation. Irrespective of any advice CSID received, it was unreasonable for it to have taken the
view that it had reasonable cause in law to contend that VAT was chargeable on the lease.
CSID’s submissions
100. CSID maintains that the High Court judge was entitled, having regard to the evidence, to find that it had reasonable and
probable cause to initiate the VAT proceedings, in the objective sense required by Dorene Ltd v. Suedes (Ireland) Ltd [1981] I.R. 312.
Whereas a good part of DWW’s submissions are focused on the subjective belief in the proceedings which CSID is said to have lacked,
CSID submit that such belief or a lack thereof is relevant only to the question of malice, and not to the question of reasonable and
probable cause. Following Dorene, CSID argues that reasonable and probable cause is to be assessed objectively, based on the facts
which operated on the party initiating litigation at the time. Thus, for the purposes of reasonable and probable cause, the question is
not what CSID actually believed, but whether the reasonable actor, given the same information as CSID had, would have considered
that there was a proper case to be laid before the courts.
101. CSID contends that the finding of the judge at para. 184 of his judgment, namely that CSID had been advised that the lease
was vatable, provides a standalone basis for the conclusion he drew at the same paragraph that it had reasonable and probable
cause to bring the proceedings. His finding regarding the nature of the advice was a finding of fact and, per the principles outlined in
Hay v. O’Grady [1992] 1 I.R. 210, it should not be disturbed on appeal where it is supported by credible evidence.
102. Such evidence, CSID submits, is plentiful in the instant case. It accuses DWW, in its submissions to this Court, of attempting to
take various snippets of communications out of their rightful context in order to portray them in a light favourable to their case,
whereas the clear overall thrust of the advice and communications received from PwC was to the effect that CSID could proceed to
use the rent formula method of valuation and thus could charge VAT on the lease.
103. CSID rejects as artificial the sharp distinction which DWW seeks to draw between law and practice. In reality, it argues that
even in the emails on which DWW place reliance, it is at all times clear that the advice of PwC was that CSID was entitled to charge
VAT on the lease.
104. In the email of the 27th November, 2002, Mr Fay says that he only raises the point about other evidence “for completeness”
whereas he states clearly that “[t]here are three valuation methods under VAT Regulations” and that “Revenue have stated in their
Notes for Guidance to Inspectors that any of the three permitted methods may be used in practice”.
105. With respect to the email of the 28th November, 2002, CSID places reliance on the fact that, while Mr O’Rourke acknowledges
that the methodology proposed is “not ‘perfect’”, he also states that “practically… should be acceptable to Revenue”.
106. CSID maintains that, in his email of the 17th June, 2003, Mr O’Reilly endorsed the valuation method being used. Insofar as DWW
seeks to argue that this advice was only to the effect that the valuation might be used in practice but does not advise that it was
permitted by law, CSID contends that that distinction, if it can even be made out from the correspondence, would have been far from
clear to CSID as the recipient of professional advice. Counsel for CSID points to the fact that Regulation 19, the interpretation of
which is at the centre of this case, was promulgated by Revenue itself. Thus, the guidance it provided could easily be understood to
carry significant weight. Certainly, the evidence was that CSID placed great weight upon the fact that Revenue was satisfied that its
intended approach was fully in accordance with its lawful entitlement.
107. CSID maintains that it is easy for DWW to look back with the benefit of a detailed Supreme Court judgment and say that it was
clear that the Regulations did not permit the choice between the three valuation methods, but this could not have been obvious to
CSID from the advice it had received from PwC at the relevant time. In particular, CSID draws attention to a draft report which was
prepared by PwC on the VAT issue for the benefit of CSID, one version of which was sent to CSID on the 30th April, 2003. Insofar as
DWW contends that this report is merely a historic account of advice given, rather than a letter of advice itself, the report is,
according to CSID, nonetheless proof of the unambiguous advice of PwC that VAT was chargeable on the lease. In relevant part it
reads: “we advised that the unencumbered rent figure of €3,376,048 should be used in one of the mathematical valuation methods as
permitted by VAT Regulations”. The advice was not given on the basis of practice, but rather on the basis of the Regulations.
108. CSID further relies upon a letter of advice issued by PwC to CSID on the 19th June, 2003 (just two days after the email of Mr
O’Reilly which described the choice between three methods as an “extra statutory practice”). This letter, in responding to the claim
made by Mr Moriarty in his letter of the 16th June, 2003 that VAT was not chargeable on the lease, stated that the methodology
adopted by CSID had “always been the practice” and had been confirmed by the Revenue Commissioners, and concluded with the
unequivocal statement of advice that, contrary to the contention of Mr Moriarty, “the VAT charge outlined on your invoice dated
15th May 2003 is correct”.
109. CSID submits that, inter alia, these unequivocal pieces of advice provide credible evidence from which the High Court judge was
entitled to conclude, as he did at para. 184 of his judgment, that CSID was advised by PwC that VAT was chargeable on the lease,
and that it had reasonable and probable cause to bring proceedings in support of that understanding.
110. The High Court judge was entitled, in the view of CSID, to conclude from the oral evidence given on behalf of the directors of
CSID that the advice had been a key item operating on their minds at the time they made the decision to initiate proceedings.
Applying the test in Dorene v. Suedes, CSID submits that, armed with the information they had been given, the actions of the
relevant persons on the board of CSID and on the EST, in relying on professional advice received and initiating proceedings, were
eminently reasonable. Counsel emphasises the trust which the directors of CSID placed in their professional advisors, especially in an
area as complex and technical as VAT. In fact, CSID submits that it would have been extraordinary if they had departed from this
advice and had decided not to charge VAT on the lease notwithstanding advice to the effect that they could do so. Consequently,
CSID submits that the advice which it received from PwC provided a standalone basis for the High Court judge to conclude as he did
at para. 184 of his judgment that CSID had reasonable and probable cause to bring the VAT proceedings, in the objective sense that
the law requires. This finding should not, in CSID’s submission, be disturbed on appeal.
111. With regard to the first basis on which the High Court judge made his decision, although CSID concedes that the conclusion
regarding the effect of the decision of the Arbitrator was not based on a point which was canvassed at trial, it submits that the judge
was nonetheless correct. It was not clear that counsel for CSID was willing to go as far as to defend the absolutist formulation
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espoused by the trial judge that a favourable decision at first instance was necessarily dispositive of a claim in the tort of malicious
prosecution, but certainly he contended that it was appropriate to consider it as a “powerful indicator” of the reasonableness of the
belief of CSID in the proceedings it initiated. Notwithstanding that CSID did not know what the decision of the Arbitrator would be
when it commenced the proceedings, CSID contend that the decision was nonetheless evidence not only that the case could be won,
but that it had a reasonable chance of success. The fact that an independent third party, with expertise and all of the relevant
information, decided in favour of CSID is, according to CSID, objective evidence that it had a stateable case.
112. Further, CSID rejects the submission on behalf of DWW that the Arbitrator decided the case on a different point. The key
question in the VAT proceedings was whether CSID was bound to use the open market valuation of the lease in the Valuation Office
Report or whether it was entitled to choose between the three methods of valuation provided for in Regulation 19. The Arbitrator
decided that it was entitled to do the latter, having determined that the open market valuation was not “other evidence” for the
purpose of Regulation 19. Thus the crux of the case was decided in favour of CSID, and this decision, notwithstanding that it was
ultimately found to be flawed, was good evidence of the reasonableness of the belief of CSID in the prospects of its VAT litigation.
113. By a similar logic, CSID rejects the submission that the views of the VAT community and the initial view of DWW’s tax advisors
Andersen were irrelevant because they were not known to CSID at the time. Again CSID submits that these views are evidence of the
reasonableness of the position it took that VAT was chargeable. The fact that there was significant confusion regarding the
interpretation of the Regulations goes some way to showing that it had taken a reasonable approach at the time.
114. As aforementioned, CSID maintains that it need only demonstrate reasonable and probable cause in the objective sense, and
that its subjective belief about whether it had such cause at the time is relevant only to the question of malice which does not arise
in circumstances where the High Court judge decided the case on the question of reasonable and probable cause. Without prejudice
to this approach, CSID argues that in any case it did in fact actually believe it had reasonable and probable cause to bring the
proceedings. It submits that it was clear from the oral evidence provided by its directors that CSID understood the advice of PwC to
mean that VAT was lawfully chargeable on the lease. CSID contends that this evidence, even taken by itself, is sufficient to support
the trial judge’s finding that the relevant persons in CSID held an actual belief that they had reasonable and probable cause to pursue
the proceedings. That belief, CSID argues, was consonant with the trust which the directors of CSID placed in their professional
advisors in the technical area of VAT, a dynamic which was brought out strongly in the oral evidence. Accordingly, CSID submits that
the trial judge’s finding that it had been advised by PwC that VAT was chargeable led inexorably to his conclusion that it genuinely
believed that it had reasonable and probable cause. So long as this belief was reasonable, which of course CSID maintains it was, and
which argument I have detailed above, this finding provides a sufficient standalone basis on which the trial judge was entitled to
decide the case.
115. In respect of the email of the 23rd December 2002, in which Mr Fay acknowledges the assessment of his colleague Mr O’Rourke
that the approach being taken was “not ‘perfect’ when read with the actual Regulations”, CSID contends that this email could not
possibly have sufficed to displace the finding of the trial judge that CSID had been advised that VAT was chargeable. This is
especially so when it is read in the overall context of the advice provided by PwC to CSID, as outlined above. CSID accuses DWW of
engaging in precisely the exercise which is condemned by MacMenamin J. in Leopardstown v. Templeville Developments [2017] IESC
50, that is of reducing an appeal to “a piece-by-piece analysis of the evidence, in an effort to show… that the trial judge might have
laid more emphasis, or attached more weight, to the evidence of one witness, or a number of witnesses, or one document, or a
number of documents, rather than others on which he or she relied”. Taken at its highest, CSID submits that DWW is attempting to
bring this Court on a selective tour of the documents which best highlights its preferred interpretation of events. CSID contends that
parsing of this kind cannot fall within the remit of an appellate court which should only intervene with findings of fact where they
could not in all reason be held to be supported by the evidence. DWW had the opportunity to put all of this evidence to witnesses at
trial, and having done so the trial judge took a view on the evidence, holding clearly that CSID had been advised and believed that it
had reasonable and probable cause for the proceedings. CSID thus argues that is impermissible for DWW to, at this late stage, seek
to frustrate the findings of the High Court judge by urging this Court to take its own view on the evidence, beyond a review of the
findings already made.
116. CSID applies the same objections to DWW’s submissions regarding the email of the 20th December 2002, and other evidence
which is said to demonstrate that CSID executed a conspiracy to conceal the open market valuation provided by the Valuation Office
from DWW. While CSID accepts that there was a reluctance on its part to provide DWW with the open market valuation, it strongly
disputes the proposition that the clear inference to be drawn from this conduct is that it knew that it had no cause to charge VAT on
the lease. Further, CSID contends that it should be clear that the trial judge was not willing to draw this inference from the evidence,
all of which was before him. It is perfectly clear from his judgment that he accepted that CSID, at the material time, believed that it
had reasonable and probable cause.
117. Moreover, the inference which DWW seeks to have drawn from the conduct of CSID is entirely inconsistent, in the submission of
CSID, with the fact that CSID sent the Valuation Office Report to Revenue. It is of significance that the emails of the 27th and 28th
November, 2002, upon which DWW places great reliance, and which discuss a letter which is to be sent to Mr Michael Kelly of
Revenue, result in the Valuation Office Report being sent to Mr Kelly. This report included the open market valuation of the lease,
which DWW accuse CSID of attempting to “bury”. CSID further point out that the letter enclosing this report was copied to three
senior Revenue officials. CSID argues that, if it truly was attempting to conceal the open market valuation and construct a valuation
which it knew to be contrary to law, it would not have so candidly brought its proposed approach to the attention of four senior
Revenue officials. Contrary to the submission of DWW, CSID contends that these were not the actions of a party who knew itself to
be acting outside of the Regulations, and the trial judge was entirely correct to give no weight to the submissions of DWW in this
regard. There can be no question but that CSID believed it had reasonable and probable cause, and the finding of the trial judge in
that respect should not be disturbed.
118. In reply to DWW’s complaint concerning its alleged failure to call certain individuals to give oral evidence, CSID maintains that its
approach of calling witnesses “by category” was sufficient, notwithstanding the fact that not every witness that DWW would have
liked it to call had been called. CSID submits that it is clear that the High Court judge had the opportunity to consider DWW’s
submissions on the subject, and by the absence of any reference to this point in his judgment this court can safely infer that he did
not see fit to draw the adverse inferences requested. Again CSID makes the point that it is highly undesirable for DWW at this stage
in proceedings to pick holes in the way in which the High Court judge expressed his decision, in circumstances where it is clear that it
failed to convince him of the necessity of drawing adverse inferences. Moreover, CSID submits, it is plain from his judgment that the
High Court judge found that CSID actually believed they had reasonable and probable cause; and to displace that finding on the basis
that he did not specifically dismiss every argument made to attack it would be to seriously distort his clear intention.
Legal principles of relevance to the submissions made by the parties on the appeal
119. Before moving to discuss and determine the issues raised for the Court’s consideration on the appeal I believe it would be helpful
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to refer briefly to a number of the authorities relied upon by the parties insofar as they consider the tort of malicious abuse of the
court’s process. However, because there is little dispute regarding the test to be applied by the Court, I do not intend to consider
these authorities in any real depth but will do so principally for the purposes of identifying the prevailing principles and where they are
to be found.
Boundaries of the tort of malicious abuse of the court’s process
120. The boundaries and component parts of the tort of malicious abuse of the court’s process are best found in the what is perhaps
the leading decision in this jurisdiction on the tort, namely that of Costello J. in Dorene Ltd v. Suedes (Ireland) Ltd [1981] I.R. 312. I
will later return to the facts of this decision, but for the moment will confine my observations to the principles that emerge therefrom.
121. At p. 316 of his judgment, Costello J. describes the essential ingredients of the tort as follows:-
“The authorities, it seems to me, establish that a claim for damages at common law will lie for the institution or
maintenance of a civil action if it can be shown that the action was instituted or maintained (a) without reasonable or
probable cause (b) maliciously and (c) that the impugned action was one which the law presumes will have caused the
claimant damage.”
122. Concerning the test to be applied for the purpose of determining reasonable and probable cause, at p. 318 of his judgment
Costello J. provides the following guidance:-
“As to reasonable and probable cause, it is now well established that the test to be applied by the court is an objective
test and so when considering a claim for damages based on a civil action the court must itself examine the facts and
consider the legal principles applicable to them and decide whether there were reasonable grounds for instituting or
maintaining the action which it is claimed was wrongfully instituted or maintained”.
123. That malice is an additional ingredient of the tort, as advised by Costello J. in Dorene, is clear also from the decision of Toulson
L.J. in Willers v. Joyce [2016] UKSC 43. At para.. 55 of his judgment he states concerning malice:-
“Malice is an additional requirement… As applied to malicious prosecution, it requires the claimant to prove that the
defendant deliberately misused the process of the court. The most obvious case is where the claimant can prove that the
defendant brought the proceedings in the knowledge that they were without foundation… But the authorities show that
there may be other instances of abuse. A person, for example, may be indifferent whether the allegation is supportable
and may bring the proceedings, not for the bona fide purposes of trying that issue, but to secure some extraneous benefit
to which he had no colour of a right. The critical feature which has to be proved is that the proceedings instituted by the
defendant were not a bona fide use of the court’s process.”
124. For the purpose of defeating a claim for malicious abuse of the court’s process it will suffice for the litigant concerned to
establish that their claim was stateable. Thus, as was stated by Devlin L.J. in Glinski v. McIver [1962] AC 726, in order to have
reasonable and probable cause the defendant does not have to believe that the proceedings will succeed, it is enough that “there is
a fit case to be tried”. In Bank of Ireland Finance v. McSorley & Macari [1994] WJSC-HC2085 the test applied by Murphy J. was
whether it was “by no means impossible” that the claim would succeed. Thus the plaintiff alleging and abuse of the court’s process
faces a heavy burden.
125. Concerning this statement of the law, which was relied upon in Dorene, Costello J. stated:-
“As to malice, it is to be borne in mind that even if it is shown that the proceedings had been instituted without
reasonable or probable cause it is necessary to show in addition that they were instituted maliciously. Malice means the
presence of some improper and wrongful motive.”
126. Thus, it would appear that the test for reasonable and probable cause is one which is essentially objective in nature with the
subjective belief of the defendant being of particular significance when the Court comes to consider the second element of the tort
i.e. malice.
127. As to how the trial judge should approach his or her assessment of a claim for damages for malicious abuse of the court’s
process, although stated in the context of a claim for malicious prosecution of criminal proceedings, the following guidance of Denning
L.J. in Tempest v. Snowden [1952] 1 K.B. 130 is of assistance:-
“In my opinion in order to determine the question of reasonable and probable cause, the judge must first find out what
were the facts as known to the defendant, asking the jury to determine any dispute on that matter, and then the judge
must ask himself whether those facts amounted to reasonable and probable cause. In Herniman v. Smith [1938] 1 All E.R.
9, Lord Atkin put it quite clearly:
‘The facts upon which the prosecutor acted should be ascertained. In principle, other facts on which he did not act
appear to be irrelevant. When the judge knows the facts operating on the prosecutor’s mind, he must then decide
whether they afford a reasonable or probable cause for prosecuting the accused.”
If these facts do afford reasonable and probable cause, then the prosecution is justified, and it is not as a rule necessary
for an inquiry to be made into the prosecutor’s belief. The state of his belief goes to malice, but not, as a rule, to
reasonable and probable cause. This view is supported by the observations of the Lord Goddard C.J., in Tims v. John
Lewis & Co., Ltd., where he said ([1951] 2 K.B. 472):
“The question whether there was a reasonable or probable cause is not, I think, to be determined subjectively, as
has been suggested. It is a question which objectively the court has to decide on the evidence before it.”
….Apart from exceptional cases….I think it right to say that, once the facts as known to the prosecutor are ascertained,
the state of his belief goes only to malice and not to reasonable and probable cause.” (Emphasis added).
128. As to the relevance or weight to be attached to any legal or other advice received by a party before they commenced the
proceedings alleged to be an abuse of the court’s process, the Court of Appeal of England and Wales in Abbott v. Refuge Assurance
Co. [1962] 1 Q.B. 432 held that the fact that counsel in that case had advised that a prosecution lay was not conclusive on the
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issue of reasonable and probable cause, and that the court itself should consider whether counsel’s advice was correct.
129. In Murphy v. Kirwin [1993] 3 I.R. 501, Finlay C.J. at p. 508 of his judgment, when considering the elements of the tort, also
reflected upon the weight that might be attached to any advice received by a party from their advisers prior to instituting the
proceedings alleged to constitute an abuse of the court’s process:-
“If the client stated the facts of the case correctly to his legal advisers and was advised not to proceed (as happened in
Dorene Ltd v. Suedes (Ireland) Ltd [1981] I.R. 312) this would support an allegation of abuse of process. If the client
stated the facts correctly and was advised to proceed this would tend to negative it. And if the client misstated the
facts to his legal advisers this would strengthen a claim that the proceedings had been instituted for an improper
purpose.”
130. On the same issue, in Dorene Costello J. stated as follows:-
“Obviously where a Plaintiff has obtained legal advice before instituting or pending legal proceedings the nature of that
advice could be a highly material factor in considering whether he was motivated by an indirect or improper motive, as it
may assist in showing whether the Plaintiff was using the proceedings for some legally inappropriate purpose.”
131. Finally, it is readily apparent from the authorities cited above that the circumstances which are material to the court’s
assessment when it comes to considering a claim that proceedings were issued in the absence of reasonable and probable cause are
those that were known at the time that step was taken. And, if the claim extends to the maintenance as opposed to the
commencement of proceedings, as was the case here and in Dorene, the circumstances which prevailed at the time any decision was
taken to maintain the proceedings are those that are relevant.
Some general observations
132. Few would dispute the importance to society that the law should be available to all who wish to employ its process for the
purpose of claiming what they believe to be their rights without their being subjected to any additional liability should they fail, over
and above the costs of the proceedings, unless they can be shown to have acted maliciously and without reasonable or probable
cause. In my view it would be extremely undesirable if a person who had a claim worthy of being decided by the courts were to find
themselves faced with secondary litigation simply because their claim ultimately failed.
133. As was cautioned by Mance L.J., albeit in the context of his dissenting judgment in Willers, the tort of malicious abuse of the
court’s process is, in many ways, unattractive because it, inter alia, invites fresh litigation about prior litigation and a consideration of
the soundness of the bases and motivations underlying those proceedings.
134. Nonetheless, many of the cases to which this court’s attention was directed in the course of this appeal serve to demonstrate
the good public policy reasons which underlie this particular tort given that it provides a means of deterring parties from instituting
proceedings which are vexatious and brought for a malicious purpose. It is important to remember that even when a defendant
succeeds in defending a claim made against them they will, in all probability, sustain some degree of financial loss, given that it is only
in the rarest of cases that costs will be awarded against a plaintiff who fails in their claim otherwise than on a party and party basis.
Further, even if the successful defendant should manage to obtain a costs order on a solicitor and own client or indemnity basis, the
plaintiff may not be a mark for those costs or the defendant may have difficulty executing such an order. A good example of this type
of prejudice is to be found in the facts of Willers where Mr Willers sought to recover the sum of £2m. sterling as damages, that sum
representing the difference between the costs awarded in his favour when he succeeded in his primary litigation and his actual bill of
c ost s.
135. Another matter worth noting is that in almost all of the claims which have proved successful it is easy to identify some obvious
collateral objective or ulterior motive underlying the proceedings. For example, in Dorene, by issuing its proceedings Dorene was in a
position to register a lis pendens over the property concerned thus rendering it unsaleable to anyone else and placing Dorene in a
very favourable position to negotiate its cheap purchase.
136. Finally, I would observe that in a very significant number of the leading cases the claim for malicious abuse of the court’s
process was raised as a counterclaim in the proceedings alleged to be an abuse of the court’s process. Perhaps this is unsurprising
given that it is the circumstances which prevailed at the time the proceedings were issued that will determine liability. There are, of
course, cases in which the claim not made prior to the secondary litigation, however this seems to occur in cases where it was not
until after the primary proceedings were concluded that documentation or information came to hand which exposed the possibility
that the proceedings had been pursued maliciously and without reasonable or probable cause.
Decision
A. The trial judge’s conclusion that the decisions of the Arbitrator and the High Court (Gilligan J.) in favour of CSID were
determinative of the claim
137. It goes without saying that all parties to litigation are entitled to a hearing that accords with the rules of natural justice and fair
procedures. It follows that in the great majority of cases where it is established on appeal that in some material respect the first
instance hearing was grossly unfair to the losing party, the appellate court has little option but to direct a retrial, regardless of the
delay, cost and expense that will result.
138. Essential to a fair and just hearing is the right of both parties to be heard on all issues crucial to the court’s ultimate
determination. In the vast majority of cases it happens quite naturally that the judgment of the trial judge will follow closely the
approach taken by the parties to the major issues canvassed in the course of the proceedings. This is particularly so in cases which
involve complex issues of law and fact where, at the close of proceedings, the court will likely be guided by the parties’ oral and/or
written submissions as to the issues they consider need to be addressed in the court’s judgment. This was one such case. At the
close of the 20 day hearing the parties delivered extensive written submissions.
139. It is accepted by CSID that neither in its written nor oral submissions did it argue that its success before the Arbitrator, or
before the High Court on its application to enforce the Arbitrator’s Award, was fatal to DWW’s claim that CSID did not have
reasonable and probable cause to issue the VAT proceedings.
140. In these circumstances it is understandable that, when the trial judge determined that DWW’s claim was to be rejected because
CSID had succeeded in its claim before the Arbitrator and later before the High Court (Gilligan J.), DWW considered that it had not
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been afforded a fair hearing.
141. The potential for injustice to one or other party should a judge decide a case on a point not advanced in the course of the
hearing is obvious. There may be a perfect answer to the point that the trial judge considers unanswerable and had it been raised at
the hearing the error in the trial judge’s thinking would have been corrected. A similar injustice would arise if, after the conclusion of a
hearing, the trial judge was to come across a legal authority not referred to in the course of the hearing and, believing it provided the
answer to the claim, decided the case on that basis. However, had that authority been brought to the attention of the parties it
might have been distinguished successfully.
142. It follows that if, when a trial judge comes to write his or her judgment, a point comes to mind or a legal authority is unearthed
which was not canvassed in the course of the hearing and is one which they consider crucial to the determination of the claim, in
order to do justice between the parties a further hearing will normally be required so that the parties may be afforded an opportunity
to address the said issue or authority.
143. The importance of a such an approach is heightened due to the fact that an appellate court cannot, save in special
circumstances, decide a point not argued in the court below. This is because constitutional justice requires that the unsuccessful
party in High Court proceedings have an automatic right of appeal from every first instance decision. In other words, every litigant
gets two chances to argue in favour of their stated position. However, where a trial judge decides a case on a point not argued at
first instance, that error is not remedied by the fact that the party aggrieved by the decision has a right of appeal. This is because
the appellate court will be hearing the parties for the first time on this particular issue as if it was a first instance court and there will
be no automatic right of appeal from its decision.
144. It follows that I consider that there is merit in the submission of DWW that it did not get a fair hearing in circumstances where
the High Court judge determined that its claim must fail by reason of the decision of the Arbitrator and/or the High Court judge on the
application to enforce his Award. However, in circumstances where the High Court judge decided the proceedings on what I consider
to have been a valid alternative basis, there is no need to reach any definitive conclusion as to the consequences that might
otherwise result from the approach adopted by the trial judge.
145. In circumstances where I am satisfied that this appeal may safely be determined by addressing the alternative basis upon which
the High Court judge rejected DWW’s claim, it is unnecessary to engage to any real extent with the submissions of DWW concerning
the relevance or otherwise of the decision of the Arbitrator and later the High Court judge upon CSID’s application to enforce the
Arbitrator’s Award. I will nonetheless offer a number of brief observations concerning the determination of the High Court judge that,
on the facts of this case, the success of CSID at first instance was determinative of the issue as to reasonable and probable cause.
146. It seems to me that there is merit in the general proposition, as contended for by counsel for DWW, that a plaintiff’s claim based
on the tort of malicious abuse of the court’s process will not necessarily fail simply because the defendant was successful at some
stage of the primary litigation. It would, I believe, be unjust if, having deliberately set out to damage their opponent by issuing
proceedings which they knew were without foundation, the malicious litigant could be saved from their wrongdoing by the fact that a
judge in the primary litigation had incorrectly found in the defendant’s favour at first instance, even though the decision was later
corrected on appeal. It is difficult to see why the happenstance of that error should deny a claimant the damages to which they
would otherwise be entitled had the claim been correctly decided at first instance.
147. I am also satisfied that, as a matter of law, the court’s decision as to whether a litigant did or did not have reasonable or
probable cause to issue the proceedings is a decision which must be made based on the facts and circumstances that existed at the
time the proceedings were issued and which were known to the litigant. Applying an objective test to the circumstances as they
existed, there either was or was not reasonable and probable cause for CSID to issue the proceedings. As was stated by Denning L.J.
in Tempest v. Snowden and Atkin L.J. in Herniman v. Smith, the role of the judge is to first find out what facts were known to the
prosecutor and then decide whether these amounted to reasonable or probable cause. Facts upon which the prosecutor did not act
were held to be irrelevant. It follows that in a civil claim for abuse of the court’s process the court will seek to establish the facts
known to the plaintiff at the time they issued their proceedings and then objectively determine whether they had reasonable or
probable cause to issue the proceedings. Facts as later established or which were unknown to the litigant have no part to play unless
there is a claim that by continuing to maintain the proceedings the plaintiff acted without reasonable and probable cause. And, that is
what actually happened in the present case, an approach which, in my view, impacted significantly on the manner in which the High
Court judge approached a number of the core issues.
148. The claim advanced by DWW (see para. 21 and following of statement of claim) not only maintained that the commencement of
the claim for VAT on the lease constituted an abuse of the court’s process, but it also claimed that CSID’s (i) maintenance of those
proceedings (ii) its maintenance of the Arbitration proceedings (iii) its commencement of the proceedings to enforce the Arbitrator’s
award and (iv) its defence of DWW’s challenge to same, each amounted to malicious prosecution of DWW.
149. Whilst DWW on this appeal confines its challenge to the High Court decision insofar as it relates to CSID’s conduct in issuing the
forfeiture proceedings including a claim for VAT, that was not its approach in the court below and for this reason the High Court judge
is not to be faulted for engaging with all of what happened in terms of litigation between the parties after those proceedings were
issued. He was clearly drawn into an analysis of the facts as they were known to CSID at varying stages of the primary litigation. An
examination of those facts would have been unnecessary had the claim for abuse of the court’s process been confined to the issuing
of the proceedings rather than their subsequent maintenance and the efforts later made to enforce the Arbitrator’s award.
150. It is abundantly clear from para. 27 of the High Court judge’s judgment that he well recognised that in deciding whether CSID did
or did not have reasonable or probable cause to issue the proceedings he was obliged to confine his consideration to the
circumstances as they existed at the time that that step was taken. Thus, much of the criticism directed to his consideration of
circumstances which post-dated the issue of the proceedings, was, in my view unwarranted.
B. Subsidiary basis for the Court’s decision that CSID had reasonable and probable cause to issue the VAT proceedings
(i) Revenue Guidance – Views of the VAT community – Advice received by DWW
151. DWW submits that the High Court judge made a number of legal and evidential errors in concluding that CSID had reasonable and
probable cause to issue the VAT proceedings. DWW submits that in so deciding it was not open to him to rely upon the
documentation containing the guidance of Revenue because PwC well knew and CSID had been advised that such guidance was out
of kilter with the Regulation. Furthermore, the High Court judge had wrongly imputed to CSID knowledge of certain materials and
publications circulating within the accountancy profession at the time concerning the proper interpretation of Regulation 19, despite
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the fact that there was no evidence to show it was aware of those materials. Further, DWW submits that the High Court judge
impermissibly relied upon the advice which DWW had received from its own expert concerning the vatability of the lease, when those
advices were also unknown to CSID at the relevant time. Thus, DWW maintains that the conclusion of the High Court judge that CSID
had reasonable and probable cause to issue the proceedings, which was influenced by this evidence, must be seen as fundamentally
flawed.
152. I am not satisfied that there is any real validity to the aforementioned submission for reasons I will now summarise.
153. First, in its email of the 19th June 2003, PwC enclosed for CSID’s attention Revenue’s Notes for Guidance of Inspectors and its
booklet on VAT and Property Transactions concerning Regulation 19. Accordingly, it cannot be said that the High Court judge wrongly
imputed knowledge of Revenue’s interpretation of Regulation 19 to CSID when he concluded that it believed that as lessor it could
choose any one of the three methods of valuing the lease and thus had reasonable and probable cause to issue the proceedings to
recover VAT on the lease.
154. Second, whilst the High Court judge stated that he intended to detail all of the documentation referred to at para. 151 above,
which he observed had been provided by CSID in support of its belief that it had a choice of three methods of valuing the lease, he
did not proceed on the basis that CSID had, with the exception of the Revenue documentation, itself actually seen these published
materials or was aware of the advice initially received by DWW from its own tax advisors concerning Regulation 19.
155. The High Court judge explicitly stated that the aforementioned evidence had been put forward to demonstrate that it was
reasonable for PwC to conclude that, regardless of the wording of Regulation 19 and the existence of the Valuation Office Report, the
lessor could choose any one of the three methods of valuing the lease and to that extent it added valuable support to Mr O’Rourke’s
evidence that the content of its advice to CSID had been to the effect that the lease was vatable.
156. I am fully satisfied from what the High Court judge stated at paras. 29, 33, 34 and 35 of his judgment that he well understood
that he was being asked to consider this particular evidence as strongly favouring a finding that it was the bona fide professional
opinion of PwC that CSID was entitled to charge VAT on the lease, and furthermore that this was, as a matter of fact, the
professional advice transmitted to CSID.
157. That this evidence was clearly relevant to the High Court judge’s consideration of a number of disputed issues relevant to the
issue of reasonable and probable cause, cannot be doubted. These included:
(i) whether it was in fact PwC’s professional opinion that CSID was entitled to claim VAT on the lease;
(ii) the import of the professional advice furnished to CSID by PwC concerning its entitlement to claim VAT on the lease;
and
(iii) what CSID understood that advice to be.
158. The fact that Revenue and other leading tax experts at the time were agreed with the professional opinion of PwC that,
regardless of the wording of Regulation 19, the lessor could choose any one of the three methods of valuing the lease, lent significant
support to the position proposed by CSID on each of these issues.
159. It is to be remembered that Mr O’Rourke’s evidence was (i) that he bona fide believed VAT might lawfully be claimed on the lease
(ii) that he had so advised CSID and (iii) had made clear that PwC’s advice was in accordance with Revenue’s opinion concerning
Regulation 19. DWW, on the other hand, had challenged PwC’s opinion as to the lawfulness of charging VAT on the lease and had
maintained that the actual advice given was that the claim for VAT was in conflict with the wording of the Regulation and was
therefore unlawful. Understanding that to be PwC’s advice, CSID could not have believed it had reasonable and probable cause to
issue the proceedings.
160. In light of that contest the High Court judge was entitled to consider how likely it was that PwC’s opinion or advice would have
been inconsistent with the views of other leading tax professionals at the time or with Revenue’s own view of the relevant Regulation.
161. If DWW had been in a position to establish that PwC’s professional opinion had been out of line with Revenue guidance and
practice and/or had been contrary to the prevailing views of leading experts in the VAT community at the time, that evidence would
have weighed in favour of DWW’s contention that PwC never believed that VAT might lawfully be claimed on the lease and would have
added force to its contention that PwC had never advised CSID that VAT could be lawfully claimed on the lease. Once satisfied that
the bona fide opinion of PwC at the time was that VAT was lawfully chargeable and that this advice had been communicated to CSID,
it was for the judge then to decide the weight to attach to these facts when deciding what CSID understood the position to be when
it decided to sue to claim the VAT on the lease.
162. Furthermore, the High Court judge’s reliance upon the aforementioned evidence was entirely logical and appropriate in light of
DWW’s submission that Regulation 19 could never have been understood to mean that the lessor could choose between any of the
three methods for the purposes of valuing the lease. As the High Court judge correctly noted, it was easy with the benefit of
hindsight and the judgment of Hardiman J. to so contend. However, what the evidence recorded in this section of the High Court
judge’s judgment demonstrated was that there was very weighty professional opinion at that time, including that of Revenue who
after all was responsible for the implementation of the Regulation, which took the alternative professional view.
163. Accordingly, I reject the submission that, insofar as the High Court judge may have been influenced by this evidence when he
came to consider the issue of reasonable and probable cause, his judgment should be considered flawed. The prevailing views of tax
advisors at the time, including DWW’s own advisors, and Revenue guidance as to the meaning of Regulation 19 were relevant to the
High Court judge’s assessment as to whether CSID subjectively believed it was entitled to claim VAT on the lease and whether
objectively assessed, it had reasonable and probable cause to issue the proceedings.
(ii) CSID’s failure to call witnesses who DWW maintained well knew that VAT could not lawfully be claimed in light of the
Valuation Office Report
164. DWW is of course correct when it submits that as a matter of law a court is entitled to draw an adverse inference from the
failure of a party to call a witness who is available to give evidence in relation to a fact in issue. In the present case, DWW submits
that the High Court judge failed to have regard to its submission that adverse inferences were to be drawn from the failure on the
part of CSID to call as witnesses Mr Thomas O’Reilly of PwC and Ms Magahy, Mr Dunne and Ms O’Donoghue, all members of the EST.
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165. However, before addressing the facts which DWW maintains mandated the calling of those witnesses in this case, it is necessary
to identify the circumstances which have been considered sufficient to warrant the drawing of adverse inferences.
166. The principles by which a court should consider a submission that an adverse inference be drawn due to the failure of a party to
call a certain witness or witnesses are set out with particular clarity by the Court of Appeal in Wisniewski v. Central Manchester
Health Authority [1998] Lloyds Rep Med 223 where Brooks L.J. summarised the position as follows:
“(1) In certain circumstances the court may be entitled to draw inferences from the absence or silence of a witness who
might be expected to have material evidence to give on an issue in an action.
(2) If a court is willing to draw such inferences, they may go to strengthen the evidence adduced on that issue by the
other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call
the witness.
(3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question
before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue.
(4) If the reasons for the witness’s absence or silence satisfies the court, then no such adverse inference may be drawn.
If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially
detrimental effect of his/her absence silence may be reduced or nullified.”
167. The aforementioned principles have since been approved of in this jurisdiction by Laffoy J. in Fyffes plc v. DCC plc [2005] IEHC
477, and more recently by the Supreme Court in Whelan v. AIB [2014] IESC 3.
168. In Fyffes, the plaintiff alleged that the defendant had engaged in insider dealing in its shares. It submitted that the Court should
draw certain inferences from the failure of the defendants to call a number of witnesses, including a stockbroker whom it maintained
was a critical witness in relation to the question of whether the defendant had dealt in the plaintiff’s shares.
169. In rejecting that submission Laffoy J. cautioned against an overbroad application of the principles laid down in Wisniewski, stating
at p. 510 of her judgment that:-
“As a general proposition, the fact that every witness who may have material evidence on a particular issue was not
called, cannot, in my view, give rise to an adverse inference against the party who might have been expected to call all
of the witnesses.”
170. In so stating, Laffoy J. emphasised the fact that the onus of proof in respect of the “dealing issue” in that case was on the
plaintiff who was aware of the fact that the stockbroker concerned was in a position to give material evidence. Accordingly, he could
have been subpoenaed by the plaintiff to give evidence, an approach which, she noted, had not been pursued. She went on to state
that whilst she considered the approach of the plaintiff in this regard to be a legitimate tactical decision the same was to be said of
the defendant’s decision not to call the stockbroker. This relatively restrictive approach to the drawing of adverse inferences was also
adopted by Hogan J. in Leopardstown Club Ltd v. Templeville Developments Ltd [2015] IECA 164, who stated at para. 108 of his
judgment that the “starting point is that a court should generally be reluctant to draw an inference from a failure to call a witness”.
171. Whilst it would undoubtedly have been more satisfactory had the High Court judge addressed the submission made by DWW in
the court below that adverse inferences should have been drawn from the failure on the part of CSID to call a number of witnesses,
parties to litigation need to understand that that they cannot expect trial judges to address every submission advanced, particularly
in lengthy and complex litigation such as this, where a myriad of arguments are advanced by each of the parties in support of their
respective positions. In some instances, a decision on one point necessarily precludes success on a separate point. In those
circumstances it is not necessary for a judge to address each and every argument advanced. Judges in general, but particularly those
who are charged with deciding cases of the type under consideration here, carry out their role in extraordinarily pressurised
circumstances. Unlike in many other jurisdictions, for the most part they are expected to write extensive and learned judgments
concerning cases recently heard at a time when they are invariably presiding over yet another equally complex case. Thus, as counsel
for CSID observed in the course of his submissions, trial judges routinely find themselves confining their judgments to the issues of law
and fact which they consider critical to their conclusions. They cannot be faulted for failing to engage with every submission made by
the parties, who must be content to receive a judgment which explains to them, in terms, the principal reasons why they were or
were not successful in their litigation, as is explained in the judgment of Clarke J. in Doyle v. Banville [2012] IESC 25 at p. 25.
172. Having considered the lengthy and detailed judgment of the High Court judge in this case, I think it only reasonable to infer that
in light of his primary findings of fact he considered it unnecessary to address this submission.
173. Whilst it may be considered inappropriate for this Court to posit any view on how the High Court judge might have addressed this
issue, had he chosen to engage with it, it can be stated nonetheless with some certainty that in accordance with the prevailing
principles to be applied he would have been obliged to reject DWW’s submissions for reasons which I will now identify.
174. The burden of proof in this case was on DWW to prove an absence of reasonable and probable cause. Critical in this regard was
its contention that CSID had been advised by PwC that it could not lawfully claim VAT on the lease and that it understood this to be
the position at the time it issued its proceedings. I will assume for present purposes that DWW had made out a prima facie case in
this regard, although I note the submission of CSID that the claim of DWW in this regard was no more than an assertion of the type
deprecated by O’Donnell J. in Whelan.
175. It is important to record that this is not a case in which CSID called no evidence to displace the prima facie case which DWW
maintains it established in the course of its evidence. CSID called a significant number of witnesses to deal with the core issues in the
case, which included the nature of the advice furnished by PwC to the EST and Board of CSID and what was understood to be the
import of that advice. In this respect the circumstances of this case are to be contrasted with those cases in which the evidence on
some particular issue was exclusively held by a particular witness who was not called to give evidence, thus leading to an inference
that had they been called they would not have been in a position to disprove the prima facie case.
176. Concerning the advice given by PwC to the EST and the Board of CSID, Mr O’Rourke, who was at all relevant times intimately
involved in the giving of that advice, was called to give evidence. He was, as a result, subjected to a rigorous cross-examination not
only in respect of his own advice but also in respect of the advice and understanding of Mr O’Reilly, who according to DWW did not
share his view of Regulation 19, concerning CSID’s entitlement to claim VAT on the lease. Material also in this regard is the fact that,
page19 ⇓
in circumstances where all of the discovery documentation pertinent to this issue was admitted into evidence without the necessity
for formal proof, DWW was not only in a position to itself to rely upon the opinion and views of Mr O’Reilly as expressed in his emails
but also to cross-examine Mr O’Rourke as to his opinion and the advice tendered based on those documents.
177. Furthermore, as was the case in the Fyffes, DWW was aware, particularly from the discovery documentation, that Mr O’Reilly
was one of a number of members of PwC involved in advising CSID in relation to Regulation 19 and its entitlement to claim VAT on the
lease. Thus, it was open to DWW to subpoena Mr O’Reilly to give evidence, albeit that there possibly were sound tactical reasons why
such an approach was eschewed. Also, as was observed by Laffoy J., it is an equally legitimate tactical approach for a defendant not
to call every single witness in relation to any particular issue. A party should not be left open to the risk of adverse inferences being
drawn just because they do not call all of the witnesses their opponent would like them to call, particularly in a case such as the
present one, which was to be both lengthy and costly. If parties felt exposed to such a threat the result would be that litigation
would become even more lengthy and expensive and the court’s scarce resources would be intruded upon to no useful purpose.
178. It is not only understandable but reasonable that parties should be entitled to choose to call who they consider to be their
stronger witnesses on any particular issue. In this regard, I accept as valid the argument made by counsel on behalf of CSID that it
was reasonable for his client to call witnesses of its own choosing in relation to each of the issues in the proceedings. It called
evidence to prove the state of knowledge and understanding of PwC, the EST and the Board in relation to the entitlement of CSID to
claim VAT on the lease. Relevant in this regard is the fact that Mr Conway, a member of the EST, gave evidence in the course of the
High Court proceedings and was thus available to be cross-examined as to the knowledge of members of the EST concerning the
advice of PwC and the reasons underlying any decisions which it had made.
179. Furthermore, four members of the Board of CSID were called to give evidence and were thus available for cross-examination as
to their knowledge and understanding of the advice of PwC and the basis upon which the Board decided to commence the
proceedings. Whilst not directly addressed by the High Court judge in the course of his judgment, it was strongly argued in the closing
oral submissions in the High Court that it was only knowledge that the Board possessed at the time it decided to issue the
proceedings that could be relevant to the issue of reasonable and probable cause. The company could not fall foul of the tort of
malicious abuse of the court’s process by reason of the independently held knowledge or state of mind of one or more of its
employees or advisors. It must be the state of mind of the person or body who decides to sue, in this case the Board, which is
material.
180. For these reasons, I am quite satisfied that, even if it be the case that DWW had made out a prima facie case that at EST level
and/or at Board level it was understood that the claim for VAT was not in accordance with Regulation 19, and I note CSID’s challenge
to this proposition, no adverse inference could reasonably have been drawn by the High Court judge for the failure on the part of
CSID to call witnesses such as Ms Magahy, Mr Dunne or Ms O’Donoghue, all members of the EST, to speak to their understanding of
PwC’s advice or to cast more light than the other aforementioned witnesses in relation to why the Valuation Office Report was not
furnished to KPMG, DWW’s advisors, in January, 2003 and their understanding of the lawfulness of the proposed claim for VAT.
181. In this regard, it is perhaps also relevant to note that that DWW might have, but did not, challenge the statement of evidence
provided by Mr John Mulcahy of CSID wherein he advised (i) that he was satisfied that the advice from PwC was that VAT was
chargeable on the lease, (ii) that as a member of the Board he had taken great comfort from Revenue approval of CSID’s proposed
approach and (iii) that at a board meeting on the 6th April, 2005 the Board had been advised that the Department for the Arts,
Sports and Tourism, on the explicit advice of the Attorney General, had instructed that the claim for the unpaid VAT be included in
the forfeiture proceedings. Neither had DWW seen fit to challenge the evidence of Mr Michael Walsh that (i) he understood the advice
of PwC to be that VAT was chargeable, (ii) that it had never been suggested that there was any issue with PwC’s advice and (iii)
that CSID might have been pursuing a course of action contrary to the advice it had received or one which was doubtful. Both
statements had been accepted without challenge.
182. Thus, I am satisfied that this is not a case where no evidence was called as to the advices furnished by PwC which would have
denied DWW the opportunity of converting through cross-examination its prima facie case to actual proof.
183. Accordingly, whilst it would have been preferable that the sought-after inferences pursued by DWW were rejected explicitly by
the High Court judge, his failure to do so does not in any way cast in doubt the validity of his conclusion that CSID had reasonable
and probable cause to issue the VAT proceedings. In the context of this litigation which was heard over a lengthy period and in which
very many issues of law and fact had to be determined, I have no doubt that the High Court judge is to be excused of this omission,
given the clear primary findings of fact which he made in respect of the issues which it is alleged that these witnesses might have
been expected to address had they been called.
(iii) Failure to engage with two emails
184. DWW submits that it is not evident from his judgment that the High Court judge had at all considered the content of two emails
dated the 20th and 23rd December 2002 which it had relied upon to support its contention that PwC did not itself believe and
consequently had not advised CSID that the latter might lawfully claim VAT on the lease.
185. DWW does not, however, contest the fact that in the course of his judgment, the High Court judge considered in significant
detail three of the emails which it had relied upon for the purpose of demonstrating that CSID had no basis for believing that the lease
was vatable and could therefore not have had reasonable and probable cause to issue the proceedings. They are dated the 27th
November, 2002, the 28th November, 2002 and the 17th June, 2003 respectively, and are referred to with some degree of
particularity at paras. 64-69 of this judgment. The content of these three emails, which the High Court judge considered in detail, is
relevant to DWW’s submission concerning the weight it maintains that the High Court judge impermissibly failed to attach to the two
emails of the 20th and 23rd December, 2002.
186. I have already referred to these emails in some detail at paras. 65-68 of this judgment. Accordingly, suffice at this stage to
summarise their content. In the first email, Mr Fay made clear that he was live to the fact that Regulation 19 provided that the
method of valuing the lease proposed by CSID could only be used in “the absence of other evidence” as to value and that CSID had
other evidence, namely the €35m. valuation in the Valuation Office Report. Nonetheless he went on to advise that Revenue in
practice permitted such an approach. In the second, Mr O’Rourke had advised that whilst the methodology proposed by CSID was
“not perfect” it should nonetheless prove acceptable. In the third, Mr O’Reilly had advised that the approach proposed represented
extra statutory practice only and that “in strictness” CSID should use the €35m. valuation in the Valuation Office Report.
187. Moving to the evidence in the other two emails, the first email of the of 20th December, 2002 was sent by Mr O’Reilly to Mr
Conway of CSID and copied to his PwC colleagues, Mr Fay and Mr O’Rourke. It reads as follows:-
page20 ⇓
“Dear David,
John will be available for the meeting on 9 January.
Valuation:
The correspondence from the Valuation Office detailing the valuation should not be given to DWW/KPMG in advance of the
meeting.
The valuation used for the purposes of the Form VAT4A is based on the unencumbered rent determined by the Valuation
Office and the multiplier provided for in VAT regulations, resulting in a capitalised value of circa €65M. The
correspondence from the Valuation Office also shows a valuation of the lease of circa €35M which does not suit our
requirements (i.e. it is not in excess of the build cost).
These matters can be discussed on the day of the meeting.
Regards
Tom [O’Reilly]”.
