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Supreme Court: Malicious Claims Actionable


Supreme Court: Malicious Claims Actionable

Does this Landmark Decision “open the floodgates” to claims from aggrieved parties?

Earlier this month a 9 Member panel of the Supreme Court decided 5:4 that the tort of malicious prosecution extends to civil proceedings. The Supreme Court usually sits with a panel of 5, and more rarely, 7. That 9 members heard this case demonstrates its importance. It is also an extreme illustration of assets and liabilities, specifically legal proceedings surviving the death of a principal party.

Willers v Joyce and another (in substitution for and in their capacity as executors of Albert Gubay (deceased)) [2016] UKSC 43 and [2016] UKSC 44.

Background

Mr Willers and Mr Gubay were business associates for over 20 years. Mr Willers was a director of Langstone Leisure Ltd, a company controlled by Mr Gubay. They fell out in 2009.

Mr Willers was sued by Langstone Leisure Ltd for alleged breaches of contractual and fiduciary duties when he was a director of the company. He defended the action and issued a third-party claim for an indemnity from Mr Gubay, on the basis that he had acted under Mr Gubay’s direction. Langstone discontinued its claim against Mr Willers shortly before trial.

Mr Willers brought proceedings against Mr Gubay for the malicious prosecution of the Langstone claim against him, contending that it had been part of a campaign to damage to his reputation, health and earnings. Mr Gubay's defence was that there was no cause of action recognised in England &Wales for malicious prosecution of a civil suit (in contrast to criminal proceedings, where it is well established).

Precedent

Mr Willers’ claim was struck out. The Judge held that she was bound by the doctrine of precedent to follow a decision of the House of Lords in Gregory v Portsmouth City Council [2000] which reiterated that the tort of malicious prosecution did not extend to civil proceedings.

However, due to a recent conflicting decision of the justices sitting in their different capacity as members of the Judicial Committee of the Privy Council (JCPC) in an appeal from the Cayman Islands (Crawford Adjusters (Cayman) Ltd v Sagicor General Insurance (Cayman) Ltd [2014]), Mr Willers was granted leave to appeal to the Supreme Court.

The High Court granted a leapfrog certificate so the scope of the tort of malicious prosecution could be resolved definitively, bypassing the Court of Appeal. As well as dealing with that issue, the court also addressed the status of Privy Council decisions in the doctrine of precedent.

The Supreme Court decision

The Supreme Court allowed Mr Willers' appeal which can now go to trial, and held that the tort does apply to civil proceedings.

The dissenting minority of justices did not find sufficient support in historical case law, arguing that recognising the tort would be inconsistent with longstanding rules of law, and expressing concerns that the decision could spawn undesirable satellite litigation.

However, the majority held that it seemed instinctively unjust for a person who has suffered injury as a result of the malicious prosecution of civil proceedings against him to be left with no redress. Addressing the concerns about 'satellite litigation', the majority emphasised that to establish a claim for malicious prosecution of civil proceedings it must be proved that the original proceedings were not a bona fide use of the court's process, e.g. where proceedings were wholly without foundation or where the party sought some extraneous benefit to which he had no right. This means that the claimant has a heavy burden to discharge, and as such successful claims are likely to be rare.

“Simple justice” dictated that Mr W's claim for malicious prosecution should be sustainable in English law.

Lord Toulson gave the lead judgment, Lady Hale, Lord Kerr and Lord Wilson agreed. Lord Clarke delivered a concurring judgment. Lords Neuberger, Mance, Sumption and Reed dissented.

Broadly, the court approached the appeal by looking both at whether the historic cases supported the existence of a general tort of malicious prosecution and also at the policy considerations for and against permitting claims of this type. The majority recognised that the authorities stretching back to the 17th century were not conclusive, but they did show that the courts were willing to develop the tort to achieve justice in situations where a person has suffered injury as a result of the malicious use of legal process without any reasonable basis.

The minority's conclusion however was that the tort had never applied in civil proceedings as such and the House of Lords had taken a firm stand against an extension to civil proceedings in Gregory. They were also unpersuaded that there was any general need to extend the tort as it would, in their view, create uncertainty, further anomalies and the potential undesirable practical consequences.

