England and Wales Court of Appeal (Civil Division) Decisions

Case No: A2/2000/2075

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM QUEEN'S BENCH DIVISION

BY THE 2ND DEFENDANT AGAINST THE ORDER

OF MR JUSTICE BUCKLEY

Royal Courts of Justice

Strand, London, WC2A 2LL

Tuesday 12 December 2000

LORD JUSTICE OTTON:

This is an appeal by the second defendant (BT) against the Order of Buckley J. on 19 April 2000 whereby he dismissed their application to strike out the Writ and Statement of Claim in this action. He granted leave to appeal.

The cause of action against both defendants is malicious prosecution.

The first defendant has taken no part in the application.

Background

From about 1990 the plaintiff and various companies with which he was involved were running a "chat-line" service, for which purpose he (or one or more) of the companies entered into a number of agreements with BT. In essence, the parties agreed to share the charges for telephone calls made to the plaintiff or the companies (the service provider). The time came when BT became suspicious as to the service provided by the service providers. They became aware that very long calls were being made running up enormous bills which were not paid and which had the appearance to BT of being bogus calls. In some instances the lines were opened by the inquirer, which set the charges running but no real conversation took place and only a radio could be heard in the background.

BT involved the police in a joint inquiry and investigation. As a result numerous arrests were made throughout the country and several individuals were charged with offences of dishonesty. Many pleaded guilty, some were sentenced to modest prison sentences and others were dealt with by way of community sentences.

Eventually, the plaintiff and a Miss Toole were charged with conspiring to arrange for such calls to be made and for employees of theirs to keep the lines open when they were not bona fide chat-line calls. The alleged conspiracy involved a substantial fraud on BT because some individuals made calls from places where they were not using their own telephone lines, for example, night-watchmen.

In March 1994 the case against Sinclair and Toole was listed for trial in Leeds Crown Court before HHJ Garner. Leading counsel for the defendants submitted to the judge that to continue with the prosecution would be an abuse of process and that the indictment should be stayed. During the joint investigation the master tapes had been recovered from the service providers. For the purpose of the prosecution process the hundred or so tapes had been edited so as to provide a summary of many of the telephone calls which had caused BT to be defrauded. It was said that it would have taken ten man-years to listen to all the master tapes. Consequently the trial was unmanageable and unfair because the parts of the tapes not included in the prosecution summaries might throw a different or innocent light on the case. As the defendants could not be expected to listen to them all, they could not defend themselves.

Somewhat surprisingly, the trial judge acceded to this submission. He does not appear to have considered methods of making the case triable within a reasonable time span. It might have been possible to take, at most, six of the shorter tapes (lasting about 4 hours each) and to confine the conspiracy to these four or to add specimen substantive counts to cover each of six tapes. The practical effect of the Judge's Order staying the proceedings was that they came to an end.

Thereafter, Mr Sinclair commenced civil proceedings against the Chief Constable of the West Yorkshire Police and BT alleging malicious prosecution. His companies also brought proceedings against BT for breach of contract which have no bearing on this appeal. In essence the Plaintiff alleges that a Mr Kelly, an employee of BT, colluded with the police and in particular with DC Todd who was in charge of the day to day handling of the "Operation Appollo" investigation in producing the summaries of tape recordings. The plaintiff asserts that the summaries presented a false picture of what was happening and being said and that DC Todd "distorted" the evidence. In essence the case against Kelly is that he allowed DC Todd to produce tape summaries in order to submit them to the CPS knowing that they were unfair and inaccurate. How this serious allegation can be made when Mr Sinclair asserted at the criminal trial that he was unable to hear all the tapes is something of a mystery.

The First Hearing before Buckley J.

On 20 January 1999 there were four summonses before the judge, only one of which is of relevance on this appeal. This sought an Order striking out the Writ and Re-amended Statement of Claim against BT under the provisions of Order 18 Rule 19(1) RSC ("the malicious prosecution summons").

BT relied on two grounds :

"(1) The fact that the indictment against the Plaintiff was merely stayed and not a determination in his favour. The judge found against defendants on this issue and it is not pursued for the purposes of this appeal.

(2) That the plaintiff had failed in the Re-amended Statement of Claim and the Further and Better Particulars to raise a sufficient case that BT improperly set the law in motion against him."