188. The email of the 23rd December, 2002 was sent by Mr Fay to Mr Conway and was copied to Mr O’Reilly and Mr O’Rourke. It reads
as follows:-
“David; further to your email on Friday I will be able to attend the proposed meeting on 9th Jan.
As you know we have traded voicemails with Clodagh Ní Eidhin in Dublin Castle; we will try and get to speak to her before
the meeting with DWW given that if she accepts that FA2002 rules do not apply the valuation issue is not as sensitive.
However, if she insists that FA2002 rules do apply we need to stick to our guns re the method of valuation we have used
and as Feargal would have explained previously (see email of 29 Nov) our approach while in accordance, we believe, with
Revenue guidelines is not “perfect” when read with the actual regulations. Will touch base early in the New Year. In the
meantime happy Christmas to you and the team and best wishes for 2003.
Kind regards
John”.
189. Much of what I have earlier stated regarding the obligations of a trial judge to deal with submissions made by the parties in
complex litigation applies with equal force to this submission on the part of DWW that the trial judge failed to direct his attention to
these two emails in the course of his judgment so as to demonstrate that he allocated appropriate weight to them. In my view, this
criticism as a ground of appeal is one which is without merit.
190. This submission, I believe, must be considered in the context of a 20-day hearing in the High Court and an appeal in which the
Core Book of Documents runs to some 423 pages made up of 136 entries. More than 50 such entries were referred to in the course of
the appeal alone. In cases such as this, it cannot be expected that every document relied upon by one or other party will be
addressed in the court’s judgment, particularly where there is nothing unique or exceptional about the document. As can be seen from
the content of the two emails, they relate to the same issues as were discussed in the emails of the 27th November, 2002 and the
28th November, 2002, which emails received significant attention.
191. Obviously, there are cases in which the failure of a judge to address a particular document might sound in a successful appeal
and a retrial. Take for example proceedings defended on the basis that the claim was statute barred or that there was no evidence to
satisfy the Statute of Frauds. In either case a single document might hold the key to the success or failure of the defence and if not
addressed by the court might provide a sound basis upon which the court’s judgment might be set aside. This is not such a case.
192. Furthermore, it cannot be assumed that the High Court judge did not consider the emails simply because he did not refer to them
individually. It is unnecessary for me to second-guess why he might not have done so but, insofar as I might, it seems far more likely
that the High Court judge simply chose to focus upon what he considered to be the highlights of DWW’s evidence to support its claim
that CSID well knew and understood from the advices received from PwC that its claim for VAT was not in accordance with law, and
for these purposes had focused upon the three emails earlier discussed.
193. What is important is that the High Court judge made clear at para. 184 of his judgment that he was deciding DWW’s claim, which
he stated, as is correctly claimed, had focused upon the three emails earlier referred to, having regard to the evidence “in the round”
(my emphasis). It was this approach that led him to conclude that “the advice received by CSID was to the effect that while the
recommended approach was not perfect, in the sense that it could not be guaranteed that the interpretation by PwC would be upheld
by a court, it was nonetheless PwC’s professional advice that the lease was vatable”. CSID understanding this to be the position, as
was his conclusion, the High Court judge was satisfied that it had reasonable and probable cause to issue the proceedings.
194. As is clear from this particular paragraph of his judgment, the High Court judge accepted as a matter of fact that CSID had been
told that what was proposed amounted to “extra statutory practice”, was “not perfect” and that the result “could not be
guaranteed”. Even when taken at their height from DWW’s perspective, these two additional emails add nothing new to the advices
furnished. They traverse much the same ground as the three emails highlighted in the judgment and are consistent with the trial
judge’s findings. Accordingly, insofar as these emails are relied upon to prove the nature of PwC’s advice, they raise nothing new.
They do not say that the proposed claim for VAT is unlawful and are equally consistent with the professed entitlement of CSID to use
the unencumbered rent formula for the purposes of claiming VAT on the lease.
195. I nonetheless recognise that DWW lays particular emphasis on the advice contained in the emails of the 20th and 23rd
December, 2002 respectively to the effect that “the correspondence from the Valuation Office should not be given to DW/KPMG in
advance of the meeting” and “we need to stick to our guns”, as relevant to the failure of the High Court judge to address the
evidence and submissions made on by DWW concerning what it maintained was the concealment of that report and its consequences
for the issue of reasonable and probable cause. That being so, I have addressed this aspect of DWW’s submission in the next section
of this judgment.
page21 ⇓
196. Also of relevance to this issue is the fact that when the High Court judge came to his conclusion he clearly took into account
the reservations expressed by PwC in the three emails earlier referred to and to which the emails of the 20th and 23rd of December,
2002 in my view add nothing. In the course of his judgment, he is seen to weigh this evidence in the context of (i) the entirety of the
written advice furnished by PwC, (ii) the oral evidence of Mr O’Rourke as to the nature of that advice, and (iii) the oral evidence of
the witnesses called on behalf of CSID and the content of the uncontested statements of evidence of Mr Walsh and Mr Mulcahy as to
their understanding of that advice. It is, I believe, worth commenting on one or two aspects of that evidence.
197. Much of the documentary evidence relied upon by the High Court judge post-dated the emails now referred to and this is clearly
relevant insofar as the test to be applied by the High Court judge required him to take into account all of the circumstances as they
were known at the time the VAT proceedings were commenced. There was, I would observe, a lot of water that went under the
bridge, so to speak, in terms of tax advice between the date upon which these two emails were written in December 2002 and when
the proceedings were actually issued in April 2005. One such example is the formal letter of advice sent by Mr O’Reilly of PwC to Mr
Donagh Morgan of CSID on the 19th June, 2003. In his letter he referred to Regulation 19 and the method adopted by PwC to
determine the capitalised value of the lease. He stated that Revenue had specifically confirmed that the methodology used by CSID
was satisfactory. Mr O’Reilly also confirmed that it had always been the practice that the lessor was entitled to choose which method
it wished to adopt for the purpose of valuing the lease, supporting his advices by reference to the Revenue’s booklet “VAT and
Property Transactions” and its “Guidance Notes for Inspectors”.
198. Even more fundamental to this issue are the findings of primary fact made by the High Court judge concerning the nature of the
professional advice furnished by PwC to CSID in the run-up to the decision made by the Board to institute the proceedings for VAT,
and those concerning CSID’s understanding of that advice, findings made based upon the oral testimony of witnesses including Mr
O’Rourke, Mr Benton, Mr Conway, Mr Morgan and Mr Haugh. Those findings are of course protected by the principles advised by
McCarthy J. in Hay v. O’Grady given that they were manifestly supported by credible evidence. As MacMenamin J. advised in
Leopardstown Club Limited v. Templeville Developments Limited [2017] IESC 50, a decision which I will consider in greater detail later
in this judgment, when primary findings of fact have been made, the fact that there was other evidence inconsistent with those
findings cannot dislodge the decision if the primary findings were based on credible evidence. If the complaint is that there was non-
engagement with evidence that was inconsistent with findings of primary fact, the appellant must be in a position to show that there
was “something truly glaring” about the default. For the reasons stated, I am quite satisfied that the trial judge’s omission to deal
with the two emails relied upon by DWW cannot be so described.
199. Finally, in the context of this ground of appeal and indeed the approach of DWW to many other aspects of this appeal, I consider
it would be remiss not to refer to the salient observations of MacMenamin J. in Leopardstown, regarding the role of the appellate
court. In particular he stated that an appellate court was not to be used as a forum for permitting what he described as:-
“a piece by piece analysis of the evidence, in an effort to show, on appeal, that the trial judge might have laid more
emphasis on, or attached more weight to the evidence of one witness, or a number of witnesses, or one document, or a
number of documents, rather than others on which he or she relied.”
That is what is attempted by DWW in this aspect of its appeal.
200. For the aforementioned reasons, and for those referred to in the next section of this judgement, I reject the arguments
advanced based on the emails of the 20th and 23rd December, 2002.
(iv) Non-engagement with evidence regarding the alleged concealment of the Valuation Office Report
201. In the High Court, a considerable part of the submissions of DWW was concerned with the argument that CSID had conspired to
conceal the Valuation Report, which of course contained the open market valuation of the lease, from DWW. DWW emphasised that,
despite multiple requests by Mr Moriarty on behalf of DWW, CSID refused to hand over the report. The submission of DWW is that the
inference to be drawn from this conduct is that CSID knew it was obliged to use the open market valuation of the lease, and that
same would render no VAT chargeable on the lease and so they hid the valuation from DWW who, once they knew of its existence,
would be in a position to insist on their legal entitlement to have it used. In this respect DWW relies upon the oral testimony of Mr
Conway, Mr Benton and Mr Morgan of CSID to the effect that they understood themselves to have been advised by PwC that they
should not hand over the report as it did not suit CSID’s purposes. If this inference were to be drawn, DWW submits that it would
demonstrate that CSID did not, at the relevant time, believe that VAT was properly chargeable on the lease, and thus did not
actually believe it had reasonable and probable cause to initiate proceedings.
202. On appeal, DWW submits that this argument, notwithstanding the reliance placed on it by counsel in the High Court, was not
addressed by the High Court judge in his judgment. Counsel for DWW argues that the assumption that this Court must draw from such
omission is that the High Court judge simply did not consider the evidence in relation to it. It is argued that this evidence goes
directly to the state of mind of CSID at the time of the decision to initiate proceedings, and thus to the question of whether it
actually believed that it had reasonable and probable cause to take that decision. DWW submits that the failure of the trial judge to
engage with this evidence renders his finding that CSID believed that VAT was chargeable on the lease, and thus that it had cause to
bring proceedings, unsafe. In circumstances where it maintains that a central finding grounding the decision of the trial judge cannot
stand, DWW submits that a retrial is warranted.
203. In response, CSID first submits that any question about the subjective belief which it held as to the viability of its proceedings is
an issue which goes only to malice, and not to the absence of reasonable and probable cause. Given that the High Court judge
decided the case in its favour on the basis of reasonable and probable cause, he was under no obligation to consider the issue of
malice. Accordingly, any question regarding the belief of CSID about the prospects of its litigation did not fall for consideration and
the High Court judge did not err in neglecting to advert to it in his judgment.
204. The essential argument of CSID is that the subjective belief of the alleged malicious prosecutor/claimant about their intended
litigation forms no part of the test for reasonable and probable cause. The test is objective, based on the information which was
before the party at the relevant time. As argued in CSID’s written submissions to this Court:
“in order to establish a want of reasonable or probable cause, it is not enough to demonstrate that the defendant was
aware (or keenly aware) that his case was problematic, or even seriously problematic: if a reasonable man faced with the
same information as the defendant would have considered that there was a proper case to lay before the court, then
reasonable and probable cause exists”.
205. This interpretation of the law would appear to be consistent with the decision in Dorene, the leading Irish case on the issue. At
p. 318 of his judgment in that case, Costello J. stated that the test for want of reasonable and probable cause was an objective one,
page22 ⇓
and in that respect he quoted from the judgment of Denning L.J. in Tempest v. Snowden [1952] 1 K.B. 130, p. 138-140, in the
following terms:
“In my opinion in order to determine the question of reasonable and probable cause, the judge must first find out what
were the facts as known to the prosecutor, asking the jury to determine any dispute on that matter and then the judge
must ask himself whether those facts amounted to reasonable and probable cause. In Herniman v. Smith 9 [1938] A.C.
305, Lord Atkin put it quite clearly: ‘The facts upon which the prosecutor acted should be ascertained; in principle, other
facts on which he did not act appear to be irrelevant. When the judge knows the facts operating on the prosecutor’s
mind, he must then decide whether they afford a reasonable or probable cause for prosecuting the accused.’” (emphasis
added).
206. Accordingly, it appears that the test for want of reasonable and probable cause proceeds in two steps. First, the court must
ascertain the facts as known to the prosecutor/plaintiff; second, there must be an objective assessment as to whether those facts
gave rise to grounds for reasonable and probable cause. This view is supported by the recent decision of the UK Supreme Court,
Willers v. Joyce [2016] UKSC 43, wherein Toulson L.J stated that, in order to defeat an allegation of want of reasonable and
probable cause, “[i]t is enough that, on the material on which he acted, there was a proper case to lay before the court.”
207. As a matter of logic, it seems to follow that in applying this test for want of reasonable and probable cause the High Court judge
was justified in not considering the question of the subjective belief of CSID. He was entitled to consider the information that CSID
had before it at the time it initiated proceedings, and assess objectively whether that gave rise to reasonable and probable cause. In
other words, it was not necessary for the High Court judge to inquire as to what CSID in fact believed about whether it had cause to
initiate proceedings, what was relevant was whether the facts as known to CSID would have led the reasonable man to the
conclusion that they had such cause.
208. Indeed, continuing the quotation by Costello J. in Dorene of Denning L.J.’s judgment in Tempest v. Snowden, it becomes clear
that this is the very conclusion that was reached:
“If these facts [operating on the mind of the prosecutor] do afford reasonable and probable cause, then the prosecution
is justified, and it is not as a rule necessary for an inquiry to be made into the prosecutor’s belief. The state of his belief
goes to malice but not, as a rule, to reasonable and probable cause. This view is supported by the observations of the
Lord Chief Justice in the recent case of Tims v. John Lewis & Co. 7 [1951] 2 K.B. 459. : ‘The question whether there was
a reasonable or probable cause is not, I think, to be determined subjectively, as has been suggested. It is a question
which objectively the court has to decide on the evidence before it.’ It is sometimes said that, in order to have
reasonable and probable cause there must be an honest belief in the guilt of the accused. But I do not think that should
be regarded as a universal proposition applicable to all cases. It depends on the particular case . . . I do not say, of
course, that the prosecutor’s belief can never come into the question of reasonable and probable cause. If the prosecutor
believed that the man was innocent and preferred the charge simply as a means of inducing him to pay over money to
him, there would be no reasonable and probable cause for the prosecution . . . Apart from exceptional cases . . . I think it
right to say that, when once the facts as known to the prosecutor are ascertained, the state of his belief goes only to
malice, and not to reasonable and probable cause.”
209. Further, it seems to me that the exclusion of subjective belief from the test for want of reasonable and probable cause is
consistent with the fact that malice is a separate ingredient to the tort. At the hearing before this Court, counsel for DWW advanced
the proposition that the test for malice would be satisfied where the prosecutor/plaintiff could be shown not to have believed that he
had reasonable and probable cause to bring the proceedings. At the same time, it seeks to maintain that a lack of actual belief will be
fatal to the issue of reasonable and probable cause. However, if both of these propositions are true, then the subjective belief of the
prosecutor would be decisive in two purportedly separate parts of the test. Therefore, a party could be guilty of the tort of malicious
abuse of the court’s process solely based on their subjective beliefs about the litigation, quite apart from its actual merits. In this
understanding, a person with a perfectly good case to lay before the courts could be found to have committed the tort on the basis
of their mistaken belief about the viability of the grounds. Such a result is starkly at odds with the fact that the test for reasonable
and probable is described throughout the case law as an objective test. The approach which DWW take on this point comes close to
requiring CSID to positively prove its subjective belief in the validity of the proceedings – if the test for want of reasonable and
probable cause were understood in the manner for which it contends, in what way could it be considered an objective test?
210. Denning L.J. was alive to this contradiction at p. 5 of his judgment in Tempest v. Snowden, where he provided the following
illustration, in a criminal context:
“Take a prosecutor, a fair-minded man, who… does not himself think the evidence is sufficient to justify a prosecution. His
solicitor advises him that the evidence is sufficient. He may well say to himself: ‘I do not myself believe there is sufficient
evidence, but my solicitor says there is, so I feel justified in going on.’ If the judge afterwards takes the same view as the
solicitor, I should have thought that such a man would have reasonable and probable cause for instituting a prosecution,
even though he did not himself affirmatively believe there were reasonable grounds for it.”
211. It seems to me the correct view that a person should be entitled to bring litigation so long as there is reasonable and probable
cause in the objective sense. Or, to put it another way, they should not be barred from bringing litigation which they personally do
not believe in, so long as there are in fact reasonable and probable grounds for it. As it was put by Denning L.J. in Tempest:
“It has to be remembered that, even though a prosecutor is actuated by the most express malice, nevertheless he is not
liable so long as there was reasonable and probable cause for the prosecution. If envy, hatred, malice and all other
uncharitableness do not deprive him of this defence, I do not see why his state of belief should necessarily do so.”
212. Admittedly, the picture is complicated somewhat by the decision of the House of Lords in Glinski v. McIver [1962] A.C. 726, to
which both parties have made reference. In the leading judgment in that case, Viscount Simonds held that the question of want of
honest belief was relevant to that of want of reasonable and probable cause. For my part, I find that pronouncement difficult to
square with the professedly objective nature of the test. It is a contradiction in terms to say that a test that mandates an inquiry
into the subjective beliefs of a party about the grounds for their litigation is an objective test. In this respect it is to be noted that,
although in Glinski four detailed judgments were handed down on the subject of the tort of malicious prosecution, no reference was
made to this case in the leading Irish case of Dorene v. Suedes.
213. Even if it were the case that Glinski is good law in this jurisdiction, I would observe that it could provide only limited assistance
to DWW. First, it is notable that in his judgment Viscount Simonds saw fit to distinguish the case where a prosecutor believes the
page23 ⇓
facts and is advised that they amount to an offence but is not himself sure of the latter which is a question of law. In circumstances
where the prosecutor at every step acted upon competent advice, the learned judge stated that he would find it difficult to hold that
he had acted without reasonable and probable cause. Albeit in a civil context, were the circumstances in which CSID was found to
have acted not the same? The High Court judge clearly found that CSID had been advised that VAT was chargeable on the lease. At
its height the submission of DWW is that an inference should be drawn from the conduct of CSID to the effect that it did not itself
believe in the proceedings. However, as I shall discuss further below, there was no real evidence that CSID actively believed that the
proceedings were not viable, merely that it was unsure about the prospects of its claim such that it was unwilling to hand over the
valuation the potential subject matter of dispute. In these circumstances I would think it open to the High Court judge to find that
the advice CSID received was decisive as to the question of reasonable and probable cause. It is to be remembered that the burden
of proof at all times remained with DWW to positively establish that CSID did not have reasonable and probable cause to commence
the VAT proceedings. It is evident that it failed to convince the High Court judge that, notwithstanding the evidence regarding the
advice of PwC, there was a question to be answered regarding the subjective belief of CSID.
214. Second, and in further support of the above, the judgment of Denning L.J. in Glinski is to be noted insofar as he states that “the
question and answer as to ‘honest belief’ should not be used in every case”, consistent with the views he had earlier expressed in
Tempest v. Snowden. Whilst he acknowledged that it might be possible to infer from the conduct of the prosecutor that he was
conscious that he had no reasonable and probable cause for the prosecution, and that same would mean he that indeed he did not
have such cause, he was anxious to caution at p. 762 of his judgment that such cases “must be carefully watched so as to see that
there really is some evidence from his conduct that he knew it was a groundless charge”. It must be questioned whether the
evidence adduced by DWW could ever have proved that CSID knew, in the words of Denning L.J., that it had “no good ground” for
the proceedings.
215. This standard is to be starkly distinguished from a standard which would require CSID to positively believe that the litigation
would succeed. Stateability is the appropriate standard for reasonable and probable cause, in which respect counsel for CSID relied
upon the Irish case of Bank of Ireland Finance Ltd v. McSorley [1994] WJSC-HC 2085. Even if the High Court judge had accepted the
evidence tendered by DWW in respect of the alleged concealment of the Valuation Office Report, it is doubtful that this could have
ever proved that CSID did not believe that it had a stateable case. Whilst the fact, if accepted, that it kept the open market
valuation from DWW might go to show that it was not absolutely certain that VAT was chargeable on the lease, it could never have
established that CSID knew it had no grounds to seek to enforce the charge. At its height, it demonstrates that CSID may not have
been sure that it was entitled not to use the open market valuation and that in order to avoid that risk it decided to postpone as long
as it could, handing over the Valuation Office Report to Mr Moriarty. However, crucially, it cannot be inferred from these actions that
CSID knew the proposed litigation to claim VAT on the lease was groundless, which is the standard required. Further, given that at
the time the Valuation Report was held back there was a dispute brewing in respect of the chargeability of VAT, it is perhaps not
surprising that CSID was reluctant to hand over a valuation which would have weakened its case. Whilst some might view this
conduct as a form of “sharp practice”, it was nonetheless wholly insufficient for the purposes of establishing that CSID did not believe
it had any case to lay before the courts, especially in circumstances where the High Court judge found that it had been advised that
the lease was vatable.
216. It appears to me that in effect DWW is attempting, on this appeal, to bring subjective belief through the back door into the
question of reasonable and probable cause. It was unable to persuade the High Court judge that CSID had been advised that it had
no cause to enforce the VAT charge. Instead he found that CSID had been advised and had believed that it had reasonable and
probable cause for commencing its proceedings to recover VAT on the lease. To defeat this, DWW relies upon email exchanges with
Mr Moriarty, from which it has asked the Court to infer that CSID knew it had no reasonable and probable cause. However, the
evidence does not go that far. At best it cast some doubt upon how certain CSID was that it would succeed in its claim for VAT on
the lease. It is quite another thing to say that it showed that CSID knew it had no claim to make and it is rather speculative to
suggest that the High Court judge should have concluded that from the evidence that was put before him.
217. Relevant in this regard is the fact that the burden was on DWW to prove want of reasonable and probable cause. It is apparent
from the High Court judgment that DWW failed to persuade the trial judge of the key elements of its case. He reached clear
conclusions as to the nature of the advice tendered by PwC to CSID and as to what CSID understood that advice to mean. It was
open to DWW to make the case that CSID did not believe it had good grounds to commence its proceedings to recover VAT on the
lease However, it failed in its efforts to displace the assumption that CSID had reasonable and probable cause for that litigation. Even
taking the authorities at their most favourable to DWW and accepting that subjective belief could be relevant to reasonable and
probable cause in some cases (though Denning L.J. stresses that it does not come into play in all cases), nonetheless it was for DWW
to convince the High Court judge that its submissions in respect of the Valuation Office Report should go to reasonable and probable
cause. From the absence of this argument in the High Court judgment it can be inferred that the High Court judge was not convinced
that said submissions had any purchase with respect to reasonable and probable cause.
218. In the preceding paragraphs I have proposed that a party’s subjective belief as to the stateability of litigation is not relevant to
the question of reasonable and probable cause, and that further or in the alternative the submissions highlighted by DWW could not
prove that CSID believed that it did not have a stateable case. However, even if I am wrong about all of this, I am in any event
satisfied that the finding that the High Court judge made regarding the subjective belief of CSID was a finding of fact which should
not be disturbed on appeal.
219. The essence of DWW’s argument on appeal is that the finding of fact made by the High Court judge that CSID actually believed
it had reasonable and probable cause is endangered by the way in which he approached the evidence. In relation to this submission I
intend first to detail some of the legal principles which I consider material to my conclusions and then to apply them to the
circumstances of this case.
220. In Delany and McGrath on Civil Procedure (4th ed., Round Hall, 2018), the authors explain at p. 903 that, for the purposes of
appellate jurisdiction, a special importance is to be attached to what are described as “findings of primary fact”. These are, as
defined by Henchy J. in JM v. An Bord Uchtála [1987] I.R. 510, 522-523, “determinations of fact depending on the assessment of the
trial judge of the credibility and quality of the witnesses”. Such findings are to be distinguished from findings of secondary or inferred
facts, which do not follow directly from an assessment of the credibility of the witnesses or the weight to be attached to their
evidence, but derive from the inferences which a judge draws from the facts found or admitted.
221. Consistent with the well-established notion that a trial judge is best placed to observe and assess oral evidence, the case-law
demonstrates that an elevated level of deference is paid to findings of primary fact when reviewed by an appellate court. (See for
example decision of Finlay C.J. in in Pernod Ricard & Comrie plc v. FFI Fyffes plc) (Supreme Court, 11th November 1988.)
222. In the often-cited case of Hay v. O’Grady [1992] 1 I.R. 210, McCarthy J. summarised the principles applicable to a review of
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evidence on appeal as follows:
“1. An appellate Court does not enjoy the opportunity of seeing and hearing the witnesses as does the trial Judge who
hears the substance of the evidence but, also, observes the manner in which it is given and the demeanour of those
giving it. The arid pages of a transcript seldom reflect the atmosphere of a trial.
2. If the findings of fact made by the trial Judge are supported by credible evidence, this Court is bound by those
findings, however voluminous and, apparently, weighty the testimony against them. The truth is not the monopoly of any
majority.
3. Inferences of fact are drawn in most trials; it is said that an appellate Court is in as good a position as the trial Judge
to draw inferences of fact… I do not accept that this is always necessarily so. It may be that the demeanour of a
witness in giving evidence will, itself, lead to an appropriate inference which an appellate Court would not draw. In my
judgment, an appellate Court should be slow to substitute its own inference of fact where such depends upon oral
evidence of recollection of fact and a different inference has been drawn by the trial Judge. In the drawing of inferences
from circumstantial evidence, an appellate tribunal is in as good a position as the trial Judge.”
223. That is not to say that findings of fact are considered unassailable. In Wright v. AIB Finance and Leasing Ltd. [2013] IESC 55,
Clarke J. made clear that findings of fact could be disturbed where there had been “a material and significant error in the assessment
of the evidence or a failure to engage with a significant element of the evidence put forward”. In Doyle v. Banville [2012] IESC 25,
Clarke J. stated that a judgment must engage with the key elements of the case made by both sides and explain why one or other
side has been preferred. In that case, a retrial was ordered in circumstances where the trial judge had accepted the evidence of two
witnesses in full notwithstanding that they gave contradictory evidence on a matter of central importance. Likewise, a retrial was
ordered in Lynch v. Cooney [2016] IECA 1 in circumstances where the trial judge was found to have failed to engage fully with the
evidence. In the context of an unsuccessful claim by a victim of assault against the trustees of a rugby club which was the alleged
site of the assault, Hogan J. held that the failure of the trial judge to analyse or explain how the assault occurred if not in the rugby
club was itself an error of law justifying the intervention of the Court of Appeal to set aside the finding of fact that the assault had
occurred outside the premises. In a similar vein, the Supreme Court in Healy v. Ulster Bank [2015] IESC 106 held that the failure of
the trial judge to address the evidence of an important witness, which contradicted his finding on a key issue of fact, was a material
and significant error.
224. Of course, in the above cases the errors of the respective trial judges in engaging with the evidence had grave consequences
for the validity of their overall findings, and it should be clear that not every such error would be considered “material and significant”.
In ICDL v. The European Computer Driving Licence Foundation Ltd. [2012] IESC 55, it was pointed out on appeal that the trial judge
had in his judgment mistakenly referred to the evidence of a witness who had furnished a witness statement but not actually been
called to give evidence, and had stated that the witness statement of another witness who had given evidence had been withdrawn.
Nonetheless, the Supreme Court refused to remit the case for a retrial in circumstances where it was satisfied that these errors had
not led to a “substantial error” in the conclusion reached by the trial judge such as might warrant a new trial.
225. Useful guidance as to the circumstances in which errors in engagement with evidence will negate findings of fact was provided in
a case which was the subject of a great part of the oral submissions of counsel for both parties in the instant case, that of
Leopardstown Club Ltd. v. Templeville Developments Ltd. [2017] IESC 50. In that case, Denham C.J. in finding that the Court of
Appeal had exceeded its jurisdiction in allowing an appeal against the order of the High Court, held that the principles in Hay v.
O’Grady were properly understood as meaning that “an appellate court should not interfere with a primary finding of fact by a trial
court which has heard oral evidence, unless it is so clearly against the weight of the evidence as to be unjust.” Explaining the line to
be drawn regarding the failure of a trial judge to engage with evidence, MacMenamin J. in his concurring judgment at paras. 7-8
stated as follows:
“Save where there is a clear non-engagement with essential parts of the evidence, therefore, an appeal court may not
reverse the decision of a trial judge, by adverting to other evidence capable of being portrayed as inconsistent with the
trial judge’s primary findings of fact.
‘Non-engagement’ with evidence must mean that there was something truly glaring, which the trial judge simply did not
deal with or advert to, and where what was omitted went to the very core, or the essential validity of his findings. There
is, therefore, a high threshold. In effect, an appeal court must conclude that the judge’s conclusion is so flawed, to the
extent that it is not properly ‘reasoned’ at all. This would arise only in circumstances where findings of primary fact could
not ‘in all reason’ be held to be supported by the evidence… ‘Non-engagement’ will not, therefore, be established by a
process of identifying other parts of the evidence which might support a conclusion, other than that of the trial judge,
when there are primary facts, such as here. Each of the principles in Hay v. O’Grady are to be applied.”
226. As adverted to at the outset of this section, DWW’s argument is that the alleged failure of the trial judge to engage with the
evidence concerning the Valuation Office Report undermines the credibility of his finding that the relevant persons in CSID actually
believed that VAT was chargeable on the lease and thus that they believed they had cause to initiate proceedings. The issue as to
the state of mind of the directors of CSID with respect to the legality of the VAT charge was examined by the trial judge at paras.
90-96 of his judgment in a section entitled “Evidence by members of the EST and directors of CSID regarding advice received”.
227. In this section, the trial judge first quoted from the oral evidence of Mr Michael Walsh, a non-executive director of CSID, who
said that he “always understood PwC’s advice to be that VAT was chargeable”. The trial judge noted that this evidence was “not
controverted by DWW”. Next, the trial judge placed reliance on the likewise uncontroverted evidence of Mr Mulcahy of CSID that he
did not have any reason to doubt that VAT was chargeable on the lease, as he understood the advice of PwC to mean. Finally, the
trial judge considered the evidence of Mr Conway of CSID and concluded at para. 96 that “on Mr. Conway’s own evidence he was
aware of the dichotomy between the practice and the law, [and] he understood PwC’s advice was that the Lease was nonetheless
vatable.”
228. From the foregoing it is clear that the trial judge was of the view that the directors of CSID understood the advice of PwC to
mean that VAT was chargeable on the lease and believed that that advice was true. Thus, having considered the oral evidence of the
directors, what emerges from a plain reading of the judgment is that the trial judge accepts their evidence that they believed that
they had reasonable and probable cause to initiate proceedings to enforce the VAT charge on the lease.
229. Although the argument that CSID had deliberately concealed the open market valuation because it knew that it was obliged to
use it did not receive mention in the High Court judgment, which is regrettable, it is implicit in the finding of the trial judge to the
page25 ⇓
effect that CSID believed that VAT was lawfully chargeable on the lease that he did not accept that argument. Quite clearly, given
that he found that the relevant persons in CSID believed that VAT was chargeable, he could not have given any credence to the
suggestion that they had hidden a valuation on foot of a belief that it legally precluded them from charging VAT. The trial judge had
the opportunity to hear all of the evidence in relation to the alleged concealment of the open market valuation due to lack of belief in
the VAT charge, in particular the exchanges between CSID and Mr Moriarty in respect of the disclosure of the Valuation Report, and
in the end produced a conclusion that was fundamentally inconsistent with that version of events.
230. The question for this Court on appeal is really: to what extent did the failure to engage with this argument go to the essential
validity of the finding that CSID actually believed in the lawfulness of the VAT charge?
231. In answering this question, the first thing to note is that, once it is understood that the trial judge accepted the evidence of
CSID that it believed VAT was chargeable, it becomes rather easy to explain the nature of the exchanges between CSID and Mr
Moriarty. It is worth remembering that the key contention of DWW is not merely that CSID deliberately withheld the open market
valuation of the lease, as this argument alone would avail it nothing. The crux of its argument is that CSID withheld the valuation
because it did not believe the VAT charge was valid. But of course, as the trial judge found it did believe in the VAT charge this
places an entirely different colour on the highlighted correspondence.
232. In other words, the key dispute between the parties was and is not whether CSID in effect withheld the valuation from Mr
Moriarty, but its state of mind when it did so. In particular, did it do it because it knew that it would be required to use that valuation
and that this would in turn negate its ability to charge VAT? When the question is framed this way, it becomes clear that the trial
judge has, in effect, already decided this question. He has clearly accepted that CSID’s state of mind was not such that it did not
believe in the validity of the VAT charge. That being so the exchanges with Mr Moriarty are much less significant than is contended
for by DWW. If CSID genuinely believed it was entitled to charge VAT, any unwillingness to hand over the open market valuation
would likely be understood as a reluctance to assist the company with whom it was trading in seeking to resist this charge. This is
hardly an alien practice to anyone who has worked in business. CSID did not have to be certain that VAT was chargeable. It was
enough that it reasonably believed that it was chargeable, and at that level of certainty it is understandable why it might not wish to
give Mr Moriarty and DWW ammunition with which to fight the proposed imposition of VAT.
233. All this is said merely to demonstrate that, if the trial judge’s finding regarding the state of mind of CSID remains valid, his failure
to reach a conclusion as to why he considered the Report had been withheld cannot afford DWW an independent ground of appeal.
So understood, the evidence regarding the withholding of the Report, and the non-engagement with same, is only useful to DWW
insofar as it undermines the credibility of the trial judge’s finding regarding the belief of CSID. The mere exclusion of an account of the
otherwise motivations of CSID in withholding the report is alone not sufficient to undermine the essential validity of that finding –
more narrowly, the question must be whether the failure of the trial judge to consider how the alleged concealment actually went to
the state of mind of CSID renders his finding on that issue so flawed as to be unreasoned.
234. Before considering this question, it is worth pausing for a moment to consider the circumstances in which a failure to engage
with evidence has been determined sufficiently fatal to the credibility of a finding of fact in the case-law. In Doyle v. Banville, the
failure to engage with evidence which was identified by the Supreme Court was not a neglect to mention particular evidence as in this
case. In Doyle, the trial judge had made a finding in the context of a road traffic accident that the defendant’s car had not dragged
the plaintiff as a result of the crash, which was a finding of great significance because the position of the plaintiff subsequent to the
crash otherwise had the effect of absolving the defendant from blame. However, the trial judge had purported to accept in full the
evidence of a witness which included evidence that the plaintiff had been dragged by the defendant’s car, in direct contradiction to
the trial judge’s finding. Accordingly, it was found that the trial judge’s finding regarding whether the plaintiff had been dragged a
distance by the car was deemed the result of clearly flawed reasoning, and a retrial was ordered. In Lynch v. Cooney, as discussed
above, the material error was the failure of the trial judge to consider how the assault might have occurred outside the rugby club if it
did not occur inside it. In essence the finding on appeal was that whereas the trial judge had determined that the assault did not
occur on the premises, he had not examined properly the evidence as to whether it happened outside, and thus the determination
regarding location was incomplete. In Healy v. Ulster Bank, the trial judge found that the plaintiff’s mother was present for discussions
which were the subject of the key dispute and that she had heard the relevant bank official say that the plaintiff was “in the clear
with Ulster Bank”. However, the trial judge proceeded to reject the plaintiff’s account of the meeting with no reference to the
evidence that the bank official had in fact assured the plaintiff that he was in the clear. This was found by the Supreme Court to be a
“material and significant error”.
235. I am of the view that the error of the trial judge in the present case is not of the order described above. While it was
undoubtedly undesirable that he did not explicitly consider the bearing that the exchanges with Mr Moriarty had on the state of mind
of the CSID directors, it cannot be said that this omission renders his determination regarding their state of mind so flawed as to be
unreasoned. In the above cases, the findings of fact interfered with were fatally undermined by the respective errors. In Doyle, the
trial judge accepted evidence which was fundamentally contradictory to the finding. In Lynch, the trial judge failed to reason out the
finding in relation to the location of the assault. In Healy, the trial judge made reference to the evidence of a witness who was
present at the material time and undermined the bank’s core case, but made no finding in relation to same.
236. In stark contrast, what remains in this case is a finding of fact in relation to the state of mind of the directors of CSID which is
supported by a wealth of credible evidence. The core logic of the trial judge was that the advice of PwC was that VAT was lawfully
chargeable, that CSID understood the advice as such, and that they therefore believed the VAT charge on the lease was valid. Thus,
in essence, DWW’s argument, in relation to the withholding of the report, even if correct, does not avail them on this appeal.
237. To what extent does the failure to engage with DWW’s argument regarding the concealment of the open market valuation
negate this core logic? Perhaps not as far as DWW has suggested. Its evidence in relation to concealment is one of several sources
of evidence which go to the state of mind of CSID at the relevant time. As explained above, the evidence as to the exchanges with
Mr Moriarty concerning the Valuation Office Report are not per se inconsistent with the trial judge’s finding of actual belief. It is only
the allegation that CSID was of a particular nefarious state of mind when engaging in this correspondence that is material. And insofar
as that allegation is concerned, it clear that there was other evidence regarding the state of mind of CSID which was preferred by
the trial judge. As I have discussed, the trial judge in his judgment examined the evidence of the CSID directors as to their beliefs
regarding the legal validity of the VAT charge at the material time, and came to the conclusion that their evidence was credible.
238. Whilst it is true that CSID’s efforts to withhold the Valuation Office Report from DWW suggests at least some lack of confidence
in the validity of its claim for VAT on the lease and to that extent might be seen to be in conflict with the ultimate finding of the trial
judge, these facts are not sufficient to dislodge his findings. It is required that failure to consider the contradictory evidence is
material in the sense that it renders the finding not properly reasoned. So, in Healy, the issue was that it was not clear why the trial
judge had come to the conclusion that the plaintiff’s account of the meeting was not credible. In such circumstances the failure to
page26 ⇓
consider evidence from someone present at the meeting was material. In contrast, in this case, the train of logic employed by the
trial judge is clear. He came to the conclusion that the directors of CSID genuinely believed the advice of PwC to the effect that VAT
was chargeable on the lease, and as a consequence of that he does not consider that the exchanges with Mr Moriarty carry the
inference of guilt that DWW says they do. Again, admittedly it is the case that the trial judge should have explicitly expressed his
rejection of that desired inference. But, on appeal, the question for this Court is whether his neglect to do so is material in the sense
that it renders his finding not properly reasoned. And to that question I would answer in the negative.
239. It is worth emphasising again that the trial judge had the benefit of observing in person all of the oral evidence, including the
demeanour of the witnesses, in order to determine their credibility. It is clear to me, although perhaps imperfectly expressed in his
judgment, that the trial judge preferred evidence to the effect that the directors of CSID believed that VAT was lawfully chargeable.
Significant deference ought to be paid to this reasoned conclusion. I find myself in agreement with the comments of MacMenamin J. in
Leopardstown Club Ltd. v. Templeville Developments Ltd., where he held that the role of an appellate court was not to be:
“9. reduced to a piece-by-piece analysis of the evidence, in an effort to show, on appeal, that the trial judge might have
laid more emphasis, or attached more weight, to the evidence of one witness, or a number of witnesses, or one
document, or a number of documents, rather than others on which he or she relied.
10. The trial judge’s major role is to determine facts. To that extent, the role must have a degree of autonomy. With
experience in fulfilling that role, there comes expertise. As has been pointed out in other jurisdictions, duplication of the
trial judge’s assessments by an appeal court will very likely only contribute negligibly to the accuracy of fact
determination, but at significant cost in the diversion of judicial resources. Parties to a case on appeal have already
concentrated their energies and resources on persuading a trial judge that their account of the facts is the correct one;
requiring them to persuade three more judges at the appellate level is requiring too much. A trial on the merits should be
‘the “main event” … rather than a “tryout on the road.’ (See the judgment of White J., speaking for the Supreme Court of
the United States, in Anderson v. City of Bessemer, 470 U.S. 564 [1985], page 574/575).
11. By virtue of sitting through the entire case the trial judge will be familiar with the evidence. The insight gained by a
trial judge, who has lived with the case for several days, weeks or even months, may be far deeper than an appeal court,
whose view of the case is much more limited and narrow, often being shaped simply by the issues which are placed before
it. As the Supreme Court of Canada pointed out in Housen v. Nikolaisen [2002] 2 S.C.R. 235, at paragraph 14, appeals are
necessarily ‘telescopic’.”
240. For this and all of the above reasons, the finding of the trial judge that CSID believed they had reasonable and probable cause
for the proceedings should be upheld.
241. To summarise my findings on this issue, the evidence in relation to the alleged concealment of the Valuation Office Report was
evidence regarding the subjective beliefs of CSID about the litigation, which is a question going only to malice and not to reasonable
and probable cause, which is tested objectively, and so the High Court judge would have been justified in not considering it. In any
case, the evidence proffered could never have proved that CSID did not even believe its litigation to be stateable. Finally, even if
subjective belief is relevant to reasonable and probable cause, the High Court judge addressed that question in his judgment and
arrived at a reasoned conclusion, which should not be disturbed on this appeal notwithstanding that he did not make mention of the
highlighted argument in his judgment.
242. In coming to these conclusions, it does not escape my attention that much confusion on appeal could have been avoided had
the High Court judge made explicit mention of the argument advanced by DWW in that Court. Notwithstanding my finding on appeal
that the High Court judge was not obliged to examine the subjective beliefs of CSID about the litigation, it would have been to the
benefit of both parties if this rationale had been made explicit in his judgment. Further, to the extent that he did go on to consider at
least to some extent the subjective belief of CSID, it would have been preferable for him to have made mention of the argument in
relation to alleged concealment, if only to reject it in favour of the other evidence on which he legitimately chose to place weight. As
I have explained, the High Court judge’s findings can be upheld based on the principles in Hay v. O’Grady, however it is far from ideal
that this Court become engaged in disputes about the logic and reasoning employed by a judge in the court below, after the fact.
Although I have clearly found that the neglect to make reference to this argument does not endanger the still reasoned conclusion of
the High Court judge, it is further important that, within reason, the judgment in any case, but especially one where a great deal is at
stake for the parties, serves to provide them with a relatively comprehensive explanation as to why the case was decided the way it
was. And in this respect, I think it is to be regretted that this argument did not receive some discussion in the High Court judgment.
(v) Internal inconsistency in judgment – dichotomy between law and practice
243. DWW submits that there is an internal inconsistency in the High Court judge’s judgment such that it casts in doubt the validity of
his conclusion that CSID had reasonable and probable cause to maintain its claim for VAT on the lease.
244. To understand this submission, it is necessary to have regard to what was stated by the High Court judge at paras. 99 and 184
of his judgment:-
“99. It was clear therefore that CSID, both at board level and at EST level, was aware that there was a dichotomy
between what Regulation 19 stated and the practice, but it is also clear that Mr. O’Rourke’s evidence is that it was PwC’s
advice to both the board of directors and the EST that the Lease was vatable…
184. For the sake of completeness, this Court would add that if it had to determine that issue, it would conclude that
when viewed in the round (i.e. not just the three emails which have been the focus of the plaintiff’s case), the advice
received by CSID was to the effect that while the recommended approach was not perfect, in the sense that it could not
be guaranteed that the interpretation taken by PwC would be upheld by a court, it was nonetheless PwC’s professional
advice that the Lease was vatable. In addition, it received advice from McCann Fitzgerald that it was arguable that DWW
was legally obliged to accept CSID’s decision that the Lease was vatable and advice from Counsel that the claim for VAT
should be included in the proceedings before the Commercial Court for the forfeiture of the Lease. While it is true that Mr.
O’Reilly, a relatively junior employee in PwC referred in an email to reliance being placed on ‘extra-statutory practice’
which email was sent to Ms. Magahy and Mr. Conway, it is also the case that Mr. Fay, the partner in the firm who was
advising on VAT, stated in another email to Ms. Magahy and Mr. Conway in the most unequivocal terms that ‘there is no
basis for KPMG/Dublin Waterworld to contend that the lease is not subject to VAT.’ This, it should be noted, is a long way
from a situation in which a client proceeds with his litigation, even though he is told in unequivocal terms that his claim
‘would not succeed’ as occurred in Dorene v. Suedes. Therefore, if the Court had to decide the case on this basis, which
it does not have to, it would conclude that CSID had reasonable or probable cause for issuing the proceedings in this
page27 ⇓
case.”
245. It is submitted that on the one hand the High Court judge found as a fact that PwC’s advice to the EST and the Board of CSID
was that the lease was vatable. Yet, he had also found that at EST and Board level there was an awareness of the dichotomy
between Regulation 19 and Revenue practice. It followed from the latter finding, according to DWW, that the trial judge was bound to
conclude that the advice of PwC had been understood to mean that the proposed claim was contrary to law. This is because the
reference to Regulation 19 had to be understood to be a reference to the law and, when read as such, meant that the claim
proposed, whilst one that might have met with Revenue approval, was in fact unlawful. Given that CSID was aware of this dichotomy,
it could not have believed that the lease was vatable.
246. Accordingly, it is contended that the evidence did not support the trial judge’s finding that PwC had advised that the claim for
VAT on the lease was in accordance with law. This finding was, according to counsel for DWW, the result of his “wholesale failure” to
engage with the evidence. PwC had done no more than suggest that as a matter of practice such a claim would not be challenged by
Revenue. Indeed, DWW goes so far as to submit that “the learned trial judge has himself confused the import of the PwC advice.
There was no evidence PwC ever said the lease was vatable at law”.
247. The first matter of import in relation to this submission, in my view, is that it ignores that the trial judge’s finding that it was
PwC’s advice to CSID that the lease was vatable, was a primary finding of fact. In so concluding the High Court judge had clearly
relied upon the credibility of the evidence of Mr O’Rourke which, as he observed, was consistent with the opinion of other VAT
professionals at the time. Mr O’Rourke, when under cross examination, as is referred to in para. 97 of his judgment, had stated as
follows:-
“Our advice was that the taxpayer had the option – had the alternative of selecting any of the three options available to
him. And that, certainly in my view, was consistent with the law, both the VAT Act itself and indeed the import of the
anti- avoidance legislation that was brought in.”
248. Furthermore, there was a swathe of other documentary evidence which lent support to the High Court judge’s finding that Mr
O’Rourke’s advice to CSID was that the claim for VAT under Regulation 19 was lawful. I will mention but a few:
(i) Letter of advice from PwC to CSID dated the 11th September, 2002, advices which pre-dated the Valuation Office
Report.
(ii) Email of the 6th January, 2003 from Mr Fay to Mr Conway. This email post-dates the Valuation Office Report but
states that PwC remains of the view that CSID may use the alternative basis proposed for valuing the lease.
(iii) Email of Mr Fay of the 31st January, 2003 to Mr O’Rourke and Mr Conway stating that there was no basis for DWW to
contend that the lease was not subject to VAT.
(iv) Email dated the 30th April, 2003 from Mr Fay to Ms Magahy, Mr O’Rourke and Mr O’Reilly stating that they were
purporting to value the lease using one of the three permissible methods under the Regulation. No distinction was drawn
between the Regulation and Revenue practice for this purpose.
(v) Email dated the 14th May, 2003 from Mr O’Rourke to Mr Conway, Mr Dunne, Ms Magahy, Mr Fay and Mr O’Reilly. The
email, which does not concern itself with Revenue guidelines or practice, queries, inter alia:-
“Have the lawyers advised as to how we can proceed with WW for the VAT due?
I think the Revenue are really out of the loop now as far as we are concerned. They agreed that VAT should be
charged and the methodology is as provided by law, so they really have no further role to play in this.” (my
emphasis)
(vi) Formal VAT report of 13th June, 2003. This report maintains that the lessor has the option of the three methods for
valuing the lease for the purposes of the Regulation.
249. It was not, in my view, inconsistent with his finding as to the nature of the advice given to CSID for the trial judge also to have
found that CSID, at EST and Board level, was aware that “there was a dichotomy between what Regulation 19 stated and the
practice”. That was, after all, the evidence. Indeed, the meeting proposed by Mr. Lonan McDowell of McCann FitzGerald in his email of
the 17th June, 2003 arose precisely because of that dichotomy. Mr McDowell, in that email referred to that which had earlier been
circulated by Mr O’Reilly and which had pointed to the possibility that a difficulty might arise as a result of difference between tax
practice and the legislation which he considered, needed “to be worked through and understood before steps were taken to enforce
recovery of the VAT”.
250. In my view, it does not follow from the High Court judge’s finding concerning CSID’s knowledge of the dichotomy between the
wording of Regulation 19 and Revenue practice that he was bound to conclude that PwC had advised CSID that its claim was contrary
to law or that CSID understood this to be the position. The High Court judge was entitled to accept Mr O’Rourke’s evidence that at
the meeting of the 25th June, 2003 he had explained to those present the divergence between the language of the Regulation and
Revenue practice but had nonetheless advised he was satisfied that the lease was vatable. In other words, he was content to
accept Mr O’Rourke’s evidence that he had explained to CSID that while the success of the proposed claim could not be guaranteed,
it was nonetheless one which he considered to be in accordance with law. Likewise, I am satisfied that he was entitled to conclude
that regardless of the dichotomy between the wording of the Regulation and the practice of Revenue, as had been explained by Mr
O’Rourke, CSID understood the advice of PwC to be that its proposed claim for VAT was lawful.
