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Hay v. Institute Chartered Accountants Scotland [2002] ScotCS 259 (11 September 2002)

OUTER HOUSE, COURT OF SESSION

A74/02

OPINION OF LADY PATON

in the cause

JAMES HAY

Pursuer;

against

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF SCOTLAND

Defenders:

________________

Pursuer: Party

Defenders: Howlin, Advocate; Simpson & Marwick W.S.

11 September 2002

Debate in defamation action with conclusions for interdict and damages

At a debate on 26 and 27 June 2002, the defenders sought dismissal of the pursuer's action, which failing, excision of certain averments. The pursuer for his part wished to proceed to a proof or jury trial.

At the beginning of the debate, the pursuer and counsel for the defenders agreed:

Firstly, that certain documents lodged by the pursuer and numbered 6/1 to 6/95 of process should be treated as incorporated in the pleadings, and should be referred to in the course of the debate.

Secondly, that copies should be held equivalent to principals.

Towards the end of the debate, counsel for the defenders lodged two productions, numbers 7/1 and 7/2 of process. These were respectively the Complaint by the Investigation Committee of the Institute of Chartered Accountants of Scotland (ICAS) dated 29 November 1999 with Summary of Facts or Matters and appendices attached; and a copy of the ICAS Royal Charter of 1854 and supplementary charters. Counsel for the defenders drew attention to page 15 of number 7/2 of process, in particular to Article 3 of the Supplementary Royal Charter of 1951, as amended by the Supplementary Royal Charter of 1992 (granting ICAS the power to organise a scheme for investigating and making findings as to the professional or business conduct, efficiency and competence of any member). The pursuer for his part drew attention to the fact that number 7/1 of process did not contain documents which he had wished the discipline committee to read, all as further explained below.

Also towards the end of the debate, counsel for the defenders provided a complete version of the ICAS Rules dated April 2001. Strictly speaking, an earlier version may be more relevant, as the disciplinary hearing in question took place on 20 September 2000.

Oil-related transaction

The pursuer was brought up in Portsoy, Scotland. He trained and qualified as a chartered accountant. His career took him into the private aviation industry, and also into oil-related equipment. In those contexts, he did not practise as a chartered accountant. Nevertheless he continued to pay the annual subscription to his professional body, ICAS. He accordingly remained registered as a member of ICAS.

In 1992 the pursuer set up a company, Riggertech Ltd. ("Riggertech"), to trade in second-hand oil equipment. Towards the end of 1992, certain events occurred, involving the pursuer and Riggertech. Very different constructions have been placed on these events:-

According to the pursuer, Riggertech was engaged in a bona fide endeavour to bring about the sale of oil equipment to a buyer in the Middle East. The sale was ultimately frustrated because a Yemeni minister demanded an excessively large honorarium. However in the course of negotiations, Riggertech became entitled to a VAT refund relating to the transaction, amounting to about £519,000. That sum was duly paid into Riggertech's account by Customs and Excise. Later, when it became apparent that the sale could not be completed, the VAT monies became repayable to Customs and Excise. But by that stage Riggertech was unable to repay the monies, as approximately £47,750 had been used to repay a business loan owed by the pursuer, and the balance had been lost in an ill-advised business venture undertaken by Riggertech, by then under the management of the pursuer's father-in-law. The only questionable behaviour which the pursuer accepted as having occurred during the contract negotiations was the passing-off of his friend John Watson, a surveyor, as "Ken Robertson of Lloyds of London", and the reliance upon a survey report produced by his friend acting as Ken Robertson.

According to Customs and Excise, however, the events represented a scheme whereby the pursuer deliberately defrauded them of £519,000. They reported the matter to the Crown Office. An indictment (number 6/1 of process) was served on the pursuer. In 1998, a jury in the High Court in Glasgow acquitted the pursuer by a majority verdict of not guilty.

ICAS investigation into alleged unprofessional behaviour

In November 1998, following upon the High Court acquittal, the Crown Office referred the matter to the pursuer's professional body ICAS. ICAS referred the matter to their investigation committee, whose secretary was Dr. McMorrow, Director of Legal Services in ICAS.