The hearing lasted nearly three days but the judge neither allowed nor dismissed the application. The summons was adjourned to permit the plaintiff's counsel to inspect BT's documents. It is highly significant to the outcome of this appeal that, in adjourning the application, the learned judge on that day made an order in the following terms:

"AND UPON THE LEARNED JUDGE deciding that

(a) there was no basis from the material then before him for inferring that there was any impropriety in this matter sufficient to involve (BT) in improperly setting in motion the prosecution herein ; and that

(b) the judge would have struck out the Writ and Statement of Claim as against (BT) were it not for the fact that counsel for the plaintiff had apparently not inspected the defendants documents ; and that

(c) counsel for the (Plaintiff) should be given an opportunity to inspect (BT's) documents before any strike out Order is made."

Thereafter Mr Engelman and Mr Spencer, of counsel carried out a detailed inspection of BT's documents. The application was eventually re-listed.

The Second Hearing before Buckley J.

On 19 April 2000 the learned judge considered submissions advanced by Mr Engelman on the basis of discovery. In essence he concluded :

"If Mr Kelly became aware of the content of Mr Todd's summaries, which for present purposes (BT) concedes is at least arguable, and if he had listened to the master tapes to any significant extent, to my mind it is clearly arguable, albeit neither of those facts in themselves is improper but putting them together, that he would have realised that DC Todd's summaries were unfair."

The Appeal

Mr Malcolm Chapple, on behalf of BT, advanced three grounds of appeal :

(1) That the learned judge was wrong in deciding that the evidence then before the Court was sufficient to satisfy the test, namely "whether there is any real prospect that the Court could conclude that Mr Kelly allowed the Todd summaries to go to the CPS or to remain with the CPS uncorrected knowing that they were unfair.

(2) In the alternative, that when applying the test and deciding that there was such "a real prospect", the learned judge was wrong in failing to give sufficient weight to the seriousness of the allegation against Mr Kelly (that of impropriety in the course of and in support of a criminal prosecution, which could itself have been a crime) and thus he was wrong in deciding that the standard and nature of the evidence then before the Court was proportionate and of the necessary precision and clarity to satisfy the test.

(3) Or, the learned judge was wrong in deciding that there was such a "a real prospect " merely by the facts of (1) a close association between Mr Kelly and DC Todd, (2) a heavy involvement by Mr Kelly and other representatives of the appellant in the relevant investigation, (3) a listening by Mr Kelly to some parts of some of the tapes and (4) of a reading of and/or listening to summaries by Mr Kelly.

Mr Chapple pointed out that the only allegation of actual misconduct is against the police by virtue of the inaccurate preparation by DC Todd of the summaries of tape recordings of the telephone conversations which lasted many hours. The Plaintiff contends that these summaries presented a false picture of what was actually happening and being said and thus, as it is pleaded, "DC Todd distorted the evidence." The allegation of inaccurate summarisation is strongly denied by both defendants but for the purposes of the application this is to be treated as arguable. However counsel contended that the Plaintiff must show that he was prosecuted by BT, that is to say, that the law was set in motion against him on a criminal charge and that it is not enough that BT was involved in the prosecution or had given evidence to the prosecuting authorities. The Plaintiff must also prove that BT or its representatives acted in bad faith and deliberately gave false or misleading information to the police, or withheld the true position with a view to securing a prosecution of the Plaintiff. In other words, the Plaintiff must prove that Todd and Kelly (or others employed by BT) acted in concert pursuant to a common and criminal design. The evidence does not support these serious allegations The judge was correct in concluding at the end of the first hearing that there was no basis from the evidence that there was any impropriety. The inspection of BT's documents did not materially alter the position. He should have reached the same conclusion and allowed the application. The Plaintiff has no cause of action against BT or, if it were allowed to continue there is no real prospect of success and it should be struck out in order to save the costs and inconvenience of a six to eight week hearing.