251. Whilst DWW contends that the trial judge’s finding as to CSID’s knowledge of the dichotomy between the Regulation and
Revenue practice was only consistent with its understanding that the advice of PwC had been that the intended claim for VAT was
unlawful, that submission is not supported by the evidence.
252. The unchallenged evidence of Mr. Mulcahy was that he was satisfied from the advice of PwC that VAT was chargeable. The
statement of Mr Michael Walsh was also not challenged. He too understood that VAT was chargeable on the lease and he stated that
the EST had confirmed that this approach was correct. As far as he was concerned, it had never been suggested that there was any
page28 ⇓
issue that CSID might be pursuing a course of action contrary to the advice it had received or that that advice was doubtful.
Furthermore, Revenue had approved the methodology which, he was satisfied, meant the lease was subject to VAT.
253. Furthermore, Mr Benton, in his evidence, stated that Revenue had advised and confirmed that CSID was entitled to charge VAT
and if it had advised otherwise that VAT would not have been charged. He also stated that he understood PwC’s advice to be that,
notwithstanding the Valuation Office Report, VAT was nonetheless chargeable.
254. DWW maintains that the trial judge ought to have found CSID guilty of the tort of malicious abuse of the court’s process
because, having been apprised of a difference between the wording of a complex tax regulation and the prevailing practice of the
Revenue and other tax professionals at the time, it failed to appreciate that its proposed claim was unlawful and as a result jettison
the advice of PwC that its proposed claim, which had at least been informally endorsed by its lawyers following the meeting of the
25th June, 2003, was lawful.
255. Whilst the advice of PwC and the practice of Revenue and other tax professionals at the time was ultimately established to be
legally incorrect, the High Court judge was satisfied that that was not obvious at the time the proceedings were issued, as was
apparent from the evidence of the wider VAT community which clearly considered that the Regulation permitted the approach advised
by PwC. Clearly, the dichotomy should not have existed and Revenue should not have been operating outside of the Regulation.
However, it is beyond doubt that PwC was led into error by Revenue practice and it was not on its own in this regard. Its professional
opinion was mirrored in the approach of other tax experts at the time including those who had initially advised DWW.
256. Accordingly, it cannot in my view be successfully contended that just because the High Court judge concluded that CSID had
been apprised, in what can only be described as pretty opaque terms, of a possible legal obstacle to its claim for VAT at the same
time as it was being advised by PwC that it was entitled to claim VAT on the lease, he was bound to conclude that CSID knew, as Mr
O’Moore S.C. submits, that the law didn’t allow VAT to be imposed and that their claim was “going to hit that reef” but they had
decided nonetheless to go ahead. If CSID understood its claim was going to “hit a reef and fail”, why would it have decided to
commenced the claim for VAT? Whilst not crucial to the outcome of this appeal, I note that at no stage in the course of the High
Court proceedings did DWW go so far as to even hint at the existence of a potential ulterior motive in an effort to explain why, as it
maintained, CSID would have chosen to ignore what is claimed to have been the clear and explicit expert advice it had received to
the effect that its claim for VAT on the lease would fail in light of the immense repercussions in terms of costs and professional
reputation that such an approach would as matter of certainty follow such an approach.
257. I am accordingly satisfied that it was perfectly open for the trial judge to make each of the findings that he made at paras. 99
and 184 of his judgment and that these are not inconsistent with each other. There was nothing inconsistent with his conclusion that
CSID knew of the dichotomy between the Regulation and Revenue practice but nonetheless reasonably understood the advice of PwC
to be that it was entitled to claim VAT on the lease.
General concluding observations
258. It is easy, armed with the benefit of the judgment of Hardiman J. to say that Regulation 19 could never have been interpreted
other than in the manner therein set forth. But if this was so obvious at the time the proceedings were commenced to recover VAT
on the lease, why did DWW not apply to dismiss that claim as one which was bound to fail based upon what it now states is such a
clear interpretation of the Regulation? Why did DWW instead apply to remit the claim to arbitration?
259. It is understandable perhaps that DWW did not seek to counter claim for malicious prosecution as was done in Dorene v. Suedes,
once the proceedings issued, given that it maintains that it was not until it obtained disclosure of the advices received by CSID from
PwC that it considered it had sufficient evidence to establish the tort of malicious abuse of the court’s process, but it could have
applied to dismiss that aspect of the claim as related to VAT on the lease as bound to fail. Neither did those representing DWW
demand, as had been done in the Dorene case, that the claim be withdrawn on the grounds that it simply could not succeed. Instead,
the claim was treated as one which was arguable and merited the determination of a tax expert, hardly the actions of a party who
believed the claim to be without prospect of success.
260. Having reviewed in some detail the evidence put before the High Court and the submissions of the parties before that Court and
this Court on the appeal, I am satisfied that the facts of the present case could hardly be further from those in Dorene where clear
legal advice had been obtained that the claim was unstateable and where, in light of the lis pendens which had been registered, the
High Court judge was content to conclude that the proceedings were being used for completely improper motive, namely to ensure
that Suedes could not sell their premises and might, as a result, be forced to deal favourably with Dorene.
Conclusion
261. Whilst I am satisfied that the High Court judge erred in law when he concluded that DWW’s claim must fail because of the
decision of the Arbitrator and the High Court (Gilligan J.) in the primary litigation, I am nonetheless satisfied that his alternative basis
for rejecting DWW’s claim, namely that it had not established that CSID did not have reasonable and probable cause to issue the
proceedings, cannot be faulted in any material respect.
262. In concluding, as he did, that DWW had not discharged the requisite burden of proof, the High Court judge did not, as alledged,
reach his decision based on an incomplete and erroneous assessment of the evidence. In particular, he did not take an impermissible
approach to documentation emanating from the Revenue Commissioners evidencing its interpretation and practice concerning
Regulation 19. Neither did he do so in respect of the documentation and materials which highlighted the considered opinion of tax
professionals at the time as to their understanding of Regulation 19.
263. As explained earlier, trial judges cannot be expected to address each and every issue or submission advanced by parties,
particularly in the context of lengthy and complex litigation. Neither can they be expected to direct their judgment to each and every
document relied upon by either party. Unless it can be shown that the failure of a trial judge to address his or her mind to an issue,
submission or document gravely casts in doubt the validity of their findings and/or conclusions, the appellate court should not
interfere with the judgment so delivered.
264. Thus, I am satisfied that the failure of the High Court judge to address with particularity DWW’s submission that the deliberate
withholding of the Valuation Office Report from DWW until after the commencement of the within proceedings does not cast in doubt
the judgment of the High Court judge. The findings of fact made by the High Court judge that CSID had been advised by its tax
advisors and furthermore believed when it issued its proceedings for VAT that its claim was lawful was supported by credible
evidence. Furthermore, those findings were in large part made on foot of the trial judge’s assessment of the credibility of the relevant
witnesses or on the basis of unchallenged witness statements, and as such are protected by the principles that emerge from Hay v.
O’Grady.
page29 ⇓
265. For similar reasons, I reject the claim of DWW that the conclusions of the High Court judge are fatally undermined by his failure
to consider in detail the emails of the 20th and 23rd December, 2002 or by his failure to formally rule upon its submission that adverse
inferences be drawn from the failure on the part of CSID to call a number of identified witness.
266. Neither is there merit in the claim that the High Court judge fell into some fatal error when, for the purpose of determining if CSID
had reasonable and probable cause to issue the VAT proceedings, he attached weight to the fact that the claim had been supported
by CSID’s solicitors.
267. I also see no merit in DWW’s submission that there was a fatal inconsistency in the trial judge’s determination that CSID had
reasonable and probable cause to issue the proceedings in light of his finding that both at EST level and board level, CSID was aware
of the dichotomy between the Revenue practice and the strict wording of the Regulation.
268. Finally, I am fully satisfied that objectively assessed, as is the test to be applied when considering the issue of reasonable and
probable cause, the evidence overwhelmingly favoured a conclusion that the reasonable actor in the shoes of CSID would have
considered it had reasonable and probable cause to issue the VAT proceedings. It would in my view have been perverse had the trial
judge, on the evidence and in particular having regard to his primary findings of fact, reached any other conclusion, regardless of
CSID’s knowledge of the dichotomy between the strict wording of the Regulation and Revenue practice and/or the possible
consequences for its claim by reason of the valuation contained in the Valuation Office Report. As to the subjective belief of CSID in
the lawfulness of its claim for VAT, that is an issue relevant only in my view to malice rather than reasonable and probable cause,
although if I am wrong about that the trial judge’s finding in respect of the belief of CSID is one based, inter alia, on primary findings
of fact which are in any event protected by the Hay v. O’Grady principles.
269. For all of the reasons earlier identified in this judgment, I would dismiss the appeal.
Crawford Adjusters & Ors v Sagicor General Insurance (Cayman) Ltd
& Anor (Cayman Islands )
[2013] UKPC 17
LORD WILSON:
INTRODUCTION
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- Mr Paterson appeals against an order of the Cayman Islands Court of Appeal, Cayman Islands, dated 5 April 2012. By a judgment delivered by Sir Anthony Campbell JA, with which Sir John Chadwick P and Elliott Mottley JA agreed, the court dismissed Mr Paterson’s appeal against an order of the Grand Court of the Cayman Islands dated 14 February 2011. By a judgment delivered on that date Henderson J had dismissed Mr Paterson’s counterclaim against Sagicor for damages.
THE FACTS
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- On 11 and 12 September 2004 Hurricane Ivan made landfall in Grand Cayman and caused substantial damage. It extensively damaged Windsor Village (“the Village”), a development of 35 residential units in six two-storey blocks along the shore. The proprietors of the Village had insured it with Sagicor against damage, including by hurricane.
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- Sagicor at once accepted that much of the damage caused to the Village was covered by the policy. On 24 September 2004 it appointed Mr Paterson to act as its loss adjuster in relation to the claim. Mr Scott, the chief executive officer of Sagicor, resided in the Village and was keen that the works of restoration should begin quickly. It was he who suggested that the works might be undertaken by one or other of two building companies of which Messrs John and Robert Hurlstone were directors. I will describe both companies and both men compendiously as Hurlstone.
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- Sagicor and the proprietors of the Village were both content that Hurlstone should undertake the works. It began the initial clean-up work on about 21 October 2004. But in the aftermath of the hurricane there was considerable chaos on the island. Building materials were in short supply and their cost had increased sharply. Little heavy equipment remained in working order. There was a severe shortage of motor vehicles. Construction workers were hard to find; Hurlstone had to employ hotel and bar workers, who demanded higher than normal hourly rates of pay. Water had devastated Hurlstone’s offices and its computers had been destroyed.
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- It was partly for these reasons that paperwork apt to a project of such size was lacking. Engineers had produced a structural report and drawings for the reconstruction but a detailed scope of works was never produced and its absence caused considerable difficulty. A total contract price was never agreed between Hurlstone and the proprietors of the Village. The absence of specifications and bills of quantities disabled Hurlstone from offering a firm price. But in November 2004 it gave the proprietors a preliminary estimate in the sum of just over $5.5m; and the estimate came to Sagicor’s attention. In this judgment all references to dollars are references to Cayman Islands dollars.
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- Hurlstone made clear to Mr Paterson and through him to Sagicor that it expected payments in advance to cover its likely expenditure. Between October 2004 and May 2005, on the recommendation of Mr Paterson, Sagicor made seven advance payments to Hurlstone which totalled $2.9m. The final three of the payments were also approved by another loss adjuster instructed by Sagicor although he expressed concern about the lack of detail in Mr Paterson’s reports. Before recommending advances to Hurlstone, Mr Paterson visited its offices, inspected its invoices and sought carefully to review its work. By June 2005 Mr Paterson was close to finalising his adjustment of Sagicor’s liability under the policy. For discussion he put forward figures, which Sagicor appeared to accept, that the total cost of the works of reconstruction at the Village would be in the sum of $6.5m, of which Sagicor would be liable for $5.5m. Hurlstone was pressing for a further advance on the basis that the total of the previous advances fell significantly short of the value of the works which it had so far done; but Mr Paterson agreed with Sagicor that no further advance would be made until a contract price had been agreed.
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- In June 2005 Mr Frank Delessio joined Sagicor as Senior Vice President. He was an experienced and able loss adjuster with an aggressive personality. He and Mr Paterson had known each other for several years. They were not fond of each other. Like many others, Mr Paterson considered Mr Delessio to be confrontational. In about 2001 Mr Paterson had inquired of the Cayman Immigration Department whether Mr Delessio held an appropriate work permit; and his inquiry had come to Mr Delessio’s knowledge.
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- On arrival at Sagicor Mr Delessio began a detailed study of its liability for losses caused by the hurricane and in particular for the cost of works at the Village. He became concerned that there was a serious deficiency in the documentation to support the advance payments which had been made to Hurlstone on the recommendation of Mr Paterson. On behalf of Sagicor Mr Delessio instructed Mr Paterson to deal only with himself. He acquired scope sheets apparently prepared on behalf of Mr Paterson, which appeared to calculate Sagicor’s total liability at $4.8m rather than $5.5m. He demanded that Mr Paterson should at once provide a full report outlining all costings. By that stage it would have been almost impossible for Mr Paterson to meet that demand; and, insofar as he could have met it in part, he could not have done so quickly.
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- In July 2005 Mr Delessio stated that he intended to drive Mr Paterson out of business and to destroy him professionally. The judge found that Mr Delessio meant what he said. To one witness Mr Delessio seemed obsessed by a desire to damage Mr Paterson. He arranged for private investigators to place Mr Paterson under surveillance. He caused Sagicor to instruct Quin and Hampson, attorneys-at-law, to advise it; and, in its dealings with the attorneys, Sagicor acted through him. At its invitation the head of the Financial Crimes Unit of the Islands Police Service attended a meeting between him and the attorneys in case it should be concluded that Mr Paterson had committed a criminal offence.
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- In August 2005 Mr Delessio instructed Mr Purbrick, a chartered surveyor and loss adjuster in practice in England, to come to Grand Cayman and to assess the value of Hurlstone’s work at the Village. Mr Purbrick spent five days on site. But, on the instruction of Mr Delessio, he did not speak to Mr Paterson or Hurlstone. Nor did he inquire of Hurlstone’s subcontractors or suppliers about costs. Nor did he even consult the engineers who had produced the structural report and the drawings.
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- In September 2005 Mr Purbrick produced a preliminary report. In it he valued the work done by Hurlstone at $0.9m, of which $0.8m was said to be the responsibility of Sagicor. On Mr Delessio’s instruction Mr Purbrick had made no allowance for the cost of any clean-up work. Mr Delessio thereupon caused the attorneys to instruct London counsel to advise whether Mr Paterson and Hurlstone had perpetrated a fraud on Sagicor. On the basis of Mr Purbrick’s report counsel advised that Hurlstone’s overcharging, approved by Mr Paterson, had been so gross as to be incapable of honest explanation. In about February 2006 Mr Purbrick wrote a second report in which he identified allegedly defective work by Hurlstone which caused him to reduce his estimate of the value of the work which it had done to $0.8m, of which $0.7m was said to be the responsibility of Sagicor. Both Sagicor and the proprietors of the Village instructed the attorneys to issue proceedings on their behalf.
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- On 28 February 2006, in the Grand Court, Sagicor and the proprietors issued a writ against Mr Paterson and Hurlstone. The statement of claim was squarely founded on Mr Purbrick’s reports. The plaintiffs alleged that Sagicor had paid Hurlstone $2.9m for works for which it was liable to pay only $0.7m; that the payments had been made as a result of fraudulent misrepresentations about the value of the works on the part of Mr Paterson and Hurlstone; and that they had conspired together to make the misrepresentations. Sagicor claimed damages against them for deceit and conspiracy. The proprietors, however, soon amended their claim so that it was brought only against Hurlstone and only for breach of contract or by way of restitution; so they thereby dissociated themselves from the allegations of fraud and conspiracy.
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- On the date when the writ was issued Sagicor, not joined by the proprietors, applied ex parte to the Chief Justice for Mareva injunctions against Mr Paterson and Hurlstone. On the usual undertaking he granted the injunction against Hurlstone; but he held that the evidence of Mr Paterson’s likely dissipation of assets was insufficient to justify an injunction against him.
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- Mr Delessio informed an officer of the proprietors that he intended to plant an article in the press about the allegations against Mr Paterson and Hurlstone in the proceedings; and the judge found that he was instrumental in alerting a journalist working for “The Caymanian Compass” to the allegations. On 22 March 2006 the Compass duly reported Sagicor’s allegations that Mr Paterson had made misrepresentations which he knew were false or which he had made recklessly. The currency thereby given to the allegations caused massive damage to his reputation and to the willingness of third parties to employ him.
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- The progress of the action was slow; but there is no evidence to justify the allegation, first raised by Mr Paterson before the Court of Appeal and there rejected, that the plaintiffs never intended to bring it to trial. In September 2008, three months prior to the dates fixed for the trial, Hurlstone made disclosure of invoices and other documentation which indicated its extensive payments to subcontractors and suppliers. Concerned that they appeared to undermine Mr Purbrick’s reports, the attorneys asked counsel to advise. His advice was that it would be professionally improper for him and the attorneys to continue to represent Sagicor in its claims of fraud and conspiracy. Only days before trial the plaintiffs discontinued the action and judgment was entered for Mr Paterson and Hurlstone. On 9 December 2008 Henderson J ordered Sagicor to pay their costs on the indemnity basis. Thereupon he granted Mr Paterson leave to amend his counterclaim so as to include a claim for damages against Sagicor for abuse of process; and he gave directions for the assembly for trial both of Mr Paterson’s counterclaim, of Hurlstone’s claim for compensation pursuant to Sagicor’s undertaking attached to the Mareva injunction and also of a claim for damages against Sagicor for malicious prosecution and/or abuse of process brought by Hurlstone in a separate action which it had recently issued.
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- Over 30 days between May and December 2009 Henderson J heard the various claims. There was a regrettable delay prior to the dissemination of his judgment, which he ascribed to pressure of work and for which he apologised to the parties. But I pay tribute to the clarity and comprehensiveness of the judgment which he ultimately disseminated on 14 February 2011 and to which, at the request of counsel then appearing for Mr Paterson, he made additions on 14 March 2011.
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- By the order dated 14 February 2011 Henderson J dismissed Mr Paterson’s counterclaim. He also dismissed the separate action brought by Hurlstone. But, by way of enforcement of Sagicor’s undertaking, he awarded Hurlstone sums totalling $7.2m in respect primarily of economic loss which it had suffered as a result of the injunction but also of damage to reputation and by way of aggravated damages for elements of non-disclosure on Sagicor’s part when obtaining the injunction. An appeal by Sagicor against the amount of the judge’s award to Hurlstone was compromised on confidential terms; and Hurlstone’s participation in the litigation came to an end.
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- As pleaded, Mr Paterson’s counterclaim had been founded on the tort of abuse of process. Before the Court of Appeal, and in particular before the Board, Sagicor has protested that it has therefore not remained open to Mr Paterson to found his argument alternatively on the tort of malicious prosecution, which had been pleaded only by Hurlstone in its separate action. It is clear, however, that, after noting that the two torts were closely related, Henderson J treated Mr Paterson, like Hurlstone, as relying alternatively on both torts. In my view Sagicor fails to establish that Mr Paterson’s omission expressly to plead that it was liable to him pursuant to the tort of malicious prosecution led to the failure of Henderson J to consider any matter arguably relevant to the existence of the tort. I would decline to accede to Sagicor’s invitation to refuse to consider this alternative basis of Mr Paterson’s appeal.
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- The second, based on agreement between experts instructed on each side, was that, were Sagicor liable to Mr Paterson either for abuse of process or for malicious prosecution, his special damages, reflective of the economic loss caused to him by its allegations, amounted to $1.3m. The judge explained that, to this sum, he would have added $0.035m by way of general damages for the distress, hurt and humiliation suffered by Mr Paterson as a result of the allegations.
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- The judge received expert evidence from three surveyors about the respects in which Mr Purbrick’s reports had been flawed. The evidence was not substantially in conflict; and the judge appears to have accepted it. The most obvious error was that Mr Purbrick had not included in his calculations the cost of the clean-up work which Hurlstone had undertaken. For Mr Delessio had told him that the clean-up work had been effected by a different contractor; indeed Mr Delessio had told him so even though he knew that Hurlstone had itself conducted the clean-up work and even though he possessed an invoice from Hurlstone in respect of the work in the sum of about $0.64m, which Sagicor had paid. Nor did Mr Delessio inform Sagicor’s attorneys that he had told Mr Purbrick not to allow for the clean-up work. But the judge also found that Mr Purbrick’s ability to reach a valid opinion had been severely fettered by Mr Delessio’s instruction to him not to speak to Mr Paterson nor to Hurlstone. He had not even spoken to the engineers nor obtained their structural drawings. He had in effect no knowledge of the local market, let alone of its distortion in the aftermath of the hurricane; and he had adopted labour rates, costs of materials and allowances for overhead and profits, all of which had been demonstrably too low.
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- The judge found that Mr Delessio knew that Mr Purbrick’s reports were not a proper basis for the allegations of fraud and conspiracy; and that Mr Delessio concealed this from Sagicor’s attorneys. Indeed, as he had observed on 9 December 2008 when ordering it to pay the costs of its action on an indemnity basis, Sagicor had never been in possession of evidence capable of establishing fraud or conspiracy.
The judge found:
(a) that Mr Delessio had noted a number of features surrounding the size of payments to Hurlstone which might, to the reasonable and objective observer, have seemed somewhat suspicious;
(b) that, in particular, Mr Paterson’s reports to Sagicor had lacked customary detail; that he could have provided a somewhat fuller response, especially in writing, to Mr Delessio’s demands for information; that one of Mr Paterson’s former employees might have told Mr Delessio that the work done by Hurlstone at the Village had a value of only $1.3m; and that Mr Paterson had put himself into a position of conflict by agreeing to act as project manager for the proprietors as well as the loss adjuster for Sagicor;
(c) that, while it was reasonable for Mr Delessio to have been somewhat suspicious, it had been unreasonable for him to believe that Mr Paterson had defrauded Sagicor;
(d) that, however, Mr Delessio had believed that Mr Paterson had defrauded it;
(e) that Mr Delessio’s belief that he had defrauded it was a significant contributing factor in leading Sagicor to make the allegations of fraud and conspiracy against Mr Paterson; but
(f) that the dominant factor which led it to make those allegations against him had been Mr Delessio’s strong dislike and resentment of him, his wish to gain revenge on him and his obsessive determination to destroy him professionally.
CONCLUSIONS OF THE COURTS BELOW
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- In the light of the above findings Henderson J addressed each of the two torts upon which Mr Paterson relied. He concluded that Sagicor was not liable for abuse of process because it had not used the facility to sue Mr Paterson in order to secure an object for which legal action was not designed; and that the fact that Sagicor’s dominant motive in making the allegations against him was improper did not convert its use of the legal process into an abuse.
(a) the prior proceedings had been determined in favour of Mr Paterson;
(b) the allegations of fraud and conspiracy made against him in the prior proceedings had been made without reasonable cause;
(c) in the light of the finding set out in para 32(f) above, the allegations against him had been made maliciously; and
(d) as a result of the allegations, he had, as was agreed, suffered substantial financial loss and significant other damage.
The crucial feature which, according to Henderson J, precluded his holding Sagicor liable to Mr Paterson for malicious prosecution was that the present state of the law did not allow extension of the tort to civil proceedings. In this regard he cited observations made by Lord Steyn in Gregory v Portsmouth City Council [2000] 1 AC 419, pp 432-433, which I will address in para 36 below.
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- In the Court of Appeal Mr Jacob, who was appearing for Mr Paterson for the first time, conceded that, in the light of the observations in the Gregory case, it would in effect not be open to that court to hold that the tort of malicious prosecution had been established. There was a formal dismissal of that ground of the appeal so that, in the event of an appeal to the Board, Mr Jacob could actively press that ground by challenging its dismissal. Instead he argued that the tort of abuse of process had been established. The court held, however, that the judge had been right to reject that argument for the reasons which he had given and which I have summarised at para 33.
THE GREGORY CASE
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- At the outset of the interesting legal excursion which this appeal invites the Board to undertake, it is worthwhile to assess the extent to which the observations made in the Gregory case, cited above, impede – or do not impede – Mr Paterson’s ability to succeed in establishing what, as I will explain, I regard as otherwise the more arguable of the torts upon which he relies, namely that of malicious prosecution.
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- In the Gregory case C was a councillor on D City Council and was a member of some of its committees. Following an allegation against him of misuse of insider knowledge in property dealings, D set up a committee which found the allegation true and purported to remove him from the committees. A court later held that the committee had thereby acted beyond its powers. C’s subsequent action against D for malicious prosecution was struck out by a district judge as disclosing no cause of action; and on appeal a High Court judge upheld the strike-out. By a majority, the Court of Appeal dismissed C’s further appeal: (1997) 96 LGR 569; but Schiemann LJ delivered a powerful dissenting judgment. The House of Lords dismissed C’s yet further appeal. Lord Steyn, with whom the other members of the House agreed, gave the only substantive speech. He said:
(a) that, whatever the extent of the tort of malicious prosecution, its paradigm was of the prosecution of criminal proceedings (p 426);
(b) that a distinctive feature of the tort was that the defendant had abused the coercive powers of the state (p 426);
(c) that a claimant had to prove that the criminal prosecution was determined in his favour, that it was brought without reasonable and proper cause, that it was malicious and that he had suffered damage (p 426);
(d) that the extension of the tort in the US to the prosecution of civil actions was related to the absence there of a general power to award costs against a claimant in favour of a successful defendant (p 429);
(e) that the academic criticism in Australia, Canada and New Zealand of the apparent absence of redress for malicious prosecution of civil proceedings did not extend to criticism in relation to the prosecution of disciplinary proceedings (p 431); and
(f) that, in relation to statements made in disciplinary, as opposed to in legal, proceedings, privilege under the law of defamation was only qualified, thus defeasible by proof of malice, and that a remedy in defamation was therefore a tort which (together with three other torts) might well be available to the victim of a malicious prosecution of disciplinary proceedings such as C claimed to be (pp 431-432).
“My Lords, it is not necessary for the disposal of the present appeal to express a view on the argument in favour of the extension of the tort to civil proceedings generally. It would, however, be unsatisfactory to leave this important issue in the air. I will, therefore, briefly state my conclusions on this aspect. There is a stronger case for an extension of the tort to civil legal proceedings than to disciplinary proceedings Both criminal and civil legal proceedings are covered by the same immunity. And as I have explained with reference to the potential damage of publicity about a civil action alleging fraud, the traditional explanation namely that in the case of civil proceedings the poison and the antidote are presented simultaneously, is no longer plausible. Nevertheless, for essentially practical reasons I am not persuaded that the general extension of the tort to civil proceedings has been shown to be necessary if one takes into account the protection afforded by other related torts. I am tolerably confident that any manifest injustices arising from groundless and damaging civil proceedings are either already adequately protected under other torts or are capable of being addressed by any necessary and desirable extensions of other torts. Instead of embarking on a radical extension of the tort of malicious prosecution I would rely on the capacity of our tort law for pragmatic growth in response to true necessities demonstrated by experience.”
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- In my view Lord Steyn’s observations should in no way discourage the Board from concluding, were it otherwise minded to do so, that the tort of malicious prosecution applies to Mr Paterson’s case. It cannot be doubted that he suffered manifest injustice as a result of groundless and damaging civil proceedings brought maliciously. If, as I will conclude, no other tort is capable of extension so as to address the injustice of the present case, the rationale behind Lord Steyn’s hesitation loses all its force. And, if, as he had earlier observed, a distinctive feature of the tort is an abuse of the coercive powers of the state, the Board will need to ask why it does not generate liability as much in the case of malicious prosecution of civil proceedings as in that of criminal proceedings. Unfortunate though it may be for members of the Board to favour such different constructions of Lord Steyn’s apparently straightforward observations, I find myself unable to subscribe to Lord Sumption’s conclusion, at para 146, that the House of Lords thereby “decided” and “declared” that the tort of malicious prosecution did not extend to civil proceedings; nor, for reasons which will become apparent, can I associate myself with his suggestion that this area of the law is “relatively well-trodden”.
EARLY DEVELOPMENT OF THE LAW
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- In 1285 the Parliament of Edward I provided a right to damages for the victims of malicious appeals (ie prosecutions) of homicides and other felonies against those who had conspired to procure them (Anno 13, Edw I, stat 1, c12); and in 1305 the Parliament ordained that the judges should be provided with a transcript of its definition of conspirators for these purposes, namely those who, in an early translation from law French, “do confeder or bind themselves by Oath, Covenant or other Alliance, that every of them shall aid and support the Enterprise of each other falsely and maliciously to… cause [a person] to be indicted…” (Anno 33, Edw I, stat 2).
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- By Elizabethan times it was recognised that the writ of conspiracy failed to recompense all deserving victims of malicious prosecution. Obviously the writ did not lie against the single prosecutor; moreover it covered malicious prosecutions for felony but not for misdemeanour; and furthermore the acquittal had to be by verdict rather than for any other reason. The engine behind the development of the common law of tort, namely the action on the case, came to the rescue. The action on the case required consideration, first, of whether D had caused C to suffer damage and then, if so, of whether D’s conduct in so doing had been so reprehensible as to make him liable to C for it. The action on the case began to supplant the writ of conspiracy for use by victims of malicious prosecution and it was not shackled by the three limitations to which I have referred.
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- I am reluctant to appear to submerge this judgment in ancient legal history. On the other hand I am concerned to demonstrate that, with respect, Lord Sumption is wrong to state, in para 145 of his judgment, that the tort of malicious prosecution has never previously applied to civil proceedings and, in para 159, that therefore to apply it to civil proceedings would be to create a wholly new tort. In The Present Law of Abuse of Legal Procedure, Cambridge University Press, 1921, Sir Percy Winfield, wrote, at p202, that the writ of conspiracy had lain for improper civil actions and, at p199, that, equally, the action upon the case was not confined to malicious indictments. I will confine myself to two of Sir Percy’s examples. The first is Bulwer v Smith (1583) 4 Leon 52, 74 ER 724, in which, knowing that C owed H £20 under a judgment debt and that H had died, D unlawfully arrogated H’s name to himself and thereby maliciously caused C to be outlawed for non-payment of the debt, as a result of which he was imprisoned for two months and suffered forfeiture of his goods. C successfully sued D for compensation for the loss and damage sustained as a result of the outlawry. The second is Gray v Dight (1677) 2 Show KB 144, 89 ER 848, in which C successfully sued D for having maliciously prosecuted him in the ecclesiastical court, as a result of which he had been excommunicated. “And resolved” states the report, “the action lies though nothing ensued but an excommunication, and no [arrest], nor any express damage laid”.
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- Although therefore, as Diplock J correctly recognised in Berry v British Transport Commission [1961] 1 QB 149, at p 159, it could be founded upon any form of legal proceedings, whether civil or criminal, the action on the case for malicious prosecution was usually brought in the wake of unsuccessful criminal proceedings; and in that regard an important aspect of public policy was engaged. It surrounded the fact that, until the nineteenth century, criminal prosecutions were brought almost entirely by victims of the alleged crimes or, if they were dead, by their kinsmen: see R (Gujra) v Crown Prosecution Service [2012] UKSC 52, [2013] 1 AC 484, para 11. In that enforcement of the criminal law therefore depended upon private initiative, it was important not to discourage the initiative by too easy a remedy for the defendant against the prosecutor in the event of his acquittal. One device was based on the need for an acquitted defendant who wished to sue for malicious prosecution to obtain from the judge in the criminal proceedings a copy of the record of the indictment and of his acquittal. As Blackstone explains in his Commentaries, 1765, Book Three, Chapter 8,
“but, in prosecutions for felony, it is usual to deny a copy of the indictment, where there is any, the least, probable case to found such prosecution upon. For it would be a very great discouragement to the public justice of the Kingdom, if prosecutors, who had a tolerable ground of suspicion, were liable to be sued at law whenever their indictments miscarried.”
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- In 1698 the Court of King’s Bench delivered its seminal judgment in Savile v Roberts. It was regarded as so important that ten different law reporters reported it. The report principally cited has been that of Lord Raymond: 1 Ld Raym 374, 91 ER 1147. D had maliciously caused C to be indicted for riot. Following his acquittal C sued D for malicious prosecution. The court affirmed the judgment which had been given for C. It was held to be irrelevant that D had not been part of a conspiracy. Chief Justice Holt observed, at p 378, that whether the action would lie had been a point “much unsettled in Westminster Hall, and therefore to set it at rest is at this time very necessary”. Lord Raymond’s report of the judgment of the Chief Justice continues as follows:
“He said that there are three sorts of damages, any of which would be sufficient ground to support the action.
1. The damage to a man’s fame, as if the matter whereof he is accused be scandalous… But there is no scandal in the crime for which the plaintiff in the original action was indicted.
2. …damages…such as are done to the person; as where a man is put in danger to lose his life, or limb, or liberty… but these kinds of damages are not ingredients in the present case.
3. …damage to a man’s property, as where he is forced to expend his money in necessary charges, to acquit himself of the crime of which he is accused, which is the present charge. That a man in such case is put to expenses is without doubt, which is an injury to his property; and if that injury is done to him maliciously, it is reasonable that he shall have an action to repair himself.”
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- The Chief Justice proceeded, at pp 379-380, pp1150-1151, to observe, no doubt subject to what he was about to add, that, where a civil action was sued without cause, no action would lie in favour of the successful defendant; for, in civil as opposed to in criminal proceedings, claimants had been required to post pledges which could be drawn down in favour of victims of false claims and, more recently, they could be ordered to pay costs to their victims directly. Then, however, he added that “if A sues an action against B for mere vexation, in some cases upon particular damage B may have an action; but it is not enough to say that A sued him falso et malitiose, but he must show the matter of the grievance specially, so that it may appear to the Court to be manifestly vexatious”. Or, in the words of another of the reports, at 12 Mod 208, 88 ER 1267, at p 211, p 1269, “if he shew any special matter, whereby it appears to the court that it was frivolous and vexatious, he shall have an action”.
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- In support of his assertion that an action could lie for the “malicious prosecution” of civil proceedings, the Chief Justice cited Daw v Swaine (1668) 1 Sid 424, 82 ER 1195. In order to cause C to be imprisoned for inability to lodge the sum claimed as bail, D had there maliciously sued him for £5000 rather than for £40 which was the amount of C’s debt to him. C’s action succeeded. I respectfully disagree with Lord Sumption’s suggestion, at para 140, that C’s cause of action was subsequently subsumed in the action for abuse of process; as I will explain, the latter requires a purpose not within the scope of the action but D’s purpose, namely to cause C to be imprisoned for want of bail, was entirely within the scope of his action.
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- Other of the reports of Savile v Roberts show that the Chief Justice also cited with approval two yet further examples of recovery for the malicious prosecution of civil proceedings: see the reports at 5 Mod 394, 87 ER 725, for his citation of Waterer v Freeman (1617) Hobart 205, 80 ER 352, and at 12 Mod 208, 88 ER 1267, for his citation of Skinner v Gunton (1669) 1 Saund 228, 85 ER 249.
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- It is fair to say that the Chief Justice, at p 379, p 1150, of Lord Raymond’s report, pointed out that, in a civil action as opposed to in a criminal prosecution, the assertion was of a private right. But, had he intended to use that distinction as a reason for excluding the malicious prosecution of a civil action from the scope of an action on the case, he would not have proceeded to stress the availability to a defendant to civil proceedings of an order for costs nor to have indorsed the previous jurisprudence that some victims of civil actions brought in such circumstances could recover. The basis of the action on the case was damage caused by D to C; and, for the purpose of this particular species of it, the crucial additional element was malice. In my view the best encapsulation of the central decision in Savile v Roberts, which makes no distinction between criminal and civil proceedings, is to be collected from the report at 5 Mod 394, 87 ER 725, as follows:
“It is the malice that is the foundation of all actions of this nature, which incites men to make use of law for other purposes than those for which it was ordained.”
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- The judgment of Holt CJ has had an extraordinary impact upon the development of the law of tort throughout the common law world. In The History of Conspiracy and Abuse of Legal Procedure, 1921, Cambridge University Press, Sir Percy Winfield, at p129, describes the three types of damage identified by the Chief Justice as “the plinths upon which English Law has been reared”.
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- First, why was there no scandal, and thus no damage to fame, in being prosecuted for riot? The answer is that the word “fame” is linked with that of “defamation” and that the word “scandal” was used in a special sense: if the oral accusation of a crime would have amounted to slander actionable per se, there was “scandal” in being prosecuted for it. At that time riot did not fall into that category: see the exegesis of Diplock J in the Berry case, cited above, at pp 161-2.
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- Second, why had C not been put in danger of losing his liberty? For riot was a trespass, punishable with imprisonment. It seems, however, from other reports of the case (for example 12 Mod 208, 88 ER 1267), that the Chief Justice had said, or intended to say, that actual loss of liberty, whether by arrest or detention on remand, was his second alternative pre-requisite.
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- Third, does the fact that over 300 years ago the court referred to financial loss in terms apt to the case before it, namely in terms of out-of-pocket expenses, mean that today the court should decline to reimburse the victim of a malicious prosecution for other sorts of financial loss which were the foreseeable, or, as in the present case, the intended, consequences of it? The question answers itself. But, in case my question is regarded as loaded, and my answer glib, I will address recovery for economic loss more fully at paras 74 to 77.
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- The decision in the Savile case was enthusiastically approved by Chief Justice Parker, sitting again in the Court of King’s Bench, in Jones v Givin (or more probably Gwynn) (1713) Gilb Cas 185, 93 ER 300. D had unsuccessfully prosecuted C for exercising the faculty of a badger (ie the right to deal in corn) without a licence. C successfully sued D for malicious prosecution and recovered damages equal to his costs of £100 expended in the criminal proceedings. As an aside, Parker CJ reiterated, at p197, p303, that an action would lie for the malicious prosecution of civil proceedings if the claimant could “show special matter which shows malice”. Later at p209, p307, he said:
“The difficulty, which stood most in the way of these actions, was the fear of discouraging prosecutions, and the regard to what was done in a legal course to bring offenders to punishment…[But] requiring satisfaction from those who proceed out of meer malice and wickedness without any reasonable ground, will be no discouragement at all to him who honestly proceeds on reasonable grounds.”
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- It was the decision of the Court of Exchequer Chamber in Grainger v Hill (1838) 4 Bing (NC) 212, 132 ER 769, which gave birth to the related tort of abuse of process. D1 and D2 lent C £80 repayable in 1837, secured by a mortgage on C’s vessel. C was to be free to continue to use the vessel in the interim but the law forbade its use if he were to cease to hold its register. In 1836 the Ds became concerned about the strength of their security. They resolved to put pressure on C to make early repayment. In an action for assumpsit they falsely claimed that the loan was already repayable. They swore an affidavit of debt, which in those days entitled them, without judicial authority, to cause to be sued out of court a writ of capias ad respondendum directed at C. This obliged the local sheriff to capture C with a view to his being brought before the court and made to respond. The sheriff indicated to C that the Ds would be content for him not to be arrested if he were to surrender the vessel’s register. He did so. He soon repaid the loan but in the interim the absence of the register had required his vessel to forego four voyages to Caen. The court upheld the judgment for C in his action on the case. The judges, led by Tindal CJ, held that the tort committed by the Ds was not malicious prosecution but abuse of the process of the law to effect an object not within the scope of the process which they had initiated, namely to “extort” the register, to which they had no right, from C or to obtain it from him by “duress”.
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- In Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674 the Court of Appeal saw fit to make categorical observations about the continued availability of a tort of the malicious prosecution of civil proceedings. D wished urgently to realise the value of his shares in the C company. Wrongly believing that his brokers had failed to sell them, he issued a petition that C be wound up on the basis of a false allegation that it would never be able to carry on business at a profit. D advertised the petition in accordance with the rules but, prior to its service on C, he withdrew it. In its action for malicious prosecution against D the trial judge non-suited C but the Court of Appeal ordered a retrial so that a jury could determine whether D had been activated by malice and whether the petition had been filed without reasonable cause.
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- Unfortunately, in upholding C’s entitlement to allege malicious prosecution of that form of civil proceeding, the court in the Quartz Hill case drew a distinction between a petition to wind up a company and an ordinary civil action, which, particularly in England and Wales, has had negative repercussions long after the distinction has ceased to be valid, indeed right up until today. The court accepted that in principle the tort of malicious prosecution extended to all civil proceedings. It held that the effect of the requirement to advertise a petition for bankruptcy or for a winding-up prior to the hearing was to injure the credit of the respondent before he could show that the foundation of the petition was false. It observed, however, that the malicious prosecution of ordinary civil actions could not lead to any of the three types of damage identified in the Savile case, cited above, in that by then orders made in such actions could not be enforced by imprisonment; that expenses incurred in resisting them would, so far as was just, already have been the subject of an order for costs; and that, by contrast with a petition for bankruptcy or for a winding-up, fair fame would not have been damaged. Brett MR explained, at p 684-685, that “the evil done by bringing the action is remedied at the same time that the mischief is published, namely, at the trial”. Bowen LJ expressed his observations in terms which are surprisingly categorical and indeed (as the editors of Fleming’s The Law of Torts, 10th ed (2011), suggest) peremptory, at p 688, as follows:
“I start with this, that at the present day the bringing of an action under our present rules of procedure, and with the consequences attaching under our present law, although the action is brought falsely and maliciously and without reasonable or probable cause, and whatever may be the allegations contained in the pleadings, will not furnish a ground for a subsequent complaint by the person who has been sued, nor support an action on his part for maliciously bringing the first action.”
Bowen LJ went on, at p689, to explain that, unlike a petition for a company to be wound up, the mere bringing of an ordinary action did not have “the necessary and natural consequence” of damage to a defendant’s fair fame and that, when the action was tried in public, his fair fame would be cleared if it deserved to be. Bowen LJ added, at p 690:
“I do not say that if one travels into the past and looks through the cases cited to us, one will not find scattered observations and even scattered cases which seem to shew that in other days, under other systems of procedure and law, in which the consequences of actions were different from those of the present day, it was supposed that there might be some kind of action which, if it were brought maliciously and unreasonably, might subsequently give rise to an action for malicious prosecution. It is unnecessary to say that there could not be an action of that kind in the past, and it is unnecessary to say that there may not be such an action in the future, although it cannot be found at the present day.”
“So the exception of civil proceedings, so far as they are excepted, depends, not upon any essential difference between civil and criminal proceedings, but upon the fact that in civil proceedings the poison and the antidote are presented simultaneously. The publicity of the proceedings is accompanied by the refutation of the unfounded charge, if it be unfounded, which was made. If there be no scandal, if there be no danger of loss of life, limb, or liberty, if there be no pecuniary damage, the action will not lie.”
Phillimore LJ added, at p 613, that an action for malicious prosecution of civil proceedings lies only when “the bane comes before the antidote, and mischief may be done which it will be too late to overtake”.
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- In a judgment of conspicuous erudition in the significant decision of the Supreme Court of Victoria, Appeal Division, in Little v Law Institute of Victoria (No 3) [1990] VR 257, Ormiston J sought to explain why in the Quartz Hill case the court had been so confident that the bringing of a civil action could not, prior to trial and his vindication if appropriate, damage a defendant’s reputation. He referred, at pp 283-286, to three features in relation to civil litigation in England and Wales in 1883. First, pleadings, though required to be served, did not have to be filed; and, even in relation to documents which were filed, there were considerable legal and practical constraints on the ability of a member of the public to secure access to them. Second, it was a contempt of court to publish, prior to trial, the contents of pleadings and affidavits referable to civil proceedings. Third, the defence of qualified privilege to a libel action seems then to have extended only to reports of what had been stated in open court at the trial. Thus, for one reason or another, the public seldom came to learn, prior to trial, of allegations made in ordinary civil proceedings.
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- Today, in the light of the right of the public in relation to most civil proceedings to inspect and take copies of the pleadings which now have to be filed, and of the media, without fear either of contempt of court or of the law of libel, fairly and accurately to report their contents even if defamatory, the basis of the distinction drawn in the Quartz Hill case has crumbled away. As Lord Steyn said in the passage of his judgment in the Gregory case quoted in para 38, it “is no longer plausible”. Or, as was said in the Little case, it is now rare for the antidote to be simultaneous with the poison (Kaye and Beach JJ at p 267) and the substratum of the reasoning of Bowen LJ has been subverted (Ormiston J at p 288). Substantial damage to the reputation of a defendant can be caused by false allegations made in civil proceedings long before it is restored, even if full restoration is then possible, by his vindication at trial. If you seek a monument, then look around you at this present case before the Board.
ABUSE OF PROCESS: LATER DEVELOPMENT
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- It is hard not to regard abuse of process as a tort distinct from malicious prosecution if only because, apart from the need to establish a purpose not within the scope of the action (ie a “collateral” or, more helpfully, an “improper” purpose), abuse of process requires neither that the action should have been brought without reasonable cause nor that it should have terminated in favour of the alleged victim: Tindal CJ said so in the Grainger case itself, at p 221, p 773, and it has never been gainsaid. Nevertheless the two torts sprang from the same tree and one would not expect issues common to them both, such as whether they enable recovery for economic loss, to be resolved differently.
“if the proceedings are merely a stalking-horse to coerce the defendant in some way entirely outside the ambit of the legal claim upon which the Court is asked to adjudicate they are regarded as an abuse of process for this purpose…”
The metaphor aids resolution of the conundrum raised by the example of a claimant who intends that the result of the action will be the economic downfall of the defendant who may be a business rival or just an enemy. If the claimant’s intention is that the result of victory in the action will be the defendant’s downfall, then his purpose is not improper: for it is nothing other than to achieve victory in the action, with all such consequences as may flow from it. If, on the other hand, his intention is to secure the defendant’s downfall – or some other disadvantage to the defendant or advantage to himself – by use of the proceedings otherwise than for the purpose for which they are designed, then his purpose is improper. See the discussions in the joint judgment in the High Court of Australia of Mason CJ, Dawson, Toohey and McHugh JJ in Williams v Spautz (1992) 174 CLR 509, at paras 34 to 36, and also in Winfield and Jolowicz on Tort, 18th ed (2010), at para 19 -14.
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- But the settlement of an action is often reached upon terms which, had it proceeded, the court could not have ordered; and not infrequently claimants reasonably initiate actions in the hope that some such settlement might eventuate. In Goldsmith v Sperrings Ltd [1977] 1 WLR 478 Bridge LJ neatly allowed for this possibility in suggesting, at p 503, that “when a litigant sues to redress a grievance no object which he may seek to obtain can be condemned as a collateral advantage if it is reasonably related to the provision of some form of redress for that grievance”. Then, however, he proceeded to notice what he described as “a difficult area”, namely whether a claimant was guilty of abuse if behind his action lay two purposes – one legitimate and one improper. He had “very much doubt” whether such would be an abuse.
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- There Bridge LJ was not, at any rate expressly, considering a case where the improper purpose is predominant and the legitimate purpose is subsidiary. But his observations seem to have been influential in leading Teare J to conclude in JSC BTA Bank v Ablyazov [2011] EWHC 1136 (Comm) that any legitimate purpose negatived abuse even if an improper purpose was predominant. With respect to Teare J, his conclusion fails in my view to allow for the ease with which a claimant with a predominantly improper purpose can point to a legitimate purpose, however slight. In any event it runs clearly counter to the weight of modern legal opinion: see Metall und Rohstoff AG v Donaldson Lufkin and Jenrette Inc [1990] 1 QB 391 at p 469, Land Securities plc v Fladgate Fielder [2009] EWCA Civ 1402, [2010] Ch 467, at paras 89 and 95, and the Williams case in the High Court of Australia, cited above, at para 42.
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- A curious feature of the tort of abuse of process is the requirement, held to exist, for example, in decisions in the U.S., in the Superior Court of Justice, Ontario (see for example Westjet Airlines Ltd v Air Canada (2005) CANLll 47722 (ONSC), at para 20) and in some of the older cases in Australia, that the claimant should prove an overt act or threat on the part of the defendant, beyond issue of the proceedings, in furtherance of the alleged improper purpose. Perhaps the perceived requirement reflects the high regard in which Fleming’s The Law of Torts is held. In the 10th edition (2011), the editors note, at para 27.100:
“In addition to the improper purpose, there must be some overt act or threat, distinct from the proceedings themselves, in furtherance of that purpose, such as in the [Grainger] case the extortion accompanying the capias. Were it otherwise, any legal process could be challenged on account of its ‘hidden agenda’.”
