England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
(MR JUSTICE EADY)

		Royal Courts of Justice Strand London WC2
		8th November 1999

LORD JUSTICE WALLER: This is an application for permission to appeal three rulings made by Eady J on 1st July 1999.

The background to this action is set out in the judge's judgment:

"The background

This action was commenced on 17th December 1993, following the collapse of criminal proceedings against the claimants, Messrs Patrick Mahon and Andrew Kent, at the Middlesex Guildhall the previous August. They were at the material times, respectively, the managing director and corporate development manager of a firm of stockbrokers, based in London, and known as T C Coombs. They had been charged in February 1991 with an offence of dishonesty relating to transactions which took place in 1988. (Further charges were added in June 1992.)

For some time prior to that, the firm had acted regularly for a Mr Malcolm Johnson. He it was, in August of that year, who approached the private Swiss bankers Rahn & Bodmer (through a former employee called Mr Kaiser) in connection with the proposed purchase of a substantial shareholding in a company named Coastline Resources NPV. To discuss that transaction, and the means by which it was to be carried through, there was a meeting at the offices of Rahn & Bodmer in Zurich on 4 August. Apparently, there were present Mr Johnson, his assistant Mr Paul Main, Mr Kent (the second claimant) and Mr Kaiser. The true nature of the transaction was complicated and was the subject of dispute. That dispute lay at the centre of the criminal proceedings to which I have referred and it also forms part of the subject-matter of the current litigation.

It happened that the Serious Fraud Office ('the SFO') was looking into the affairs of Mr Johnson during the early part of 1990 and, in the course of their investigations, members of the staff sought information from Rahn & Bodmer. Their account of the Coastline transaction was communicated at a meeting at Elm Street on 9 August 1990 (attended by Dr Rahn and his legal representative Dr Paltzer) and also in a written summary headed 'Working paper: T C Coombs - Coastline Resources NPV Transaction'. Although the investigations into Mr Johnson's affairs continued, a further and separate enquiry was authorised by the then Director of the SFO, the following November, into those of T C Coombs. This was at least in part because of the information supplied by Rahn & Bodmer. Those investigations continued for some time but, relatively shortly after they were officially begun, the claimants were arrested in February 1991. This was, according to the evidence, because of an apprehension within the SFO at that time that there was a risk of their absconding.

Eventually, the trial on the criminal charges began in June 1993. After some two months of prosecution evidence, the learned judge ruled in accordance with the principles identified in R v Galbraith [1981] 1 WLR 1039 that there was no case to answer.

Within months of that successful outcome, the claimants sued for libel in respect of a letter sent on behalf of the defendants (or so it is alleged) on 20 December 1990 to the Securities Association ('TSA') and addressed to Mrs Rosiland Wright. The contents of the letter are complained of in the Re-amended Statement of Claim at paragraph 3, as referring to both claimants, and the meanings put upon the document on their behalf are as follows:

'(a) that the first Plaintiff, together with the Second Plaintiff, was guilty or probably guilty of attempting to dishonestly obtain 2 million Canadian dollars from Rahn & Bodmer by falsely claiming that Rahn & Bodmer had agreed to purchase shares in Coastline Resources for 5 million Canadian dollars, when in fact Rahn & Bodmer had agreed to do so for 3 million Canadian dollars;

(b) that the First Plaintiff together with the Second Plaintiff and others had conspired to defraud Rahn & Bodmer by selling them virtually worthless securities (namely the said shares in Coastline Resources) at an artificially inflated price by means of a complicated fraud, particulars of which were given in the words complained of.'

The action has had a complicated history. In June 1996 Brooke J struck out the proceedings on the basis that the document sued upon had only come into the claimants' possession by way of disclosure in the criminal proceedings. He took the view that there should be an implied undertaking in respect of such documents, which would be broadly analogous to that arising at common law as to documents disclosed on discovery: see eg Riddick v Thames Board Mills [1977] QB 881. The important aspect of this principle for present purposes was that, for reasons of public policy, a person to whom such a document was disclosed was not permitted to launch defamation proceedings over the contents. Subsequently, it has been held in the House of Lords in a different case that Brooke J was indeed correct in law as to the need for such an undertaking in criminal cases: see Taylor v Serious Fraud Office [1998] 3 WLR 1040. Meanwhile, however, the decision of Brooke J in this action had been overturned by a decision of the Court of Appeal: see Mahon and anor v Rahn and ors [1998] QB 424. This decision was in certain respects held by the House of Lords in Taylor to have been in error.

There had been a plea of qualified privilege in the original defence of 26 February 1996. Pleas of absolute privilege (paragraph 5A) and justification (paragraph 6A) were added by way of amendment on 9 June 1998. The Lucas-Box meanings sought to be justified are to the effect that the claimants were parties to a conspiracy to defraud Rahn & Bodmer of five million Canadian dollars.

On 27 April 1998, nearly a year after the Court of Appeal's decision and some six months before that of the House of Lords in Taylor v Serious Fraud Office, the claimants obtained leave to amend in order to add a claim in malicious prosecution. This was based in part on the proposition that the defendants (in conveying information to the SFO in August 1990 and in copying the allegedly defamatory letter of 20 December to the SFO) had been actively instrumental in setting the criminal law in motion against them. There are, of course, other components to the tort, namely that:

* there has been a prosecution causing damage to the claimants;

* it was terminated in their favour;

* the defendants acted without reasonable and probable cause;

* the defendants were malicious.

The present applications

The issues that now arise before us may be listed as follows:

1. Mr Moloney QC, for the defendants, invokes the jurisdiction of the Court under Part 24 of the CPR 1998, to strike out those parts of the Re-amended Statement of Claim relating to malicious prosecution, on the footing that the defendants cannot in the light of the evidence properly be regarded as having instituted the proceedings. He refers in particular to the decision of the House of Lords in Martin v Watson [1996] AC 74 and argues that similar reasoning ought to prevail here.