The policy arguments

Lord Toulson found the statement in Savile v Roberts (1698 12 Mod Rep 208) 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…” to be obvious and compelling. He found that it would be instinctively unjust for there to be no recourse for a person who suffers injury as a result of malicious prosecution of civil proceedings.

The tort would not discourage those with valid claims

There is no evidence that the existing risk of indemnity costs faced by claimants pursuing improper claims has deterred the pursuit of legitimate claims

There is a public interest in avoiding unnecessary satellite litigation, but malicious prosecution isn’t a collateral attack on the outcome of the first proceedings

There might be an attack where, for example, the judge in the original proceedings refused to award indemnity costs, the malicious prosecution claim being an indirect means of challenging the judge’s refusal to penalise the claimant’s conduct

There is no duty of care between litigants, but a liability for maliciously instituting proceedings without reasonable or probable cause is “simple justice”

Anyone seeking to establish such a claim would have a heavy burden to discharge

The test to be applied

The court held that, to establish a claim for malicious prosecution, the claimant would have to prove:

Proceedings had been brought against it without reasonable and probable cause.

The party that brought those proceedings did so maliciously.

Guidance.

The first limb will be satisfied where the claimant does not have a proper case to put before the court; if the claimant did not believe its claim would succeed. On the second limb, a claim will be malicious if the claimant had deliberately misused the process of the court. This includes cases where it can be shown that the underlying claim was brought in the knowledge that it had no foundation: the proceedings were not a bona fide use of the court’s process.

Privy Council

The case is also of constitutional importance in deciding the extent to which Privy Council decisions made by a board formed solely of serving Supreme Court Justices and based on English law interpretation was legal precedence in England and Wales.

It was confirmed unanimously that a court should not normally follow a decision of the Privy Council if it is inconsistent with the decision of another court which would otherwise be binding on it. However, this should be subject to an exception. In an appeal to the Privy Council involving an issue of English law on which a previous decision of the House of Lords, Supreme Court or Court of Appeal is challenged, the members of the Privy Council can, if they think it appropriate, not only decide that the previous decision is wrong, but can also expressly direct that domestic courts should treat their decision as representing the law of England and Wales. This was considered expedient bearing in mind that the Privy Council panel normally consists of the same judges as the Supreme Court. This should increase the value of Privy Council judgments on English law.

Landmark Decision

The decision means that any claimant bringing unfounded proceedings for malicious reasons now faces additional potential sanctions (being sued for damages for Malicious Prosecution) on top of the usual costs and other risks. While this is a landmark decision, the issue before the court was whether this type of claim was sustainable in principle, do there has been no specific award as yet.

  • It is suggested that the decision is an overdue recognition that where there is a wrong, as a matter of principle and policy, it would be unjust to leave the claimant without a remedy for the damage caused.
  • An anomalous contradiction between civil and criminal and law has been resolved and a gap in the law filled.
  • The specifics of Malicious Prosecution, its precise boundaries, causation and the types of loss that can be recovered will be the subject of developing case law.
  • It remains to be seen how far the tort will evolve, although it is likely that successful claims will be rare, and there will be no “opening of the floodgates”.
  • There is already a tort of “abuse of process” (the abuse of civil proceedings for a predominant purpose other than that for which they were designed). The tort is rarely invoked.
  • Distinct from the tort, “abuse of process” is also a ground for striking out a claim under CPR 3.4(2)(b).
  • There already exist related torts offering protection from malicious prosecution, including defamation, malicious falsehood, conspiracy and misfeasance in public office.
  • Reflecting Lord Neuberger’s concern that it could have a chilling effect on the bringing, prosecuting or defending of civil proceedings, judges will take in to account the risk of defendants threatening malicious prosecution claims in order to deter genuine claimants.
  • The heavy burden of satisfying the test to establish a successful claim is referred to above, and emphasised in the judgment.

Paul Sykes is a Director in our Disputes Management department. For further information regarding malicious prosecution, and business disputes contact Paul Sykes

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Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.


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