In the Williams case, cited above, the four judges of the High Court of Australia to whose joint judgment I have referred, concluded, at paras 38 to 43, for reasons not entirely clear, that the need for an overt act might be more justifiable in the case of the tort of abuse of process than in the case, which was before them, of an application by a defendant to stay proceedings as an abuse of process. If the rationale behind the suggested need for proof of an overt act or threat is no more than that, in its absence, the defendant in an application for a stay, or indeed a claimant in an action based on the tort, might fail to establish that the other party’s purpose had been improper, it would readily be understandable. But, insofar as in some quarters the overt act or threat has taken root not just as having likely evidential importance but as being a substantive requirement, whether for the defendant’s application or for the claimant’s tort, I struggle to understand the reason for it.
MALICIOUS CIVIL PROSECUTION: LATER DEVELOPMENT
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- The result of the effective prohibition by the comments in the Quartz Hill case of any general development in England and Wales of a tort of malicious prosecution of civil proceedings has been to confine the tort to a few disparate situations, linked only by the occurrence of prejudice to the victim at or close to the outset of the proceedings. They include:
(a) a petition for bankruptcy: Johnson v Emerson (1871) LR 6 Ex 329;
(b) a petition for winding-up: the Quartz Hill case itself;
(c) a writ to arrest and detain a judgment debtor who had in effect already paid the debt: Gilding v Eyre (1861) 10 CB (NS) 592, 142 ER 584;
(d) the procurement of a bench warrant to arrest and produce a person for failure to respond to a witness summons which had not been served on him: Roy v Prior [1971] AC 470;
(e) a writ to arrest a ship in the course of a dispute about a contract for its sale: The Walter D Wallet [1893] P 202;
(f) a writ to arrest an aircraft in the course of a dispute about an alleged lease of it: Transpac Express Ltd v Malaysian Airlines [2005] 3 NZLR 709;
(g) an order for the attachment of the claimant’s assets in advance of an arbitration: The Nicholas M [2008] EWHC 1615 (Comm), [2009] 1 All ER (Comm) 479; and
(h) a search warrant: Gibbs v Rea [1998] AC 786.
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- In comparison with other common law jurisdictions, England and Wales has been slow to recognise that, because the reasoning in the Quartz Hill case no longer applies, there may, subject to policy considerations to which I will refer and which demand caution, be a need for reversion to the old, principled, law which made no distinction between the malicious prosecution of criminal and of civil proceedings. Indeed the paradox is that nowadays, at any rate in England and Wales, there is much less chance of being a victim of a criminal prosecution brought maliciously and without reasonable cause than of a civil action so brought. For most criminal prosecutions are brought at the direction of the Crown Prosecution Service, which, by its code, must first be satisfied that the evidence in support of it is such as to render the chance of a conviction greater than even; and, more importantly for present purposes, it is the policy of the Director of Public Prosecutions to take over a private prosecution and to discontinue it unless in his opinion the evidence in support of it crosses that same threshold: see the Gujra case, cited above.
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- In Australia there is the decision of the Supreme Court of Victoria, Appeal Division, in the Little case, cited above. C was a solicitor and D was a professional association which had obtained an injunction against his continuation in practice on the basis that he was in breach of regulations which required him to procure professional insurance. The regulations were later held to be invalid and the injunction was discharged. He thereupon sued D for malicious civil prosecution in having obtained the injunction. His action was allowed to proceed. In their joint judgment Kaye and Beach JJ held, at p 267:
“In our opinion, there is no longer justification for confining to a bankruptcy petition and an application to wind up a company the remedy for malicious abuse of civil proceedings where the damages claimed is to the plaintiff’s reputation.”
Ormiston J added, at p 289:
“the risk that maliciously made allegations in civil proceedings may cause perceptible harm to a person’s reputation is now a real risk under current law and procedures…”
As I will explain in para 77(d), the reference of the justices to damage to reputation was clearly not intended to exclude a claim for consequential economic loss.
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- In New Zealand there are the statements made by the Court of Appeal in New Zealand Social Credit Political League Inc v O’Brien [1984] 1 NZLR 84. C had been a member of D but had resigned. D had sued him for the misappropriation of its assets but had discontinued its action. Following other unsuccessful proceedings then brought by him against D, C issued proceedings against it for malicious prosecution of that action. In the light of his previous proceedings, his action was struck out as an abuse of process. In passing, however, Cooke J noted, at p 88, that in Jones v Foreman [1917] NZLR 798 a Full Court of the Supreme Court had adopted the observations in the Quartz Hill case in concluding that there was no general tort of civil malicious prosecution; that in modern times textbook writers had widely criticised the conclusion; and that in an appropriate case there was reason for the Court of Appeal to review it. Casey J added, at p 98, that the existence of the tort was certainly arguable. In Rawlinson v Purnell Jenkison and Roscoe (1999) 1 NZLR 479 an action in the High Court of New Zealand for malicious civil prosecution failed if only for want of proof of malice but Hammond J discussed whether, had malice been proved, the action could have been sustained. He recognised that, in the light of the statements in the New Zealand Social Credit case the existence of the tort was a live issue and, after addressing rival arguments of policy, he conjectured, at p 488, that it would be possible “to…constrain the cause of action, by confining it to the institution of proceedings which are really quasi-criminal in character, or reflect a particular kind of odour”.
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- In the United States there is the jurisprudence in relation to the tort of malicious prosecution of civil proceedings of which, at paras 165 to 196, Lord Neuberger provides a valuable survey. He demonstrates that the states of the union are almost equally divided between their adoption of the English Rule, which is set out in §677 of the Restatement of the Law, Torts, 2d (1977), and which broadly reflects the law of England and Wales following the curtailment of the extent of the tort by the observations in the Quartz Hill case, and their adoption of the American Rule, which is set out in §674 of the Second Restatement. There is no doubt that the general inability of a successful defendant to obtain an award of costs against the claimant in the states of the union has provided an extra spur to the adoption in many of them of the American Rule; so it would be wrong to place their approach in the front of the present analysis. It does not follow, however, that the ability in England and Wales to make an award of costs, even on an indemnity basis, eliminates the need for the law to be able to recompense the victims of malicious actions who have suffered substantial damage beyond the costs of defending themselves.
(a) (i) The spectre of being sued for malicious prosecution in the event of failure would inhibit litigants from bringing cases with merit and in good faith (Lord Neuberger, para 181). Ugly threats by prospective defendants with long pockets would drive prospective claimants from the seat of justice (para 184).
(ii) This argument deserves considerable respect. But it was, as it happens, considered and rejected by Parker CJ as long ago as 1713: para 55 above. Is his rejection still valid? If the litigant with a reasonable case and a proper purpose would otherwise be minded to trust the court fairly to appraise it, should we assume that he would not be minded to trust the court to discern the demerits of a case of malicious prosecution brought against him in the event of failure? The requirement of proof first of malice (notwithstanding that the concept extends beyond spite to where the predominant purpose is something other than the vindication of the law: Winfield and Jolowicz on Tort, 18th ed (2010), para 19-11) and then of the absence of reasonable cause places two high hurdles before a claimant. No evidence has been presented to the Board, for example from the states of the US which adopt the American Rule, of the chilling effect of the tort upon the honest bringing of litigation of arguable merit which this argument foretells. Should the law be shaped by concern about ugly threats of its misuse?
(b) (i) Litigation must have an end and so lack of success in one action should not generate another. A failed action for malicious prosecution might even generate a further such action by the original claimant (para 182).
(ii) But the law recognises the need to give victims of malicious prosecution the opportunity to initiate consequential litigation in relation to criminal prosecutions and to the disparate situations broadly encompassed by the English Rule. The law has therefore already seen fit to override the argument in the first sentence and the only remaining question relates to the extent to which it should do so. Is the scenario posed by the second sentence fanciful?
(c) (i) A perspective which ascribes curative power only to law-suits has limitations which should be cast off (para 183).
(ii) But what other curative power (Mr Paterson might ask) does the American progenitor of this reflection have in mind?
(d) (i) If few claimants will recover in the subsequent action, is there any point in recognising the expanded cause of action (para 183)?
(ii) But is this a principled approach to an analysis of legal rights?
(e) (i) Recognition of the general tort might open “floodgates” which would cause the legal system to be flooded and so would contaminate its ability to function effectively (para 190).
(ii) But how powerful is this argument in the absence of empirical evidence in support of it?
(f) (i) The present law draws a “bright line” on a “principled” and “logical” basis and departure from it would be “potentially confusing” and would cause “unnecessary uncertainty” (paras 194 and 195).
(ii) The whole drift of my judgment to this point shows why, with great respect to Lord Neuberger, I cannot subscribe to any part of this final proposition.
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- In the end I conclude that the arguments against renewed recognition of a tort of malicious prosecution of civil proceedings fail to override the need for the law to be true to the reason for its very existence. In X (Minors) v Bedfordshire County Council [1995] 2 AC 633 Sir Thomas Bingham MR referred, at p663, to “the rule of public policy which has first claim on the loyalty of the law: that wrongs should be remedied”. The word in the rule is “wrongs” as opposed to “misfortunes”: see Gorringe v Calderdale Metropolitan Borough Council [2004] UKHL 15, [2004] 1 WLR 1057, at para 2 (Lord Steyn). In Jones v Kaney [2011] UKSC 13, [2011] 2 AC 398, Lord Dyson said, at para 113:
“The general rule that where there is a wrong there should be a remedy is a cornerstone of any system of justice. To deny a remedy to the victim of a wrong should always be regarded as exceptional…any justification must be necessary and requires [to be] strict and cogent…”
The cumulative force of the suggested justifications for denying Mr Paterson a remedy for what can only be described as the wrong done to him by Sagicor fails in my view to measure up to these demanding standards. In determining his claim of malicious prosecution, the Board should be true to its primary loyalty.
BOTH TORTS: RECOVERY FOR ECONOMIC LOSS
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- Can general economic loss qualify as damage recoverable within the torts of malicious prosecution, whether criminal or civil, or of abuse of process? In the Land Securities case, cited above, C obtained planning permission to develop a site and D, who had offices opposite a related site owned by C, challenged the planning authority’s grant of permission by judicial review. C sued D for abuse of process, alleging that the purpose behind the application for judicial review was to put pressure on C financially to assist D to relocate its offices. C claimed damages for the loss occasioned by the delay in its ability to develop the site. The Court of Appeal held that C’s action had rightly been struck out. One ground was that the alleged purpose was sufficiently related to a successful outcome of the application for judicial review as not to be wrongful. But the main ground was that the tort did not enable recovery for general economic loss. Etherton LJ said that:
(a) in the Savile case, being one of malicious prosecution, Holt CJ had referred only to reimbursement for charges and expenses (para 54);
(b) Holt CJ had appeared to limit damages for purely pecuniary loss to the costs of defending them and there was nothing whatever in the Savile case to indicate that general economic loss was recoverable (para 55);
(c) the suggested recovery for general economic loss was “contrary to the whole approach” of the House of Lords in the Gregory case, in which Lord Steyn had gone no further than to quote Holt CJ’s description of the third type of recoverable damage (para 56);
(d) recovery for malicious prosecution of civil proceedings is confined on policy grounds to the three established heads of damage identified by Tindal CJ and recognised in the Quartz Hill case (para 67); and
(e) there was no sense behind having rules for recoverable damage which were more generous for abuse of process than for malicious prosecution (para 68).
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- I agree with the point made by Etherton LJ at (e) above. But, with respect, I disagree with the rest of his reasoning. I consider that he treats the words uttered by the Chief Justice 300 years ago too much as if they were enshrined in statute. He makes no allowance for the fact that the only claim there made was for out-of-pocket expenses, with the result that they were the focus of the judgment. Nor do I perceive Lord Steyn in the Gregory case to have grappled in any way with recovery for general economic loss. Indeed, having noted, at p424, that the claimant was including a claim for damages for financial loss consequent upon alleged damage to his employment prospects, Lord Steyn never reverted to it as constituting some further obstacle in his path to success.
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- In the Land Securities case Moore-Bick LJ adopted a somewhat softer approach to recovery for economic loss. He accepted, at para 99, that “there are arguments in favour of recognising other kinds of damage, including consequential economic loss, at least in cases where the predominant purpose of instituting proceedings has been to inflict such loss as a means of coercion but there is no clear authority which supports such a development of the law”. He accepted that some support for it was to be found in Australian cases and in the decision of the Court of Appeal in Speed Seal Products Ltd v Paddington [1985] 1 WLR 1327 but again, taking his cue from the generalised doubts expressed by Lord Steyn in the Gregory case, Moore-Bick LJ concluded at para 101, as did Mummery LJ at para 107, that there were insufficient grounds for holding that the tort of abuse of process extended to recovery for general economic loss.
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- I have reached the conclusion that the main ground of the decision in the Land Securities case is wrong. If economic loss has been caused by malicious prosecution of proceedings, whether criminal or civil, or by abuse of process, and if its causation was foreseeable (irrespective of whether, as in the present case, it was intended), preclusion of recovery for it should be the subject of principled justification. Yet I discern none. McGregor on Damages, 18th ed (2009), says, at para 38-007, under the heading of Malicious Criminal Prosecution, “as to pecuniary loss, loss of general business and employment should be recoverable; authority however is lacking”. But, reaching out to cases of malicious civil prosecution and to abuse of process, one can at least notice the following:
(a) In the Grainger case itself the claim included damages for loss “of all the benefits, profits and advantages” which would have accrued to the claimant from the four lost voyages to Caen (p 215, p 771). There seems to have been no issue but that the claimant should recover in that regard.
(b) In the Speed Seal case, cited above, D was a former employee of C, who sued D for alleged misuse of its confidential information in his new business. The question was whether D should be allowed to amend his defence so as to allege, by counterclaim, that, in so suing him, C was abusing the process of the court. It is not clear why the allegation was not framed as the foundation of an application to stay C’s action. At all events the decision of the Court of Appeal was that D’s invocation of the tort of abuse of process was arguable and could be pleaded by amendment. As Moore-Bick LJ observed in the Land Securities case, at para 99, D was clearly seeking to recover economic loss in one form or another resulting indirectly from the institution of the proceedings.
(c) In the Gibbs case, cited above, being, like the present, an appeal to the Board from the Court of Appeal of the Cayman Islands, C was the managing director of a bank and D was a detective inspector who had successfully applied to the court for a warrant to search C’s home on the basis that there were reasonable grounds for suspecting that he had benefited from drug-trafficking. The bank dismissed C. But the search yielded nothing which incriminated him. He was never charged. His action against D for malicious prosecution, namely of the application for the warrant, was upheld in the Court of Appeal and, by a majority, by the Board. D’s appeal to the Board did not include a challenge to the amount of the damages which had been awarded to C in the Court of Appeal, namely $616,281. But perusal of the judgment of Collett JA in that court, 1994-95 CILR 553, at p 610, shows, unsurprisingly, that they primarily comprised damages “for loss of employment remuneration and benefits forfeited since his enforced retirement from his former post”.
(d) Todd, the Law of Torts in New Zealand, 5th ed (2009), writes, at para 18.2.07, that “the third head of damage which may found a claim [for malicious prosecution] is property damage or economic loss. Loss in the practice of the plaintiff’s profession is an example”. The author there cites the Little case, in which the claimant alleged that the damage caused to him by the injunction included damage in the practice of his profession. In allowing most of the claim to proceed, the Appeal Division included the claim for economic loss.
MALICIOUS CIVIL PROSECUTION: SUMMARY OF CONCLUSIONS
78. (a) For my part, I am convinced that the common law originally recognised that the tort of malicious prosecution extended as much to that of civil as to that of criminal proceedings.
(b) But the early availability of an order for costs in favour of a successful defendant of civil proceedings often disabled him from proving the damage required by the tort, which for that reason, as well as for others, became – in practice – mainly focussed on criminal proceedings.
(c) The limitation on the scope of the tort of malicious prosecution of civil proceedings, cast by the observations made in the Court of Appeal in the Quartz Hill case, was justified by reasoning which is no longer valid.
(d) The disparate situations to which the tort of malicious prosecution of civil proceedings has been confined as a result of the observations in the Quartz Hill case are a rag-bag which include cases in which the gravity of the wrong (such as in the Roy case, in which the intended witness had, as a result of the malicious application for a bench warrant, been the subject of wrongful arrest and detention for 10 hours) would not approach its gravity in other cases of malicious prosecution of civil proceedings, such indeed as in the case before the Board.
(e) Insofar as the rationale for the tort of malicious prosecution is the inability of a successful defendant to sue a claimant for defamation in respect of allegations made maliciously in legal proceedings, it applies as much to civil as to criminal proceedings.
(f) In that (as Lord Steyn suggested in the Gregory case: see para 37 (b) above) a distinctive feature of the tort is that the defendant has abused the coercive powers of the state, it applies as much to civil as to criminal proceedings. There is no principle behind a redefinition of the distinctive feature as being an abuse of the coercive powers of the state only in criminal proceedings: that would be to generate a delineation of the contours of the tort in line only with what the draftsman of the redefinition subjectively preferred.
(g) Irrespective of the malice which may prompt assertions made in a defence and of the damage which may thereby be done to another person, it may be that defendants, like witnesses, cannot be said to be abusing the coercive powers of the state. They may therefore be beyond reach of the tort and their immunity may remain absolute. But I would leave this point open, as, albeit with a different emphasis, does Lord Kerr at paras 111-113.
(h) If no tort other than malicious prosecution is available to remedy the sort of wrong done to Mr Paterson, Lord Steyn’s observations in the Gregory case form no impediment to its recognition. On the contrary, they encourage it.
(i) A tort of malicious prosecution of civil proceedings should enable a claimant to recover damages for foreseeable economic loss beyond out-of-pocket expenses.
(j) The arguments of policy against restoration of a general tort of malicious prosecution of civil proceedings are worthy of respect but they are insufficiently strong to override the rule which has first claim. Perhaps also they fail to allow for the height of the hurdles which, as Lord Kerr explains in paras 109 and 110, confront a claimant in establishing, or even mounting an arguable case, not only that the defendant’s action lacked reasonable cause but that he prosecuted it maliciously.
(k) It might be possible to limit the ambit of the tort of malicious prosecution to civil proceedings of which the basis was an allegation which might have been the subject of a criminal charge. Sagicor’s allegation of Mr Paterson’s conspiracy to defraud would fall within that limited ambit and so, strictly, the Board does not need to consider whether it has any wider ambit. But, provisionally, I would oppose the introduction of that potentially troublesome distinction and would deprecate, as illogical, the denial of a remedy for damage done to the victim of a malicious prosecution, brought without reasonable cause, of any action irrespective of its basis.
(l) In that, as Lady Hale points out at para 84, control of abuse of legal proceedings is particularly well-suited to development in judge-made law, courts in future will need to monitor whether today’s reinstatement of a remedy for abuse of civil proceedings by their malicious prosecution is itself productive of abuse and, if so, to make any necessary adjustments to its effect.
DETERMINATION OF THE APPEAL
-
- Sagicor did not commit the tort of abuse of process. Henderson J found that the predominant factor which led Sagicor to allege fraud and conspiracy against Mr Paterson had been Mr Delessio’s obsessive determination to destroy him professionally. But he did not proceed to find that Mr Delessio intended to achieve Mr Paterson’s professional destruction other than through the initiation and successful prosecution of the action. One can only speculate why, in that he was aware that Mr Purbrick’s reports were not a proper basis for the allegations, Mr Delessio anticipated that the action would succeed. But Mr Jacob failed in his attempt to persuade the Court of Appeal that the judge should have found that Mr Delessio, and thus Sagicor, had no intention of bringing the action to trial. In the absence of a finding of that character Mr Delessio’s purpose cannot be regarded as outside the scope of the action.
-
- But in my view Sagicor committed the tort of malicious prosecution. Sagicor does not challenge the judge’s conclusion that, if the tort applied to civil proceedings, all four of its ingredients were present. The predominant purpose of Mr Delessio amounts to malice. Moreover the fact that he believed that Mr Paterson had defrauded Sagicor counts for nothing because of the absence of reasonable cause for any such belief. I propose that the Board should humbly advise Her Majesty that the appeal be allowed and that judgment be entered for Mr Paterson in the sum of $1.335m, the composition of which I have explained in para 29.
LADY HALE:
-
- It is always tempting to pray in aid what Sir Thomas Bingham MR referred to as “the rule of public policy which has first claim on the loyalty of the law: that wrongs should be remedied” (X (Minors) v Bedfordshire County Council [1995] 2 AC 633, at 663). But by itself that wise dictum does not tell us what the law should define as a wrong. Some conduct is wrongful whether or not it causes any damage – that is the essence of the tort or torts of trespass; other conduct is only wrongful if it causes particular types of damage – that was the essence of the action on the case; but not all conduct which causes such damage is wrongful. The tort or torts of wrongfully bringing legal proceedings are actions on the case and therefore can only lie if there is damage of the kinds specified in Savile v Roberts in 1698. But that is not enough. Instigating legal proceedings in good faith and with reasonable cause, even if they fail and even if they do damage in the Savile v Roberts sense, is not wrongful. Even maliciously instigating legal proceedings is not always, or even often, wrongful. So how is the wrong done by instituting legal proceedings to be defined?
-
- It would be understandable if there were no such wrong at all. Two policy reasons are cited against it. First, people should not be deterred from instigating criminal charges or bringing lawsuits by the fear of being sued if they fail. It does not matter that such tit-for-tat suits would usually fail. There would still be the so-called “chilling effect” of a potential liability, as Lord Hope pointed out in Jones v Kaney [2011] UKSC 13, [2011] 2 AC 398, at paras 130, 131. Second, once proceedings are over, the courts should not be troubled with further claims. Clearly, it cannot be open to every successful defendant to round upon his unsuccessful claimant or prosecutor, no matter how great the collateral damage. Defining the circumstances in which he can do so is fraught with difficulty, as this case shows. Hence both of the principal policy reasons given for declining a remedy in this case would support the denial of any remedy to anyone.
-
- But that such a wrong has been recognised by the law for centuries is incontrovertible. It is not suggested that this Board either can or should abolish the torts of malicious prosecution and abuse of process. We are faced with the task of discerning some rational principles which will enable us to define their boundaries. In an ideal world the separate torts of malicious prosecution and abuse of process might be brought together in a single coherent tort of misusing legal proceedings. This looks like a task much better suited to the Law Commission than to this Board. This Board can research the existing state of the law in this country (which will apply in the Cayman Islands unless there is some local legislation to the contrary). It can research the law in some comparable common law jurisdictions, but by no means all. But it does not have the resources to research and develop the policy arguments, conduct empirical research and consult the legal and general public on possible ways forward. It was for those reasons that I did not support the abandonment of the long-established principle of witness immunity in order to impose a duty of care upon certain professional witnesses in Jones v Kaney.
-
- But that was a case where there was (and remains) a clearly established immunity which the court was being invited to curtail. The majority felt able to take that radical step in the light of modern developments in the law and in pursuit of the first rule of public policy. They also felt that the judiciary were particularly well suited to develop the law relating to their own proceedings. This too is a case which is particularly well suited for judicial development: it is about the use and misuse of judicial proceedings; the law is entirely judge-made; and some would say that it is in a judge-made mess. If so, the judges should do what they can to sort it out. It is unfair to expect Parliament to do so.
-
- Here we have an established cause of action, for malicious prosecution or abuse of process, the boundaries of which are either unclear or make little sense in today’s world. We can all read Savile v Roberts in one or more of the ten law reporters’ versions. It was a case of malicious prosecution of criminal proceedings for riot. It contemplated that the action might also lie for the malicious prosecution of some proceedings of a civil nature. But for most civil actions there would be no damage of the requisite sort. That was clearly the view taken in Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674, where a remedy was granted for the malicious presentation of a winding up petition on the analogy of the previously recognised remedy for the malicious presentation of a bankruptcy petition.
-
- It is possible to characterise the list of cases in which claims for malicious prosecution of civil proceedings have been recognised as a “rag bag” or as a rational list of ex parte processes which do damage before they can be challenged. But that can be the only principle upon which they were singled out and today bringing an ordinary action can also do damage before it can be challenged, as this case shows only too well. It is particularly ironic that Mr Paterson would have done much better had he, too, been the subject of a freezing order, as the Hurlstone parties were. The judges who invented this modern form of advance protection also recognised that an unjustified grant might do damage which could not be compensated in other ways, so they extracted a so-called “undertaking in damages” which in fact is an undertaking to compensate. Such an undertaking bites even if the unsuccessful claimant was entirely without malice. But if he were malicious, the tort of malicious prosecution ought surely to extend to this modern form of pre-emptive coercive relief. The old reasons why the judges might have thought that simply bringing an action could do no damage have been exploded, as Lord Steyn recognised in Gregory v Portsmouth City Council [2000] 1 AC 419. If damage is done, why should it matter that it is done by the malicious obtaining of a search warrant or the malicious filing (and publicising) of a pleading alleging fraud?
-
- Nor does the distinction between bringing criminal proceedings in the public interest and bringing civil proceedings in one’s own private interest make much sense today, if it ever did. In the days when the Queen’s peace depended upon private citizens bringing criminal prosecutions, it might have been thought even more important that they should not be deterred from doing so by the prospect of allegations of malice if the prosecution failed. While it is obviously reprehensible maliciously and unjustly to put a person at risk of condign punishment, it is also obviously reprehensible maliciously and unjustly to bring proceedings in the hope of personal gain. Some might think it the more so, as the protection available to the accused in criminal proceedings is so much greater than that available to the defendant in civil proceedings. (In other words, the chances of your wicked plot succeeding are so much greater.) The importance of deterring claimants from bringing false and malicious claims and protecting their victims from this injustice is at least as great as the importance of not deterring honest claimants from bringing just claims. We do not know how real the claims of a chilling effect can be; we do know how real the injustice of being the victim of malicious proceedings can be.
-
- In Jain v Trent Strategic Health Authority [2009] UKHL 4; [2009] AC 853, Mr and Mrs Jain were ruined when their business was closed down in an ex parte procedure brought by the regulator without good cause. The House of Lords held that there was no duty of care, partly because the parties to litigation do not generally owe one another a duty of care and partly because regulators do have a duty of care towards the vulnerable people whom they are protecting, which could conflict with a duty of care to the people they are regulating. All that makes sense, although the Jains undoubtedly suffered a grievous injustice. But had the regulator been malicious, why should they not have had a cause of action in malicious prosecution? It is one thing to say that the regulator should not be liable for carelessness, and quite another to say that they should not be liable for malice.
-
- The Jains, of course, suffered from an ex parte remedy of the sort which has previously given rise to liability for malicious prosecution. They also suffered at the hands of a body performing public functions, which is a distinction favoured by Lord Sumption. But it cannot be accepted that malice only turns right into wrong when public officials are concerned. Intentionally causing physical or psychological harm is a tort which can be committed by anyone. Intentionally causing economic damage is not a tort, because that is the object of most business competition. But intentionally abusing the legal system is a different matter. That is not simply doing deals to damage the competitors’ business. It is bringing claims which you know to be bad in order to do so.
-
- For all these reasons, and for the reasons given by Lord Wilson and Lord Kerr, I agree that bringing a civil claim which you know to be bad and which results in damage to the defendant’s reputation, person, liberty, property or finances, comes within the scope of the tort of malicious prosecution and this appeal should succeed.
LORD KERR:
Introduction
-
- That Frank Delessio wanted to ruin Alastair Paterson is no longer open to doubt. It has been established that in July 2005 he said that he intended to drive Mr Paterson out of business and destroy him financially. He set about his mission in a determined fashion, engaging attorneys, having private investigators carry out surveillance of his intended victim, meeting a senior police officer about possible criminal activity on Mr Paterson’s part and issuing proceedings against him alleging fraud. He did not stop there. He caused an immensely damaging article concerning the allegations made against Mr Paterson in the proceedings to be published in the local press. It is not in dispute that the action brought by Sagicor and the publication of the article caused enormous damage to Mr Paterson’s professional reputation and that his business suffered hugely. The trial judge fixed the amount of professional losses suffered by Mr Paterson at CI$1.3m. He found that, if Mr Paterson had been able to maintain an action for abuse of process or malicious prosecution, damages of CI$35,000 would have been awarded for the distress, hurt and humiliation that he suffered.
-
- Mr Delessio failed to bring about Mr Paterson’s utter ruin. Although they do not amount to an unqualified vindication, the judge’s findings for the most part restore his reputation. But, if Mr Paterson fails in his claim for compensation, Mr Delessio’s campaign against him will have succeeded to no small extent.
Policy as an incentive for development of the law
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- The policy considerations which militate in favour of this species of tortious liability and those which are opposed to it have been marshalled and powerfully analysed by Lord Wilson and Lord Sumption. I do not attempt to rehearse all of these but will touch briefly on those that I consider are the most significant. As a general observation, however, it is right to recognise that conclusions on matters of policy in the legal context are not usually the product of empirical research. Customarily, they are formed instinctually and constitute, at most, informed guesswork about the impact that the selection of a particular policy course will have. While, therefore, policy considerations can, and on occasions must, underlie decisions as to how law should develop, it is necessary to recognise the inherent impossibility of making an infallible prediction about the outcome of a policy choice. Where possible, therefore, such a choice should be aligned with principle. In my view, fundamental principle has a large part to play in the resolution of the debate in this case. And the pre-eminent principle at stake here is that for every injustice there should be remedy at law.
-
- Mr Paterson has undoubtedly suffered an injustice. And, so far, the law has not afforded him a remedy. Those responsible for the injustice have been held to be immune from liability. As this court has said in Jones v Kaney [2011] UKSC 13, [2011] 2 AC 398, such an immunity must be justified. It is not enough that there are policy reasons, even compelling policy reasons, for retaining the immunity. Justification for its retention must be sufficiently powerful to warrant its retention as “necessary in the public interest” – per Lord Dyson at para 108 of Jones v Kaney.
The policy reasons for immunity from liability for malicious prosecution
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- It is suggested that the refusal to extend liability for malicious prosecution to civil proceedings is an instance of the law declining to afford a remedy for an obvious wrong because of the need to preserve intact the inviolability of legal proceedings from satellite or subsequent challenge; and that the demands of overall legal policy that the right to invoke the jurisdiction of the court should remain unfettered are so strong that they must trump Mr Paterson’s otherwise valid claim that his predicament should be legally recognised and alleviated.
-
- A second and related argument is that malicious prosecution is anomalous in that it runs counter to the well-established principles that there should be absolute immunity for things done and said in the course of legal proceedings and that malice does not transform an otherwise lawful act into a tortious condition. As a corollary to this, the claim is made that the exceptional nature of the tort is justified because it is a form of misfeasance in public office and that this public function foundation of the tort is not present in civil proceedings between private parties.
-
- Thirdly, it is suggested that to recognise the existence of the tort in the circumstances of Mr Paterson’s case will inevitably lead to its deployment in all manner of civil litigation. The fact that there are substantial difficulties in proving malicious prosecution will not operate as a deterrent to those aggrieved by the outcome of litigation.
The need for inviolability of legal proceedings and immunity from things done and said in legal proceedings
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- Those contemplating legal proceedings should not be deterred by the prospect of subsequent litigation challenging the propriety of their having invoked the jurisdiction of the court. But it is surely too glib to say that this will be the inevitable consequence of rendering liable those who have pursued baseless claims for improper motives. A litigant in this jurisdiction (and in the Cayman Islands) must confront the likelihood of an award of costs in the event of his failure. In the case of a claimant with a genuine and reasonable belief in the rightness of his cause, will that habitual deterrent be enhanced by the possibility that his opponent will embark on further proceedings against him? Lord Sumption suggests that the fact that few may succeed will not deter the many who will allege malice. I cannot share his confidence in that assertion. True it may be, as he suggests, that litigation sharpens men’s conviction of their own rightness and their suspicion of their opponents’ motives. But those who launch proceedings rarely do so without regard to the possibility of failure. And the possibility of failure in all but the clearest cases of malicious prosecution is very real indeed.
-
- Absolute immunity for things done and said in legal proceedings is not, in my opinion, infringed in any unacceptable way by recognition of liability for malicious prosecution in civil proceedings. Manipulation of the legal system lies at the root of the tort. A person will only be liable if he pursues a claim which has no foundation and which has, as its dominant purpose at least, an objective other than success in the claim. The underlying reason for immunity for what is said or done in litigation is surely the need to protect litigants who legitimately use the legal system to have perceived wrongs redressed or claims resisted. It should not be used as a charter for improper resort to legal proceedings to achieve an aim unrelated to their professed purpose.
-
- Evidence given in the course of proceedings – even perjured evidence – will continue to enjoy the immunity that Lord Hope described in Darker v Chief Constable of the West Midlands Police [2001] 1 AC 435 if tortious liability for malicious prosecution of civil proceedings is recognised. It is not sufficient to show that a claimant (or, for that matter, a defendant) has proffered perjured evidence for the tort to be made out. It must be established that a baseless claim has been pursued for a reason other than that ostensibly advanced by way of action or defence. What Lord Sumption describes (in para 125) as the underlying policy of the immunity will remain intact.
-
- The need for finality in legal proceedings and to avoid prolongation of unnecessary disputes must, of course, be considered. The suggestion made in some of the American cases, notably Norcross v Otis Bros & Co 25 A575 (1893) and Engel v CBS Inc 711 N E 2d 626 (1999), that permitting malicious prosecution claims in civil proceedings would lead to endless litigation seems somewhat fanciful. There is no evidence that this has in fact occurred in those states of America where the tort is recognised. And as Lord Atkin remarked in Ras Behari Lal v King Emperor (1933) 50 TLR 1, [1933] All ER Rep 723, “finality is a good thing, but justice is better”. Moreover, the evidential difficulties faced by a litigant seeking to establish the ingredients of malicious prosecution will militate strongly against the pursuit of pointless litigation in this field.
Does the tort of malicious prosecution require a public function element?
-
- I do not agree that the tort of malicious prosecution is limited to a form of misfeasance in public office. Nor do I believe that there is any logical or sound policy reason that it should be so confined. The essence of the tort is the illegitimate use by an individual of coercive legal powers to cause harm to another. There is no reason that these should be state sanctioned. As Lord Wilson has explained (in para 43), malicious prosecution claims were usually brought after unsuccessful criminal proceedings and the ingredients of the tort were fashioned so that victims of crimes (who were customarily the prosecutors) should not be unnecessarily deterred from bringing prosecutions by the prospect of a ready remedy against them following acquittal. But that incidental historical circumstance should not be used as a basis for introducing the further condition on the availability of the remedy that there must be a public function dimension in the malicious prosecution of proceedings.
-
- In Berry v British Transport Commission [1961] 1 QB 149, 159 Diplock J said that “the action on the case for malicious prosecution was available against a single defendant, and could be founded upon any form of legal proceedings, whether civil or criminal, brought maliciously and without any reasonable or probable cause against the plaintiff by the defendant.” Although this was obiter dictum, its correctness was not questioned in the Court of Appeal, [1962] 1 QB 306, despite the fact that Diplock J’s decision was reversed on other grounds.
-
- The decision in Savile v Roberts (1698) 1 Ld. Raym. 374 has been fully considered by Lord Wilson in paras 44-54 of his judgment. It is not necessary to discuss it further other than to point out that, as Lord Wilson has demonstrated in para 45, the reason that the action was not generally available in civil proceedings was that claimants were required to post pledges which could be drawn down in favour of victims of false claims. Moreover, Holt CJ observed that an action for mere vexation might lie on proof of “particular damage”. There is no suggestion in the judgment that a public function element was a prerequisite for a claim of malicious prosecution.
-
- Finally, the decision in Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674, although it asserted that malicious prosecution of ordinary civil actions could not lead to the types of damage that had been identified in Savile, did not suggest that the nature of the tort was as a form of or akin to misfeasance in public office. On the contrary, the issue of a winding up petition, which the court held could found an action for malicious prosecution, bears none of the hallmarks of state sanctioned action.
The possible proliferation of actions
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- The United States of America is the country where malicious prosecution of civil proceedings is most widely available. Lord Neuberger has conducted an extensive review of US jurisprudence in this area. As he has pointed out, there are sharply divided views among the judiciary of America as to whether what has been described as the American rule should be preferred to the English rule. What is notably absent from the various cases that Lord Neuberger discussed is any suggestion that adoption of the American rule has led to a significant increase in the number of cases based on malicious prosecution of civil proceedings. Colourful language has been used in some cases forecasting an avalanche of litigation but evidence for that having happened is conspicuously missing.
-
- This is unsurprising. Establishing the various rudiments of the tort of malicious prosecution is no easy task. Two particular elements constitute significant challenge by way of proof. It has to be shown that there was no reasonable or probable cause for the launch of the proceedings. This requires the proof of a negative proposition, normally among the most difficult of evidential requirements. Secondly, malice must be established. A good working definition of what is required for proof of malice in the criminal context is to be found in A v NSW [2007] HCA 10; 230 CLR 500, at para 91:
“What is clear is that, to constitute malice, the dominant purpose of the prosecutor must be a purpose other than the proper invocation of the criminal law – an ‘illegitimate or oblique motive’. That improper purpose must be the sole or dominant purpose actuating the prosecutor”.
-
- There is no reason that proof of malice in the civil context should be any less stringent. Together these requirements present a formidable hurdle for anyone contemplating the launch of a claim for malicious prosecution. In my view, no convincing case has been made that these substantial requirements will not act as a deterrent to frivolous claims.
The availability of claims for malicious defence
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- There is obvious logic in the suggestion that if a claim for malicious prosecution of civil proceedings is to be available, so must a claim for malicious defence of such proceedings. In Aranson v Schroeder, 671 A 2d 1023 (1995), the Supreme Court of New Hampshire recognised the “tort of malicious defense”. The court outlined the basis of the tort in the following passage from its judgment:
“One who takes an active part in the initiation, continuation, or procurement of the defense of a civil proceeding is subject to liability for all harm proximately caused, including reasonable attorneys’ fees, if:
(a) he or she acts without probable cause, i.e., without any credible basis in fact and such action is not warranted by existing law or established equitable principles or a good faith argument for the extension, modification, or reversal of existing law,
(b) with knowledge or notice of the lack of merit in such actions,
(c) primarily for a purpose other than that of securing the proper adjudication of the claim and defense thereto, such as to harass, annoy or injure, or to cause unnecessary delay or needless increase in the cost of litigation,
(d) the previous proceedings are terminated in favor of the party bringing the malicious defense action, and
(e) injury or damage is sustained.”
-
- Other states in America have been less ready to countenance the existence of a tort of malicious defence. In Young v Allstate Ins Co, 198 P.3d 666 (2008), the Supreme Court of Hawaii decried the possibility of such a basis for tortious liability, stating that as the party “hauled into court” the defendant had the right to vigorously defend itself against the plaintiff’s claims.
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- Whatever view one takes about recognition of a tort of malicious defence, it is possible, I believe, to remain sanguine about its likely prevalence. Again it must be proved that the defendant knew or had notice of the lack of merit of the basis on which the claim was resisted and persisted in it for a reason unrelated to its legitimate defence. These are not insubstantial requirements of proof. They represent significant evidential hurdles. There is no reason to suppose that the theoretical possibility of such a claim being made will translate to an explosion in the number of actions based on malicious defence.
Historical reasons for not extending liability for malicious prosecution to civil proceedings
-
- It is interesting to trace the various reasons given in the past for not recognising liability for malicious prosecution in civil proceedings. In Savile the availability of pledges posted by plaintiffs was considered to be an adequate means of compensating the victim of such proceedings. In the Quartz Hill case the judgment of the court rejecting the malicious allegation was considered to provide appropriate redress to the wronged defendant. Likewise in Wiffen v Bailey and Romford Urban District Council [1915] 1 KB 600 the simultaneous presentation of the poison (the unfounded allegation) and the antidote (its rejection by the court) was deemed a sufficient recompense for the wrongly accused defendant. In Quartz Hill, the recovery of costs against the unsuccessful claimant was treated as a factor justifying the refusal to contemplate the availability of a further remedy for malicious prosecution of civil proceedings. And this was perceived to be the basis for the English rule in some of the decided cases in America – see, for instance, Lord Neuberger’s reference at para 177 of his judgment to Ciparick J’s discussion of this issue in Engel.
-
- In Gregory v Portsmouth City Council [2000] 1 AC 419 Lord Steyn concluded that many of these reasons were no longer valid. At pp 427-428 he said:
“The traditional explanation for not extending the tort to civil proceedings generally is that in a civil case there is no damage: the fair name of the defendant is protected by the trial and judgment of the court. The theory that even a wholly unwarranted allegation of fraud in a civil case can be remedied entirely at trial may have had some validity in Victorian times when there was little publicity before the trial: see Little v Institute of Victoria (No 3) [1990] VR 257. However realistic this view may have been in its own time, it is no longer plausible. In modern times wide dissemination in the media of allegations in litigation deprive this particular reason for restricting the tort to a closed category of special cases of the support of logic or good sense. It is, however, a matter for consideration whether the restriction upon the availability of the tort in respect of civil proceedings may be justified for other reasons.”
“There is a stronger case for an extension of the tort to civil legal proceeding than to disciplinary proceedings. Both criminal and civil legal proceedings are covered by the same immunity. And as I have explained with reference to the potential damage of publicity about a civil action alleging fraud, the traditional explanation namely that in the case of civil proceedings the poison and the antidote are presented simultaneously, is no longer plausible. Nevertheless, for essentially practical reasons I am not persuaded that the general extension of the tort to civil proceedings has been shown to be necessary if one takes into account the protection afforded by other related torts. I am tolerably confident that any manifest injustices arising from groundless and damaging civil proceedings are either already adequately protected under other torts or are capable of being addressed by any necessary and desirable extensions of other torts”
-
- This passage is highly significant, in my opinion. In the first place. Lord Steyn felt that it was not necessary to extend the tort to civil proceedings. It seems to me implicit in this statement, that had he considered it necessary to do so, there was no impediment of principle that would have made the extension impossible. Secondly, he considered that extension was not required because manifest injustices arising from groundless and damaging proceedings were already catered for or were capable of being adequately addressed by appropriate extensions of other torts.
-
- Underlying Lord Steyn’s reasoning – and, indeed, the reasoning of earlier cases which refused to extend the tort to civil proceedings – is the rationale that manifest injustices suffered by victims of malicious prosecution of civil proceedings could be adequately redressed by other means – the verdict of the court, the award of costs, the availability of an action for defamation or the extension of other areas of tortious liability. No such rationale is possible here. In this case, the Board must frankly confront the reality that a manifest injustice will not be put right if Mr Paterson is denied the right to recover for the malicious prosecution of proceedings against him. To borrow Lord Steyn’s language, one cannot be “tolerably confident” that manifest injustices are adequately protected in the way that he envisaged. On the contrary this case is a graphic illustration of the inadequacy of alternative torts to afford Mr Paterson justice.
Conclusion
-
- The case for recognising the existence of the tort for civil proceedings as well as in criminal proceedings seems to me far more grounded in logic than the case for refusing to extend it. Although the private prosecutor may take on the mantle of the state in criminal proceedings and although the coercive power of the state may be present in the prosecution by the DPP of offences, the central and critical species of wrongdoing is the same in malicious prosecution of civil proceedings. It is the procuring by malice of the discomfiture (at least) or the ruin (not infrequently) of the person against whom the action is taken for reasons disassociated with the professed purpose of the proceedings. Proceedings motivated by nothing more than malice are capable of wreaking devastation whether in pursuit of criminal prosecution or private action. Where it can be demonstrated that the court’s procedures do not provide an adequate remedy (or in this case no remedy at all) there can be no logic for denying the person who has suffered the same harm by the institution of civil proceedings as he who has been the victim of criminal proceedings. Indeed, it is not difficult to envisage cases where the harm will be considerably greater.
LORD SUMPTION (DISSENTING):
-
- The tort of malicious prosecution was created in the seventeenth and eighteenth centuries to deal with the problem of abusive private prosecutions, which was then a serious social evil but has now almost entirely vanished as a result of the creation of public prosecuting authorities. As a result, the tort in its traditional form is now all but defunct. The majority of this court, however, proposes to expand its ambit so that it covers all civil litigation. I regret that I cannot agree that this is a justifiable development of the law. I would therefore have advised that the appeal should be dismissed and the judgments of the courts below affirmed. Both of them applied the law as the English courts right up the House of Lords have always held it to be.
General Considerations
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- Mr Paterson has clearly suffered an injustice. He has been dragged through the courts to answer allegations of dishonesty which were known to Mr Delessio to be unfounded but were maintained until a late stage of the proceedings. He has been publicly discredited in his profession. He and his companies have lost much of their business. He has been put to great expense to defend himself, not all of which will be recoverable as costs. That this has happened to him is, on the Judge’s findings, the result of the malice and dishonesty of Sagicor’s Vice-President. However, the injustice which he has suffered is not the only factor which can determine whether the law recognises a cause of action in tort. Defining the legal elements of a tort and the legal limitations upon its ambit will commonly involve a large element of policy which may conflict with the simple principle that for every injustice there should be remedy at law.
-
- Claims in respect of the initiation or conduct of litigation give rise to particular difficulty. The court has an inherent jurisdiction and extensive procedural powers to control its proceedings. The ordinary assumption is that these are apt to prevent abuse and injustice. In a case where their exercise is inappropriate or incapable of achieving that purpose, that is because the claimant is entitled to prosecute his proceedings and the only appropriate intervention by the court is to resolve them on their merits. In dealing with the risk that its process may be abused, the law has always been extremely reluctant to go beyond the exercise of the court’s procedural powers in a way that may fetter or deter access to justice or the right of parties to prosecute legally intelligible claims as they see fit.
-
- This is the basis of the general rule that a litigant owes no duty to his adversary in relation to the conduct of proceedings: see Commissioners of Customs & Excise v Barclays Bank plc [2007] 1 AC 181, Elguzouli-Daf v Commissionerr of the Metropolis [1995] QB 335. These and similar cases were rationalised by the House of Lords in Jain v Trent Strategic Health Authority [2009] AC 853. The Defendant local authority in that case made a successful ex parte application to a magistrate to close down a registered nursing home on the basis of a slipshod investigation and inaccurate information. The proprietors of the business successfully applied to have the order set aside, but the process took four months and by that time the business had been ruined. The House of Lords held that it owed no duty to the proprietors of the home for the basis on which they made the application. Lord Scott, with whom the rest of the committee agreed, said at para 35:
“Where the preparation for, or the commencement or conduct of, judicial proceedings before a court, or of quasi-judicial proceedings before a tribunal such as a registered homes tribunal, has the potential to cause damage to a party to the proceedings, whether personal damage such as psychiatric injury or economic damage as in the present case, a remedy for the damage cannot be obtained via the imposition on the opposing party of a common law duty of care. The protection of parties to litigation from damage caused to them by the litigation or by orders made in the course of the litigation must depend upon the control of the litigation by the court or tribunal in charge of it and the rules and procedures under which the litigation is conducted.”
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- It may fairly be said that there is a difference between the negligent and the dishonest conduct of litigation. But it is not a difference which has influenced this area of the law. Perjured evidence is necessarily dishonest, but it is well established that the perjurer is absolutely immune from civil liability. The rule was restated by Lord Hope, delivering the leading speech in Darker v Chief Constable of the West Midlands Police [2001] 1 AC 435, 445-446:
“This immunity, which is regarded as necessary in the interests of the administration of justice and is granted to him as a matter of public policy, is shared by all witnesses in regard to the evidence which they give when they are in the witness box. It extends to anything said or done by them in the ordinary course of any proceeding in a court of justice. The same immunity is given to the parties, their advocates, jurors and the judge. They are all immune from any action that may be brought against them on the ground that things said or done by them in the ordinary course of the proceedings were said or done falsely and maliciously and without reasonable and probable cause: Dawkins v Lord Rokeby (1873) LR 8 QB 255, 264, per Kelly CB. The immunity extends also to claims made against witnesses for things said or done by them in the ordinary course of such proceedings on the ground of negligence.”