Mr Philip Engelman, on behalf of the Plaintiff, submitted that on the second occasion Buckley J. applied the correct test, namely whether there was any real prospect that the Court could conclude that Kelly allowed the summaries to go to the CPS uncorrected knowing that they were unfair. The judge was correct in concluding on the material before him that there was a real prospect that the trial judge would so conclude. The test to be applied is clear and unequivocal. In effect the appellant seeks to appeal the exercise of Buckley J's exercise of discretion. There was no error of principle or in law in the exercise of that discretion. Moreover the learned judge was wrong, having heard submissions on the written evidence over five days, to grant the appellant permission to appeal. Accordingly this Court should only allow this appeal if it is shown that the decision of the lower Court was wrong or where it was unjust because of a serious procedural or other irregularity in the proceedings in the lower Court (see Tanfern Ltd v. Gregor Cameron-MacDonald & Anr (unreported, 12 May 2000 per Brooke LJ). Applying CPR 52.11(3) and the accompanying Practice Direction the power of this Court to interfere on appeal is now significantly circumscribed. Consequently this appeal is outside those limited circumstances.

In the alternative, counsel submitted that there was sufficient evidence based on the background circumstances of the case and the documents disclosed on discovery to justify the judge's conclusion. BT's employees were heavily involved from the preparatory stages of the investigation until the proceedings were stayed. BT's officers were present at the arrest, search and interview of some 57 suspects. BT, through Kelly, attended criminal case conferences with the CPS. Kelly advised that the service to the Plaintiff should be closed forthwith so as not to jeopardise the CPS's case. Other BT's officials believed that there was no reason for the Plaintiff to be involved in the fraud. BT's investigation officers, including Kelly, were ex-serving police officers. Kelly was located with the senior police officer in Manchester and acted as exhibits officer from arrest through to trial. More important, BT destroyed relevant and disclosable documents relating to the prosecution contrary to its own Document Retention Policy in advance of the decision in R v. Ward (1993) 1 WLR 619. Mr Kelly was present when DC Todd prepared the tape summaries and must have been aware that they were inaccurate and unfair.

Discussion and Conclusion

When the application first came before Buckley J. in January 1999 it was governed by Order 18 Rule 19(1) which provided :

"(1) the Court may at any stage of the proceedings order to be struck out or amended any pleading ....on the ground that

(a) it discloses no reasonable cause of action ...

etc. .... and may order the action to be dismissed."

On that occasion the learned judge approached the application to strike out on the correct basis whether there was a reasonable cause of action and whether it was frivolous or vexatious or an abuse of process. He considered the nature of the tort of malicious prosecution and the manner in which the claim was pleaded. Based on a premise that DC Todd distorted the evidence he assumed, for the purposes of the application, that Todd "deliberately edited the tapes improperly or omitted tracks from the master tape which would have thrown an innocent light on those parts upon which he did rely, and BT acted in concert with him in some way." He continued (page 14/3) :

"In the final analysis, the question, I believe, for me in the context of these proceedings is whether there is any sensible argument, which must of course be based on some evidence or inference from facts which might be proved, to support the charge that BT were involved in that allegation against DC Todd."

He considered each of Mr Engelman's evidential points in turn. He accepted Mr Chapple's submission :

"That none of those matters, when you look at the source evidence upon which Mr Engelman has inevitably to base them, are per se any evidence of any impropriety on the part of Mr Kelly and hence involve BT in anything improper, because on the authority of Martin it is plain that co-operation with the police providing information to the authorities, however close the working relationship may have become, and even if the information turns out to be wrong, unless it is done with some improper motive or mala fides, is not going to support an action and does not involve the party in improperly setting in motion, as has been said, the prosecution."

The learned judge then considered Mr Engelman's submission that if it is assumed that the Plaintiff might be able to show that DC Todd behaved improperly in putting together a misleading exhibit for the purpose of the criminal trial and placed that assumption alongside the basic facts one is driven to the inevitable conclusion that Kelly must have known what was going on and that the fruits of his labours were being misused and being put into a thoroughly misleading exhibit which in due course would be passed to the CPS and used for the purposes of the prosecution.

The learned judge acknowledged that this submission had caused him some concern but concluded :

"There is, in my final view of this, no basis in the material before me for imputing by inference or otherwise to Mr Kelly any impropriety in this matter sufficient to involve him and through him BT in anyway improperly setting in motion this prosecution. That being so, as the matter stands at the moment, I regard this claim against BT as doomed to failure."

Buckley J. then considered the assertion that BT had destroyed some of the documents. He pointed out that this was not a pleaded allegation "and in any event does not alter the view that I have formed." However he acceded to Mr Engelman's application that the action should not be struck out but merely adjourned to afford the claimant a final opportunity for inspection "to see if perchance there is any basis there or further basis for the claim they make."