2. Alternatively, he argues that the defence of absolute privilege raised in paragraph 5A of the Amended defence is so manifestly well founded that I ought to dismiss the defamation claim either by way of preliminary issue or pursuant to the Part 24 jurisdiction.

3. In the event that Mr Moloney is unsuccessful in those various endeavours, and the action therefore continues, he wishes to amend his particulars of justification for the purpose of adding certain other transactions which he says are capable of justifying the broad Lucas-Box meaning in paragraph 6A of the defence.

Needless to say, each of those applications is controversial."

The judge, having defined the issues before him, ruled in the following way. In relation to the malicious prosecution aspect he ruled that the test was not the high hurdle which had been contended for by Mr Moloney and might arguably appear from one passage of Lord Keith's judgment in Martin v Watson: he ruled that the formulation was much wider than that which Lord Keith might otherwise have been suggesting. He then ruled that the appropriate course was to have a trial and there should not be a summary determination of the malicious prosecution aspect. On the absolute privilege point he again looked at the matter in some detail and concluded that because in this instance the TSA were exercising a licensing function, its function did not fall within that area which should attract absolute privilege. Thus in this instance he ruled that there should be no absolute privilege as a defence to the libel claim. Finally he refused leave to amend in relation to some prior business dealings between the stockbrokers and the defendants. What is said there is that the claimants were seeking to rely on some nine previous dealings; the defendants now want to rely on two out of those nine and a further two previous dealings in order to justify if the action is to go to trial.

The matter came before the single Lord Justice. The preliminary view he formed at that stage was, first, that the amendment point was a second tier appeal, and he pointed to paragraph 2.19.1 of the practice direction which shows the very high hurdle which has to be crossed before permission can be given on a second tier appeal. He then turned to the other two aspects, of malicious prosecution and absolute privilege, and suggested that the points raised by the defendants could have been raised at a very much earlier stage. He also pointed to the fact that the lists in the Court of Appeal and the House of Lords were somewhat overloaded and that accordingly the trial of this action would be very much delayed if permission to appeal were given. He further thought that it would be helpful to a court in considering the two points if there was a finding in relation to malice. So his view at that stage was that the correct course was to adjourn those two points so that the matters came to the Court of Appeal only after a trial.

Mr Moloney has demonstrated that it would have been difficult for the defendants to take the points they have sought to take at an interlocutory stage any earlier than this year, having regard to the fact, first of all, that the absolute privilege and malicious prosecution were pleaded only by way of amendment in 1998 and that it is only really following the introduction of the new procedure that it was open to the defendants at least to argue that the malicious prosecution aspect of the claimant's case should be struck out. He also submits that in truth the test really should be, so far as appeal is concerned, whether there is some reasonable prospect of success. He also emphasises that the question which arises on both the malicious prosecution and the absolute privilege aspects relates to public policy.

He correctly points out that the courts, in considering the question of malicious prosecution and the level at which the test should be, are obviously seeking to balance the interest of anybody injured by a prosecution brought dishonestly and the interest that the prosecuting authorities may have in obtaining information from informants. Putting it bluntly, it is very important that informants are not discouraged from providing information to prosecuting authorities by a risk of malicious prosecution. It is for that reason that Mr Moloney would argue that the test is as high as Lord Keith put it in the passage on which he relied.

The same point applies in relation to absolute privilege. Mr Moloney submits that the whole reason for having absolute privilege is to protect persons from supplying information in certain instances. So his argument is that if his clients are not entitled to bring these matters before the Court of Appeal at this stage, but if at the end of the day they were found to be right in their arguments both on malicious prosecution and on absolute privilege, they would have been put through the very ordeal from which the court (on one view) is seeking to protect them. He thus submits that these are both points which he ought to be entitled to argue before the Court of Appeal before a trial takes place. He further points out that the defendants will be incurring substantial costs if a trial were to take place before these points are decided. If both these points were decided in his client's favour there would be a total saving of the costs of a trial; if one of the points were decided in his favour - for example, the absolute privilege point - that itself would produce a saving; he accepts not perhaps very substantial in the context, but certainly a saving in costs.

I have to say that I have not found this an easy matter. But at the end of the day, I am persuaded that, certainly on the malicious prosecution and absolute privilege aspects, there are points which are fit to go to the Court of Appeal. Indeed, as it seems to me, that was the view of the single Lord Justice, Brooke LJ. The most difficult question is whether now, as opposed to after a trial, is the time for these matters to go to the Court of Appeal. I am persuaded that because of the public policy considerations these matters ought to be looked at by the Court of Appeal before a trial. Furthermore, if these matters are being looked at by the Court of Appeal then, despite the fact that the amendment points are a second tier appeal, it seems to me that it will add very little to the time taken on an appeal if those matters were looked at as well, since it does seem to me that there is some force in the point that if one side is looking at previous business dealings, then the other side should be entitled to do so also.

The only question that remains is whether the right course is to force the parties to continue preparing for a trial (which, on the present estimate, would in any event not be before June next year and probably some time later) while the matter is pursued in the Court of Appeal. My view is that if the matter is coming to the Court of Appeal costs should be saved; that it would be wrong to compel the parties to incur further expenditure. The appropriate course is to see what can be done so far as the Court of Appeal is concerned in getting these appeals on as early as possible so that the least damage is done to any trial programme if the end result is that there should be a trial. So I would grant permission to appeal and with that caveat.

LORD JUSTICE WARD: I agree.

ORDER: Application allowed. Notice of appeal to be served within seven days. Trial stayed pending judgment on appeal. Costs in the appeal.

(Order not part of approved judgment)