The immunity applies in subsequent proceedings which seek to assert liability not just for things said or done in the face of the court in earlier proceedings but also for statements sufficiently closely connected with them, for example by a potential witness when a witness statement is taken from him: Watson v M’Ewen [1905] AC 480; Taylor v Director of the Serious Fraud Office [1999] 2 AC 177. As a general rule, it applies not just in subsequent actions for defamation but irrespective of the cause of action: Hargreaves v Bretherton [1959] 1 QB 45, and Marrinan v Vibart [1963] 1 QB 528. No doubt, in recent years, some inroads have been made into the full breadth of the principle. It no longer applies to expert witnesses: Jones v Kaney [2011] 2 AC 398. Nor does it exclude the liability of a barrister in negligence to his own client: Arthur J S Hall & Co v Simons [2003] 1 AC 615. But these inroads reflect the voluntary and contractual character of the participation of experts and lawyers. They do not discredit the underlying policy.
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- All of this derives from two developed legal instincts, both of them based on long experience, and both endorsed comparatively recently by Lord Steyn, giving the reasoning of the House of Lords in Gregory v Portsmouth City Council [2000] 1 AC 419 in terms which make more copious citation unnecessary. The first is a concern about the deterrent effect of potential liability upon litigants, who may be inhibited from invoking the jurisdiction of the courts; and upon witnesses, who may be inhibited from freely assisting in the administration of justice. Lord Steyn put it this way at p 426D of Gregory:
“In a democracy which upholds the rule of law, it is a delicate matter to allow actions to be brought in respect of the regular processes of the law. Law enforcement agencies are heavily dependent on the assistance and co-operation of citizens in the enforcement of the law. The fear is that a widely drawn tort will discourage law enforcement: it may discourage not only malicious persons but honest citizens who would otherwise carry out their civic duties of reporting crime. In the result malevolent individuals must receive protection so that responsible citizens may have it in respect of the hazards of litigation.”
The second instinct reflects a concern, in the interests of the efficient deployment of resources, to discourage secondary litigation in which the parties complain of the conduct of earlier litigation in what is potentially an unending sequence of actions upon actions. Explaining why the tort of malicious prosecution is narrowly defined, Lord Steyn said at p 426F-G:
“Telling lies about a defendant is not itself tortious: Hargreaves v Bretherton [1959] 1 QB 45. A moment’s reflection will show what welter of undesirable relitigation would be permitted by any different rule.”
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- These are not new problems. In England and other common law jurisdictions, actions seeking to impeach the propriety of earlier proceedings or the manner in which they were conducted have a long history, and the issues to which they give rise have provoked much judicial reflection. The case-law is testimony to the irrepressible persistence and optimism of litigants in cases good, bad or indifferent. It establishes two cognate torts both of which are subject to carefully formulated limits. The first is the tort of malicious prosecution which, with limited and anomalous exceptions, is confined to claims arising out of criminal prosecutions. The second is the tort of abuse of process, which enables a party to civil proceedings to recover damages in carefully circumscribed cases where the process of the court has been used for a wholly collateral purpose.
Malicious prosecution
“In an action for malicious prosecution the claimant must show first that he was prosecuted by the defendant, that is to say that the law was set in motion against him by the defendant on a criminal charge; secondly, that the prosecution was determined in his favour; thirdly that it was without reasonable and probable cause; fourthly, that it was malicious.”
This definition has appeared in successive editions of the work, and was adopted by the House of Lords in Gregory v Portsmouth City Council [2002] 1 AC 419, 426, and before that in Martin v Watson [1996] AC 74, 80.
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- On the findings of the judge in the present case, all of these elements are present except for the first. Mr Delessio did not set in motion proceedings on a criminal charge. He caused Sagicor to initiate a civil claim for damages. It follows that the appellants’ case under this head depends on the argument that the ambit of the tort should be extended from malicious criminal prosecutions to any malicious civil proceedings.
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- This question was directly considered by the House of Lords in Gregory v Portsmouth City Council [2000] 1 AC 419. The appeal did not arise out of a civil action but out of the internal disciplinary proceedings of a local authority. Mr Gregory was a councillor of the City of Portsmouth. He had been removed from all the committees on which he sat after a disciplinary proceeding for breach of the Council’s code of conduct. He successfully applied for judicial review, obtained an order quashing the decision, and then began an action for malicious prosecution. The action came before the House on his appeal from the decision of the courts below to strike it out. The appeal was dismissed on the ground that an action for malicious prosecution was not available for the abuse of disciplinary proceedings. However the case necessarily raised the broader question whether the tort was or should continue to be confined to the abuse of criminal prosecutions. This issue had been fully argued in the Court of Appeal by reference to English, Commonwealth and United States authority, and had generated an eloquent dissenting judgment from Schiemann LJ proposing its extension to civil proceedings generally (1997) 96 LGR 569. In the House of Lords, it was expressly raised in the statement of issues: see [2000] 1 AC 419, pp 425-426. After full argument on the point, Lord Steyn, giving the leading judgment of a unanimous committee, held that “in English law, the tort of malicious prosecution has never been held to be available beyond the limits of criminal proceedings and special instances of abuse of civil legal process.” In response to the Appellants’ invitation to extend the ambit of the tort, Lord Steyn declined to extend them to disciplinary proceedings: pp 428-432. And, while recognising that there was a stronger case for extending them to civil actions, he declined to do so for “essentially practical reasons”, namely that “any manifest injustices arising from groundless and damaging civil proceedings are either already adequately protected under other torts or are capable of being addressed by any necessary and desirable extensions of other torts”: pp 432-433. In other words, the House did not envisage an extension of the tort of malicious prosecution, but a possible extension of other torts to cater for the more egregious injustices.
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- It has sometimes been suggested that the rationale for the distinction between civil and criminal proceedings is that in a civil proceeding the judgment of the court rejecting the allegation is a sufficient vindication of the defendant’s reputation and the award of costs a sufficient compensation for the expense. This appears to have been the view of Bowen LJ in Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674, 690. The same suggestion was made by Buckley LJ in Wiffen v Bailey and Romford Urban District Council [1915] 1 KB 600, 607, and Sir John Beaumont delivering the advice of the Privy Council in Mohamed Amin v Jogendra Kumar Bannerjee [1947] AC 322, 331. But as Lord Steyn pointed out in Gregory at p 432G-H, the factual premise of this explanation is not convincing. In the Court of Appeal 96 LGR 569, 594, Walker LJ doubted whether it ever had been. I respectfully agree. The defendant may suffer serious and irreversible damage to his reputation and business before the proceedings can be brought to judgment, as the facts of this and other cases illustrate. Assessed costs, even if awarded on an indemnity basis, are almost always less than a full indemnity and do not extend to losses attributable to the diversion of the defendant’s time and energy to the litigation. But the explanation is unsatisfactory for a far more fundamental reason than this, namely that it does not explain the particular elements of the tort. In particular it does not explain why proof of malice should be required in order to give rise to tortious liability for a baseless criminal prosecution.
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- Malice is as a general rule irrelevant to liability in tort. The principle was finally established by the decision of the House of Lords in Bradford Corpn v Pickles [1895] AC 587. It was restated by Lord Watson in Allen v Flood [1898] AC 1, 92, in terms which have been adopted or paraphrased by judges and writers ever since that case was decided:
“Although the rule may be otherwise with regard to crimes, the law of England does not, according to my apprehension, take into account motive as constituting an element of civil wrong. Any invasion of the civil rights of another person is in itself a legal wrong, carrying with it liability to repair its necessary or natural consequences, in so far as these are injurious to the person whose right is infringed, whether the motive which prompted it be good, bad, or indifferent. But the existence of a bad motive, in the case of an act which is not in itself illegal, will not convert that act into a civil wrong for which reparation is due. A wrongful act, done knowingly and with a view to its injurious consequences, may, in the sense of law, be malicious; but such malice derives its essential character from the circumstance that the act done constitutes a violation of the law.”
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- There are two significant exceptions to this principle. The first is the tort of conspiracy to injure, where the existence of a dominant intention to injure the plaintiff may make actionable conduct which would otherwise be lawful. This has generally been regarded as sui generis, and is usually justified by reference to the especially pernicious effect of combinations. The second exception comprises a limited category of causes of action in which the essence of the tort is the abuse of a public function for some collateral private purposes of the person performing it. This may be (and generally is) established by proof of targeted malice. The paradigm case is the tort of misfeasance in public office, which in its modern form dates back to the decision in Ashby v White (1704) 14 St Tr 695. The tort may be committed by any person performing a public function notwithstanding that he is not actually employed in the public service: Henly v Lyme Corporation (1828) 5 Bing 91, 107-108. As Lord Steyn put it in Three Rivers District Council v Governor and Company of the Bank of England (No 3) [2003] 2 AC 1, 190, malice is a condition of liability notwithstanding the general rule that it is irrelevant in the law of tort, because “the rationale of the tort is that in a legal system based on the rule of law, executive or administrative power ‘may be exercised only for the public good’ and not for ulterior and improper purposes.”
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- The origins of the tort are colourful, archaic and technical. It arose out of the peculiarity of English legal history that until the creation in the 1830s of the first public police forces with prosecuting powers, almost all prosecutions were private prosecutions. They were brought by private individuals, generally the victims, or occasionally by public officers in their personal capacity. The private prosecutor nevertheless brought his indictment in the name of the Crown, and performed an essentially public function. The fact that the state’s coercive powers were invoked by a private individual, who controlled both the initiation and conduct of the proceedings, gave rise to frequent abuse, which was a constant preoccupation of the law from the thirteenth to the nineteenth centuries. It led to the early development of the tort of conspiracy, one of the first torts to be recognised in English law. Originally statutory, but subsequently developed by the common law in the course of the fourteenth and fifteenth centuries, the essential features of the early tort of conspiracy was the combination of two or more persons falsely and maliciously to indict or appeal another person of treason or felony: see Holdsworth, A History of English Law, 2nd ed, viii (1937), 378-379, 385, and the citation from March’s Actions for Slaunder at p 385n5. It was not available for the malicious prosecution of civil actions.
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- The action on the case for malicious prosecution emerged from the shadow of the law of conspiracy in the sixteenth century. The most satisfactory account of this development is that of Professor Baker in The Oxford History of the Law of England, vi (2003), 797. It appears to have originated in the qualified privilege enjoyed by a prosecutor in a subsequent action for slander. The prosecutor’s defence of lawful prosecution was anticipated by a plea of malice which, if proved, defeated the privilege. The analogy with defamation was occasionally drawn in later periods, notably by Bowen LJ in Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674, 692. But, it has never been exact, and as a rationalisation of the tort it became redundant once statements in the course of legal proceedings were recognised as enjoying not just qualified but absolute privilege.
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- For many years, actions for malicious prosecution were rare, because the judges discouraged them. In 1664, the judges adopted the practice when presiding at criminal trials of refusing to release the original indictment to a defendant who had been acquitted, unless they were convinced that there had never been any foundation for the prosecution. This made it impossible under the then rules of evidence to bring an action for malicious prosecution. The reason for this judicial hostility, as Blackstone explained in his Commentaries, III.8, was the state’s dependence on private prosecutors to enforce the criminal law and the danger that they would be inhibited if they were exposed to retaliation. “It would be a very great discouragement to the public justice of the Kingdom,” he wrote, “if prosecutors, who had a tolerable ground of suspicion, were liable to be sued at law whenever their indictments miscarried.” In 1811, however, the judges’ practice fell away when it was held that the plaintiff in an action for malicious prosecution could prove the contents of the indictment without the original. This development opened the floodgates to unmeritorious actions in tort by acquitted defendants. The first half of the nineteenth century was the great age of such actions, many of which were tools of blackmail, harassment and extortion. The consequences are vividly described by Professor Hay in his essay “Prosecution and Power. Malicious Prosecution in the English Courts, 1750-1850” (Policing and Prosecution in Britain 1750-1850, ed. Hay and Snyder (1989), Chapter 8). Against this background, the tort of malicious prosecution provided the only means available to the common law of deterring the abuse of private prosecutions.
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- Eighteenth and nineteenth century judges were no more inclined than their modern successors to declare large general principles beyond the requirements of the case in hand. It is, however, clear that the rationale of the tort, the relevance of malice as one of its elements and the reason why it was treated as an exception to the absolute immunity attaching to things done and said in the course of legal proceedings, all lie in the public character of the function performed by the prosecutor. This accounted for both the continued existence of the tort and its limitations. In particular, it accounted for the fact that it was confined to the abuse of criminal proceedings.
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- Lord Wilson considers, adopting the view of Fleming, that the limitation of the tort to criminal proceedings was a distortion introduced into the law by the obiter dictum of the Court of Appeal in Quartz Hill Consolidated Gold Mining Company v Eyre (1883) 11 QBD 674. But this view is unsound. It has been a cardinal feature of the law relating to malicious prosecution from its inception. For nearly three centuries, the leading case on the elements of the tort was Savile v Roberts (1698) 1 Ld Raym 374. This famous case was decided just six years before the closely analogous tort of misfeasance in public office was authoritatively defined in Ashby v White (1704) 14 St Tr 695. Holt CJ reaffirmed the existence of the action for malicious prosecution of criminal proceedings and defined its ambit in the face of objections that it had become anomalous and redundant. One of the objections was that “there is no more reason that an action should be maintainable in this case than where a civil action is sued without cause, for which no action will lie.” Rejecting this argument, at p 379, Holt CJ said that the two processes were not comparable, for two reasons. One was that the malicious prosecution of crime was an abuse of a public function, whereas a civil action was undertaken for private purposes. The other was that costs were recoverable in civil proceedings but not in criminal ones. Holt CJ dealt with the point as follows:
“There is a great difference between the suing of an action maliciously, and the indicting of a man maliciously. When a man sues an action, he claims a right to himself, or complains of an injury done to him; and if a man fancies he has a right, he may sue an action… If then the law will permit a man to make a false claim out of a court of justice, a fortiori when he proceeds to assert his right in a legal course. The common law has made provision, to hinder malicious and frivolous and vexatious suits, that every plaintiff should find pledges, who were amerced, if the claim was false; which judgment the court heretofore always gave, and then a writ issued to the coroners, and they affeered them according to the proportion of the vexation. See 8 Co 39 b F N B 76 a. But that method became disused, and then to supply it, the statutes gave costs to the defendants. And though this practice of levying of amercements be disused, yet the court must judge according to the reason of the law, and not vary their judgments by accidents. But there was no amercement upon indictments, and the party had not any remedy to reimburse himself but by action.”
In a passage that at first sight may be thought to contradict his rejection of liability for the malicious conduct of civil proceedings, Holt CJ added:
“If A sues an action against B for mere vexation, in some cases upon particular damage, B may have an action; but it is not enough to say that A sued him falso et malitiose, but he must shew the matter of the grievance specially, so that it may appear to the Court to be manifestly vexatious. 1 Sid 424, Daw v Swaine, where the special cause was the holding to excessive bail.”
It is clear from the reference to Daw v Swaine that Holt CJ in this passage was talking about the action for malicious and vexatious arrest or distraint of goods, which was subsequently subsumed in the action for abuse of process. In Salkeld’s report of the same case (1 Salk 13, 14), it is expanded as follows:
“…but yet if one has a cause of action to a small sum, and take out a latitat to a very great sum, or has no cause of action at all, and yet maliciously sues the plaintiff to the intent to imprison him for want of bail, or do him some special prejudice, an action of the case lies; but then it is not enough to declare generally, that he brought an action against him ex malitia & sine causa, per quod he put him to great charge, &c. but he must shew the grievance specially, as in 1 Sid. 424, sc. whereas he owed the defendant 100l. he sued him for 500l and to hinder him from bail affirmed to the sheriff 500l was due, per quod he was imprisoned for want of bail; or 1 Saund. 228, for that the defendant intending to procure his imprisonment, where there was no cause of action, or without any cause of action, sued him in an action for 300l whereupon he was arrested and imprisoned, &c.”
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- Of Holt CJ’s two reasons, the first, relating to the public character of the functions of a criminal prosecutor was much the most significant and has proved to be the most fertile in the subsequent development of the law. The same point was made a decade later by Parker CJ in Jones v Givin (1713) Gilb KB 185, 186-187, where a similar objection was raised to the tort of malicious prosecution, namely that it had no counterpart in civil litigation. His response was that a civil litigant was allowed a degree of latitude which was not appropriate for a prosecutor seeking the punishment of the accused by the state:
“I choose to say there is a great difference between the two cases. Because the demand of right or satisfaction is more favoured than the bringing to punishment. An action is to recover his right, or satisfaction for it, perhaps his subsistence… And it is observable, that in actions of conspiracy, in cases of appeals, the plaintiffs in appeals never were made defendants, but in case of judgments the prosecutors for the most part were.”
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- From the outset of the modern history of the tort, the reason why proof of malice was required was that it negatived the public character of the prosecutor’s performance of his functions, and exposed him to liability which would not have attached to the proper albeit misguided performance of a public function. Restating the position in the leading modern case, Gregory v Portsmouth City Council [2000] 1 AC 419, 426, Lord Steyn observed that “a distinctive feature of the tort is that the defendant has abused the coercive powers of the state.” As the context of this remark demonstrates, what Lord Steyn meant by the “coercive power of the state” was its power to punish.
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- There is a small and anomalous class of civil cases in which an action has been held to lie for maliciously procuring an order of the court. Of these the only one of any real significance in modern conditions is the action for maliciously presenting a winding up petition (Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674). Other, less common special cases are procuring a search warrant without reasonable cause (Gibbs v Rea [1998] AC 786) or a bench warrant of arrest (Roy v Prior [1971] AC 470), maliciously setting in train a process of execution against property (Clissold v Cratchley [1910] 2 KB 244), and maliciously procuring the arrest of a ship (The Walter D Wallet [1893] P 202). All of these cases involved ex parte interlocutory orders improperly procured by the person initiating the proceedings, in circumstances where in the nature of things there would never be a final order. Such orders give rise to rather special considerations. They were reviewed by the House of Lords in Gregory v Portsmouth City Council [2000] 1 AC 419, 427-428 and treated as examples of the ex parte abuse of the court’s coercive powers whose existence did not in itself justify a wider ambit for the tort of malicious prosecution. I respectfully agree with the analysis of these cases in Lord Neuberger’s judgment, by reference to the United States case-law.
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- It is in my opinion entirely clear that on the law as it presently stands there is no action for the malicious prosecution of civil proceedings outside the special case of malicious winding up petitions and a small number of analogous ex parte proceedings. The question is therefore whether the Board should develop the law so that this long-standing limitation on the reach of the tort is swept away. I acknowledge the attraction of doing so on the extreme and unpleasant facts of this case. But if the law is to be developed, it must be done in a manner which is principled, leaves it coherent across cognate subject areas, and does not simply resolve one problem at the cost of creating many more. Even if judges were Herculean, it would be pointless for them cut off the head of the Lernaean Hydra merely to see it grow two more in its place.
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- First, and fundamentally, the distinction between civil proceedings and criminal prosecutions is neither arbitrary nor unsatisfactory. Malicious prosecution is in modern conditions an anomalous tort. It was devised to meet a particular social problem, associated with the private prosecution of crime, which hardly exists today. It would be eccentric to enlarge the anomaly by extending liability to civil proceedings to which it has never previously applied. The tort is an exception to two well-established principles of English law, namely the principle that things done and said in the course of legal proceedings are absolutely immune from civil liability, and the principle that malice does not make an otherwise lawful act tortious. These exceptional features of the tort of malicious prosecution are justifiable only because the tort of malicious prosecution is a form of misfeasance in public office. It is a tool for constraining the arbitrary exercise of the powers of public prosecuting authorities or private persons exercising corresponding functions. A malice-based tort makes no sense in the context of private litigation where the plaintiff is not exercising any public function. Nor is there any justification in that context for making a further substantial inroad into the immunity from civil liability for things said and done in the course of legal proceedings.
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- Secondly, within the last few years, the House of Lords has held in Gregory v Portsmouth City Council [2000] AC 419 that the tort of malicious prosecution does not (with immaterial exceptions) extend beyond the abuse of criminal proceedings, and has declined to expand its scope. The House’s refusal to expand the scope of the tort so as to embrace civil proceedings other than disciplinary proceedings was obiter. However, there are dicta and dicta. The application of the tort to the abuse of civil proceedings was decided in Gregory because it was important to settle it: see Lord Steyn at p 432F-G. It had been fully argued both in the Court of Appeal and in the House, and the answer given at both levels was as carefully considered as any ratio decidendi. Schiemann LJ’s dissenting judgment in the Court of Appeal, which raised all of the points which are now urged upon the Board, was rejected. Nothing has changed since 2000 to undermine the authority of the Committee’s statement of the law. No considerations have been urged upon the Board to suggest that the common law of the Cayman Islands on this point should differ from that which applies in England and will continue to apply in England, at least until the point reaches the Supreme Court. There are no features of the present case which distinguish it from Gregory except that one is bound to have more sympathy for Mr Paterson. The conduct of Mr Delessio, for which the respondent is vicariously liable, was appalling. But the respondent was nevertheless entitled to defend the counterclaim on the basis of the common law as the House of Lords had so recently declared it, and Henderson J and the Court of Appeal were both entitled and bound to apply it. Litigants are entitled to a measure of stability and predictability in this relatively well-trodden area of law.
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- Third, the precise ambit of the tort, if it extends to civil proceedings of a private nature will be both uncertain and potentially very wide. The Board would have created a new malice-based tort the gist of which is the malicious initiation of baseless proceedings in a manner which damages the reputation of the victim. But if that is to be the essence of the tort, then it ought in principle to apply to the malicious abuse of disciplinary proceedings, the very proposition which the House of Lords was not prepared to accept in Gregory. Logically, it would also apply to any factual case advanced in civil proceedings which maliciously and baselessly discredited another party, including a case advanced by a defendant or a third party. Logically it would extend to cases where the action was not maliciously brought but the plaintiff gave malicious evidence, or indeed to a case where a witness who was neither the plaintiff nor the directing mind and will of the plaintiff gave malicious evidence. In the case presently before the Board, the particular abuse consisted in the introduction of a baseless allegation of fraud. But if the tort is extended to the conduct of civil proceedings, there is nothing in logic to suggest that liability can be limited to such cases.
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- Finally, there are real concerns about the practical consequences of any extension of the law in this area which would offer litigants an occasion for prolonging disputes by way of secondary litigation. It is no answer to these concerns to say that the bar can be set so high that few will succeed. Malice is far more often alleged than proved. The vice of secondary litigation is in the attempt. Litigation generates obsession and provokes resentment. It sharpens men’s natural conviction of their own rightness and their suspicion of other men’s motives. It turns indifference into antagonism and contempt. Whatever principle may be formulated for allowing secondary litigation in some circumstances, for every case in which an injustice is successfully corrected in subsequent proceedings, there will be many more which fail only after prolonged, disruptive, wasteful and ultimately unsuccessful attempts.
Abuse of process
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- Abuse of process emerged as a tort considerably later than malicious prosecution and differs from it in significant respects. It applies to the initiation or conduct of civil proceedings. It is not necessary to prove malice. It is not necessary to show that the proceedings have gone to judgment. It is not even necessary to show that they were baseless, although in practice they often will be. The essence of the tort is the abuse of civil proceedings for a predominant purpose other than that for which they were designed. This means for the purpose of obtaining some wholly extraneous benefit other than the relief sought and not reasonably flowing from or connected with the relief sought. The paradigm case is the use of the processes of the court as a tool of extortion, by putting pressure on the defendant to do something wholly unconnected with the relief, which he has no obligation to do. Such cases are extremely rare. Although there is a moderately substantial body of case-law, there are only two reported cases in England in which the action has succeeded, both involving the now obsolete procedures for the arrest of debtors, which had an obvious potential for abuse. No case has succeeded in England since 1860, although Australian litigants appear to have been both more persistent and more successful. Like the tort of malicious prosecution as it was conceived to be before this case, abuse of process is on the verge of extinction, the only recent sightings being in Australia.
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- The origin of the tort is the decision of the Court of Common Pleas in Grainger v Hill (1838) 4 Bing NC 212, a case expressly decided on the footing that there was no previous authority. It arose out of the right of a creditor to sue for a writ of capias ad respondendum, an ex parte administrative process by which a writ was issued to a creditor upon his verifying the debt on affidavit. The writ directed the sheriff to arrest the debtor to require him to answer the claim. These particular creditors had lent money to a shipowner, secured by a mortgage of his ship. Being concerned about the adequacy of their security, they threatened to have him arrested before the debt was due, unless he repaid it early. They then procured the writ and endorsed it with a direction to the sheriff’s officers that if the defendant could not find bail, they were to take the ship’s register, without which it could not trade. Neither the creditors nor the sheriff’s officers had any right to the ship’s register. In a subsequent action by the debtor on the case, the creditors applied for a non-suit, arguing that the merits of their earlier action had never been decided judicially and that there was no averment in the pleadings of a want of “reasonable and probable cause”. This argument was substantially based on the law relating to malicious prosecution. Rejecting it, Tindal CJ said, at 221:
“The second ground urged for a non-suit is, that there was no proof of the suit commenced by the defendants having been terminated, But the answer to this, and to the objection urged in arrest of judgment, namely the omission to allege want of reasonable and probable cause of the defendants’ proceeding, is the same, that this is an action for abusing the process of the law, by applying it to extort property from the plaintiff, and not an action for malicious arrest or malicious prosecution, in order to support which action the termination of the previous proceeding must be proved, and the absence of reasonable and probable cause be alleged as well as proved. In the case of a malicious arrest, the sheriff at least is instructed to pursue the exigency of the writ: here the directions given, to compel the plaintiff to yield up the register, were no part of the duty enjoined by the writ… [The plaintiff’s] complaint being that the process of the law has been abused to effect an object not within the scope of the process, it is immaterial whether the suit which that process commenced has been determined or not, or whether or not it was founded on reasonable and probable cause.”
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- The only other reported English case in which such an action has succeeded is Gilding v Eyre (1861) 10 CB (NS) 592, which concerned another ex parte process by way of enforcement. The defendant was a judgment creditor who had obtained a writ of capias ad satisfaciendum. This was a writ directing the sheriff to arrest the debtor and unless he satisfied the judgment to produce him in court. The writ in Gilding was endorsed with a direction to levy a sum substantially exceeding the true amount due. The debtor tendered the amount actually due but refused to pay the balance. He was therefore arrested by the sheriff’s officers and had to pay the balance to obtain his release. Willes J, delivering the judgment of the Court of Common Pleas, said at p 604:
“In the present case, the complaint is not that any undetermined proceeding was unjustly instituted. The alleged cause of action is, that the defendant has maliciously employed the process of the court in a terminated suit, in having by means of a regular writ of execution extorted money which he knew had been already paid and was no longer due on the judgment.”
“In the sense requisite to sustain an action, the term ‘abuse of process’ connotes that the process is employed for some purpose other than the attainment of the claim in the action. If the proceedings are merely a stalking-horse to coerce the defendant in some way entirely outside the ambit of the legal claim upon which the court is asked to adjudicate they are regarded as an abuse of process for this purpose, and as, ex hypothesi the final judgment however given will have no reference to the ulterior purpose, there is no necessity to await the irrelevant determination.”
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- Once the tort had been established, the courts consistently declined to extend it so as to cover cases in which the defendant was genuinely seeking the relief prayed in the writ but for an ulterior motive, even if that motive were malicious or improper. Insolvency proceedings were, and perhaps still are commonly initiated with a view to obtaining some benefit which will flow from the insolvency other than the recovery of the debt or a dividend. In King v Henderson [1898] AC 720, the creditor intended to obtain the dissolution of his partnership with the debtor, which would automatically follow from his bankruptcy. In the Australian case of Dowling v Colonial Mutual Life Assurance Society Ltd (1915) 20 CLR 509, the creditor hoped to discover from the bankrupt’s examination who had instigated him to make certain defamatory statements. In neither case was the creditor’s conduct tortious. He truly wanted a bankruptcy order, which was the purpose for which the proceedings were designed. Once that was demonstrated, the reason why he wanted it no longer mattered. In Dowling, Isaacs J put the point in this way at pp 521-522:
“If the object sought to be effected by the process is within the lawful scope of the process, it is a use of the process within the meaning of the law, though it may be malicious, or even fraudulent, and in the circumstances the fraud may be an answer; if, however, the object sought to be effected by means of the process is outside the lawful scope of the process, and is fraudulent, then – both circumstances concurring – it is a case of abuse of that process, and the court will neither enforce nor allow it to afford any protection, and will interpose, if necessary, to prevent its process being made the instrument of abuse.”
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- In England, perhaps the most striking modern illustration is the decision of the Court of Appeal in Goldsmith v Sperrings Ltd [1977] 1 WLR 478. The background to this decision was the well-established rule of English law that the distributors as well as the authors and publishers of a libel, are liable in an action for defamation. The question at issue was whether Sir James Goldsmith was entitled to sue the distributors of Private Eye for libel, with a view to making it impossible for the magazine to continue in business. This was to be achieved by putting pressure on the distributors to settle on terms that they ceased to distribute it. An application to stay or dismiss the proceedings as an abuse of process failed for a number of reasons, one of which was that Sir James’s objective was not in the relevant respect extraneous to the proper purpose of the proceedings. This was because, although he could not have got an order from the court preventing the distribution of Private Eye, a claim for damages against the distributors was a proper use of the court’s process and a settlement of such a claim on whatever terms the parties might fairly agree was simply a consequence of the distributors’ potential liability. It could not therefore be regarded as an abuse. Bridge LJ, at p 503 dealt with the applicant’s submissions on abuse of process in terms which go to the heart of the issue. Answering the question what is meant by a “collateral advantage” in the context of this tort, he said:
“The phrase manifestly cannot embrace every advantage sought or obtained by a litigant which it is beyond the court’s power to grant him. Actions are settled quite properly every day on terms which a court could not itself impose upon an unwilling defendant. An apology in libel, an agreement to adhere to a contract of which the court could not order specific performance, an agreement after obstruction of an existing right of way to grant an alternative right of way over the defendant’s land – these are a few obvious examples of such proper settlements. In my judgment, one can certainly go so far as to say that when a litigant sues to redress a grievance no object which he may seek to obtain can be condemned as a collateral advantage if it is reasonably related to the provision of some form of redress for that grievance. On the other hand, if it can be shown that a litigant is pursuing an ulterior purpose unrelated to the subject matter of the litigation and that, but for his ulterior purpose, he would not have commenced proceedings at all, that is an abuse of process. These two cases are plain; but there is, I think, a difficult area in between. What if a litigant with a genuine cause of action, which he would wish to pursue in any event, can be shown also to have an ulterior purpose in view as a desired byproduct of the litigation? Can he on that ground be debarred from proceeding? I very much doubt it.”
-
- Perhaps the most illuminating analysis of the question is to be found in the majority judgments in the High Court of Australia in Williams v Spautz (1992) 174 CLR 509. Dr. Spautz had been dismissed from his lectureship at the University of Newcastle for persisting in a campaign against another academic member of the university after being required by the university’s council to desist. He instituted 32 actions against the university and various of its members, in which he made allegations of criminal libel, conspiracy, perverting the course of justice and the like. Some of those whom he had sued began separate proceedings against him seeking declarations that his actions were an abuse of process. The trial judge found that Dr Spautz’s predominant purpose was to put pressure on the university to reinstate him or to settle his claims on favourable terms. Other, subordinate, purposes, included the vindication of his reputation and the collection of material for his research into corruption at Australian institutions. Mason CJ and Dawson, Toohey and McHugh JJ reviewed the principal English and Australian authorities and summarised the essence of the tort as being that “the party who has instituted proceedings has done so for a purpose or to effect an object beyond that which the legal process offers”: para 27. In a valuable concurring judgment, Brennan J adopted the view of Bridge LJ in Goldsmith v Sperrings Ltd and concluded at para 12 that:
“An abuse of process occurs when the only substantial intention of a plaintiff is to obtain an advantage or other benefit, to impose a burden or to create a situation that is not reasonably related to a verdict that might be returned or an order that might be made in the proceeding.”
-
- It is sometimes said, for example in Fleming, The Law of Torts, 10th ed (2011), 708, that in addition to the extraneous purpose, it is necessary to prove some “overt act” other than the proceedings themselves, such as the extortionary threat in Grainger v Hill. The better view, however, is that this is not an additional requirement but merely evidence of the extraneous purpose. As Mason CJ and Dawson Toohey and McHugh JJ observed in Williams v Spautz (1992) 174 CLR 509, at para 41, in practice “the conclusion which the court reaches is more likely to be founded upon objective evidence rather than subjective evidence of intention.” In the great majority of cases, an overt act may be the only way of proving the abuse. But it is not a legal element of the tort. The abuse may sometimes be the inevitable inference from the surrounding circumstances, as it was in Dr Spautz’s case.
-
- These limitations on the scope of the tort are not technicalities, but arise from a principled reluctance on the part of the courts to countenance civil liability for invoking the jurisdiction of the court. As Slade LJ observed, delivering the judgment of the Court of Appeal rejecting a claim for abuse of process in Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391, 470F, the limitation may well cause hardship, but if there is a gap in the law it rests on the same considerations of public policy which give immunity to witnesses against civil actions based on the falsity of evidence given in judicial proceedings. He added that “if the position were otherwise, honest litigants might, be deterred from pursuing honest claims or defences and honest witnesses might, be deterred from giving evidence.”
-
- In the present case, the Judge recorded that it had not been alleged that the legal process was used by Mr Delessio for any purpose for which it was not designed, and that in any event such an allegation could not have been made out on the facts. This conclusion was inevitable once he had found that Mr Delessio genuinely believed that Sagicor had been overcharged. Relief was genuinely being claimed in order to recover the overcharge, which was a proper purpose of such an action. Mr Delessio’s dislike of Mr Paterson did not explain why the relief claimed was sought. It was only “the dominant factor which led him to present what should have seemed like an ordinary case of overcharging as one of fraud” (para 239). It is true that the allegation of fraud was both baseless and malicious, but neither baselessness nor malice are relevant to this cause of action.
Conclusion
-
- In a passage which I have already cited from his speech in Gregory v Portsmouth City Council [2000] 1 AC 419, 432-433, Lord Steyn expressed the view that any manifest injustices arising from the limitation of the tort of malicious prosecution to criminal prosecutions were capable of being addressed by “any necessary and desirable extensions” of other torts. Lord Steyn had a number of possible torts in mind in addition to abuse of process. In my opinion he cannot be read as saying that an extension of either of the two torts relied upon in this case was “necessary and desirable”. Nor can he have thought that there would necessarily be a remedy in every case of “groundless and damaging civil proceedings”. His earlier observations about the problems of secondary litigation suggest that he did not. The principal difficulty faced by the appellants in this case is that on the Judge’s findings of fact the only tort which would avail them would not in fact be an extension of any existing tort. It would be a wholly new tort of maliciously making damaging allegations of fact in the course of advancing a genuine but unfounded claim in civil proceedings. In my opinion the law has never been prepared to countenance such a tort in the past and should not be prepared to do so now.
LORD NEUBERGER (DISSENTING):
Introductory
-
- Lord Wilson would use this opportunity to extend the law of malicious prosecution to cover a case such as the present, and Lord Sumption would not. Neither of them would extend the law of abuse of process. I agree with them about abuse of process and it is unnecessary to say any more about it. So far as extending the law of malicious prosecution is concerned, I agree with Lord Sumption. I do so with great sympathy for the appellants, because, as Lord Wilson’s opinion graphically establishes, one’s instinctive reaction as a human being is that Mr Paterson and his company should be entitled to compensation for their emotional and financial losses resulting from Mr Delessio’s actions.
-
- However, there are sound reasons for not following this instinctive reaction, and for rejecting the suggestion that we should extend the scope of malicious prosecution. These reasons are contained in paras 144 to 148 of Lord Sumption’s opinion, when viewed in the context of the principles he sets out in paras 122 to 127, and, in my view, they strike the right balance between preventing malicious proceedings, and maintaining access to the courts.
The relevance of the United States jurisprudence
-
- First, on this sort of issue, it is generally helpful to look at the experience of other common law jurisdictions. In the recent decision of the Supreme Court in Jones v Kaney [2011] 2 AC 398, para 76, Lord Collins said this:
“It is highly desirable that at this appellate level, in cases where issues of legal policy are concerned, the Court should be informed about the position in other common law countries. This Court is often helped by being referred to authorities from other common law systems, including the United States.”
-
- Secondly, in this case, as in Jones, the position is as Lord Collins immediately went on to describe it, namely, “[i]t is only in the United States that there has been extensive discussion in the case law of the policy implications of” the issue in this case, extension of the scope of the tort of malicious prosecution, and in that case, “removal of immunity for actions by disappointed clients against their experts”.
-
- Thirdly, in Gregory v Portsmouth City Council [2000] 1 AC 419, where, as Lord Sumption explains, the House of Lords decided that it would be wrong to extend the scope of the tort, Lord Steyn considered in some detail, at pp 428-430, the position which, as he understood it, had been taken by the courts in the United States. Having quoted passages from §674 and §680 of The American Law Institute, Restatement of the Law, Torts, 2d (1977) (“the Restatement”), and having referred to two decisions of state Supreme Courts and a decision of the District of Columbia Court of Appeals, he said that:
“[I]t seems realistic to take into account that the difference in the way in which the tort of malicious prosecution has developed in the United States and England is to a considerable extent the result of structural differences between the two legal systems. In England the award of costs in the discretion of the court is an important weapon in deterring groundless actions. But in the United States there is no such general judicial power. … In the United States the absence of a general judicial power to award costs in respect of a groundless claim apparently played a part in the development and extension of the tort of malicious prosecution to all civil proceedings …. In these circumstances the development in the United States, while undoubtedly relevant to the issue before the House, must be seen in the light of two legal systems which in material respects diverge.”
In fact, as a fuller analysis of the United States jurisprudence shows, it is by no means the general rule that the scope of the tort of malicious prosecution is significantly wider than it is in England and Wales following Gregory.
-
- Fourthly, the United States jurisprudence casts illuminating light on, and helps to shape the contours of, “the small and anomalous class of civil cases in which an action has been held to lie for maliciously procuring an order of the court”, which are referred to by Lord Sumption in para 143 above, and renders those cases less anomalous than they appear at first sight.
The United States jurisprudence: an overview
-
- It is convenient to start with the Restatement, which has various sections dealing with the torts which are the focus of this appeal. §653 is concerned with malicious prosecution of criminal proceedings, §674, §677 and §680 are concerned with malicious prosecution of civil and administrative proceedings, and §682 is concerned with abuse of process. For present purposes, one need, I think, focus only on §674, §677 and §680.
“One who takes an active part in the initiation, continuation or procurement of civil proceedings against another is subject to liability to the other for wrongful civil proceedings if (a) he acts without probable cause, and primarily for a purpose other than that of securing the proper adjudication of the claim in which the proceedings are based, and (b) except when they are ex parte, the proceedings have terminated in favor of the person against whom they are brought.”
§680, also referred to by Lord Steyn, is to similar effect, save that it applies to “civil proceedings … before an administrative board”.
“One who by taking an active part in the initiation, continuation or procurement of civil proceedings against another causes him to be arrested or deprived of the possession of his land or chattels or other things is subject to liability to him for the harm done thereby if
(a) he acts without probable cause, and primarily for a purpose other than that of securing the proper adjudication of the claim on which the proceedings were based, and
(b) except when they are ex parte, the proceedings have terminated in favor of the person against whom they are brought.”
This section appears to be unnecessary as it is a subset of §674. However, as the comment in the Restatement explains:
“This Section is a special application of §674 […] . It receives separate statement only because some courts that have been unwilling to accept the broader rule stated in §674 have applied the rule here stated.”
§674 is often referred to by United States judges and textbooks as “the American Rule” or “the Restatement Rule”, whereas §677 is often referred to as “the English Rule”.
“The plaintiff can recover if the defendant had participated in instigating or continuing a civil proceeding, including a declaratory judgment action or even a quasi-judicial administrative proceeding, without probable cause and for an improper purpose, provided that the proceeding had been terminated favourably to the now-plaintiff.”
-
- Dobbs explains the English Rule as mirroring the American Rule, but with the added requirement that the plaintiff must establish that the previous proceedings were not merely without probable cause and unsuccessful, but that they caused him “special injury”, i.e. what the Restatement refers to as “caus[ing] him to be arrested or deprived of the possession of his land or chattels or other things”. At pp 416-417, Dobbs says this:
“[S]pecial injury must be something more than the expense, distress, and reputational loss that is ordinarily suffered as a result of wrongful litigation. Rather, the interference must result directly from the suit itself or the court’s pre-judgment orders. The wrongful litigation claim is allowed when the defendant has repeatedly brought unjustified suits. It is also allowed when a single suit directly results in pre-judgment impairment or suspension of the plaintiff’s rights in property, income, or credit, or detention of the plaintiff’s person. Unjustified insanity proceedings are actionable, at least when they constrain the plaintiff’s person for examination or otherwise, while unjustified bankruptcy proceedings are actionable because they put the plaintiff’s property under the control of the bankruptcy court.”
-
- Examination of the cases suggests that courts in the United States are almost as likely to adopt the English Rule as the American Rule. According to Dobbs, p. 415, “a majority of American courts” follow the American Rule. In terms of numbers, there is a list of jurisdictions which applied each Rule as at 1977 in footnotes 3 and 4 of the judgment of the Supreme Court of Oregon in O’Toole v. Franklin, 569 P.2d 561 (1977), 564. These footnotes identify 23 states (including California, Florida, Massachusetts and Missouri) which then adopted the American Rule, and 17 states (including Illinois, New York, Ohio and Texas) which then adopted the English Rule. However, since then, legislation has intervened in some states, and some states have changed their approach. Thus, in Illinois, statute has removed the requirement for a plaintiff to show “special injury” where he has been the defendant in what he now claims was a malicious medical malpractice claim; and New Mexico used to adopt the English Rule but now adopts the American Rule, although it has gone further still and restated the tort in its entirety.
The “small and anomalous class of civil cases”
-
- It is, I think, convenient first to examine how the courts in the United States which have adopted the English Rule, have justified and applied the exceptions to the general rule that the tort of malicious prosecution does not extend to civil, as opposed to criminal, claims. As is apparent from §677 of the Restatement and the extract cited above from pp 416-417 of Dobbs, malicious prosecution can only be invoked by a former defendant to proceedings under the English Rule where the proceedings have caused him “special injury” – i.e. injury over and above the ordinary emotional and financial damage, including, as the Supreme Court of Texas put it, the “inconvenience [and] embarrassment”, normally caused by litigation – see Texas Beef Cattle Co v Green, 921 S.W.2d 203 (1996), 208.
“The requirement had its genesis in England, and the original reasons for it do not pre-dominate in this country. In England, a defendant need not worry about being saddled with the costs of a successful defense. The English rule is that generally the loser must pay the winner’s attorneys’ fees. Thus, an English plaintiff who brings a frivolous suit does so as the peril of paying his adversary’s litigation expenses […] . It was only where an English defendant endured some special injury that the action for malicious prosecution was needed […] . Otherwise, the English defendant really did not suffer redressable harm.”
-
- It appears to me that this satisfactorily explains and justifies the various established exceptions to the rule that the tort of malicious prosecution does not extend to civil proceedings. Those exceptions are set out by Lord Sumption in para 143. They all involve either ex parte or interlocutory orders being made against a defendant, and, because they are ex parte or interlocutory, they could quite conceivably have been granted in proceedings which could subsequently be established as having been “malicious”. Final relief will never be granted in such proceedings (save, I suppose, where the final order is subsequently set aside), as it is an essential ingredient of a claim in malicious prosecution that the proceedings in question will have failed. However, where interlocutory relief is granted, any loss thereby caused will be “special injury”, as it is not part of the normal emotional and financial detriment typically caused by litigation.
-
- An obvious type of case where special injury could be caused is where interlocutory relief (or, in United States nomenclature, a provisional remedy) is granted against a defendant in the allegedly malicious proceedings. In practice, however, it would normally be unnecessary for the former defendant to resort to a malicious prosecution claim to recover compensation for such loss, as the interlocutory relief will have been an injunction, for which the former claimant normally will have given a cross-undertaking in damages.
-
- In conclusion on this aspect, then, it seems to me that the “special injury” rule which United States jurisprudence has identified as the distinguishing ingredient of the English Rule, as against the American Rule, satisfactorily explains the otherwise seemingly anomalous exceptions to the general rule that a malicious prosecution claim does not lie in respect of civil proceedings. It is also interesting to note that its justification is said at least partially to lie in the fact that a successful defendant in English civil proceedings can expect to recover his costs. And, I would add, where such proceedings were “malicious”, he should recover them on an indemnity basis.
The United States jurisprudence: a little more detail
-
- As is clear from the summary in para 175, the issue whether to adopt the English Rule or the American Rule has been considered by a large number of different courts at different levels in the great majority of the fifty states of the United States. It would be inappropriate, indeed it would be well-nigh impossible, to discuss each of them in this judgment. Whatever the ultimate decision, the nature of the court’s function in this field was well summarised by Freeman CJ in the Illinois Supreme Court decision of Cult Awareness Network v Church of Scientology International, 685 N.E. 2d 1347 (1997), p. 1356, as being the “responsibility to maintain a proper balance between the societal interest in preventing harassing suits and in permitting the honest assertion of rights”. Courts must “respon[d] to these competing interests” whilst maintaining that balance – per the District of Columbia Court of Appeals, Morowitz v Marvel, 423 A. 2d 196 (1980), pp 197-198.
-
- Various judges have suggested that adopting the American Rule would mean that “there would be no end of litigation”, as “the parties could keep on suing each other to the end of time”, as it was put in the Supreme Court of Pennsylvania by Paxson CJ in Norcross v Otis Bros & Co, 25 A. 575 (1893), at 578. A successful defendant, “seeking additional vindication”, might be tempted to sue for malicious prosecution, “and, if unsuccessful in that claim, their opponents will be all too willing to return the favour”, as the New York Court of Appeals put it in Engel. However, these points did not impress the dissenting judges in the Supreme Court of Michigan, who, in expressing their support for the American Rule, did not, as Coleman CJ put it, “normally find significant the fact that unsuccessful suits may be brought”, as this was a factor which should not “be given added importance simply because the wrong to be compensated is itself a lawsuit”, see Friedman v Dozorc, 312 N.W.2d 585 (1981), at 612.
-
- The English Rule was, however, supported by the majority in Friedman, in a judgment given by Levin J, who pithily said that “[t]he cure for an excess of litigation is not more litigation”, and that it was desirable “to cast off the limitations of a perspective which ascribes curative power only to lawsuits”. He also justified the English Rule on practical grounds, in the light of the heavy burden of proof the plaintiff in a malicious prosecution claim bears:
“[I]f few plaintiffs will recover in the subsequent action, one may wonder whether there is any point in recognizing the expanded cause of action. If the subsequent action does not succeed, both parties are left to bear the expenses of two futile lawsuits, and court time has been wasted as well.”
-
- The chilling effect of the American Rule has also been cited as a reason for adhering to the English Rule. Thus, again in Friedman, Levin J referred to “defense litigators […] whose clients can afford to devote extensive resources to prophylactic intimidation”, and warned against “arm[ing] all prevailing defendants with an instrument of retaliation”. To the same effect, the New York Court of Appeals in Engel emphasised the importance of “plaintiffs remain[ing] relatively free from the threat of retaliatory law suits in bringing their good faith claims”.
-
- However, many judges who prefer the American Rule make the point that the English Rule “denie[s] free access to the courts for all those who have suffered harm but not ‘special injury’ from wrongful litigation”, as Coleman CJ put it in Friedman. He and Moody J also characterised the English Rule’s requirement for special injury as arbitrary. Moody J thought that
“The strict requirements of lack of probable cause and malice, i.e., improper purpose, are more appropriate guardians of free access to the courts and of promoting the honest use of the judicial process than the artificial requirement of special injury.”
-
- A number of judges who prefer the American Rule have relied on the fact that, unlike successful English defendants, American defendants who successfully defeat a claim generally cannot recover their costs, even if the claim can be shown to have been “malicious”. This point was well made by Lockwood J giving the judgment of the Supreme Court of Arizona in Ackerman v Kaufman, 15 P.2d 966 (1932), when justifying the application of the American Rule. However, the distinction was considered and rejected as a good enough reason for departing from the English Rule in Pennsylvania – see per Paxson CJ giving the Supreme Court judgment in Norcross v Otis Bros & Co, 25 A. 575 (1893), essentially on the ground that otherwise “there would be no end of litigation”. It is also interesting to note that Myerscough J in the Appellate Court of Illinois, when refusing to depart from the English Rule, relied on the court’s power to “impose sanctions, which may include an order to pay the other party’s expenses incurred as a result of” a pleading which “harass[ed] or [caused] unnecessary delay or needless increase in the cost of litigation” – in Thomas v Hileman, 775 N.E.2d 231 (2002), at 237.