Inspection duly took place. At the relisted hearing on 19 April 2000 Mr Engelman relied upon a single document headed "Operation Appollo" a summary of enquiries conducted between February and October 1991 into this matter. It was an internal BT memorandum prepared by Mr Kelly giving a careful and detailed account of the whole investigation. It demonstrated the deep involvement of Mr Kelly and other BT officers working alongside the police. Counsel relied on two passages to defeat the adjourned application. The first under the heading "Management Observations" the relevant part being :

"Upon listening to the recordings, I noted that if a call was not an open line then there was a high probability of it being obscene. See appendix 1, summary of 121 conversations."

Appendix 1 is a summary of the transcribed conversations from a master tape referred to as the ICSTIS where it is recorded :

"Listening to the ICSTIS recordings of one to one chat-line conversations (and a reference is given) proved very useful and has proved a great deal of good evidence to support this prosecution."

There is no doubt in my mind that this additional document and the two passages did not materially alter the situation from what it was when the application was adjourned. If RSC O.18 R.19 had still been in force it is almost inevitable that the learned judge would have reached the same conclusion (as he had formed) that there was still no basis from the material for inferring that there was any impropriety sufficient to involve BT and that the action was doomed to failure and should be struck out.

By the time of the adjourned hearing in April 2000 RSC O18 & 19 had disappeared. CPR 24.2 had come into force which provides :

"The Court may give summary judgment against a Plaintiff or the whole of a claim or on a particular issue if

(a) it considers that

(i) the Plaintiff has no real prospect of succeeding on the claim or issue ;"

I have come to the conclusion that, with all due respect to the learned judge he did not correctly apply CPR 24.2's `real prospect' test correctly. The following passage betrays a mistake (my emphasis added) :

"If Mr Kelly became aware of Mr Todd's summaries, which for present purposes [BT] concedes is at least arguable, and if he had listened to the master tapes to any significant extent, to my mind it is clearly arguable, albeit neither of those facts in themselves is improper but putting them together, that he would have realised that DC Todd's summaries were unfair."

As Mr Chapple neatly and graphically put it in his skeleton argument the Judge misdirected himself when he "slipped away" from the `real prospect' test and applied a mere arguability test based on two prior conditions or hypotheses. I agree. In so finding he fell into error. I reject Mr Engelman's submission that this appeal is only concerned with the exercise of discretion. The discretion was exercised but on the basis of an error of principle or law which flaws the decision.. Thus the decision is reviewable by this Court.

It follows that I would allow the appeal on that ground alone.

In order to defeat the application for summary judgment it is sufficient for the respondent to show a `prospect' - i.e. some chance of success. However the prospect must be `real.' The Court must disregard prospects which are merely fanciful, imaginary, unreal or intrinsically unrealistic.

I have come to the conclusion that if the correct test is applied the correct answer must be that there is no real prospect of success, the application should succee7d and the action must be struck out.

In reaching this conclusion I take into account a number of matters. Buckley J. stated towards the end of the first hearing that there was no evidence from which he could infer or conclude that a Court could reasonably draw an inference that Kelly must have known that the tape summaries prepared by DC Todd were false and inaccurate. I agree and would say that there is still no such evidence and that fact as found by the Judge is sufficient to satisfy the `no real prospect' test. I would go further. In order to succeed it will not be sufficient for the Plaintiff to prove that the summaries were merely unfair and inaccurate. He must also show that they were inaccurate in a material respect in the sense that if they had been presented to the CPS in an accurate form the CPS would not have prosecuted, or alternatively that the summaries were so inaccurate that the CPS was misled by the summaries into concluding that there was reasonable cause to prosecute when in truth there was not. It is significant in this regard that the burden of proof is upon the claimant to prove absence of reasonable cause and not for the defence to prove that there was. Thus in my judgment there is no evidence to show that the inaccuracy would pass that test at trial, hence there is no real prospect of success on this ground also.

Malicious prosecution is one of the most serious allegations in our civil jurisprudence. It is akin to fraud and imparts an assertion of deliberate dishonest behaviour on the part of the defendant. In order to succeed the Plaintiff faces a considerable task. The following conditions must be fulfilled :

"(1) The proceedings must have been instituted or continued by the defendant;

(2) He must have acted without reasonable and probable cause :

(3) He must have acted maliciously :

(4) The proceedings must have been unsuccessful-that is to say, must have terminated in favour of the plaintiff now suing."