About a year later, on 20 November 1999, the investigation committee referred the matter to a discipline committee. In terms of the ICAS Rules (Rule 58) a discipline committee is appointed annually by the ICAS Council. The committee comprises twelve persons, of whom not less than three are non-accountants. The chairman of the discipline committee for the purpose of a hearing under Rule 60 (i.e. a hearing on a formal complaint by the investigation committee such as the complaint concerning the pursuer) is appointed by the President of ICAS from a panel of solicitors or advocates of at least seven years standing. Three members of the discipline committee constitute a quorum.

A formal complaint (numbers 6/17B and 6/17C of process) specifying various instances of alleged professional misconduct was sent to the pursuer. It appears from the documents lodged that Dr. McMorrow had responsibility for preparing and presenting the complaint before the discipline committee. For example, a draft joint minute number 6/70A of process commences "McMorrow for the complainers (ICAS) and Reid for the respondent have agreed and hereby agree ...".

In terms of ICAS Rule 59(3)(b), the investigation committee had a duty to "send to [the discipline] committee a summary of the facts and matters and any further information in the [investigation] committee's knowledge and on which its opinion is based which were before the investigation committee, together with a summary or copy of any representations made by the [chartered accountant] to the investigation committee". It would appear therefore that the Summary of Facts or Matters number 7/1 of process may have been prepared by the secretary of the investigation committee, namely Dr. McMorrow. The summary contained one or two errors: for example, in paragraph 1 there was a reference to the pursuer's trial having taken place in Aberdeen High Court (whereas it took place in Glasgow High Court); and in paragraph 5 there was a statement that the jury had returned a verdict of not proven, when in fact the verdict was not guilty.

The pursuer's lawyer Mr. Reid attempted to negotiate reduced charges with Dr. McMorrow. No agreement could be reached. A hearing before the discipline committee was set down for 20 June 2000. The pursuer, his solicitor, and his senior and junior counsel attended, but no full hearing took place that day.

The pursuer was by then living abroad. Initially he lived in Geneva, but subsequently he moved to an address in France.

Disciplinary hearing held in the absence of the pursuer

A further disciplinary hearing was set down for 20 September 2000. For some reason, the pursuer's lawyer Mr. Reid appeared to be unaware of the pursuer's then address. Mr. Reid attempted to contact the pursuer at his previous address by letter, and telephone, and also attempted to send him several faxes. Having received no response and no instructions, Mr. Reid withdrew from acting. By letter dated 15 September 2000 addressed to Dr. McMorrow number 6/65 of process, Mr. Reid advised that he was withdrawing from acting, and stated that:

"... I further confirm that I advised Mr. Hay that the hearing would be on Wednesday 20 September by first class mail on 21 August. Since that time I have sent him several faxes and left messages with his secretary to no avail."

The pursuer advised this court that he had not in fact received notice of the date of the hearing. He had not known that the hearing was taking place until, by chance, he telephoned Mr. Reid on 20 September 2000 to ask what was happening with his case.

Accordingly, at the hearing on 20 September 2000, there was no appearance by or on behalf of the pursuer. The discipline committee was satisfied in terms of ICAS Rules 57 and 60(1)(a) that the pursuer had received due notice of the hearing but had failed to attend. The committee accordingly proceeded to deal with the complaint in the pursuer's absence. It appears from the documents lodged by the pursuer that Dr. McMorrow, acting on behalf of ICAS, may have presented the complaint and certain supporting materials to the committee, and may have invited the committee to make certain findings.

Findings of the discipline committee, and expulsion of the pursuer

The discipline committee issued a decision letter dated 21 September 2000 number 6/15 of process, stating its findings. ICAS knew the pursuer's address (possibly as a result of the pursuer's having paid his annual subscription). The decision letter was therefore sent direct to the pursuer.