-
- It is instructive to see some of the developments which have occurred in states whose courts have adopted the American Rule. In DeVaney v Thriftway Mktg. Corp., 953 P.2d 277 (1997), the Supreme Court of New Mexico concluded that the special injury requirement should be abandoned – ie that the American Rule should be followed. In so doing, the Court concluded that, in the light of the similarities between the tort of malicious prosecution and the tort of abuse of process, “there [was] no longer a principled reason for characterizing these two forms of misuse of process as separate causes of action”, and restated the elements of these two torts as the tort of malicious abuse of process. In Durham v Guest, 294 P.3d. 19 (2009), the Supreme Court of New Mexico overruled DeVaney in certain respects, so that, for instance, a claim of “malicious abuse of process” could be raised by a defendant in relation to a plaintiff’s improper use of any aspect of the court’s procedure.
-
- In Aranson v Schroeder, 671 A.2d 1023 (1995), the majority of the Supreme Court of New Hampshire, which follows the American Rule, recognised the tort of “malicious defense”, where a defendant to proceedings raises a defence “without probable cause, …with knowledge … of the lack of merit …, [and] primarily for a purpose other than that of securing the proper adjudication of the claim […]”, and the defendant loses, thereby causing loss to the plaintiff. If, as Levin J considered in Friedman, the American Rule “push[es] the pendulum too far in favour of the defense”, one might more readily see why the Supreme Court of New Hampshire sought to level the playing-field. After all, “a plaintiff [is not] less aggrieved when the groundless claim put forth in the courts is done defensively rather than affirmatively”, although, quite understandably, the Supreme Court of Hawaii has criticised this extension in strong terms for “chilling legitimate defenses” – see Young v Allstate Ins Co 198 P.3d 666 (2008).
-
- Principally because of concerns over its chilling effect, the Supreme Court of California, while adhering to the American Rule in relation to malicious prosecution claims based on civil proceedings, has described the tort as a “disfavored cause of action” and has consequently declined to extend its scope further – see Sheldon Appel Co v Albert & Oliker, 765 P.2d 498 (1989).
-
- In Bidna v Rosen (1993) 23 Cal. Rptr. 2d 251, the Californian Court of Appeal interpreted Sheldon Appel as “enunciating a basic judicial policy in favour of curing the evil of abusive litigation at its source rather than allowing it to metastasize into yet more litigation”, and so decided that malicious prosecution claims could not be brought in respect of family law proceedings. Sills PJ said that “the inadequacy of the husband’s family law remedies” had to be “‘balanced’ against the ‘floodgates’ and ‘chilling’ effects” and that “this balance tilts against malicious prosecution”, as there were “several and substantial” arguments for “a bright line rule” in family cases, namely their “unique propensity for bitterness”, the desirability “to swiftly discourage litigious nonsense at its source”, the requirement for “special sensitivity and flexibility”, and the consequent concern about the chilling effect, and “albeit perhaps tangentially, […] the impact […] on lawyers’ malpractice insurance premiums”. However, a different view was taken by the Oregon Court of Appeals in Vazquez v Reeves, 907 P.2d 254 (1995), which found these points “ultimately unpersuasive”.
Conclusions to be drawn from the United States experience
-
- There is no doubt that there is support both for maintaining the present English Rule and for adopting the American Rule in the United States jurisprudence. A person who wants to read a single case where both sides of the argument are articulately advanced, would be well advised to turn to the Michigan Supreme Court decision of Friedman.
-
- The arguments summarised in paras 181 to 185 above do not specifically arise out of the United States jurisprudence, and they cut both ways. Accordingly, I do not propose to rehearse them again. There are, however, in my view, some more specific reasons why the United States experience supports the conclusion which Lord Sumption has reached.
-
- First, and most obviously, even in a jurisdiction where successful defendants rarely can expect to recover their costs, there seems to be as strong judicial support for the English Rule as for the American Rule. That might at first sight appear to be a somewhat cheap or lazy point, but I believe that it has real force. In a highly developed common law country, where the issue has been considered in far greater depth and by almost infinitely more judges than here, there is about as much support for adhering to the English Rule as there is for departing from it, even though there is a significantly stronger case for departure than there is here.
-
- Secondly, it is clear that departing from the English Rule would have the disadvantage of potentially confusing the law, causing unnecessary uncertainty. The present position is clear: there is a “bright line”, as identified in Bidna. However, if the law was to be changed, so that the American Rule became the norm, judges would have to consider questions such as whether to exclude family law proceedings from the ambit of the tort, whether to extend the tort to cover malicious defence, and whether to extend the law to cover the unjustifiable issue of applications or other steps in proceedings.
-
- Thirdly, and more marginally, the United States jurisprudence, with its “special injury” requirement in the English Rule, justifies on a principled basis what would otherwise appear to be anomalous exceptions to the principle that a claim in malicious prosecution cannot be based on civil proceedings. Where a rule has apparently anomalous exceptions, it is, in my view, easier to justify departing from that rule or adding to the exceptions. Once, however, the exceptions are logically explained, it is harder to justify departing from the rule or adding to the exceptions other than on a logical basis.
-
- Fourthly, the United States jurisprudence provides a reminder that wrongful civil litigation should not be viewed in isolation. The courts have procedural mechanisms at their disposal to preserve and strengthen the civil litigation process, and to target proceedings brought wrongfully or mistakenly. As Levin J recognised in Friedman, “[g]roundless civil litigation is […] more than an affliction visited upon a few scattered individuals; it besets the judicial system as a whole”. In circumstances where a party has not suffered special injury, the use of procedural mechanisms is preferable to “randomly providing a fortuitous amount of compensation in a handful of isolated cases”.
Other common law jurisdictions
-
- In this judgment, I have concentrated on the United States jurisprudence, because it represents an extraordinarily rich seam of learning and thought on the topic which we are being invited to consider. The only other jurisprudence to which we were taken in argument was that of the Australian courts. In that connection, it would seem that the furthest the courts have gone is to refuse to strike out or stay claims based, to put it shortly, on the American Rule: see, for instance, Little v Law Institute of Victoria (No 3) [1990] VR 257; Kinghorn v HKAC Asset Management Services [2010] NSWDC 232. While Australian judgments always merit considerable respect, I believe that decisions which simply result in a refusal to strike out a claim are rarely of great assistance. While they no doubt help establish that the point raised is arguable, and often that it is important, they throw relatively little light on the issue of whether the point is right.
Conclusion
- Accordingly, for the reasons given by Lord Sumption, as supplemented by the points made in this judgment, I would, for my part, have humbly advised Her Majesty that this appeal be dismissed.
Willers v Joyce & Anor (Re: Gubay (deceased) No 1)
[2016] UKSC 43 (20 July 2016)
LORD TOULSON: (with whom Lady Hale, Lord Kerr and Lord Wilson agree)
Introduction
- This appeal raises the question whether the tort of malicious prosecution includes the prosecution of civil proceedings. It also raises a question about whether and in what circumstances a lower court may follow a decision of the Privy Council which has reached a different conclusion from that of the House of Lords (or the Supreme Court or Court of Appeal) on an earlier occasion. The second question is the subject of a separate judgment: [2016] UKSC 44.
- The appeal is from a decision of Ms Amanda Tipples QC, sitting as a deputy judge of the Chancery Division, striking out a claim brought by Mr Peter Willers against Mr Albert Gubay as disclosing no cause of action known to English law. The judge was faced with conflicting views of the House of Lords in Gregory v Portsmouth City Council [2000] 1 AC 419 and the Privy Council in Crawford Adjusters (Cayman) Ltd v Sagicor General Insurance (Cayman) Ltd [2014] AC 366. She held that she was bound by the decision of the House of Lords but granted a “leapfrog” certificate under section 12 of the Administration of Justice Act 1969, and permission to appeal was given by this court. In excellent arguments on both sides the court was referred to a large number of authorities. In examining the case law it will be convenient to begin with the Gregory case and the Crawford case, before going back to the earlier authorities, and then to consider the policy arguments. First, it is necessary to explain in brief outline the nature of the claim.
Mr Willers’ claim
- Mr Gubay was a successful businessman. He died while this appeal was pending and his executors now act on behalf of his estate. Mr Willers was Mr Gubay’s right hand man for over 20 years until he was dismissed by Mr Gubay in the summer of 2009. Among the group of companies controlled by Mr Gubay was a leisure company, Langstone Leisure Ltd (“Langstone”). Mr Willers was a director of it. Prior to Mr Willers’ dismissal, Langstone pursued an action for wrongful trading against the directors of another company, Aqua Design and Play Ltd (“Aqua”), which had gone into liquidation. That action was abandoned shortly before trial in late 2009 on Mr Gubay’s instructions.
- In 2010 Langstone sued Mr Willers for alleged breach of contractual and fiduciary duties in causing it to incur costs in pursuing the Aqua directors. Mr Willers defended the action, and issued a third party claim for an indemnity against Mr Gubay, on the grounds that he had acted under Mr Gubay’s directions in the prosecution of the Aqua claim. On 28 March 2013, two weeks before the date fixed for a five-week trial of the action, Langstone gave notice of discontinuance. On 16 April 2013 Newey J ordered Langstone to pay Mr Willers’ costs on the standard basis.
- It is Mr Willers’ case that the claim brought against him by Langstone was part of a campaign by Mr Gubay to do him harm. It is unnecessary to set out the details pleaded by him in the present action. It is not disputed that they include all the necessary ingredients for a claim of malicious prosecution of civil proceedings, if such an action is sustainable in English law. In particular, it is sufficiently alleged that Mr Gubay was responsible for having caused the claim to be brought; that the claim was determined in Mr Willers’ favour; that it was brought without reasonable cause, since Mr Gubay knew that it was he who was responsible for causing Langstone to bring the earlier wrongful trading claim; that Mr Gubay was actuated by malice in causing Langstone to sue Mr Willers; and that Mr Willers suffered damage. The heads of damage claimed are damage to his reputation, damage to health, loss of earnings and the difference between the full amount of the costs incurred by him in defending Langstone’s claim (£3.9m) and the amount recovered under the costs order of Newey J (£1.7m).
Gregory v Portsmouth City Council
- Mr Gregory was a member of Portsmouth City Council. Allegations were made that he had misused, for his personal advantage, confidential information gained by him as a councillor about matters affecting local properties. Internal disciplinary proceedings resulted in findings of misconduct and his removal from various committees. The details were widely reported in the local press. Mr Gregory successfully challenged the decision by means of judicial review. He then brought an action against the council for malicious prosecution of the disciplinary proceedings. The House of Lords upheld a decision striking out his claim. The main speech was given by Lord Steyn.
- It was argued by Mr Gregory that disciplinary proceedings were penal in nature and should therefore be covered by the tort of malicious prosecution in the same way as criminal proceedings. This argument was rejected. Lord Steyn observed that there was a great diversity of statutory and non-statutory disciplinary proceedings with different purposes. To leave it to the courts to decide on a case-by-case basis which disciplinary proceedings might ground the tort would be liable to plunge the law into uncertainty. In arguing that the disciplinary proceedings should be regarded as penal, counsel for Mr Gregory conceded that the tort did not extend to civil proceedings generally. Lord Steyn observed (pp 427-428) that it had never been held to be available beyond the limits of criminal proceedings and a few special cases of abuse of civil legal process, such as malicious presentation of a winding up or bankruptcy petition (Johnson v Emerson (1871) LR 6 Ex 329; Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674), malicious obtaining of a search warrant (Gibbs v Rea [1998] AC 786) or bench warrant (Roy v Prior [1971] AC 470), or malicious process to obtain execution against property (Clissold v Cratchley [1910] 2 KB 244). He said that although such cases appeared to be disparate, there was in a broad sense a common feature in that they potentially involved immediate and irreversible damage to the reputation of the victim. Another recognised head of actionable abuse of process was the malicious arrest of a vessel (The Walter D Wallet [1893] P 202) and in such cases the loss was merely financial, but Lord Steyn described them as rare. He said that the traditional explanation for not extending the tort to civil proceedings generally was that in a civil case there was no damage, since the fair name of the victim was protected by the trial and judgment. Lord Steyn acknowledged (p 432) that this theory was no longer plausible in an age when reputational harm can be caused by pre-trial publicity, but he said that it was a matter for consideration whether there might be other reasons for restricting the availability of the tort in respect of civil proceedings.
- Lord Steyn concluded (p 432) that it was not necessary for the disposal of the case to express a view on the argument in favour of extending the tort to civil proceedings generally, but that it would be unsatisfactory to leave the matter in the air, and he therefore stated his opinion briefly. He accepted that there was a stronger case for extending the tort to civil proceedings generally than to disciplinary proceedings, but he said that “for essentially practical reasons” he was not persuaded that such an extension had been shown to be necessary, taking into account the protection afforded by the torts of defamation, malicious falsehood, conspiracy and misfeasance in public office.
Crawford Adjusters (Cayman) Ltd v Sagicor General Insurance (Cayman) Ltd
- Mr Alastair Paterson was a chartered surveyor in the Cayman Islands. He provided services as a loss adjuster and as a project manager, acting through two companies of which he was a director. In those capacities he was instructed by the insurers and owners of residential development in the Cayman Islands that had suffered hurricane damage. Mr Paterson instructed building contractors to carry out the remedial work. Acting on his advice the insurers made substantial payments to the contractors. He was close to finalising his adjustment of the insurers’ liability, when the insurers’ internal claim-handling was taken over by a newly appointed senior officer, Mr Frank Delessio. From their past acquaintanceship Mr Delessio had a strong dislike of Mr Paterson and a low opinion of his competence.
- On studying the paperwork, Mr Delessio became concerned that there was a serious lack of documentation to support the payments which the insurers had already made on Mr Paterson’s advice. He announced that he intended to drive Mr Paterson out of business and to destroy him professionally. He instructed another surveyor and loss adjuster to value the work done, but on Mr Delessio’s instructions the second surveyor did not speak to Mr Paterson or the contractors. Nor did he make inquiries of the subcontractors or suppliers about costs or consult the structural engineers who had prepared the drawings. On the strength of the figures put forward by the second surveyor, Mr Delessio caused the insurers to sue Mr Paterson, his companies and the contractors, claiming damages on various bases including deceit and conspiracy to defraud. He was also instrumental in alerting the local press to the allegations against Mr Paterson of fraudulent or reckless misrepresentations, and the allegations were published. As intended, the publicity caused great harm to Mr Paterson’s business and reputation.
- After the contractors gave disclosure of invoices showing the amounts paid by them to the subcontractors and suppliers, the insurers’ attorneys were advised by counsel that it would be professionally improper for him, or them, to represent the insurers in the claims of fraud and conspiracy. Days before the trial the insurers and owners discontinued their claims. The judge ordered them to pay the defendants’ costs on an indemnity basis and gave Mr Paterson permission to amend his counterclaim to claim damages against the insurers for abuse of process.
- At the trial of the counterclaim the judge considered the torts of abuse of process and malicious prosecution. He rejected abuse of process because the insurers were genuinely seeking the relief claimed in the writ, rather than using the action as a device to secure an entirely extraneous objective. As to malicious prosecution, he found that all the ingredients were established if the tort was capable in law of applying to the relevant proceedings, but, citing Gregory, he held that it was not. He therefore dismissed the claim but said that, if it had been available, he would have awarded Mr Paterson CI$1.3m for his professional losses and CI$35,000 for distress and humiliation. In particular, the judge found that although Mr Delessio believed that Mr Paterson had defrauded the insurers, his belief was without reasonable cause; that Mr Delessio knew that the second surveyor’s report was not a proper basis for making such allegations; and that the dominant factor which led him to make them was his strong dislike of Mr Paterson and obsessive determination to destroy him professionally.
- The Privy Council decided by a majority of three to two that on those facts the judge was wrong to dismiss the claim for malicious prosecution. All five members of the panel gave reasons for their opinions. On the majority side the leading opinion was given by Lord Wilson. On the dissenting side the leading opinion was given by Lord Sumption. They each carried out a detailed historical survey of the tort from the middle ages to the present day but with different conclusions.
- At the risk of over-simplification, Lord Wilson concluded that the case law prior to Quartz Hill did not distinguish between civil and criminal proceedings as such, but limited the types of damage recoverable in a way which had the practical effect of restricting the claims that were brought as a result of malicious civil process. Lord Wilson was critical of dicta in Quartz Hill to the effect that by the late 19th century, when that case was decided, no mere bringing of an action, albeit maliciously and without reasonable cause, could give rise to the tort. As to later authority, Lord Wilson noted that Lord Steyn’s remarks on the subject in Gregory were obiter, and he observed that the practical rationale behind Lord Steyn’s reluctance about the tort applying to civil proceedings lost its force in circumstances where no other tort was capable of application. As a matter of principle and policy, Lord Wilson concluded that it would be unjust for Mr Paterson to be left without a legal remedy for the damage which Mr Delessio had intentionally caused him to suffer by the malicious prosecution of civil process without any reasonable cause.
- Lord Sumption’s conclusion was that the tort had never applied to civil proceedings as such. Over the course of history there had come to be recognised a small and anomalous class of cases in which the action had been held to be available for maliciously obtaining an ex parte order of the court which caused, or was liable to cause, immediate injury to the claimant through the misuse of the court’s coercive powers. Such cases were rare and in Quartz Hill the Court of Appeal had taken a firm stand against their extension. So too had the House of Lords in Gregory. Mr Paterson had suffered an undoubted injustice, but this did not make it right to sweep away restrictions on the application of the tort to civil process which had existed for very many years. Lord Sumption was unpersuaded that there was a general need to extend the tort. To do so would in his view create uncertainty, further anomalies and the likelihood of undesirable practical consequences.
Analysis: the case law
- Lord Wilson’s and Lord Sumption’s historical analyses were the subject of very detailed critical analysis by counsel in the present case. While respecting the thoroughness of their arguments, I do not intend to rehearse them. It is apparent to my mind that the early case law is capable of more than one respectable interpretation, and it may be that there was never a time when there was a general understanding precisely where the boundaries of the tort lay. The same could be said about other aspects of the common law. In any case, the decision now to be made by this court should not depend on which side has the better argument on a controversial question about the scope of the law some centuries ago. Having said that, it is right that I should indicate the more significant points which I glean from my reading of the case law. But I do so with caution, because the identification of such points involves an element of selection in which I cannot lay any special claim to being necessarily right.
- Before the judgment of Holt CJ in Savile v Roberts in 1698 (discussed below), I have not detected any authority which excluded the application of the tort to a civil action, and there are some indications that it was capable of applying to civil proceedings. A number were referred to in the reported argument for the plaintiff in Cotterell v Jones (1851) 11 CB 713, 719-724. Counsel cited, among other sources, Waterer v Freeman (1618) Hobart 266, Atwood v Monger (1653) Style 378, and a note by Hargrave to Coke on Littleton. Waterer v Freeman involved double execution on goods, but counsel in Cotterell v Jones relied on what he argued was a statement of general principle by Hobart CJ (who had succeeded Sir Edward Coke as Chief Justice of the Court of Common Pleas):
“Now to the principal case, if a man sue me in a proper court, yet if his suit be utterly without ground of truth, and that certainly known to himself, I may have an action of the case against him for the undue vexation and damage that he putteth me unto by his ill practice, though the suit itself be legal and I cannot complain of it.”
This statement was described by Blackburn J as “an authority entitled to weight” in Wren v Weild (1869) LR 4 QB 730, 736 (to which I refer below). Atwood v Monger arose from proceedings brought against the plaintiff before the conservators of the River Thames, who had a statutory responsibility for the management of the river, for allegedly allowing earth to fall into the river. Counsel for the plaintiff in Cotterell v Jones relied on what they submitted was a statement of general principle by Rolle CJ in the Atwood case:
“‘An action upon the case lies for bringing an appeal against one in the Common Pleas, though it be coram non judice, by reason of the vexation of the party, and so it is all one whether here were any jurisdiction or no, for the plaintiff is prejudiced by the vexation and the conservators took upon them to have authority to take the presentment. And I hold that an action upon the case will lye,’ (sic) ‘for maliciously bringing an action against him where he had no probable cause, and if such actions were used to be brought, it would deter men from such malitious’ (sic) ‘courses as are to (sic) often put in practice.’”
The passage from Hargrave’s note to Coke on Littleton read:
“Where two or more conspire to harass any person by a false and malicious suit, whether criminally or civilly, it is a crime punishable by indictment, or the parties injured may sue for damages by writ of conspiracy; and both of these remedies lie at common law, that part of the statute or ordinance of Articuli super chartas which gives remedies against conspirators by writ out on Chancery, being, according to both Staunford and Lord Coke, only an affirmation of the common law. Staunf CP 172 [Staunford’s Common Pleas], 2 Inst 561, 562 [Coke’s Institutes]. There is also a remedy for false and malicious prosecution, though the aggravation of a conspiracy or confederacy is wanting, and the injury comes from one only; for, in such a case, the party prosecuted may have an action upon the case for damages. I apprehend, too, that such an action lies, as well where the vexation is practised by a civil suit, as where it is carried on through the medium of a criminal process. FNB 114, D [Fitzherbert’s Natura Brevium].” (Sir William Staunford was a judge of the Court of Common Pleas from 1554 to 1558. Sir Anthony Fitzherbert was appointed a judge of the Court of Common Pleas in 1522. His “new Natura Brevium” was published in 1534.)
- Savile v Roberts was an important case. The defendant on two occasions caused the plaintiff to be prosecuted at quarter sessions on an indictment charging him with riot. After being acquitted both times the plaintiff sued the defendant in the Court of Common Pleas for prosecuting him maliciously. His claim succeeded and he was awarded damages for the expenses which he had incurred in defending himself. The defendant brought a writ of error to have the judgment set aside but the judgment was upheld. There are nine reports of the decision, varying in length and content. Among them, I have found the reports at 5 Mod 405, 12 Mod 208 and 1 Ld Raymond 374 the most helpful.
- Since the action was on the case, damage had to be proved. Holt CJ identified three types of damage which could support such a claim. The first was damage to the plaintiff’s fame or reputation. The second was damage to his person either by assault or by deprivation of his liberty. The third was damage to his property, which included being put to expense. The damages awarded to the plaintiff fell within this category, as to which Holt CJ said (12 Mod 209) “that if this injury be occasioned by a malicious prosecution, it is reason and justice that he should have an action to repair him the injury: though of late days it has been questioned, yet it has always been allowed formerly; as … Atwood v Monger” (to which I have referred).
- The defendant objected that to allow such an action “will be of mischievous consequence, by stopping all prosecutions of this kind; and there is no more reason in this case of a malicious indictment, than a malicious action: and no man shall be responsible for any damages whatsoever for suing a writ or prosecuting in the King’s Courts” (12 Mod 210). Holt CJ said that there was a great difference between bringing an action maliciously and prosecuting an indictment maliciously (5 Mod 408, 12 Mod 210, 1 Ld Raymond 379-380). He explained that in former times the common law provided that every claimant should provide pledges, who were amerced (that is, they forfeited the amount pledged) if the claim was false. That method was replaced by statutes which provided for defendants to recover their costs. By contrast Holt CJ said that “there was no amercement upon indictments, and the party had not any remedy to reimburse himself but by action” (1 Ld Raymond 380). Holt CJ added that if an action were brought merely through malice and vexation, an action on the case would lie in some cases, where the plaintiff could show “particular damage” (1 Ld Raymond 380) or “special matter” (5 Mod 408, 12 Mod 211). The ability to sue for malicious prosecution seems therefore to have depended, according to Holt CJ, essentially on the nature of the damage suffered rather than the form which the proceedings took, although the two were likely to be interrelated.
- It is also possible that when Holt CJ spoke of “special matter” he was not referring to the damage suffered but to special matter showing the malicious nature of the defendant’s conduct. I take this interpretation from the judgment of Parker CJ in Jones v Givin (1713) Gilb Cas 185, 196-197 (also reported as Jones v Gwynn 10 Mod 147, 214). After commenting that the demand of right (a civil claim) was “more favoured” than bringing to punishment, and that if an action was false, the plaintiff was “by law amerced, and the defendant to have costs”, Parker CJ said:
“And therefore my Lord Chief Justice Holt, in his excellent argument in Savill and Roberts, … where he fully states the difference between the two cases, said that in case for a malicious action the plaintiff must shew special matter which shows malice, for else an action, being the plaintiff seeking and demanding advantage to himself, carries in it [a] fair and honourable cause, unless the recovery be utterly hopeless, and the suit without some other design, which therefore must be specially shewn.”
- It is not necessary, even if it were possible, to decide whether the special matter referred to in these authorities was an evidential requirement, ie a reference to what was needed to prove malice, or related to the type of damage which could give rise to the action. Either way the premise appears to have been that an action would lie if the defendant maliciously invoked civil process against the plaintiff which resulted in the plaintiff suffering a recognised head of damage.
- In Grainger v Hill (1838) 4 Bing (NC) 212 the plaintiff owned a vessel which he mortgaged to the defendants as security for a loan repayable after 12 months. The plaintiff was to retain the vessel’s register, which he needed in order to make voyages. Two months later the defendants became concerned about the adequacy of the security and determined to obtain the register. To that end they swore an affidavit of debt and issued a writ of capias for the arrest of the plaintiff in support of a claim of assumpsit. The sheriff’s officers told the plaintiff that they had come for the register, and that if he failed to hand it over or provide bail he would be arrested. Under that threat he handed over the register. The defendants’ claim in debt was settled by the repayment of the loan and release of the mortgage deed. The plaintiff then sued the defendants for malicious issue of the civil proceedings. At the trial the plaintiff obtained a verdict in his favour, but the defendants argued that the plaintiff should be nonsuited among other reasons because he had failed to aver that the action had been commenced without reasonable or probable cause. The plaintiff responded that he had proved that the defendants’ suit was without reasonable or probable cause, but that in any event this was unnecessary in a case where the action had been brought for an improper purpose, ie as a means of coercing the plaintiff into giving up the register to which the defendants had no right. The court accepted the plaintiff’s argument.
- Tindal CJ said at 221:
“If the course pursued by the defendants is such that there is no precedent of a similar transaction, the plaintiff’s remedy is by an action on the case, applicable to such new and special circumstances; and his complaint being that the process of the law has been abused, to effect an object not within the scope of the process, it is immaterial whether the suit which that process commenced had been determined or not, or whether or not it was founded on reasonable and probable cause.”
Similarly Park J said at 222:
“… this is a case primae impressionis, in which the defendants are charged with having abused the process of the law, in order to obtain property to which they had no colour of title; and, if an action on the case be the remedy applicable to a new species of injury, the declaration and proof must be according to the particular circumstances.”
- Grainger v Hill has been treated as creating a separate tort from malicious prosecution, but it has been difficult to pin down the precise limits of an improper purpose as contrasted with the absence of reasonable and probable cause within the meaning of the tort of malicious prosecution. This is not entirely surprising because in Grainger v Hill itself there plainly was no reasonable or probable cause to issue the assumpsit proceedings, since the debt was not due to be paid for another ten months as the lenders well knew. It might be better to see it for what it really was, an instance of malicious prosecution, in which the pursuit of an unjustifiable collateral objective was evidence of malice, rather than as a separate tort. This would be consistent with the reference in Parker CJ’s judgment in Jones v Givin (or Jones v Gwynn), cited above, to “some other design” as a potential “special matter” showing malice. It is unnecessary to express a firm view on this point, but Grainger v Hill does at any rate illustrate the willingness of the court to grant a remedy, in what it regarded as novel circumstances, where the plaintiff had suffered provable loss as a result of civil proceedings brought against him maliciously and without any proper justification.
- In other mid-19th century cases the courts recognised a broad principle underlying the cause of action for malicious prosecution; De Medina v Grove (1847) 10 QB 172 and Churchill v Siggers (1854) 3 E & B 929. In both cases the plaintiff suffered a period of imprisonment and incurred expenditure through the execution of a writ of capias, which the plaintiff claimed that the defendant had issued for an excessive sum. In De Medina v Grove the plaintiff’s claim was dismissed on the ground that the facts pleaded by him were consistent with the existence of probable cause. The claim in Churchill v Siggers was allowed to go to trial. The judges in each case adopted a common starting point.
- In De Medina v Grove the judgment of Wilde CJ (with whom Maule J, Cresswell J, Williams J, Parke B and Rolfe B agreed) began:
“The law allows every person to employ its process for the purpose of trying his rights, without subjecting him to any liability, unless he acts maliciously and without probable cause.”
- In Churchill v Siggers the judgment of the court (Lord Campbell CJ, Erle J and Crompton J) began:
“To put into force the process of the law maliciously and without any reasonable or probable cause is wrongful; and, if thereby another is prejudiced in property or person, there is that conjunction of injury and loss which is the foundation of an action on the case.”
- It is argued by those in favour of limiting the cause of action to the various circumstances in which it has been applied that these statements were not intended to be definitive and should be read in their particular factual context. But the statements contained the rationale by reference to which the cases were decided and cannot be regarded as obiter dicta. The reference, for example, to the law allowing every person to apply its process “for the purpose of trying his rights”, unless he acted maliciously and without probable cause, does not fit with a narrow concept peculiar to the process of execution.
- The subject was considered indirectly in Wren v Weild (1869) LR 4 QB 730. The claim was in substance a patent dispute. The plaintiffs were manufacturers of machinery. They sued the defendant for falsely and maliciously telling their customers that their machines infringed the defendant’s patents and threatening legal action if the customers used the machines without paying royalties to the defendant. There was no allegation on the pleading that the defendant acted without reasonable and probable cause. Lush J nonsuited the plaintiffs, who applied to set aside the nonsuit. The judgment of the court (consisting of Blackburn, Lush and Hayes JJ) was given by Blackburn J. He considered whether “the circumstances were such as to make the bringing of an action [against the customers] altogether wrongful”.
- In that context Blackburn J considered (p 736) the statement of principle by Hobart CJ in Waterer v Freeman, set out in para 17 above, and the effect of Savile v Roberts:
“In Waterer v Freeman (1618) Hobart 266, 267, which was an action for maliciously and vexatiously issuing a second fi. fa. whilst the first was unreturned, the Chief Justice says: ‘If a man sue me in a proper court, yet if his suit be utterly without ground of truth, and that certainly known to himself, I may have an action of the case against him for the undue vexation and damage that he putteth me unto by his ill practice.’ This was not necessary for the decision of the case before the court, but it was by no means irrelevant, and it is therefore an authority entitled to weight. On the other hand, in Savile v Roberts 1 Ld Raym 374, Lord Holt, in delivering the judgment of the Exchequer Chamber, expresses an opinion that no such action would lie without alleging and proving some collateral wrong, such as that he was maliciously held to bail, or the like. For this he gives two reasons, first that a man is entitled to bring an action if he fancies he has a right, which is in accordance with Lord Ellenborough’s reasoning in Pitt v Donovan (1813) 1 M & S 639. But this reason is quite consistent with Lord Hobart’s position, that the action will lie where it was certainly known to him that the action was utterly without ground. His second reason is, that the law considers that the party grieved has an adequate remedy in his judgment for costs; and on this the Court of Common Pleas acted in Purton v Honnor (1798) 1 B & P 205. But this artificial reason does not apply in the present case …”
- Applying the same line of reasoning, the court held in the case before it that “the action could not lie, unless the plaintiffs affirmatively proved that the defendant’s claim was not a bona fide claim in support of a right which, with or without cause, he fancied he had; but a mala fide and malicious attempt to injure the plaintiffs by asserting a claim of right against his own knowledge that it was without any foundation” (p 737). The court’s reasoning was consistent with the statements of principle in De Medina v Grove and Churchill v Siggers and it confirms that this was a mainstream view. It is noteworthy that by 1869 the court regarded the notion that a party who was sued maliciously and without any ground had an adequate remedy in a judgment for costs as artificial. Blackburn J’s statement that Holt CJ in his judgment in Savile v Roberts “expresses an opinion that no such action would lie without alleging and proving some collateral wrong, as that he was maliciously held to bail, or the like” must have been his interpretation of the sentence in the report in 1 Ld Raymond (the version cited by Blackburn J) at 380:
“If A sues an action against B for mere vexation, in some cases upon particular damage B may have an action; but it is not enough to say that A sued him falso et malitiose, but he must show the matter of the grievance specially, so that it may appear to the court to be manifestly vexatious. 1 Sid 424, Daw v Swain, where the special cause was the holding to excessive bail.”
I have discussed the interpretation of Holt CJ’s reference to “particular damage” (or “special matter” as it appears in other reports of the judgment) at paras 20 to 21 above.
- In Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674, [1882] WN 27, the defendant presented a petition to wind up the plaintiff company and advertised it in several papers. The petition alleged that the company’s capital had been raised by a fraudulent prospectus and that there was no possibility of its trading profitably. The defendant believed at that time that he was a shareholder of the company, but immediately after the presentation he learned that his broker had sold his shares and he promptly gave notice that his petition would be withdrawn. The petition was never served on the company and was dismissed by Hall V-C. Both parties were represented at the hearing, and each applied for their costs of appearance, but the judge made no order for costs. The reason that the company was not given its costs appears to have been that its appearance was considered unnecessary: see Berry v British Transport Commission [1962] 1 QB 306, 319, per Devlin LJ. The company then sued the defendant for maliciously presenting the petition without reasonable or probable cause. At the trial before Stephen J the company adduced no evidence of special damage other than its costs in respect of the petition. At the close of its case, the judge nonsuited it. His decision was upheld by the Divisional Court (Pollock, B and Manisty, J) but reversed by the Court of Appeal, comprising Brett MR and Bowen LJ, and a new trial was ordered.
- Counsel for the defendant advanced three arguments why the company’s claim must fail. The first was that there was no evidence of special damage necessary to maintain the action: Savile v Roberts. The second was that there was no evidence of malice or absence of reasonable or probable cause. The third was that no action of this kind would lie under the circumstances, because the action taken by the defendant was not of an ex parte character, but an application to the court on which the company had the opportunity of appearing in opposition, and the judge hearing the petition could make an award of costs.
- Brett MR rejected the first argument on the ground that the publication of the petition in the newspapers would have been destructive of the company’s reputation and that this amounted to damage within Holt CJ’s first category. He accepted that the company was not entitled to recover its costs, because the courts operated on the theory that the jurisdiction to award litigation costs to the successful party covered all costs reasonably and necessarily incurred, and therefore any excess was not to be regarded in law as caused by the conduct of the losing party. The second argument was a purely evidential matter. The third argument has significance in the present case because Mr Bernard Livesey QC argued on behalf of Mr Gubay’s estate that the cases in which claims for malicious prosecution of civil proceedings have succeeded should be explained as cases in which the defendant took it on himself to make malicious and unjustifiable use of the coercive powers of the state, such as the power of arrest of a person or their property, and that it is only in such a case that the action can be maintained. This submission has a strong echo of the third argument advanced by the defendant in the Quartz Hill case. It was rejected by Brett MR in these terms, at (1883) 11 KB 684:
“The proposition is that an action cannot be maintained because the petitioning creditor merely asks the court to act judicially, and because it was to be assumed that the court would decide rightly. If that proposition were well founded, it would be an answer to malicious prosecution on a criminal charge, because even in that case the prosecutor merely asks the tribunal to decide upon the guilt of the person whom he charges. If a man is summoned before a justice of the peace falsely and maliciously and without reasonable or probable cause, he will be put to expense in defending himself, and his fame may suffer from the accusation; nevertheless the prosecutor only asks the justice to adjudicate upon the charge. Therefore it is not a good answer to an action for maliciously procuring an adjudication in bankruptcy to say, that the alleged creditor has only asked for a judicial decision. It seems to me that an action can be maintained for maliciously procuring an adjudication under the Bankruptcy Act, 1869, because by the petition, which is the first process, the credit of the person against whom it is presented is injured before he can shew that the accusation made against him is false; he is injured in his fair fame, even although he does not suffer a pecuniary loss.”
- Bowen LJ began his judgment by saying that he was of the same opinion as Brett MR and that he would not have added anything if they had not been overruling the opinion of more than one judge of great experience and ability. He ended by saying that there must be a new trial for the reasons given by the Master of the Rolls and that he hoped that he had not weakened the force of those reasons by stating his own. It is clear therefore that Brett MR’s judgment had the full authority of the court.
- In his judgment Bowen LJ expressed the view, obiter, that “under our present rules of procedure, and with the consequences attaching under our present law”, the bringing of an action could not give rise to an action for malicious prosecution, even if the first action were brought maliciously and without reasonable and probable cause (pp 690-691). The reason, he explained, was that he could not conceive that under the court’s present mode of procedure the bringing of an action could result in any of the three heads of damage recognised in Savile v Roberts. As to damage to reputation, he acknowledged that the publication of the proceedings might “incidentally” cause damage to a person’s reputation, but he said that the bringing of an action itself was not the cause of injury, and that when the action was tried in public “his fair fame will be cleared, if it deserves to be cleared: if the action is not tried, his fair fame cannot be in any way assailed by the bringing of the action”. In this respect Bowen LJ contrasted the bringing of a civil action with the bringing of a criminal allegation involving scandal to reputation, or the issue of a bankruptcy petition, which he said in its nature caused reputational damage that could not necessarily be repaired afterwards.
- Where reputational damage is concerned, to draw a distinction between the effect of the bringing of proceedings as such and the effect of attendant publicity seems highly artificial in circumstances where the action is brought as part of a determined campaign to destroy a person’s reputation. It seems surprising also that Bowen LJ considered it inconceivable that the making of allegations in a civil suit might result in reputational damage with immediate and irreparable consequences, in the same way as might result from the institution of criminal or insolvency proceedings. But, if it was inconceivable in 1883, it is certainly not inconceivable in today’s world. Bowen LJ did not suggest that if he were wrong, and if such damage were to result from the malicious institution of civil proceedings without reasonable or probable cause, there would be any principled reason to leave the injured party without a remedy. That would have been inconsistent with the reasoning which led the court to hold that Quartz Hill’s claim should go to trial.
- In Berry v British Transport Commission the plaintiff was prosecuted for the summary offence of pulling the communication cord on a train without reasonable cause. After conviction by the magistrates she appealed to quarter sessions, her conviction was quashed and she was awarded costs against the complainant in a sum which amounted to about a quarter of her actual costs. She sued the defendant for malicious prosecution, claiming that she had suffered damage to reputation; had been held up to ridicule; had suffered mental anxiety; and had incurred special damage by way of the shortfall between the full amount of her expenses and the amount awarded to her at quarter sessions. On the trial of a preliminary question of law, Diplock J struck out her claim as disclosing no cause of action: [1961] 1 QB 149.
- Diplock J said at p 159 that the action on the case for malicious prosecution could be founded upon any form of legal proceedings, civil or criminal, brought maliciously and without any reasonable or proper cause by the plaintiff against the defendant, but, as the action was in case, damage was an essential ingredient. He held that the criminal allegation was not an imputation affecting her “fair fame”, and that the rule in Quartz Hill that the difference between actual costs incurred and party and party costs awarded in civil proceedings could not be recovered as special damage should be applied also to costs incurred in defending criminal proceedings, since the criminal court had a discretion to order the prosecutor to pay such costs as were just and reasonable.
- The Court of Appeal (Ormerod, Devlin and Danckwerts LJJ) upheld Diplock J’s judgment on the issue of damage to reputation, but reversed his judgment on the issue of special damages: [1962] 1 QB 306. The court accepted that it was bound by the decision in Quartz Hill that the excess of costs incurred in defending civil proceedings over the taxed costs awarded could not be recovered as special damage in a subsequent action for malicious prosecution, but it declined to extend the rule to costs incurred in defending criminal proceedings. In his judgment, at p 334, Danckwerts LJ repeated Diplock J’s obiter dictum that the action for malicious prosecution lies for wrongful and malicious civil proceedings as well as criminal proceedings.
- The common law is prized for its combination of principle and pragmatism. The doctrine of precedent in the words of Dean Roscoe Pound is “one of reason applied to experience”: The Spirit of the Common Law, 1963 ed, pp 182-183. “Growth” he said “is insured in that the limits of the principle are not fixed authoritatively once and for all but are discovered gradually by a process of inclusion and exclusion as cases arise which bring out its practical workings and prove how far it may be made to do justice in its actual operation.” The case law on the tort of malicious prosecution is in point. It shows how the courts have fashioned the tort to do justice in various situations in which a person has suffered injury in consequence of the malicious use of legal process without any reasonable basis. Drawing on that experience, the court has to decide whether the tort should now apply to the malicious and groundless prosecution of a civil claim causing damage of the kinds alleged in the present case. This requires consideration of the justice and practical consequences whichever way the question is decided. In considering those consequences, it is appropriate to have in mind the essential ingredients of the tort, although they were not the subject of argument (see paras 52 to 56 below).
Analysis: policy
- Mr Willers’ claim to recover the excess of his legal expenses over the amount awarded under the costs order made in the action brought against him by Langstone raises a question to which I will return. Otherwise I see no difficulty in principle about the heads of damage claimed by him (damage to reputation, health and earnings), subject to the fundamental question whether his action is maintainable in law. The case put on his behalf can be simply stated. In the words of Holt CJ in Savile v Roberts, “if this injury be occasioned by a malicious prosecution, it is reason and justice that he should have an action to repair him the injury.” This appeal to justice is both obvious and compelling. It seems instinctively unjust for a person to suffer injury as a result of the malicious prosecution of legal proceedings for which there is no reasonable ground, and yet not be entitled to compensation for the injury intentionally caused by the person responsible for instigating it. It was that consideration which led the judges to create the tort of malicious prosecution, as can be seen in the case law. The question is whether there are countervailing factors such that its applicability to civil proceedings should be limited to an assortment of instances where it has previously been applied. A considerable number of countervailing factors have been suggested, and I turn to what appear to me to be the principal ones. Underlying the individual counter-arguments, it is a common theme of the opinions of the minority that malicious prosecution of criminal proceedings is now obsolescent, if not obsolete, as a form of tort, and so this is no time to countenance it in the area of civil proceedings. I disagree with the premise of that argument. Maliciously causing a person to be prosecuted on the basis of an allegation known by the complainant to be false is far from being a thing of the past, and in recent times it has led in some cases to the conviction of the complainant for the offence of perverting or attempting to pervert the course of justice. Although in such cases the complainant has typically not been worth suing, if the situation were otherwise there would be no reason to regard an action for malicious prosecution as inappropriate.
- Floodgates. It is suggested that although Mr Willers’ claim may be meritorious, there is an unacceptable risk of its being followed by other claims which are unmeritorious. The argument that a good claim should not be allowed because it may lead to someone else pursuing a bad one is not generally attractive, but in this case it is bolstered by two other arguments, the deterrence factor and the finality factor.
- Deterrence. It is suggested that if the tort is available it may deter those who have valid civil claims from pursuing them for fear that if the claim fails they may face a vindictive action for malicious prosecution. This was the argument advanced 300 years ago in Savile v Roberts for not allowing the tort in criminal proceedings. I am not persuaded that it has greater merit in relation to civil proceedings. There are many deterrents to litigation (uncertainty, time, expense, etc), some of which may be stronger than others. A claimant who brings civil proceedings on an improper basis exposes himself to the risk of having to pay indemnity costs, but I am not aware of evidence that this has deterred those with honest claims from pursuing them. One can always hypothesise that an honest litigant who has not been put off from bringing a claim by the risk of the judge (wrongly) deciding that he had acted improperly and making an indemnity costs order might nevertheless be put off by the extra risk of an opposing party bringing a vindictive action for malicious prosecution, but there is no way of testing the hypothesis and it seems to me intrinsically unlikely.
- Finality. There is unquestionably a public interest in avoiding unnecessary satellite litigation, whether in criminal or civil matters, but that has not been considered a sufficient reason for disallowing a claim for malicious prosecution of criminal proceedings. Unlike certain other forms of satellite litigation, an action for malicious prosecution does not amount to a collateral attack on the outcome of the first proceedings (subject to the discrete point about a claim for costs in excess of those allowed in the underlying proceedings).
- Duplication of remedies. In Gregory Lord Steyn expressed himself to be “tolerably confident” that any manifest injustices arising from groundless and damaging civil proceedings were either adequately protected under other torts or capable of being addressed by any necessary and desirable extensions of other torts: [2000] 1 AC 419, 432. Crawford and the present case show that this is not so.
- Inconsistency with witness immunity from civil liability. It is suggested that to allow Mr Willers’ claim would introduce an inconsistency with the rule that evidence given to a court is protected by immunity from civil action, even if the evidence is perjured. If this were a valid objection it would apply to all forms of the tort of malicious prosecution, including prosecution of criminal proceedings, as well as to the instances of malicious institution of civil process which are acknowledged on all sides to be within the scope of the tort. Roy v Prior [1971] AC 470, 477-478, is authority that the rule which bars an action against a witness for making a false statement does not prevent an action in respect of abuse of the process of the court. Lord Morris of Borth-y-Gest explained the difference:
“It is well settled that no action will lie against a witness for words spoken in giving evidence in a court even if the evidence is falsely and maliciously given (see Dawkins v Lord Rokeby (1873) LR 8 QB 255, Watson v M’Ewan [1905] AC 480) …
This, however, does not involve that an action which is not brought in respect of evidence given in court but is brought in respect of an alleged abuse of process of the court must be defeated if one step in the course of the abuse of the process of the court involved or necessitated the giving of evidence.
It must often happen that a defendant who is sued for damages for malicious prosecution will have given evidence in the criminal prosecution of which the plaintiff complains. The essence of the complaint in such a case is that criminal proceedings have been instituted not only without reasonable and probable cause but also maliciously. So also in actions based upon alleged abuses of the process of the court it will often have happened that the court will have been induced to act by reason of some false evidence given by someone. In such cases the actions are not brought on or in respect of any evidence given but in respect of malicious abuse of process (see Elsee v Smith (1822) 2 Chit 304).”
- Inconsistency with the absence of a duty of care by a litigant towards the opposing party. There is a great difference between imposing a duty of care and imposing a liability for maliciously instituting proceedings without reasonable or probable cause. The same distinction is established in relation to criminal cases. The police owe no duty of care towards a suspect (Calveley v Chief Constable of Merseyside Police [1989] AC 1228), but that does not mean that a police officer is immune from the tort of malicious prosecution. The distinction between careless and intentional conduct is a familiar feature of parts of the common law, reflected in Oliver Wendell Holmes, Jr’s often quoted saying, “Even a dog distinguishes between being stumbled over and being kicked” (The Common Law, 1909, lecture 1).
- The tort should be confined to persons exercising the coercive power of the state. This was the third argument advanced by the defendant in Quartz Hill and was rejected by the Court of Appeal for reasons which I regard as sound: see para 35 above. Implicit in the suggested restriction is the idea that malicious prosecution is a public law tort, available against public officers and others who take it on themselves to exercise the coercive powers of the state; but in Gibbs v Rea [1998] AC 786, 804 Lord Goff and Lord Hope were emphatic that it would be incorrect to see the tort as having any of the characteristics of a public law remedy. They were in a minority in their opinion about the proper decision in that case, but I do not detect any difference on that point.
- Reciprocity. It is suggested that the logical corollary of allowing a claim for malicious prosecution of civil proceedings should be a right to sue for the malicious defence of a civil claim without reasonable or probable cause. The same argument might logically be advanced in relation to the malicious prosecution of criminal proceedings. It is not uncommon for a criminal suspect, when questioned about an offence, to advance a defence involving false accusations of one kind or another against the complainant, which may be injurious to the complainant’s reputation. It is easy to think of some high profile examples. That aside, the question whether there should be civil liability for bad faith denial of claims raises other and wider considerations. For an English court to adopt the approach of Supreme Court of New Hampshire in Aranson v Schroeder (1995) 671 A 2d 1023 and recognise the existence of a cause of action of that description would be bold, to say the least, but I do not see that recognition of civil liability for malicious prosecution of civil proceedings carries with it as a necessary counterpart that there should be liability for bad faith denial of a claim. There is an obvious distinction between the initiation of the legal process itself and later steps which may involve bad faith (for which the court is able to impose sanctions) but do not go to the root of the institution of legal process.