(see Martin v. Watson (1996) AC 74 at p.80). The first and secondary ingredients can be conveniently assumed in favour of the Plaintiff for the purpose of the appeal. That still leaves the third and fourth.

No action lies for the institution of legal proceedings, however malicious, unless they have been instituted without reasonable and probable cause. The words reasonable and probable cause are synonyms. In Williams v. Taylor (1829) 6 Bing 183 Tindal CJ said at p. 186 :

"Malice alone is not sufficient, because a person actuated by the plainest malice may none the less have a justifiable reason for prosecution."

The burden of proving absence of reasonable and probable cause is on the Plaintiff, who thus takes on the notoriously difficult task of proving a negative (see Arbroath v. N.E. Rly (1883) II QBD 440). Moreover the existence of reasonable and probable cause is a question for the judge and not for the jury (see Lister v. Perryman (1870) LR 4 HL 521). This anomalous rule was established as a precaution against erroneous verdicts for the plaintiff - `per doubt del lay gents' (see Salmond & Heuston on "The Law of Torts" 20th Edition p.408). The defendant is not required to believe that the accused is guilty, it is enough if he believes there is reasonable cause for prosecution (see Tempest v. Snowden 1952 I KB 130 at 135 and Glinski v. McIver 1962 AC 726 at 758).

"No action lies for the institution of legal proceedings, however destitute of reasonable and probable cause unless they are instituted maliciously - that is to say, from some wrongful motive" (per Salmond & Heuston supra at p.411 and Williams & Taylor supra). Malice and absence of reasonable and probable cause are separate elements but must unite in order to produce liability.

Malice means the presence of some improper and wrongful motive, i.e. an intent to use the legal process in question for some other than its legally appointed and appropriate purpose. The Plaintiff has to prove malice by either showing what the motive was and that it was wrong, or that the circumstances were such that the prosecution can only be accounted for by imputing some wrong or indirect motive to the prosecutor e.g. blackmail or coercion. There must be some evidence of malice, otherwise the case will be withdrawn from the jury (see Brown v. Hawkes (1891) 2QB 718).

On this analysis it is apparent that the Plaintiff has no real prospect, or realistic chance, of successfully establishing either reasonable and probable cause or malice at trial. There is no evidence to base even a prima face case on either element. There is an inherent implausibility in the claim. DC Todd was investigating and acting throughout in his capacity as a police officer, and Mr Kelly was similarly employed as an investigator for a responsible public company. From the tapes which were eventually summarised there was abundant reasonable cause for them to act as they did. The Plaintiff has failed to spell out a purpose or motive to displace the presumption that Mr Kelly was acting otherwise than with the legitimate object of assisting in the institution of criminal proceedings against a person against whom there was a reasonable suspicion that he had committed the offence for which he was indicted. The Plaintiff was not acquitted by a jury, nor did the judge rule that there was no case to answer. He imposed a stay because he was persuaded that the defence could not adequately prepare itself for trial.

The CPR are a procedural code with the overriding objective of enabling the Court to deal with cases justly including saving expense and ensuring that it is dealt with expeditiously and fairly. The Court must seek to give effect to the overriding objective when it exercises any power given to it or interprets any rule. I take this into account when considering the application under Part 24.2. Moreover Part 3.4 provides the power to strike a statement of case "if it appears to the Court - (a) that the statement of case discloses no reasonable grounds for bringing .... the claim." This language is very akin to that in the now extinct RSC O.18 & 19 and under which this application was commenced (and as good as succeeded) at the first hearing. This Part includes "a claim which raises an unwinnable case where continuance of the proceedings is without any possible benefit to the respondent and would waste resources on both sides" (see Harris v. Bolt Burdon 2000 LTL February 2 C.A.). Although there was no application (or apparently, argument) based on this rule at the second hearing, in my judgment this is such a case. Rule 3.3 enables this Court to make such an order of its own initiative, and in my view, in the alternative, it should do so.

I would allow the appeal and grant the application under CPR 24.2, alternatively strike out the action under CPR 3.4.

LORD JUSTICE JONATHAN PARKER:

I agree.