- Uncertainty as to malice. It is suggested that a decision in Mr Willers’ favour would take the courts into new and uncertain waters about the meaning of malice. The requirement of malice has been considered in the past at the highest level, for example in Glinski v McIvor [1962] AC 726, 766, and Gibbs v Rea [1998] AC 786, 797. No argument was addressed to the court in the present case on this issue for understandable reasons. If the facts alleged by Mr Willers are substantiated, there was undoubtedly malice on the part of Mr Gubay. Lord Mance expresses concern about the concept of malice in the context of a claim for malicious prosecution of civil proceedings (paras 137 to 140). I make two preliminary observations. First, this subject was not raised in either party’s written or oral arguments, for understandable reasons. Mr Willers’ case is that Mr Gubay well knew that Mr Willers had done Mr Gubay’s bidding in the matter of Langstone’s claim against the Aqua directors, and the prosecution of Langstone’s claim against Mr Willers was part of Mr Gubay’s vendetta against him. Secondly, over the last 400 years there has been a volume of case law about malice, and the related requirement of absence of reasonable and probable cause, for the purposes of the tort of malicious prosecution. Most of it has not been cited, and the court has not had the benefit of the parties’ analysis of it. I recognise that Lord Mance is registering a concern, rather than seeking to seeking to lay down doctrine. It would be wrong for me to ignore that concern, but anything that I say on this aspect is necessarily obiter.
- In the early case law Hobart CJ stated the requirements succinctly in the passage from his judgment in Waterer v Freeman cited at para 17 above: “… if a man sue me in a proper court, yet if his suit be utterly without ground of truth, and that certainly known to himself, I may have an action of the case against him”. This formula was adopted by Blackburn J in 1869 in Wren v Weild. It accords with Lord Mance’s suggestion (para 139) that he would be readier to accept a concept of malicious prosecution “which depended on actual appreciation that the original claim was unfounded”. Hobart CJ’s statement remains a helpful starting point and, speaking in general terms, it has in my view much to commend it.
- It is well established that the requirements of absence of reasonable and probable cause and malice are separate requirements although they may be entwined: see, for example, Glinski v McIver [1962] AC 726, 765, (“it is a commonplace that in order to succeed in an action for malicious prosecution the plaintiff must prove both that the defendant was actuated by malice and that he had no reasonable and probable cause for prosecuting”, per Lord Devlin). In order to have reasonable and probable cause, the defendant does not have to believe that the proceedings will succeed. It is enough that, on the material on which he acted, there was a proper case to lay before the court: Glinski v McIver, per Lord Denning at 758-759. (Compare and contrast a suit which is “utterly without ground of truth”, per Hobart CJ.)
- Malice is an additional requirement. In the early cases, such as Savile v Roberts, the courts used the expression “falso et malitiose”. In the 19th century “malitiose” was replaced by the word “malicious”, which came to be used frequently both in statutes and in common law cases. In Bromage v Prosser (1825) 4 B & C 247, 255, Bayley J said that “Malice, in common acceptation, means ill-will against a person, but in its legal sense it means a wrongful act, done intentionally, without just cause or excuse.” His statement was cited with approval by Lord Davey in Allen v Flood [1898] AC 1, 171. (For a recent discussion of the nineteenth century understanding of the meaning of “malicious” in the law of tort, see O (A Child) v Rhodes [2016] AC 219, paras 37 to 41.) As applied to malicious prosecution, it requires the claimant to prove that the defendant deliberately misused the process of the court. The most obvious case is where the claimant can prove that the defendant brought the proceedings in the knowledge that they were without foundation (as in Hobart CJ’s formulation.) But the authorities show that there may be other instances of abuse. A person, for example, may be indifferent whether the allegation is supportable and may bring the proceedings, not for the bona fide purpose of trying that issue, but to secure some extraneous benefit to which he has no colour of a right. The critical feature which has to be proved is that the proceedings instituted by the defendant were not a bona fide use of the court’s process. In the Crawford case Mr Delessio knew that there was no proper basis for making allegations of fraud against Mr Paterson, but he did so in order to destroy Mr Paterson’s business and reputation.
- The combination of requirements that the claimant must prove not only the absence of reasonable and probable cause, but also that the defendant did not have a bona fide reason to bring the proceedings, means that the claimant has a heavy burden to discharge.
- All things considered, I do not regard the suggested countervailing considerations as sufficient to outweigh the argument that simple justice dictates that Mr Willers’ claim for malicious prosecution should be sustainable in English law.
- Excess costs. Newey J’s decision to award costs to Mr Willers on a standard basis is readily understandable. The action had been discontinued and the judge would not have been able to determine whether Mr Willers should recover indemnity costs without conducting what would have amounted to a trial of the present action. On the other hand, the notion that the costs order made has necessarily made good the injury caused by Mr Gubay’s prosecution of the claim is almost certainly a fiction, and the court should try if possible to avoid fictions, especially where they result in substantial injustice. A trial of Mr Willers’ claim will of course take up further court time, but that is not a good reason for him to have to accept a loss which he puts at over £2m in legal expenses. Expenditure of court time is sometimes the public price of justice. If Langstone’s action against Mr Willers had gone to a full trial, and if at the end the judge had refused an application for indemnity costs because he judged that the claim had not been conducted improperly, then to attempt to secure a more favourable costs outcome by bringing an action for malicious prosecution would itself have been objectionable as an abuse of the process of the court, because it would have amounted to a collateral attack on the judge’s decision. But those are not the circumstances and I do not regard Mr Willers’ claim to recover his excess costs as an abuse of process.
Conclusion
- For these reasons, which largely replicate the judgments of the majority in Crawford, I would allow the appeal and hold that the entirety of Mr Willers’ claim should be permitted to go to trial.
LORD CLARKE: (agrees with Lord Toulson)
Introduction
- The principal issue in this appeal is whether the tort of malicious prosecution includes the prosecution of civil proceedings. I would firmly answer that question in the affirmative.
- Lord Toulson and others have set out the facts and the issues in the light of the conflicting approaches of the House of Lords in Gregory v Portsmouth City Council [2000] 1 AC 419 and the Privy Council in Crawford Adjusters (Cayman) Ltd v Sagicor General Insurance (Cayman) Ltd [2014] AC 366. I am content to adopt the facts as stated by Lord Toulson at paras 3 to 5 and his analyses of Gregory at paras 6 to 8 and of Sagicor at paras 9 to 15 respectively.
Lord Toulson’s historical analysis
- Lord Toulson’s analysis of the cases he refers to at paras 16 to 41 is by no means conclusive but I agree with him when he says at the end of para 25 that Grainger v Hill (1838) 4 Bing (NC) 212 does at any rate illustrate the willingness of the court to grant a remedy in what it regarded as novel circumstances, where the plaintiff had suffered provable loss as a result of civil proceedings brought against him maliciously and without any proper justification.
- Moreover it seems to me to be of some note that, as Lord Toulson says at paras 26 and 27, having briefly set out the facts of De Medina v Grove (1847) 10 QB 172 and Churchill v Siggers (1854) 3 E & B 929, the judges in each case adopted a common starting point. See in particular the quotations in Lord Toulson’s para 27, where he sets out a quote from De Medina v Grove in which Wilde CJ (with whom Maule J, Cresswell J, Williams J, Parke B and Rolfe B agreed) began his judgment by stating:
“The law allows every person to employ its process for the purpose of trying his rights, without subjecting him to any liability, unless he acts maliciously and without probable cause.”
- Similarly in Churchill v Siggers (1854) 3 E & B 929 Lord Campbell CJ, delivering the judgment of the court, including Erle J and Crompton J, began thus:
“To put into force the process of the law maliciously and without any reasonable or probable cause is wrongful; and, if thereby another is prejudiced in property or person, there is that conjunction of injury and loss which is the foundation of an action on the case.”
- I agree with Lord Toulson (in his para 29) that there is no good reason for limiting the breadth of that proposition: see his paras 30 to 32. I also agree with his analysis of the Quartz Hill case at his paras 33 to 38 and with his analysis of the Berry v British Transport Commission case at his paras 39 to 42. That analysis appears to me to provide at least some support for the proposition stated by Danckwerts LJ in the Court of Appeal [1962] 1 QB 306 in which at p 334 he repeated Diplock J’s obiter dictum at first instance that the action for malicious prosecution lies for wrongful and malicious civil as well as criminal proceedings.
- In all the circumstances I agree with Lord Toulson’s conclusion at his para 42 that the courts have fashioned the tort of malicious prosecution to do justice in various situations in which a person has suffered injury in consequence of the malicious use of legal process without any reasonable basis. As he puts it, the court has to decide whether the tort should now apply to the malicious and groundless prosecution of a civil claim causing damage of the kinds alleged in the instant case.
Discussion
- I have reached the clear conclusion, in agreement with the majority in Crawford, and in particular with the leading judgment given by Lord Wilson, that this court should conclude that there is a tort of malicious prosecution of civil claims. I recognise that there is scope for argument but, in my opinion, Lord Toulson’s analysis shows that there is a good deal of support for such a tort.
- In this regard I am not persuaded that the cases show that, in so far as such a tort has been recognised, it has been limited to ex parte applications to secure a claim. In particular it does not seem to me that the jurisprudence on the arrest of ships is limited in that way. Claims for damages for wrongful arrest of a ship are not limited to claims for security obtained on an ex parte basis. They are claims in tort for wrongful arrest in which, if the claimant is successful he or it will obtain damages calculated in accordance with the principles of the common law. A person who arrests a ship does not have to provide security to the defendant in respect of any loss which he might incur. It is thus not helpful (as I see it) to note that it is now commonplace for claimants to be required to give undertakings as a condition of obtaining a freezing order. I recognise that there are those who favour the introduction of such an approach in the case of the arrest of ships; see for example Sir Bernard Eder in a lecture given on 12 December 1996 under the auspices of the London Shipping Law Centre entitled Wrongful Arrest of Ships and see further the articles referred to in paras 82-84 below. However, so far as I am aware, no such approach has been adopted in any decided case.
- Much of the learning in this area derives from the decision of the Privy Council in The Evangelismos (1858) Swa 378, 12 Moore PC 352, where the judgment of the Board was given by the Rt Hon T Pemberton Leigh, where he said at pp 359-360:
“Their Lordships think that there is no reason for distinguishing this case, or giving damages. Undoubtedly there may be cases in which there is either mala fides or that crassa negligentia, which implies malice, which would justify a Court of Admiralty giving damages, as in an action brought at Common law damages may be obtained. In the Court of Admiralty the proceedings are, however, more convenient, because in the action in which the main action is disposed of, damages may be awarded.
The real question in this case, following the principles laid down with regard to actions of this description, comes to this: is there or is there not, reason to say, that the action was so unwarrantably brought, or brought with so little colour, or so little foundation, that it rather implies malice on the part of the plaintiff, or that gross negligence which is equivalent to it?”
The test was thus malice or crassa negligentia, defined as “that crassa negligentia which implies malice”.
- That decision was preceded by a number of earlier cases to much the same effect including The Orion (1852) 12 Moo 356, The Glasgow (1855) Swab 145, The Nautilus (1856) Swab 105, and The Gloria de Maria (1856) Swab 106. Moreover the principle in The Evangelismos was applied consistently through the late 1800s, usually by Dr Lushington: see The Active (1862) 5 LT (NS) 773, The Eleonore (1863) Br & Lush 185, The Volant (1864) Br & Lush 321; 167 ER 385 and The Cathcart (1867) LR 1 A & E 314, The Collingrove, The Numida (1885) 10 PD 158 and The Keroula (1886) 11 PD 92.
- In The Kate (1864) Br & Lush 218, Dr Lushington drew an express analogy with common law actions for malicious prosecution. He said:
“The defendants are not in my opinion entitled to damages, because the circumstances of the case do not shew on the part of the plaintiffs any mala fides or crassa negligentia, without which, according to The Evangelismos unsuccessful plaintiffs are not to be mulcted in damages.”
The principles in The Evangelismos were further expressly followed by the Privy Council in The Strathnaver (1875) 1 App Cas 58.
- The position was summarised in the well-known case of The Walter D Wallet, [1893] P 202, where Sir Francis Jeune P put the principles thus at pp 205-206:-
“No precedent, as far as I know, can be found in the books of an action at common law for the malicious arrest of a ship by means of Admiralty process. But it appears to me that the onus lies on those who dispute the right to bring such an action of producing authority against it. As Lord Campbell said in Churchill v Siggers …, ‘To put into force the process of law maliciously and without any reasonable or probable cause is wrongful; and, if thereby another is prejudiced in property or person, there is that conjunction of injury and loss which is the foundation of an action on the case.’ Why is the process of law in Admiralty proceedings to be excepted from this principle? It was long ago held that that an action on the case would lie for malicious prosecution, ending in imprisonment under the writ de excommunicato capiendo in the spiritual court: Hocking v Matthews (1670) 1 Ventris 86. It can, therefore, hardly be denied that it would have lain for malicious arrest of a person by Admiralty process in the days when Admiralty suits so commenced, just as for malicious arrest on mesne process at common law. But if for arrest of a person by Admiralty process, why not for arrest of a person’s property? I can imagine no answer, and the language of the reasons of the Privy Council in the case of The Evangelismos …, quoted with approval in the later case of The Strathnaver … appears to me to treat the existence of such an action at common law as indisputable. The words to which I refer were employed by their lordships in speaking of the arrest of a ship in a salvage suit. Their lordships say (at p 67), ‘Undoubtedly there may be cases in which there is either mala fides, or that crassa negligentia which implies malice, which would justify a Court of Admiralty giving damages, as in an action brought at common law, damages may be obtained. In the Court of Admiralty the proceedings are, however, more convenient, because, in the action in which the main question is disposed of, damages may be awarded.’”
- It is perhaps noteworthy that, at any rate as I read it, The Walter D Wallet was an action brought at common law, although the President held that the relevant principles were the same as had been applicable in the Court of Admiralty. He said at p 208:
“Still, the action of the defendants was, I think, clearly in common law phrase, without reasonable or probable cause; or, in equivalent Admiralty language, the result of crassa negligentia, and in a sufficient sense mala fides, and the plaintiff’s ship was in fact seized.”
- A little earlier, at p 207 the President said:
“No doubt in an action on the case for commencing or prosecuting an action, civil or criminal, maliciously and without reasonable or probable cause, damage must be shown: Cotterell v Jones.”
Cotterell v Jones is reported at (1851) 11 CB 713. It was not necessary to decide whether an action would lie at all because it was held that, if it did, damage must be proved. Although a majority of the judges left the point open, Williams J plainly thought that, if damage was proved, such an action would lie: see p 730. The President was of the same view in The Walter D Wallet. See also Mitchell v Jenkins (1833) 5 B & Ad 588.
- There has been little analysis in England and Wales of the principles governing wrongful arrest since The Walter D Wallet. The courts have essentially applied the principles in The Evangelismos since then. See, comparatively recently, The Kommunar (No 3) [1997] 1 Lloyd’s Rep 22, per Colman J at p 30 and the decision of the Court of Appeal in Gulf Azov Shipping Co Ltd v Idisi [2001] 1 Lloyd’s Rep 727.
- I note in passing that in The Maule [1995] 2 LRC 192 the Court of Appeal in Hong Kong applied the same principles by reference to the same cases. Moreover it is interesting in the present context to see that Bokhary JA said at p 195, under the heading “The analogy with malicious prosecution” that “[t]he analogy between the tort of malicious prosecution and claims such as the present is well established”.
- I should add that the court does not have a discretion as to whether to permit the arrest of a vessel. It was held by the Court of Appeal in The Varna [1993] 2 Lloyd’s Rep 253 that, provided the property was within the scope of an action in rem, and provided that there had been procedural compliance with the rules, the plaintiff was entitled to arrest the vessel. The specific issue related to the question whether there was a duty of full and frank disclosure. The court held that after a change in the RSC in 1986, there was no such duty. Before 1986 there was such a duty but, as I see it, there was a right to arrest subject to that duty.
- Thus in the context of the arrest of ships the courts have recognised a claim for what is in essence malicious prosecution of a civil action by arresting a ship in circumstances where the ingredients of the tort are “either mala fides, or that crassa negligentia which implies malice”. Moreover the above passage shows that damages were recoverable both in the Admiralty Court and in the courts of common law, where the principles were the same and where the action was on the case.
- To my mind these principles cannot be disregarded on the basis that they were applied only in some form of interlocutory process. They appear to me to support the historical analysis identified by Lord Toulson. Moreover they show that there are some torts which require proof of malice or something akin to it. There are two other examples which seem to me to support this approach. They are misfeasance in public office and malicious prosecution of a criminal process.
- I first came across misfeasance in public office in 1995 when I was asked, at first instance, to identify the ingredients of the tort in Three Rivers District Council v Governor and Company of the Bank of England [1996] 3 All ER 558. However the case subsequently went twice to the House of Lords, reported at [2003] 2 AC 1. On the first occasion the House considered the ingredients of the tort. They were identified by Lord Steyn at pp 191-196. His third ingredient focused on two alternative states of mind on the part of the defendant. The first was targeted malice. The second (at p 191E) was
“where a public officer acts knowing that he has no power to do the act complained of and that the act will probably injure the plaintiff. It involves bad faith inasmuch as the public officer does not have an honest belief that his act is lawful.”
That test seems to me to be close to the test of malice referred to in the wrongful arrest cases referred to above. It shows that the torts which require malice or something like it are not uncommon.
- There is in my opinion a close affinity between the tort of malicious prosecution of a crime and the tort of malicious prosecution of a civil action. The ingredients are essentially the same, namely malice or, in the old language, crassa negligentia which implies malice. I agree with Lord Toulson’s approach to malice in his paras 52 to 56. In addition, as Lord Toulson explains in para 54, by reference to Lord Devlin’s opinion in Glinski v McIver [1962] AC 726 at 765, “it is commonplace that in order to succeed in an action for malicious prosecution the plaintiff must prove both that the defendant was activated by malice and that he had no reasonable and probable cause for prosecuting”.
- There is some scope for argument as to whether that is the same test as crassa negligentia in a claim based on wrongful arrest. However, this was not discussed in the course of the argument in this appeal and is not relevant to the issue for decision. Equally I should note in passing that there has been some discussion, both in academic articles here and elsewhere and in judgments in common law jurisdictions, on the question whether a less stringent test should be introduced in a claim for damages for wrongful arrest. The articles include, in addition to the article referred to in para 68 above, the following. First there are three articles in volume 38 of the Tulane Maritime Law Journal Winter 2013, No 1, at pp 115-145: the first by Sir Bernard Eder entitled “Time for a Change”, the second by Martin Davies by way of reply to Sir Bernard and the third a rejoinder by Sir Bernard. The second is by Dr Aleka Sheppard in the third edition of her Modern Maritime Law, 2013 at section 2.4 under the heading “Wrongful Arrest of Ships”. The third article is by Michael Woodford in (2005) 19 MLAANZ 115 which sets out the position in Australia and discusses many of the cases including those referred to above.
- As to decided cases, there have been some Singapore cases in recent years which discuss the same cases and, for the most part follow the English cases. They include the decision of Selvam JC in The Ohm Mariana, Ex p Peony [1992] 1 SLR(R) 556 and The Kiku Pacific [1999] SGCA 96, in which the Court of Appeal, endorsed the test of mala fides and crassa negligentia implying malice rather than the test of absence of reasonable and probable cause. That decision was followed by the Singaporean High Court in The Inai Selasih (Ex p Geopotes X) [2005] 4 SLR 1, [2005] SGHC 132 . Subsequently the same point was considered in some detail by the Court of Appeal in The Vasily Golovnin [2008] 4 SLR (R) 994, especially at paras 118-134, where it noted that the test was widespread in the Commonwealth, including Canada and New Zealand: see paras 132-133.
- Rajah JA, delivering the judgment of the court, concluded as follows:
“134. We would agree with the views of both Iacobucci J [in the Canadian Supreme Court] and Giles J [in the High Court in New Zealand] to the extent that the Evangelismos test is long-standing, and should not be departed from lightly, without good reasons and due consideration. However, it is always open to this court to depart from this judicially created test if the day comes when it no longer serves any relevant purpose. Having examined the genesis of the Evangelismos test and its current application in Singapore, we shall for now leave this issue to be addressed more fully at a more appropriate juncture. We are prepared to reconsider the continuing relevance and applicability of the Evangelismos test when we have had the benefit of full argument from counsel as well as the submissions of other interested stakeholders in the maritime community in the form of Brandeis briefs. For the present appeal, as will be demonstrated shortly, the outcome reached by this court would nonetheless be the same whether the Evangelismos test or a less onerous test is applied.”
The court had earlier noted that relaxation of the test had in many cases been achieved by statute.
- It is not necessary to consider this further here because the issue does not arise. However, it is important to note that nobody has suggested that there should be no claim for damages for wrongful arrest, only that the test should be lower than the test of “either mala fides, or that crassa negligentia which implies malice”. In so far as the test for malicious prosecution identified in Glinski v McIver includes the requirement that the defendant had “no reasonable and probable cause for prosecuting”, there may be scope for argument as to precisely what is meant by that expression, but that is not the subject of this appeal.
- The question here is whether there is a tort of malicious prosecution of a civil claim. For my part I can see no sensible basis for accepting that the tort of malicious prosecution of a crime exists in English law, whereas the tort of malicious prosecution of a civil action does not. Not only are the ingredients the same, but it seems to me that, if a claimant is entitled to recover damages against a person who maliciously prosecutes him for an alleged crime, a claimant should also be entitled to recover damages against a person who maliciously brings civil proceedings against him. The latter class of case can easily cause a claimant very considerable losses. They will often be considerably greater than in a case of malicious prosecution of criminal proceedings.
- Some members of the court rely upon a number of factors which are said to point to a different conclusion. Lord Toulson has discussed those factors in his paras 44 to 51 under the headings of floodgates, deterrence, finality, duplication of remedies, inconsistency with the absence of a duty of care, witness immunity, limitation to the coercive power of the state and reciprocity. Largely for the reasons given by Lord Toulson I agree that those factors do not have sufficient weight to counter the conclusion that, like malicious prosecution of criminal proceedings, malicious prosecution of civil proceedings is a tort. The only point I would make by way of postscript in relation to the factors discussed by Lord Toulson is that it is to my mind irrelevant that no duty of care is owed because the sole question is whether the tort of malicious prosecution exists. In my opinion it does.
- Finally, I note that in Congentra AG v Sixteen Thirteen Marine SA (The Nicholas M) [2008] EWHC 1615 (Comm); [2009] 1 All ER (Comm) 479 Flaux J, albeit obiter, considered the question whether English law recognises a tort of wrongful attachment of property. It was argued that it does not based on a passage in the speech of Lord Steyn in Gregory at p 427, which was relied upon as support for the proposition that the tort of malicious prosecution is not generally available in respect of civil proceedings.
- Flaux J concluded that Lord Steyn was not laying down that proposition as of general application. He referred in particular to Lord Steyn’s speech at pp 432-433, where he said this:
“My Lords, it is not necessary for the disposal of the present appeal to express a view on the argument in favour of the extension of the tort to civil proceedings generally. It would, however, be unsatisfactory to leave this important issue in the air. I will, therefore, briefly state my conclusions on this aspect. There is a stronger case for an extension of the tort to civil legal proceeding than to disciplinary proceedings. Both criminal and civil legal proceedings are covered by the same immunity. And as I have explained with reference to the potential damage of publicity about a civil action alleging fraud, the traditional explanation namely that in the case of civil proceedings the poison and the antidote are presented simultaneously, is no longer plausible. Nevertheless, for essentially practical reasons I am not persuaded that the general extension of the tort to civil proceedings has been shown to be necessary if one takes into account the protection afforded by other related torts. I am tolerably confident that any manifest injustices arising from groundless and damaging civil proceedings are either already adequately protected under other torts or are capable of being addressed by any necessary and desirable extensions of other torts. Instead of embarking on a radical extension of the tort of malicious prosecution I would rely on the capacity of our tort law for pragmatic growth in response to true necessities demonstrated by experience.”
It is important to note that Lord Steyn’s conclusion was not based upon principle but upon what he called practical reasons.
- Flaux J concluded (at para 22), that Lord Steyn expressly recognised that there may be scope for incremental growth and extension of existing torts, including wrongful arrest. I agree. Indeed, I would go further and hold that the logical conclusion from the cases is that a person who suffers damage as a result of the malicious prosecution of a civil suit against him is entitled to recover that damage in just the same way as a person who suffers damage as a result of the malicious prosecution of criminal proceedings against him.
Conclusion
- For these reasons and those given by Lord Toulson I would allow the appeal.
LORD MANCE: (dissenting)
Introduction
- This appeal revisits before nine Justices in the Supreme Court the question how far the tort of malicious prosecution does or should apply in relation to civil proceedings. The question received intense and helpful consideration in no less than five judgments given by the five members of the court sitting as Privy Counsellors in Crawford Adjusters (Cayman) Ltd v Sagicor General Insurance (Cayman) Ltd [2013] UKPC 17, [2014] AC 366 (“Crawford v Sagicor”). I would also pay tribute to the meticulous analysis of the issues in the first instance judgment of Miss Amanda Tipples QC in the present case. Much of the discussion in those judgments can be taken as read. The difficulty is that the Judicial Committee was split three to two in Crawford v Sagicor, taking different views both of the case law and of policy.
- That the Supreme Court must also engage closely with legal policy is I think clear. Viewed in isolation, the assumed facts of this case make it attractive to think that the appellant should have a legal remedy. But the wider implications require close consideration. We must beware of the risk that hard cases make bad law, and we are entitled to ask why, until the Privy Council’s majority decision in Crawford v Sagicor, there has been an apparent dearth of authority in this jurisdiction for a claim such as the appellant wishes to pursue.
- Both sides attached significance to this last question. Mr John McDonnell QC for the appellant said at the outset that he accepted a “fundamental” difference between creating a remedy for the first time and recognising a remedy that had become over-looked with time. He relied on a series of authorities in the 16th, 17th and 18th centuries for an underlying principle, encapsulated he submitted most clearly by Holt CJ in the late 17th century in Savile v Roberts 1 Ld Raym 374, 3 Salk 17, 3 Ld Raym 264, 1 Salk 13, 12 Mod 208, Carthew 416, 5 Mod 405. The principle was, he submitted, that malicious prosecution of an unfounded civil suit can give rise to liability for damage inflicted in respect of reputation, health, earnings and charges. This principle had, he submitted, been misunderstood and wrongly constrained during the 19th century, in particular by the Court of Appeal in Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674.
Analysis of the case law
- I have come to the conclusion that the reading of the authorities which Mr McDonnell advocates is not justified:
- i)The 16th to 18th century authorities must be seen in the light of contemporary procedures governing civil proceedings. Plaintiffs at the relevant times could on an ex parte basis institute or cause an officer of the state to institute drastic measures affecting the intended defendant’s person, property or ability to trade. In that context, it was recognised that, once it had been established that the measures had been instituted or caused without any reasonable cause and maliciously, the defendant should have a remedy for what was effectively wrongful imprisonment, wrongful deprivation of goods or wrongful deprivation of the opportunity to trade. He could then recover any concomitant damage to person, reputation, business or pocket.
- ii)However, it was established that damage to a plaintiff’s pocket did not in this connection include extra costs, over and above those recoverable inter partes in the original action.
iii) The principle of the prior authorities was in the 1880s extended by analogy to enable the recovery of general damages to reputation arising from malicious pursuit of a winding up petition in respect of a company. But this extension was carefully limited, so as to exclude any general right to bring an action for malicious pursuit of a prior action.
- iv)I will in the following paragraphs examine the authorities to make good these propositions.
- Taking the cases prior to Savile v Roberts, in Bulwer v Smith (1583) 4 Leon 52, the defendant, by impersonating a deceased judgment creditor, took out against the judgment debtor successive writs, first a capias ad satisfaciendum whereby the debtor was outlawed and forfeited all his goods and then a capias utlagatum whereby he was arrested and imprisoned for two months. The error having been revealed, it was held that the judgment debtor was entitled to damages. In Waterer v Freeman (1617) Hobart 205, (1618) Hobart 266, the claim was that the defendant had wilfully and vexatiously taken out a second writ of fieri facias, thereby causing the sheriff to levy double execution on the plaintiff’s goods. The court held the claim to be maintainable, once the double execution was established and provided that the suit (here the second execution) was “utterly without ground of truth, and that certainly known to the” person taking it. In Skinner v Gunton (1667) 2 Keb 473, (1668) 1 Saund 228(d), 2 Keb 475 and T Raym 176, (1671) 3 Keb 118, Gunton, maliciously and knowing that Skinner would not be able to find bail, issued an unfounded plaint for trespass allegedly causing loss of £300 against Skinner, causing the sheriff to arrest Skinner and imprison him for 20 days. Gunton was held liable for damages of £10. Finally, Daw v Swaine (or Swayne) (1668) 1 Sid 424, (1668) 2 Keble 546, (1669) 1 Mod 4, was another case of malicious issue of a plaint in a sum (variously put at £5,000 or £600), in the knowledge that it was not due and the defendant would not be able to afford bail and would suffer incarceration. In fact a much lesser sum was due. Skinner v Gunton was followed.
- All these cases involved imprisonment or at least seizure of goods. A case outside that ambit was Gray v Dight (1677) 2 Show KB 144 where the plaintiff, having given an account as churchwarden before the Ecclesiastical Court, was prosecuted a second time by the defendant, “who went and told the Judge that he would not account, on which he [was] excommunicated”. It was resolved
“the action lies, though nothing ensued by an excommunication, and no capias, nor any express damage laid; for this court will consider of the consequences of an excommunication; and an action lies for a malicious prosecution, though the judges proceedings are erroneous, for that is not material in this case.”
It may be inferred from this reasoning that the court was conscious that it was outside the normal area of malicious prosecution, where a capias led to arrest, but justified this because of the seriousness attaching to excommunication. In holding that judicial error in giving effect to the second action was no bar to the claim, the court was also anticipating much later decisions in Johnson v Emerson (1871) LR 6 Ex 329 and Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674: see below.
- Against this background I turn to Savile v Roberts. It was in fact a case of alleged malicious indictment (for taking part in a “riot”, by stopping a road by which the defendant used to carry his tithes). But both counsel’s submissions and the judgment also addressed malicious pursuit of civil proceedings. The Privy Council in Crawford Adjusters Ltd v Sagicor Insurance Ltd considered that
“the best encapsulation of the central decision in Savill v Roberts, which makes no distinction between criminal and civil proceedings, is to be collected from the report at 5 Mod 394, as follows: ‘It is the malice that is the foundation of all actions of this nature, which incites men to make use of law for other purposes than those for which it was ordained’.”
It is now clear that the report at 5 Mod 394 is of counsel’s submissions. The judgment of Holt CJ is covered by other reports, notably 1 Ld Raym 374, 1 Salkeld 13 and 12 Mod 208. From those reports, it is clear that Holt CJ, speaking for all three members of the court, drew distinctions between maliciously pursued criminal proceedings and maliciously pursued civil proceedings.
- Thus, addressing an objection that there was “no more reason that an action should be maintainable in this case (ie for a malicious indictment) than where a civil action is sued without cause, for which no action will lie” Holt CJ said (taking the report at 1 Ld Raym 374):
“There is a great difference between the suing of an action maliciously, and the indicting of a man maliciously. When a man sues an action, he claims a right to himself, or complains of an injury done to him; and if a man fancies he has a right, he may sue an action.” …
He went on:
“2. The common law has made provision, to hinder malicious and frivolous and vexatious suits, that every plaintiff should find pledges, who were amerced, if the claim was false; which judgment the court heretofore always gave, and then a writ issued to the coroners, and they affeered them according to the proportion of the vexation. See 8 Co 39 b FNB 76a. But that method became disused, and then to supply it, the statutes gave costs to the defendants. And though this practice of levying of amercements be disused, yet the court must judge according to the reason of the law, and not vary their judgments by accidents. But there was no amercement upon indictments, and the party had not any remedy to reimburse himself but by action. 2. If A. sues an action against B. for mere vexation, in some cases upon particular damage B. may have an action; but it is not enough to say that A. sued him falso et malitiose, but he must shew the matter of the grievance specially, so that it may appear to the court to be manifestly vexatious. 1 Sid 424, Daw v Swain, where the special cause was the holding to excessive bail. But if a stranger who is not concerned, excites A. to sue an action against B. B. may have an action against the stranger. FNB 98 n and 2 Inst 444.”
- The report at 1 Salkeld 13 adds a further reference at the end to 3 Cro 378. That is the case of Robodham v Venleck, recognising a malicious assertion that a person had lied on his oath in court as involving an actionable slander. The citation of 2 Inst 444 in the context of a stranger exciting the pursuit of an action indicates that Holt CJ was referring to a statute of 13 Ed I Stat 1 (Westminster second) chapter 36 entitled A Distress taken upon a Suit commenced by others. This was enacted to deal with abuses of position by feudal courts. Its opening words were: “Forasmuch as lords of courts, and others that keep courts, and stewards, intending to grieve their inferiors, where they have no lawful means so to do, procure others to move matters against them, and to put in surety and other pledges …”. (Holt CJ also referred to the statute expressly in a passage cited in para 103 below.) The remedy for such abuses was prescribed to be triple damages. This cause of action no longer exists, and no distinction was drawn in counsel’s submissions on the present appeal between the liability of a party maliciously suing and the liability of a third party knowingly procuring or assisting a party to sue maliciously. It seems right that the two should be assimilated, certainly in a case like the present where Mr Gubay is said to have been the alter ego of the company alleged to have pursued civil proceedings maliciously at his instance.
- In the report at 12 Mod 208, Holt CJ is reported as referring to both Daw v Swain and Skinner v Gunton, and as adding that:
“There is another case where an action of this nature will lie, and that is, where a stranger, who is not at all concerned, will excite another to bring an action, whereby he is grieved, an action lies against the exciter. There are other cases where this action is allowed; as Carlion v Mills 1 Cro 291, Norris v Palmer 2 Mod 51 and Ruddock v Sherman 1 Danv Abr 209: but though this action does lie, yet it is an action not to be favoured, and ought not to be maintained without rank and express malice and iniquity. Therefore, if there be no scandal or imprisonment, and ignoramus found [ie lack of basis for the original claim], no action lies, though the matter be false.”
- Carlion v Mills and Ruddock v Sherman concerned malicious citations before ecclesiastical courts for respectively “inconsistency” and adultery, and Norris v Palmer extended the action on the case for malicious prosecution to an indictment for “a common trespass in taking away one hundred bricks” in respect of which the defendant was only acquitted by the jury at trial after “he was compelled to spend great sums of money” – presumably on lawyers, not the jury.
- The judgment in Savile v Roberts focused on the nature of the injury which could found an action for malicious indictment. The report at 1 Ld Raym 374 records Holt CJ saying (at p 378) that the nature of the injury for which damages might be recoverable
“has been much unsettled in Westminster-Hall, and therefore to set it at rest is at this time very necessary. And, 1. He said, that there are three sorts of damages, any of which would be sufficient ground to support this action. 1. The damage to a man’s fame, as if the matter whereof he is accused be scandalous. … But there is no scandal in the crime for which the plaintiff in the original action was indicted. 2. The second sort of damages, which would support such an action, are such as are done to the person; as where a man is put in danger to lose his life, or limb, or liberty, which has been always allowed a good foundation of such an action, as appears by the Statute de Conspiratoribus … where the Parliament describes a conspirator, and the Statute of Westm 2, 13 Ed 1, st 1, c 12, which gives damages to the party falsely appealed, respectu habito ad imprisonamentum et arrestationem corporis, and also ad infamiam; but these kinds of damages are not ingredients in the present case 3. The third sort of damages, which will support such an action, is damage to a man’s property, as where he is forced to expend his money in necessary charges, to acquit himself of the crime of which he is accused, which is the present charge. That a man in such case is put to expences is without doubt, which is an injury to his property; and if that injury is done to him maliciously, it is reasonable that he shall have an action to repair himself.”
It cannot be assumed that Holt CJ meant that the same approach applied in respect of an action for malicious pursuit of civil proceedings. In speaking of the third sort of damages, he expressly referred only to crime. In the same judgment he went on to make clear (at p 379) that one of the great differences between criminal and civil proceedings, which explained why a claim could lie for maliciously instituting the former when it did not lie for maliciously pursuing the latter, was that the law did not provide for costs in relation to the former, when it did in relation to the latter: see para 99 above. Further, and as will appear, later authority is almost unanimously to the effect that the costs position in relation to the malicious pursuit of civil proceedings is quite different from that in relation to criminal proceedings (see paras 107, 110, 111, 124-125 and 141 below).
- The report at 12 Mod 208 also refers to the three sorts of damage which Holt CJ identified:
“it is necessary to consider what are the true grounds and reasons of such actions as these; and it does appear, that there are three sorts of damages, any one of which is sufficient to support this action.
First, damage to his fame, if the matter whereof he be accused be scandalous.
Secondly, to his person, whereby he is imprisoned.
Thirdly, to his property, whereby he is put to charges and expenses.”
A scandalous matter in the context of the first sort of damage meant a charge, an oral accusation of which would amount to slander per se (not the case at the time with a charge of riot). Later authority appears to have understood scandal as including any defamatory accusation – a point that may require consideration in the context of the present case: see Berry v British Transport Commission [1961] 1 QB 149, pp 163-165, per Diplock J, discussing the effect of Rayson v South London Tramways Co [1893] 2 QB 304 and Wiffen v Bailey and Romford Urban District Council [1915] 1 KB 600. As to the second sort of damage, the report at 12 Mod 208 makes clear that the second sort of damage involved showing actual imprisonment, rather than a mere risk of loss of liberty: Berry v British Transport Commission [1961] 1 QB 149, 161.
- Two years after Savile v Roberts, Neal v Spencer (1700) 12 Mod 257 held that an action on the case for arresting without cause of action “lies not, if it be not that he [the current plaintiff] was held to excessive bail”. The nature of the damage recoverable in an action upon the case for malicious indictment was further considered in Jones v Givin (or Gwynn) (1713) Gilb Cas 185, (1712) 10 Mod 147 and 214 (a case where the plaintiff had been wrongly accused of exercising the trade of a badger of corn and grain). Holt CJ having died in 1710, his successor Parker CJ delivered a formidably erudite judgment paying tribute to the “excellent argument” of that “great man” in Savile v Roberts. Dismissing a submission that a claim for malicious indictment was no more actionable than certain (unspecified) claims for malicious prosecution of a civil action, Parker CJ said:
“But I choose to say there is a great difference between the two cases.
(1) Because the demand of right or satisfaction is more favoured than the bringing to punishment.
An action is to recover his right, or satisfaction for it, perhaps his subsistence.
An indictment does himself no good, only punishes another, and there is a case which goes so far as to say, that to indict for a common trespass for which a civil action will lie, is malice apparent.
Pas 30 Car 2, C B 2 Mod 306. Lord Chief Justice North not named.
And it is observable, that in actions of conspiracy, in cases of appeals, the plaintiffs in appeals never were made defendants, but in case of judgments the prosecutors for the most part were.
(2) Because if the action is false, the plaintiff is by law amerced, and the defendant to have costs.
And therefore my Lord Chief Justice Holt, in his excellent argument in Savill and Roberts, Mich 10 W 3, where he fully states the difference between the two cases, said that in case for a malicious action the plaintiff must shew special matter which shews malice, for else an action, being the plaintiff’s seeking and demanding advantage to himself, carrys in it, 1. A fair and honest cause, unless the recovery be utterly hopeless, and the suit without some other design, which therefore must be specially shewn.”
- Parker CJ concluded that, applying the guidance given in Savile v Roberts regarding the sorts of recoverable damage, a man was just as much
“intitled to satisfaction as well for damages in his property through expence, as for damage in his fame through scandal, the species of the damage, whether the one or the other is the same, for they can make no difference now, whatsoever it might have done formerly.”
Again, that was said in the context of the claim for malicious indictment.
- Then in Chapman v Pickersgill (1762) 2 Wils KB 145, Lord Mansfield CJ considered whether an action would lie for falsely and maliciously petitioning the Lord Chancellor that the plaintiff owed the petitioner a debt of £200 and had committed an act of bankruptcy, whereupon the commission had been issued (the petitioner giving to the Lord Chancellor a bond for £200 to cover loss which the plaintiff might sustain if no such debt was proved) and the plaintiff had been declared bankrupt. The bankruptcy having been set aside, the petitioner, now defendant, objected, first, that “a proceeding on a commission of bankruptcy was a proceeding in nature of a civil suit; and that no action of this sort was ever brought” and, second, that the statutory remedy excluded any common law claim. Lord Mansfield, giving the judgment of the whole court, gave both objections short shrift. Of the first, he said:
“The general grounds of this action are, that the commission was falsely and maliciously sued out; that the plaintiff has been greatly damaged thereby, scandalized upon record, and put to great charges in obtaining a supersedeas to the commission. Here is falsehood and malice in the defendant, and great wrong and damage done to the plaintiff thereby. Now wherever there is an injury done to a man’s property by a false and malicious prosecution, it is most reasonable he should have an action to repair himself. See 5 Mod 407, 8 10 Mod 218 [ie Jones v Givin or Gwynn], 12 Mod 210. I take these to be two leading cases, and it is dangerous to alter the law. See also 12 Mod 273, 7 Rep Bulwer’s case [ie Bulwer v Smith], (1583) 4 Leon 52 … 1 Roll Abr 101, 1 Ven 86, 1 Sid 464. But it is said, this action was never brought; and so it was said in Ashby and White. I wish never to hear this objection again. This action is for a tort: torts are infinitely various, not limited or confined, for there is nothing in nature but may be an instrument of mischief, and this of suing out a commission of bankruptcy falsely and maliciously, is of the most injurious consequence in a trading country.”
As to the second objection, Lord Mansfield said:
“we are all of opinion, that in this case the plaintiff would have been entitled to this remedy by action at common law, if this Act had never been made, and that the statute being in the affirmative, hath not taken away the remedy at law. … but the most decisive answer is, that this statute-remedy is a most inadequate and uncertain remedy; for though there be the most outrageous malice and perjury, and the party injured suffer to the amount of ten or twenty thousand pounds, yet the Chancellor has no power to give him more than the penalty of £200. Besides, the method of applying to the Chancellor is more tedious, expensive, and inconvenient than this common law remedy; and this case, in its nature, is more properly the province of a jury than of any judge whatever.”
As the first passage shows, the damages awarded had been put in broad terms covering, according to Lord Mansfield, both great damage due to being “scandalised upon record” and great charges in obtaining a supersedeas to the commission. Lord Mansfield in the second passage was clearly focusing on the former head of damages and on the evident inadequacy of a bond limited to £200 to cover all loss which the victim of a malicious civil suit might suffer up to five figure amounts. He was not addressing the recoverability of extra costs in circumstances where the original court had or has a discretion to award appropriate compensatory costs.
- In Goslin v Wilcox (1766) 2 Wils K B 303, the plaintiff, a market trader, owed some £5, but the creditor maliciously issued a writ of capias ad respondendum in the Bridgwater Borough court which he knew to have no jurisdiction. On that basis, he caused the plaintiff while trading at his stall in Bridgwater Fair to be arrested by the bailiffs on pain of providing £5 bail, so that the plaintiff was not only put to “great charges in freeing himself”, but was also during his imprisonment hindered from trading and lost his whole profit at Bridgwater put at some £50. The Common Pleas held that, although “Courts will be cautious how they discourage men from suing”, the action lay (p 307). Lord Camden CJ, after initial hesitation, was evidently satisfied that the case was sufficiently analogous to those where nothing was due, or where the arrest was for much more than was due, where it had been held that “the costs in the cause are not a sufficient satisfaction for imprisoning a man unjustly” (p 305).
- In Purton v Honnor (1798) 1 B & P 205, the claim was for damages for vexatious ejectment. On “the court expressing themselves clearly of opinion on the authority of Savile v Roberts 1 Salk 13, that such an action was not maintainable”, counsel for the plaintiff declined to argue the point. The report at 1 Salk 13 is very brief and confined to the proposition that “it is not sufficient that the plaintiff prove he was innocent, but he must prove express malice in the defendant”. It therefore appears probable that the defect in the claim in Purton v Honnor was simply that there was no plea of malice. On that basis, the case is presently irrelevant.
- Sinclair v Eldred (1811) 4 Taunt 7 concerned the arrest of the plaintiff by a bill of Middlesex, the device whereby civil proceedings could be commenced in the Court of King’s Bench (rather than the Common Pleas) under the fiction that a trespass had been committed in the County of Middlesex. The bill was indorsed for bail for £10, which the plaintiff’s attorney undertook whereupon the plaintiff was released. The defendant allowed the claim to lapse. The plaintiff had by then incurred costs of 13 guineas, but was only allowed £4 4s 6d, leaving him out of pocket for £9, which he claimed to recover. The claim failed, for want of evidence of malice, but Mansfield CJ said during submissions (p 9):
“The plaintiff has recovered already in the shape of taxed costs all the costs which the law allows, and it cannot be that an action may be sustained for the surplus.”
And in his judgment (pp 9-10) he added:
“This is certainly a new species of action, I mean considering it as an action to recover the extra costs, for there was no proof of any inconvenience of any sort arising to the plaintiff, except in the payment of more costs than the law allows him, and which therefore he ought not to recover.”
- Cotterell v Jones (1851) 11 CB 713 involved a claim against two third parties for maliciously commencing an unfounded action against the plaintiff using the name of Osborne and knowing him to be a pauper. The action was non-suited without, so far as appeared, any order for costs being made against Osborne who was insolvent. During the elaborate argument, the court evinced scepticism about the proposition that injury to property in putting a person to needless expense could ground a claim for malicious pursuit of a civil claim. After counsel had made extensive reference to Savile v Roberts and other authority, Jervis CJ said (p 718): “You will find that doctrine very much qualified, as you approach more modern times”, and Williams J said (p 723):
“I doubt whether we can take notice of the alleged insolvency of the nominal plaintiff in the former action: the costs must be assumed to be a full compensation for the vexation.”
- Ultimately, the claim failed because no judgment for costs had, for whatever reason, been obtained against Osborne, so that his insolvency was not shown to have been causative of any inability to recover costs. But the court endorsed the proposition, which was evidently common ground, that in the ordinary case costs not recoverable in the action cannot be recovered in an action for malicious pursuit of the action. As Jervis CJ said:
“It is conceded also, that, if the party so wrongfully put forward as plaintiff in the former action had been a person in solvent circumstances, this action could not have been maintained, inasmuch as the award of costs to the defendant (the now plaintiff) upon the failure of that action, would, in contemplation of law, have been a full compensation to him for the unjust vexation, and consequently he would have sustained no damage.”
To like effect, Maule J said:
“It is conceded that this action could not be maintained in respect of extra costs, that is, costs ultra the costs given by the statute (23 H 8, chapter 15, section 1) to a successful defendant.”
Williams and Talfourd JJ started their judgments by saying that they were of the same opinion. Talfourd J also said:
“It appears from the whole current of authorities, that an action of this description, if maintainable at all, is only maintainable in respect of legal damage actually sustained; and that the mere expenditure of money by the plaintiff in the defence of the action brought against him does not constitute such legal damage; but that the only measure of damage is, the costs ascertained by the usual course of law. There being no averment in this declaration that any such costs were incurred or awarded, no legal ground is disclosed for the maintenance of the action.”
- Churchill v Siggers (1854) 3 E & B 929 and Gilding v Eyre (1861) 10 CB NS 592 were both successful claims for maliciously issuing writs of capias for sums larger than any remaining due, with the result that the plaintiff had been wrongly imprisoned for periods and had also incurred expenses. Sophia de Medina v Grove and Weymouth (1846) 1 QB 152, 166-170 and (1847) 1 QB 172 was a claim for wrongfully issuing a writ of fi fa to enforce a judgment allegedly obtained for more than remained due, leading to the plaintiff’s imprisonment until he provided securities for the full judgment sum. The claim failed in the absence of any plea that the claim was brought without probable cause, as well as maliciously. The plaintiff’s remedy in such circumstances was to apply to set aside the judgment. The case adds nothing to the wisdom of other case law. In Johnson v Emerson (1871) LR 6 Ex 329 an order that the plaintiff put up a bond within seven days was stayed, but the allegation was that the petitioner, being aware of this, nonetheless maliciously petitioned ex parte for the plaintiff’s bankruptcy for failure to put up such a bond and also ex parte obtained the appointment of a receiver, leading to the plaintiff being adjudicated bankrupt, an adjudication later set aside as having been erroneous. The court split equally on the factual question of awareness and maliciousness, with the result that the verdict below in favour of the plaintiff stood.
- Cleasby B, who with Kelly CB upheld the claim, distinguished “a petition for adjudication [from] an ordinary commencement of an action, which leaves both parties in the same position”, describing it as “a most important ex parte proceeding against a man”, which “may be likened to an application for a capias to hold to bail … The one makes a man’s property liable to be taken, and the other makes his person liable to be taken …” (p 340). On the other side, Martin B, who would have set aside the verdict in favour of the plaintiff, questioned whether an action for malicious pursuit of civil proceedings could ever lie where a petition would, procedurally, lead in due course to an inter partes adjudication. Martin B’s view was not however followed by the Court of Appeal in Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674.
Quartz Hill
- Quartz Hill concerned a claim for malicious presentation and advertisement of a winding up petition, which was subsequently dismissed. The Court of Appeal consisted of the powerful combination of Brett MR and Bowen LJ. They addressed two main points, which they saw as related. The first was whether an action would lie for falsely and maliciously presenting a petition to wind up a company, while the second related to the nature of any damage which might be recoverable in such an action: see p 688, per Bowen LJ. As to the first, both members of the court treated it as axiomatic that no action lay for maliciously pursuing ordinary civil proceedings. The question was whether a winding up petition could be brought by analogy within the group of ex parte procedural measures involving damage to person, property or reputation which, on past authority, could give rise to such an action. As to the second, both members of the court also treated it as axiomatic that extra costs, over and above those recoverable in the original civil proceedings, could not be recovered in a later action for maliciously pursuing those proceedings. In my opinion, the Court of Appeal was on all these points correct in its analysis of past authority.
- Taking the first point, a petition to wind up a company could have no immediate effect of any person or property as such. The authorities on arrest of the person and seizure or dispossession of goods were not therefore in point. But the petition to wind up was nonetheless an ex parte procedure which directly affected the company’s trading reputation. It was in Brett MR’s words (p 685) “more like a bankruptcy petition” than an action charging fraud, and
“the very touchstone of this point is that the petition to wind up is by force of law made public before the company can defend itself against the imputations made against it; for the petitioner is bound to publicly advertise the petition seven days before it is to be heard and adjudicated upon …”
- Both members of the court gave consideration to the distinction between what they saw as a general inability to found an action upon the malicious pursuit of a prior civil action and the case before them. In a much-commented passage, Brett MR suggested (pp 684-685) that the case before them was “not like an action charging a merchant with fraud, where the evil done by bringing the action is remedied at the same time that the mischief is published, namely at the trial”. That idea was picked up by Buckley LJ in Wiffen v Bailey and Romford Urban District Council [1915] 1 KB 600, 607, who said that “the exception of civil proceedings so far as they are excepted, depends not upon any essential difference between civil and criminal proceedings, but upon the fact that in civil proceedings the poison and the antidote are presented simultaneously.”
- Brett MR’s and Buckley LJ’s aphorisms have been well criticised, on the basis that, if they were ever justified, the transparency and publicity surrounding modern day civil actions, at least in common law countries, make them quite unrealistic. This criticism was accepted by the Supreme Court of Victoria in Little v Law Institute of Victoria (No 3) [1990] VR 257, where Kaye and Beach JJ held (in the context of allegedly malicious pursuit of civil proceedings alleging that the plaintiff had been practising as a solicitor without being qualified to do so) that there was “no longer justification for confining to a bankruptcy petition and an application to wind up a company the remedy for malicious abuse of civil proceedings where the damages claimed is to the plaintiff’s reputation”. The criticism was also accepted as valid by the House of Lords in Gregory v Portsmouth City Council [2000] 1 AC 419, 428A.
- But the House of Lords went on, rightly, to indicate (p 428B) that acceptance of the criticism leaves open “for consideration whether the restriction upon the availability of the tort in respect of civil proceedings may be justified for other reasons”. In this regard, Bowen LJ’s judgment is in my opinion of interest for its fuller treatment of the point. He said (p 688):
“I start with this, that at the present day the bringing of an action under our present rules of procedure, and with the consequences attaching under our present law, although the action is brought falsely and maliciously and without reasonable or probable cause, and whatever may be the allegations contained in the pleadings, will not furnish a ground for a subsequent complaint by the person who has been sued, nor support an action on his part for maliciously bringing the first action. To speak broadly, and without travelling into every corner of the law, whenever a man complains before a court of justice of the false and malicious legal proceedings of another, his complaint, in order to give a good and substantial cause of action, must shew that the false and malicious legal proceedings have been accompanied by damage express or implied.”
- After examining the three sorts of damage contemplated in Savile v Roberts, Bowen LJ went on (pp 690-691):
“To apply this test to any action that can be conceived under our present mode of procedure and under our present law, it seems to me that no mere bringing of an action, although it is brought maliciously and without reasonable or probable cause, will give rise to an action for malicious prosecution. In no action, at all events in none of the ordinary kind, not even in those based upon fraud where there are scandalous allegations in the pleadings, is damage to a man’s fair fame the necessary and natural consequence of bringing the action. Incidentally matters connected with the action, such as the publication of the proceedings in the action, may do a man an injury; but the bringing of the action is of itself no injury to him. When the action is tried in public, his fair fame will be cleared, if it deserves to be cleared: if the action is not tried, his fair fame cannot be assailed in any way by the bringing of the action.”
- In contrast, certain indictments, those involving scandal to reputation or possible loss of liberty, were by their nature considered to affect a person’s fair fame and to be actionable, if malicious, and the presentation of a bankruptcy petition fell into the same class:
“In the past, when a trader’s property was touched by making him a bankrupt in the first instance, and he was left to get rid of the misfortune as best he could, of course he suffered a direct injury as to his property. But a trader’s credit seems to me to be as valuable as his property, and the present proceedings in bankruptcy, although they are dissimilar to proceedings in bankruptcy under former Acts, resemble them in this, that they strike home at a man’s credit, and therefore I think the view of those judges correct who held, in Johnson v Emerson, that the false and malicious presentation, without reasonable and probable cause, of a bankruptcy petition against a trader, under the Bankruptcy. Act, 1869, gave rise to an action for malicious prosecution.”
- On the general inability to found an action upon the malicious pursuit of a previous civil action, Bowen LJ also said this, vividly and in my view wisely (at pp 690-691):
“I do not say that if one travels into the past and looks through the cases cited to us, one will not find scattered observations and even scattered cases which seem to shew that in other days, under other systems of procedure and law, in which the consequences of actions were different from those of the present day, it was supposed that there might be some kind of action which, if it were brought maliciously and unreasonably, might subsequently give rise to an action for malicious prosecution. It is unnecessary to say that there could not be an action of that kind in the past, and it is unnecessary to say that there may not be such an action in the future, although it cannot be found at the present day. The counsel for the plaintiff company have argued this case with great ability; but they cannot point to a single instance since Westminster Hall began to be the seat of justice in which an ordinary action similar to the actions of the present day, has been considered to justify a subsequent action on the ground that it was brought maliciously and without reasonable and probable cause. And although every judge of the present day will be swift to do justice and slow to allow himself as to matters of justice to be encumbered with either precedents or technicalities, still every wise judge who sits to administer justice must feel the greatest respect for the wisdom of the past, and the wisdom of the past presents us with no decisive authority for the broad proposition in its entirety which the counsel for the plaintiff company have put forward. But although an action does not give rise to an action for malicious prosecution, inasmuch as it does not necessarily or naturally involve damage, there are legal proceedings which do necessarily and naturally involve that damage …”
- These passages highlight the point that civil actions cannot be said to have the same inevitable or necessary effect on trading or any other reputation as a winding up petition. They may be the occasion for serious allegations, which may be reported, but that is a feature of much civil litigation, not merely as a result of the way in which it is initiated and pursued, but as a result of evidence which may be given by independent factual and expert witnesses as well as parties. Civil actions are complex and developing phenomena, not infrequently exciting the interest of the press and public and leading ultimately to a resolution, by judgment, earlier settlement or sometimes withdrawal. This is so with whatever motive or prospect they may be pursued. The basic point which the Court of Appeal in Quartz Hill was concerned to underline was that an action to investigate the maliciousness or otherwise of a full-blown prior civil action, which had been fought and resolved inter partes, was and is a quite different proposition to an action for malicious pursuit of an ex parte step taken maliciously with immediate effect on the other party’s person, property or business. That distinction is still in my view a valid one. A judge of today would also be as sensible as a judge of Bowen LJ’s time to heed the fact that the wisdom of the past presents no decisive authority for the broad contrary proposition which counsel for Mr Willers puts forward.
- The second proposition for which Quartz Hill stands is that “extra costs” over and above those awarded in a prior civil action cannot on any view ground or be recovered in an action for malicious pursuit of that prior action. That proposition is supported by Sinclair v Eldred (1811), as well as by Johnson v Emerson (1871) to which the Court of Appeal referred. Although such extra costs might be quite reasonable as between solicitor and client, they were as between the parties to be regarded as the only costs which were necessary or were caused by or properly recoverable in respect of the prior litigation: per Brett MR and Bowen LJ at pp 682 and 690. There is an obvious policy imperative behind this rule. A court awarding costs in a civil action is entitled to have regard to all relevant matters, including the absence of any prospects of success and the state of mind in which it was pursued, when deciding what costs, and whether on an indemnity or standard basis; should be recoverable. To permit litigation about these issues after the close of an unsuccessful action would be to invite or risk re-litigation of issues which were or could have been decided in the first action. And in so far as the costs assessed by a costs judge are not likely to or may not enable full recovery of all costs incurred, the reason is likely to be that the costs incurred were not in the eyes of the law necessary, reasonable or proportionate in the context of the issues. To allow a claim for their recovery in a separate action for malicious pursuit of the original action would in each of these cases run contrary to the general policy of the law regarding costs.
Authority since Quartz Hill
- Pursuing the line of relevant authority, in Wiffen v Bailey and Romford Urban District Council [1915] 1 KB 600 the Court of Appeal held (albeit applying a view of scandal not necessarily coincident with that which Holt CJ intended in Savile v Roberts: see para 103 above) that non-compliance with a Public Health Act 1875 notice did not necessarily and naturally involve damage to the defendant’s fair fame. Buckley LJ noted Bowen LJ as indicating in Quartz Hill that “it is in very few cases that an action for malicious prosecution will lie where the matter is one of civil proceedings” (p 606). It was accepted by counsel, and endorsed by Buckley and Phillimore LJJ (pp 607 and 610), that extra costs over and above the five guineas allowable by the Justices were not legal damages within the third head of damage recognised in Savile v Roberts.
- Over the years since Quartz Hill, there has been a miscellany of further instances in which a remedy has been recognised in respect of procedural measures taken against the person or property. The malicious arrest of a vessel was recognised as actionable in The Walter D Wallet [1893] P 202 and Varawa v Howard Smith Co Ltd (1911) 13 CLR 35, where Quartz Hill was cited with approval (by O’Connor J at p 72); the case actually concerned the issue of a writ of capias for breach of an alleged contract for sale of a ship, pursuant to which writ the plaintiff had been arrested, imprisoned and held to bail. There is nothing in The Walter D Wallet or the other Admiralty arrest cases which Lord Clarke cites in his judgment contrary to the general principles and distinctions identified in Quartz Hill. The cases he cites do no more than illustrate that the malicious initiation of civil proceedings by wrongful arrest of a vessel can give rise to liability in similar fashion to the malicious institution of civil proceedings by wrongful arrest of a person. The malicious obtaining of a bench warrant, although supported by false testimony from the witness box, was likewise held actionable in Roy v Prior [1971] AC 470, where the analogy with malicious arrest on a criminal charge was drawn. Maliciously setting in train execution against property was accepted as actionable in Clissold v Cratchley [1910] 2 KB 244. Maliciously procuring the issue of a search warrant by a judge was held actionable in Gibbs v Rea [1998] AC 786, where it was held that such a claim had “long been recognised though seldom successfully prosecuted” (p 797B), and that it was “akin to malicious prosecution which is a well established tort and to the less common tort of maliciously procuring an arrest: Roy v Prior”. In Gregory v Portsmouth City Council [2000] 1 AC 419, 427G Lord Steyn said that:
“These instances may at first glance appear disparate but in a broad sense there is a common feature, namely the initial ex parte abuse of legal process with arguably immediate and perhaps irreversible damage to the reputation of the victim.”
- In Gregory v Portsmouth City Council the House of Lords refused to extend the tort of malicious prosecution to the malicious commencement of disciplinary proceedings (involving in that case the removal of a local counsellor from various committees). But Lord Steyn, giving the only full speech, accepted at p 432F-G that there was
“a stronger case for an extension of the tort to civil legal proceeding than to disciplinary proceedings. Both criminal and civil legal proceedings are covered by the same immunity. And as I have explained with reference to the potential damage of publicity about a civil action alleging fraud, the traditional explanation namely that in the case of civil proceedings the poison and the antidote are presented simultaneously, is no longer plausible. Nevertheless, for essentially practical reasons I am not persuaded that the general extension of the tort to civil proceedings has been shown to be necessary if one takes into account the protection afforded by other related torts. I am tolerably confident that any manifest injustices arising from groundless and damaging civil proceedings are either already adequately protected under other torts or are capable of being addressed by any necessary and desirable extensions of other torts.”
While the last comment could well be true in relation to disciplinary proceedings not enjoying absolute privilege of the sort actually before the House, it would not necessarily be so in relation to civil proceedings before a court which enjoy absolute privilege.
Summary of the effect of the case law
- As I have indicated in para 95 above, the authorities on malicious prosecution prior to Crawford v Sagicor appear to me to fall into only a limited number of categories, in essence:
- i)prosecution of criminal (and, at least anciently, some ecclesiastical) proceedings, but not of disciplinary proceedings;
- ii)institution of coercive measures instituted ex parte (though with the assistance of, or subject to some form of adjudication by, legal authorities) under civil procedures available leading to the arrest, seizure or search of the plaintiffs’ person or property or scandalisation of his fair fame;
iii) petitions for bankruptcy or insolvency, even though the grant of the petition is subject to some form of adjudication.
In claims for malicious prosecution within point (i), ie relating to a criminal prosecution, damages could include costs which the plaintiff incurred in successfully defending the malicious prosecution. But in the case of claims within points (ii) and (iii), ie in relation to the pursuit of prior civil proceedings, a plaintiff could, under the rules recognised in and expounded after Savile v Roberts recover damages for injury to person or reputation (in cases of “scandal”), but could not recover any extra costs over and above those recoverable inter partes in the original action.
- In Crawford v Sagicor, the debate between Lord Wilson in the majority and Lord Sumption in the minority appeared at times to focus on whether the tort of malicious prosecution had or had not applied to civil proceedings: compare eg paras 42 and 140. But, in reality, the position is more nuanced as appears both by their detailed discussion and by the analysis above of the case law. There is a range of cases in which the ex parte misuse of civil procedures, with immediate effects on the other party’s person, property or business, has grounded a tortious claim for malicious prosecution. But it has never been accepted that there is a general right to claim damages for the malicious pursuit of a prior civil action, which has been decided in the original defendant’s favour by judgment, settlement or abandonment.
Policy
- The question is whether that position should as a matter of policy be maintained. I have already indicated some factors which suggest that it should be. But ultimately it is necessary to review the issues of policy more generally. At this point, I can return gratefully to the discussion in Crawford v Sagicor, in particular in the judgments of Lord Wilson and Lord Sumption, as well as to Lord Neuberger’s judgment on the present appeal which I have had the benefit of seeing before writing this part of my own judgment. As will appear, I myself see the position in similar terms to Lord Neuberger and Lord Sumption. But I add this. To my mind, one thing is missing from the judgments so far. That is a discussion of the nature of the heads, or sorts, of damage which might be recoverable, if such an action were to be admissible. As Quartz Hill made clear, there can be a close relationship between this issue and the question whether any such action is admissible. According to the Statement of Facts and Issues, it is to be assumed that Mr Willers has suffered damage (1) to his reputation, (2) to his health, (3) in the form of lost earnings, (4) in the form of expenses incurred but not fully recovered, ie his costs of defending the Langstone action net of the costs awarded in it by Newey J on the standard basis. But there is no further information or assumption about the nature or causation of these heads of damage. And we have heard no submissions on them. It is impossible to form any view as to whether all or any of them might be said to have followed necessarily or naturally from the allegations made in the allegedly malicious action brought by Langstone Leisure Ltd against Mr Willers. Nevertheless, I regret that it has not been possible, on the facts being assumed and on the way in which the case has been presented, to give any close examination to the sorts of damage that might be recoverable under any tort of malicious prosecution that might otherwise exist. I shall nevertheless say some words on this.
- Taking first however the general question of policy, I do not consider that the law should recognise the suggested general tort. The first point I would make is that it is to my mind unconvincing to suggest that, because there is a tort of malicious prosecution of criminal proceedings, therefore it is logical or sensible that there should be a tort of malicious prosecution of civil proceedings. Not only does that ignore the teaching of history, showing courts studiously avoiding any such parallel. It also ignores the fact that, in an era when private prosecutions have largely disappeared, the tort of malicious prosecution of criminal proceedings is virtually extinct. To create a tort of malicious prosecution of civil proceedings might in these circumstances be thought to come close to necromancy.
- Second, the recognition of a general tort in respect of civil proceedings would be carrying the law into uncharted waters, inviting fresh litigation about prior litigation, the soundness of its basis, its motivation and its consequences. The basis, motivation and consequences of individual ex parte steps, having immediate effects at the outset of litigation, are likely to be relatively easy to identify. The exact opposite is likely to be the position in the context of prior litigation which has extended quite probably over years. Further, there is (and could logically be) nothing in the proposed extension of the tort of malicious prosecution, to limit it to circumstances where the claim was at the outset unfounded or malicious. It would be open to a defendant throughout the course of civil proceedings to tax the claimant with the emergence of new evidence, or the suggested failure of a witness to come up to proof, and to suggest that from then on the claim must be regarded as unfounded and could only be being pursued for malicious reasons. Logically, as Lord Kerr recognised in Crawford v Sagicor, paras 111-113, it must also be open to a claimant to tax a defendant with pursuing a malicious defence.
- Logically again, any such general tort should extend to any individual application or step in the course of a civil action, which could be said to be unfounded and maliciously motivated, eg to gain time or avoid execution, rather than for genuine litigational purposes. Indeed, logically in my view, once the parties are exposed to claims for maliciously pursuing their respective cases, there is no real reason why witnesses should not likewise be exposed, whether as co-conspirators or even as persons having their own individual malicious axe to grind by giving unfounded evidence. Equally, as Lord Neuberger notes (para 162), there seems to be no reason why the extended tort should not extend to family court, domestic tribunal or arbitral proceedings. I do not see how we can avoid considering these implications of the suggested extension, when we decide the present appeal. It is no answer to say that they do not arise for immediate decision. If on the face of it they follow logically from the suggested extension, we must recognise them.
- Lord Wilson was unperturbed by any idea that claimants might feel exposed to off-putting risks or that litigants might misuse the tort of malicious prosecution to their advantage. He suggested in paras 72(a)(i) and (e)(ii) of his judgment in Crawford v Sagicor that the court should have before it empirical evidence before giving weight to any suggestion that litigants might be put off bringing civil actions by threats of malicious prosecution or that actions for malicious prosecution might become pervasive and contaminate the system. In my opinion, such evidence could hardly be expected, when such actions have for long been seen as impossible. In any event, the formation of legal policy does not normally depend on statistics, but rather on judges’ collective experience of litigation and litigants and, more particularly here, their appreciation of the risks involved in litigation and the risks of its misuse. Judges have enough experience of disingenuous behaviour and procedural shenanigans on the part of litigants to form a view of sound policy in this area.
- Further, there already exists a clear recognition of the need that civil actions should in general be litigated without any risk of one or another party, or a third party, subsequently being able to go over and claim in respect of anything said or done in such actions. That is the absence of any duty of care owed by one litigant to another, and the general immunity which attaches to what is said or done in court by litigants or witnesses: see Lord Neuberger’s first and second points in paras 157 and 158 of his judgment on this appeal. A similar recognition informs the House of Lords’ conclusion in Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd [2001] UKHL 1; [2003] 1 AC 469, paras 73-78 that, once parties are in litigation, their conduct is subject to the rules governing litigation, which supersede the application of (in that case) any prior duty of good faith.
- I need not go further into the reasons why I consider the proposed extension to be unjustified and unwise. I am content simply to say that they have been fully and to my mind powerfully set out in Crawford v Sagicor by Lord Sumption in the four points he made at paras 145-148, supplemented by those made by Lord Neuberger on the basis of United States law and experience in paras 192-196, and on the present appeal by Lord Neuberger in his first ten and final points in paras 157 to 167 and 169.
- However, I would add that I am also troubled by the role assigned to the concept of malice in the expanded tort for which Mr Willers contends, and reluctant on that ground also to undertake the proposed expansion. The concept is key. The pursuit of an unfounded claim, defence or other step during civil proceedings has never been actionable in itself. Rather, the remedies available for such behaviour include striking out, judgment or costs or, where an undertaking is given or required as a condition of for example an injunction, enforcement of the undertaking. The additional feature of malice is, as Lord Sumption observes in Crawford v Sagicor (para 133 et seq), not as a general rule relevant to tortious (or one may add contractual) liability. One should hesitate before extending its role, for reasons which I will indicate.
- The starting point is to ask what malice is said to mean in the context of malicious prosecution. This is illustrated by Crawford v Sagicor itself. The facts were that (a) it was unreasonable for Mr Delessio, acting for Sagicor, to believe that Mr Paterson had defrauded Sagicor, but (b) he did nonetheless believe this and (c) his dominant motive in alleging fraud against Mr Paterson was his strong dislike and resentment of Mr Paterson, his wish to gain revenge on him and his obsessive determination to destroy him professionally. These factors were sufficient to make Sagicor liable: see paras 32 and 80, per Lord Wilson.
- Two points arise from this. First, liability for malicious pursuit of civil proceedings can arise from an unfounded claim, if the claimant’s “dominant” motive is to injure, even if he believes the claim to be well-founded and intends to “injure” the defendant by pursuing it to judgment. I would for my part better understand and be readier to accept a concept of malicious prosecution which depended on actual appreciation by the original claimant that the original claim was unfounded. The concept as advanced, and as the case law suggests, opens the door to wider claims, to wider exposure and to wider risks of misuse.
- Second, the concept as advanced also opens the door to future litigation about the meaning of dominant motive. This was discussed and left unanswered in the very different context of directors’ duties to act for a proper purpose: see Eclairs Group Ltd v JKX Oil & Gas plc [2015] UKSC 71; [2015] Bus LR 1345. Lord Sumption there considered that “but for” causation was the answer, whereas I thought that the principal or primary purpose in mind would be likely to be easier to identify, as well as more consistent with such guidance as authority afforded.
The sorts of damage recoverable
- I turn to the sorts of damages that might be contemplated when considering the possibility of an action for malicious pursuit of a prior civil action. As indicated above, although much weight is put by those representing Mr Willers on Savile v Roberts, the submissions before the Supreme Court have not addressed this aspect, which was a significant element in Holt CJ’s judgment. It was also central to the discussion in Quartz Hill. It seems to me potentially to represent a whole further area for litigation, very likely at the appellate level, though one which it is impossible for us to resolve in any detail without having heard further submissions about it. It seems clear, however, that what is contended is that, once proceedings are found to have been maliciously pursued, all adverse consequences of their pursuit, in terms of damage to reputation, earnings, health and extra costs, are recoverable without further enquiry into their precise nature or causation.
- I will comment briefly on each of these sorts of damage. As regards injury to reputation, all that can be said is that it will be necessary to revisit the area on which Diplock J touched in Berry v British Transport Commission [1961] 1 QB 149, pp 163-165 (see para 104 above) and then perhaps, having decided what is the correct – or the appropriate modern – understanding of a “scandalous” allegation, to consider whether the allegations of breach of common law and statutory duties made against Mr Willers by Langstone Leisure Ltd in action HC10C01760 fell necessarily and naturally within this concept. It seems at least clear from Bowen LJ’s judgment in Quartz Hill that he would not have contemplated that breaches of this nature could constitute recoverable damage or ground an action for malicious pursuit of a prior civil action: see para 120 above.
- The damage alleged to health (or by way of distress) lies some way from the damage to the person by way of arrest or imprisonment in issue in the case law discussed above. Both the nature of the damage and its causation are presently unparticularised. Once these are known, consideration will need to be given to whether the claim to recover damages in respect of them is subject to any special rule or simply to ordinary tortious rules.
- The claim for damage to earnings is put on the basis that it was impossible for Mr Willers to find alternative employment while Langstone Leisure Ltd’s claims of breach of duty against him were unresolved. He claims £500,000 in respect of the period 27 August 2009 to 28 March 2013. Sinclair v Eldred (1811) 4 Taunt 7 stands as a precedent for the recovery of loss of earnings during a period of unfounded and maliciously caused imprisonment. Mr Willers’ claim for loss of earnings is not related to imprisonment, but rather, it seems likely, to the alleged damage to his reputation which Langstone Leisure Ltd’s proceedings allegedly caused. Consideration will need to be given to whether damage of this nature is recoverable at all, whether as general damages on account of the “scandalous” or other nature of the original malicious action under Savile v Roberts or as special damages on any other principle.
- Finally, there is Mr Willers’ claim to recover extra costs amounting to £2,199,966.32, over and above the £1,700,582.20 which he recovered in the proceedings brought by Langstone Leisure Ltd. There is a strong line of case law over the last 200 years holding as a rule that extra costs of this nature are as a matter of principle irrecoverable as between the parties to the original proceedings: Sinclair v Eldred, Cotterell v Jones, Quartz Hill and Wiffen v Bailey (paras 110, 111, 124 and 125 above). This line can also be traced back to Holt CJ’s reasoning in Savile v Roberts and to Parker CJ’s in Jones v Givin (paras 99 and 105 above). This line extends back before and continues after Chapman v Pickersgill and, for the reasons I have given in para 107 above, Lord Mansfield CJ’s approach to the bond for £200 covering all loss in that case does not in my view impinge on it or on the rule it establishes. The rule must in my opinion also apply in a case like the present where Mr Gubay is said to have been the effective instigator of the proceedings brought by Langstone Leisure Ltd (and indeed to have owned as well as controlled that company). Extra costs may in some circumstances be payable to or recoverable from a true third party, eg payable by a party to its solicitor or recoverable under an insurance or other contract. But a claim for malicious pursuit of prior proceedings against those responsible for their instigation is in effect a claim between the parties to the prior proceedings. For the reasons given in the line of authority to which I have referred, and in my discussion of it (in particular in para 124 above), the rule applies and I agree with it.
Conclusion
- It follows from all the above that I would dismiss this appeal.
LORD NEUBERGER: (dissenting)
The tort of malicious prosecution in the civil context
- The question whether there should be a cause of action in malicious prosecution in respect of civil proceedings has recently been considered by the Judicial Committee of the Privy Council in Crawford Adjusters (Cayman) Ltd v Sagicor General Insurance (Cayman) Ltd [2014] AC 366, and it is now being addressed by the Supreme Court. In each case, the answer is in the affirmative, albeit by a bare majority.
- As in Crawford v Sagicor, I am in the minority. Although I agree with the judgment of Lord Mance, I propose to summarise my reasons for concluding that the answer should be in the negative, because, no doubt partly thanks to the judgments in Crawford v Sagicor, we have been given a fuller analysis of the history and implications of this tort than we had in the Judicial Committee.
- So far as the history of the tort of malicious prosecution in civil proceedings is concerned, there was considerable debate as to the effect of the judgments in various cases, starting with the judgment of Wray CJ in Bulwer v Smith (1583) 4 Leon 52, including the much-reported judgment of Holt CJ in Savile v Roberts (1698) reported variously in 1 Ld Raym 374, 3 Salk 17, 3 Ld Raym 264, 1 Salk 13, 12 Mod 208, Carthew 416, 5 Mod 405, and ending with the judgment of Campbell CJ in Churchill v Siggers (1854) 3 E & B 929. The appellant’s argument is that those judgments demonstrate that the tort of malicious prosecution extended to all civil proceedings which had been maliciously and baselessly brought against the potential claimant. The respondents’ argument is that those cases support the view that, although the tort did not generally apply to civil proceedings, there were exceptions which were limited to cases where the potential claimant loses his liberty or his property as a result of a malicious and baseless ex parte application or the like, and, as legal procedures have developed, those exceptions have largely fallen away. The decision of Sir Francis Jeune P in The Walter D Wallet [1893] P 202 is a relatively late example of a successful malicious prosecution claim in such circumstances (in that case, the malicious arrest of a ship).
- These old judgments, at least in the form in which they are reported, (i) are sometimes hard to interpret, (ii) often refer to, and may depend on, procedures and rules which have long since ceased to exist, (iii) at least in some cases, are not entirely reliable, as is apparent from differing reports of the same case, and (iv) do not, on any view, speak with one voice. Accordingly, it is perhaps understandable that there is disagreement as to their precise effect in terms of the overall legal position. Nonetheless, having read Lord Mance’s full and informative analysis in paras 96-110 above, which is supported by that of Lord Sumption in Crawford v Sagicor, I am satisfied that the respondents’ analysis is correct.
- Apparently general remarks, such as one finds in the judgment of Lord Campbell CJ in Churchill at p 937 are not, on close analysis, as clear as they might at first appear to a modern reader. He said “[t]o put in force the process of law maliciously and without any reasonable or probable cause is wrongful”, and the reference to “the process of the law” seems to me to be to be at least capable of referring to the execution of ex parte legal process, such as detention the claimant’s person or his assets, attachment and the like. In any event, broad general statements about the law, even by highly respected judges, are by no means always a reliable guide to the precise boundaries of a cause of action, when the extent of those boundaries is not in issue in the case concerned. In any case, any judicial decision is authority for what it decides, not for dicta which plainly go beyond the decision.
- In addition to the actual contents of those judgments, two factors persuade me that the respondents’ contention as to the effect of these old judgments is correct. First, there is not a single reported case of a successful claim in malicious prosecution which is inconsistent with the respondents’ much more limited version of the tort. If the much wider tort, as contended for by the appellant, existed, one would have expected there to have been a reported case of a claim based on such a tort succeeding, or at least having been brought, especially bearing in mind the many law reporters in Westminster Hall between the 17th and 19th centuries.
- Secondly, in Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674, both Sir Baliol Brett MR at pp 682-685 and Bowen LJ at pp 688-691 (where, as Lord Mance points out at para 122 above, he discusses, rather more fully, the point made in para 153 above) clearly took the view that the tort of malicious prosecution in civil proceedings had the more limited character contended for by the respondents. In addition, I note from p 677 that the first instance judge was Stephen J, who held that there was no cause of action, and that his decision had been upheld by Pollock B and Manisty J. It is perfectly true that in that case it was not argued that the tort was as wide as the appellant now suggests, and that the issue was whether the malicious and unfounded presentation of a winding-up petition (whose immediate effect was then more drastic than under the current state of the law) was to be treated as within the class of ex parte exceptions to the normal rule that there was no general tort of malicious prosecution in civil cases. Not only is that of itself worthy of note, but it appears to me to be little short of fanciful to imagine that all those five distinguished Judges would have misunderstood the scope of the tort of malicious prosecution. All of them had been in practice in the 1860s, well before the fundamental procedural changes effect in the 1870s, and Sir Baliol Brett, Pollock B and Manisty J had all been in practice since the 1840s. Further (at least in the Court of Appeal), they referred to a number of the previous authorities in their judgments.
- Of course, the fact that the boundaries of the tort were heavily circumscribed in the past does not mean that this court is bound to hold that they should remain circumscribed. However, the fact that the boundaries of the tort have (in my view) always been heavily circumscribed and have (on any view) been treated by the courts as heavily circumscribed since 1883, places a tolerably heavy burden on the appellant’s argument that those boundaries should, in effect, be removed, or at least substantially widened.
- A defendant to a malicious groundless civil claim will suffer stress and often will suffer financially in general terms, and many people’s immediate reaction on hearing of what happened in this case (at least as pleaded by the appellant) would be that the malicious claimant should compensate him for any mental distress and other damage which he has suffered as a consequence.
- However, to my mind, there are powerful reasons, some of which were identified by Lord Sumption in Crawford v Sagicor, against confirming (to use a neutral verb) the existence of a tort such as that contended for by the appellant. Some of those reasons are based on principle and some are based on practical considerations.
- The first reason, referred to in Crawford v Sagicor, para 124, is that the existence of the tort would be inconsistent with the well-established general rule that a litigant owes no duty to his opponent in the conduct of civil litigation, a proposition which is supported by two recent House of Lords decisions, Customs and Excise Comrs v Barclays Bank plc [2007] 1 AC 181, and Jain v Trent Strategic Health Authority [2009] AC 853. In the latter case, at para 35, Lord Scott, who gave the only reasoned judgment, said that, where the defendant’s slipshod conduct of an investigation and prosecution led to a wholly unjust order which caused the claimant substantial damage, “a remedy for the damage cannot be obtained via the imposition on the opposing party of a common law duty of care”, but that the solution “must depend on the control of the litigation by the court or tribunal in charge of it”.
- The second reason, discussed in Crawford v Sagicor, para 125, is that the existence of the tort would be inconsistent with the equally well-established rule that even a perjuring witness in court proceedings is absolutely immune from civil liability – for a recent example see Darker v Chief Constable of the West Midlands Police [2001] 1 AC 435, 445-446, 460-461 and 464. As was confirmed in Taylor v Director of the Serious Fraud Office [1999] 2 AC 177, this principle also applies to a potential witness giving a statement. While the decision in Jones v Kaney [2011] 2 AC 398 can be said to have made a slight inroad into this principle, the Supreme Court actually affirmed the general rule (see paras 16-17 and 105). More importantly, the effect of Jones was not to create a new tort or even a new duty of care; it was simply to remove an existing limitation on an existing duty of care: the result of the decision was that an expert witness’s duty to her client did not stop when she came to give evidence in court.
- The third reason, identified in Crawford v Sagicor, para 145, is that the original justification for the tort in the criminal context does not apply in the ordinary civil context. As Lord Sumption put it, the tort of malicious prosecution was developed as “a tool for constraining the arbitrary exercise of the powers of public prosecuting authorities or private persons exercising corresponding functions” against the claimant in subsequent potential malicious prosecution proceedings. In the non-criminal context this was limited to cases where the court was invited by the potential defendant to exercise ex parte or interlocutory powers which resulted in the claimant losing his liberty or property without the prior opportunity properly to defend himself. That is no basis for extending it to civil proceedings generally.
- It is perhaps worth adding that the courts have developed a different and more wide-ranging power in this context, by requiring, almost as a matter of course in most cases, a cross-undertaking in damages to be given by a party who obtains an interlocutory order. In other words, rather than limiting damages claims by victims of wrongly granted ex parte or interlocutory orders to maliciously brought applications leading to loss of liberty or of property, the law grants an almost automatic right to such victims, irrespective of the nature of the loss or of the presence of malice. That seems to me to render it all the more peculiar to resurrect today the tort of malicious prosecution in relation to civil claims generally.
- The fourth reason, mentioned in Crawford v Sagicor para 146, is that within the past twenty years, in a judgment given by Lord Steyn, the House of Lords in Gregory v Portsmouth City Council [2000] AC 419 made it clear in obiter but very carefully considered remarks that the tort should not be extended beyond criminal proceedings. The contrary view had been very fully expressed by Schiemann LJ in the Court of Appeal, and Lord Steyn’s detailed discussion and clear conclusion should, in the absence of very telling reasons to the contrary, settle the matter.
- The fifth reason, as described in Crawford v Sagicor, para 147, is that “the precise ambit of the tort, if it extends to civil proceedings of a private nature will be both uncertain and potentially very wide”. It appears that it would extend to a malicious defence (see per Lord Kerr in Crawford v Sagicor, paras 111-113), and it may be hard to justify why it should not extend to malicious applications or allegations in proceedings which would otherwise not be malicious. And, as Lord Mance says in para 132 above, the tort could apply at different stages of proceedings, so that a claim which was not malicious initially could arguably become malicious as things change. In particular, as he points out at para 133 above, there are likely to be arguments whether proceedings, which were initially unexceptionable, have become malicious because they are being continued for tactical or costs reasons. Similarly, there could easily be arguments as to whether it could apply to family court proceedings, domestic tribunal proceedings, and arbitrations. As I observed in Crawford v Sagicor, para 194, the present position is clear and simple, and in the field of law clarity and simplicity are at a premium.
- The sixth reason, adumbrated in Crawford v Sagicor, para 148, arises from the practical consequences in terms of the risk of satellite litigation. There are several recent examples where the House of Lords has had cause to express concern as to how well intentioned changes in the law have spawned such undesirable results – eg “an industry of satellite litigation” in Grovit v Doctor [1997] 1 WLR 640, “a new and costly form of satellite litigation” in Medcalf v Mardell [2003] 1 AC 120, para 24, and “a mass of satellite litigation” in Three Rivers District Council v Bank of England [2005] 1 AC 610, para 65.
- Seventhly, it seems to me that confirmation of the existence of the tort could well have unanticipated knock-on effects in other areas of law. For instance, in relation to the law of privilege. Lord Reed pointed out that in Scotland, where such a tort is recognised, the law of privilege in relation to defamation claims is different, and it may need to be amended in this jurisdiction to accommodate the tort, with unpredictable consequences. The unforeseen problems which follow when a court seeks to change the law of tort to do what it sees as justice in particular cases are, as Lord Reed says in para 184 below, well illustrated by the problems thrown up in Zurich Insurance plc UK Branch v International Energy Group Ltd v Zurich Insurance plc UK Branch (Association of British Insurers intervening) [2015] UKSC 33; [2015] 2 AC 509 and the cases cited therein.
- Eighthly, problems could arise for a defendant to a malicious prosecution claim, who wished to invoke his right to privilege in relation to any document in connection with the allegedly malicious proceedings. This problem would not arise in relation to a claim based on the ruling in Jones v Kaney, as the privilege would be that of the claimant, who would presumably be waiving the privilege in order to bring his claim in the first place.
- Ninthly, the existence of the tort could have a chilling effect on the bringing, prosecuting or defending of civil proceedings. The notion that a person should not have to face malicious proceedings brought by a ruthless party is said to justify the existence of this tort; but the existence of the tort severely risks creating what would be at least an equally undesirable new weapon in the hands of a ruthless party, namely intimidation through the unjustified, but worrying, threat of a malicious prosecution claim to deter bona fide proceedings. In other words, the creation of a remedy for one wrong is likely to lead to another wrong.
- Tenthly, it is almost inevitable that the cost and time of some proceedings will be increased as a party manoeuvres in one way or another with a view to setting up a malicious prosecution claim if the other party’s case fails.
- Eleventhly, there is a particular irony that we are creating or affirming the existence of this tort at a time when the courts of England and Wales have more powers than ever before to control litigation and make peremptory orders for costs.
- Twelfthly, as I discussed in Crawford v Sagicor, paras 170-175 and 181-190, unlike courts in England and Wales, courts in the United States of America have considerable experience of claims for malicious prosecution in the civil field. The state courts are pretty evenly divided as to the existence of the wide tort contended for by the appellant. Many state courts which accept the existence of the wide tort justify departing from what they understand to be the law in England on the basis that “[t]he English rule is that generally the loser must pay the winner’s attorneys’ fees” and so “an English plaintiff who brings a frivolous suit does so as the peril of paying his adversary’s litigation expenses” (to quote Ciparick J in Engel v CBS Inc (1999) 711 NE 2d 626, 629). Thus, even though the costs sanction which applies to litigation in this jurisdiction is largely absent in the United States, a substantial proportion of the courts in that jurisdiction have set their face against the existence of this tort, and many of those that accept it justify their view by reference to the absence of the costs sanction which is routinely available in our courts.
- In addition to these reasons for not approving the existence of the tort as proposed by the appellant, there are the two rather fundamental points made by Lord Mance in paras 136-139 and 140-144 above, which appear to me to be well founded. Thus, I consider that there could be real problems involved both in identifying what constitutes malice and in deciding what types of loss and damage should be recoverable in connection with claims based on the proposed tort.
- Finally, in this connection, it seems to me that the risks of according a right of action to those who suffer as a result of wrong-doing in the context of litigation are very well illustrated by the unfortunate experience of the litigation prompted by Parliament’s decision to extend the right of litigants to seek wasted costs orders against barristers in England and Wales through section 4 of the Courts and Legal Services Act 1990. In Ridehalgh v Horsefield [1994] Ch 205, 239, Lord Bingham MR in the Court of Appeal, after referring to the fact that “the number and value of wasted costs orders applied for, and the costs of litigating them, have risen sharply” tried to stem the flow of such claims. Subsequently, in the House of Lords case of Medcalf v Mardell, para 13, Lord Bingham referred to the fact that “the clear warnings given in [Ridehalgh] have not proved sufficient to deter parties from incurring large and disproportionate sums of costs in pursuing protracted claims for wasted costs, many of which have proved unsuccessful”. In Ridehalgh, the Court of Appeal also tried to curtail the expense involved in wasted costs hearings by saying that such hearings should be measured in hours not days (a view repeated in Medcalf). That led to courts refusing to hear wasted costs applications when they became disproportionate – see eg Regent Leisuretime Ltd v Skerrett [2006] EWCA Civ 1032. Because wasted costs applications are procedural and ultimately discretionary, it is far easier for the court to control the proceedings than it would be in relation to a malicious prosecution proceedings, where the claim would be based on a substantive legal right (although, as mentioned in para 168 above, the courts generally have greater powers of case management than they did in the past).
- The judgments in Ridehalgh v Horsefield at pp 233-234 and in Medcalf v Mardell at paras 23-24, 40 and 61 also demonstrate the problems thrown up by the law of privilege in relation to claims founded on the conduct of litigation. In addition, Ridehalgh v Horsefield at pp 233-234 support the concerns I have expressed about the risk of the tort giving rise to intimidation to discourage the bringing of valid claims.
- For these reasons, I would have held that a tort such as that argued for by the appellants should not be recognised in the courts of England and Wales, and I would have dismissed the appeal.
LORD SUMPTION: (dissenting)
- This appeal has been argued with conspicuous learning and skill on both sides, but the result has been to confirm me in the view which I expressed in Crawford Adjusters (Cayman) Ltd v Sagicor [2014] AC 366, that the recognition of a tort of maliciously prosecuting civil proceedings is unwarranted by authority, unjustified in principle and undesirable in practice. The only exception is the limited category of cases in which the coercive powers of the courts are invoked ex parte at the suit of the former claimant, without any process of adjudication. This exception is less significant today than it was historically, because modern forensic procedure offers less scope for the exercise of this kind of power. The only notable survivor of the panoply of procedures that once existed for the exercise of coercive powers over person or property without judicial intervention is the power to procure a warrant for the arrest of a ship, a context in which the exception is still germane and valuable. But whatever its limits, the exception is at least certain and rationally founded upon the special features of such cases. It has no application in this case any more than it did in Crawford v Sagicor.
- Since I expressed my reasons at length in that case, and I entirely agree with the judgments of Lord Neuberger and Lord Mance in this one, I shall limit myself to some brief general observations.
- The appellants are contending for a tort of general application, which was thought to have received its quietus from the Court of Appeal more than a century ago in Quartz Hill Consolidated Gold Mining Co v Eyre 11 QBD 674 and has never once been successfully invoked in the period of some five centuries during which the question has arisen. The alleged tort can therefore fairly be described as novel, whatever one’s interpretation of the language of Holt CJ in Savile v Roberts (1698) 1 Ld Raym 374. Novelty as such is of course no bar to the recognition of a rule of law. But in a system of judge-made customary law, judges have always accepted limitations on their ability to recognise new bases of non-consensual liability.
- Two limitations are particularly germane in this case, neither of which is consistent with recognising the wider tort for which the appellant are arguing.
- The first is that where the courts develop the law, they must do so coherently. This means, among other things, that the development must be consistent with other, cognate principles of law, whether statutory or judge-made. The recognition of a general liability for maliciously prosecuting civil proceedings fails that test. It circumvents the careful and principled limits that the courts have imposed on the tort of abuse of civil process. It cuts across the immunities which the law has always recognised for things said and done in the course of legal proceedings. It introduces malice as an element of tortious liability contrary to the long-standing principle of the law of tort that malice is irrelevant. Logically, it would entitle litigants to recover as of right costs which by statute are a matter of discretion. And unless we are to overrule not just the reasoning but the decision of the House of Lords in Gregory v Portsmouth City Council [2000] 1 AC 419, it would introduce an unjustifiable distinction between civil proceedings sounding in private law and those sounding in public law such as the disciplinary proceedings in issue in that case. The recognition of the wider basis of liability urged by the appellant would make the law relating to the conduct of legal proceedings incoherent in ways that cannot simply be brushed aside or left to other cases to sort out.
- The second limitation is that the proposed development of the law should be warranted by current values and current social conditions. Unless the law is to be reinvented on a case by case basis, something must generally have changed to make appropriate that which was previously rejected. The appellants’ arguments fail that test also. The courts have far more extensive powers today than they did a century and a half ago to prevent abuse of their procedures, and the closer judicial supervision of the interlocutory stages of litigation makes it easier to exercise them. Of course, these powers will not be enough to identify in time the more determined and skilful abuses, but that is part of the price to be paid for access to justice. The reluctance of the courts to accept rules of law justifying secondary or satellite litigation is born of long-standing judicial experience of the incidents of litigation and the ways of litigants. That experience is as relevant today as it has ever been. The volume of litigation has increased exponentially in the last 70 years. Its tendency to generate persistence, obsession and rancour is as great as ever. The hazards of losing, already considerable in terms of costs, must inevitably be greater if one adds the threat of secondary litigation for prosecuting the earlier action in the first place. Doubtless the great majority of secondary actions will fail, but that makes it even less satisfactory to enlarge the opportunities for bringing them.
- On the status as authority of the judgments of the Privy Council, I have nothing to add to the judgment of Lord Neuberger, with which I entirely agree.
- I would dismiss this appeal.
LORD REED: (dissenting)
- I agree with the judgments of Lord Neuberger and Lord Mance, and wish to add only three observations. The first concerns the extent to which the discussion in the present appeal has focused on the interpretation of law reports from the 16th to the 18th centuries. It is often valuable to understand how the modern law has come to be shaped as it is, especially where, as in the present case, the court is faced with an argument that it contains an anomaly. The judgment of Lord Sumption in Crawford Adjusters (Cayman) Ltd v Sagicor General Insurance (Cayman) Ltd [2013] UKPC 17; [2014] AC 366, and that of Lord Mance in the present case, are therefore valuable in explaining how the modern law came about, and why criminal prosecutions and certain ex parte civil proceedings have been treated differently from other civil proceedings. But the significance of the historical inquiry to the court’s decision should not be exaggerated. My own conclusion in the present case would have been the same even if a judgment had been discovered which unequivocally demonstrated that a right of action had been held to lie 300 years ago for the malicious prosecution of a civil suit inter partes. That is because, in the first place, the question raised by the appeal has to be answered in the context of the modern law of tort and modern civil procedure, rather than the corresponding law of 300 years ago. More generally, the court must not lose sight of the fact that it is deciding the law for the 21st century. We have to develop a body of law which is well-suited to the conditions of the present day, looking back to the achievements of our predecessors, and also, often more pertinently, to those of our contemporaries in other jurisdictions (as Lord Neuberger did in Crawford, in his consideration of the US authorities). As Maitland observed, every age should be the mistress of its own law (“The making of the German Civil Code”, in Fisher (ed), The Collected Papers of Frederic William Maitland, Vol III, p 487 (1911)). The great judges of the past, such as Holt and Mansfield, would have been the first to recognise that.
- The second point also concerns the use made of the reports of judgments given several centuries ago. As any modern judge knows, the citation of something he has said in a judgment, taken out of its context, is liable to be misleading. The same is surely true of the judgments of our predecessors. The court must therefore have a secure understanding of the factual and legal context of those judgments in order to be able to determine the intended scope of any judicial pronouncements. It is often difficult, however, to attain such an understanding of the judgments of the distant past. Difficulties arising from an unfamiliar procedural context, and an equally unfamiliar remedy-centred approach to legal thinking, are liable to be exacerbated by the variable quality of the reports themselves, and the variations between reports of the same case. It is unsurprising that, in the present case, notwithstanding the careful research carried out by counsel and members of the court, the authorities are nevertheless interpreted differently.
- Thirdly, major steps in the development of the common law should not be taken without careful consideration of the implications, however much sympathy one may feel for the particular claimant. The confusion resulting from the development of the law in order to afford justice to the victims of mesothelioma, in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32, should have taught us that lesson. In the present case, the basic problem facing the appellant, so far as his claim is based on damage to his reputation caused by allegations made against him in earlier civil proceedings, is the absolute privilege accorded by the modern law of defamation. The solution favoured by the majority results in the circumvention of that problem by the creation or extension of another tort. The question where that leaves the law of defamation, and the other issues identified by Lord Mance, appear to me to require fuller consideration than they have received. Sooner or later, this court will have to address them.