The decision letter stated inter alia:

"...The committee therefore held in relation to each of the following that you were guilty of misconduct in terms of Rule 57A(1)(a) of the Institute in that:

1. in circumstances that having contracted, as director and owner of a company, Riggertech Ltd., with another company, Chevron (UK) Ltd., for the purchase from the said Chevron (UK) Ltd. of goods, namely used sub-sea water injection systems, and for the immediate re-sale of the said goods to an entity situated in Saudi Arabia, Palm Drilling Ltd., you falsely represented to the said Chevron (UK) Ltd. in terms of a letter dated 28 June 1992 that the said re-sale would have to be completed by 31 July 1992, the truth being, as you well knew, that no such sale was contemplated by that or any other date; and

2. in terms of a letter dated 21 July 1992, you falsely represented to the said Chevron (UK) Ltd. that you had travelled to Saudi Arabia in order to pursue negotiations in respect of the contract referred to at head of complaint (1) (above); and

3. between about May 1992 and February 1993, in relation to the contract referred to at head of complaint (1) (above), you concealed from the said Chevron (UK) Ltd., H.M. Inland Revenue and H.M. Customs & Excise, the fact of your personal relationship with, and financial interest in, the said Palm Drilling Ltd., the purpose of which concealment was (i) to pretend to the said Chevron (UK) Ltd. that you had no executive control over the actions of the said Palm Drilling Ltd. and (ii) to conceal from the said H.M. Inland Revenue and H.M. Customs & Excise that you were to be the recipient of taxable income from the said Palm Drilling Ltd.; and

4. on or about 30 June 1992, you procured a friend, John Watson, to personate before representatives of the said Chevron (UK) Ltd. "Kenneth Robertson", a surveyor employed by Lloyds of London; and

5. on 30 June 1992, having attended a meeting with the representatives of the said Chevron (UK) Ltd. at that company's premises in Aberdeen with the said John Watson, by means of the personation referred to in head of complaint (4) (above), you thereby induced the said company's representatives to believe (i) that the said John Watson was "Ken Robertson of Lloyds of London" by passing him off as such, (ii) that he (Kenneth Robertson) was present in order to survey the goods referred to in head of complaint (1) (above) on behalf of the intended purchaser, and (iii) that a sale of the said goods referred to in head of complaint (1) (above) was imminent, the truth being, as you well knew, that no such sale was contemplated; and

6. were willing to utter a survey report on the goods referred to at head of complaint (1) (above), written by the said John Watson, but bearing to have been written by the said Kenneth Robertson, endorsed on Lloyds of London blank headed notepaper together with a photograph of the said Kenneth Robertson with the intention that the report be uttered to persons such as the said Chevron (UK) Ltd., H.M. Inland Revenue and H.M. Customs and Excise as genuine; and

7. in terms of a letter dated 23 October 1992, you falsely pretended to H.M. Customs & Excise that the said goods referred to in head of complaint (1) (above) would be exported to Saudi Arabia on or about 14 November 1992 in execution of a contract for their resale by the said Riggertech Ltd. to the said Palm Drilling Ltd. all as referred to in head of complaint (1) when the truth, as you well knew, was that no contract for the sale of the said goods had been effected and none was likely to be; and

8. in terms of a letter dated 23 November 1992, you failed to disclose to the said Chevron (UK) Ltd. the fact that you had, on 18 November 1992, relinquished your directorship in the said Riggertech Ltd. to your father-in-law, William Taylor, a fact which you knew was material to your relationship with the said Chevron (UK) Ltd., and knowledge of which might have led the said Chevron (UK) Ltd. to be concerned that the contract referred to at head of complaint (1) (above) would not be performed and, in particular, that the said Riggertech Ltd. would not be in a position to pay the purchase price of the said goods; and

9. between about August and December, both 1992, you caused the said Riggertech Ltd. to pay to or on behalf of yourself or your wife, and to or on behalf of the said William Taylor, sums totalling £50,000 from funds held by the bankers of the said Riggertech Ltd., which sums you knew would require to be refunded to the donor, H.M. Customs and Excise, and which you knew the said Riggertech could not repay.

The committee considered that each of these heads of complaint constituted a serious breach of professional conduct and that cumulatively, they warranted a severe disciplinary sanction ..."

The decision letter further advised that the pursuer was expelled from membership of ICAS, and was liable to pay costs of £5,000; that publicity would be given to "the committee's findings and disposal"; and that there were rights of appeal, with reference to ICAS Rules 61 and 62.

The pursuer found it difficult to believe that the discipline committee had not attempted to give him personal notice of the hearing, and that the hearing had proceeded in his absence. There followed letters and communications between the pursuer and his lawyer Mr. Reid on the one hand, and the President of ICAS and Dr. McMorrow on the other. The final position was that the pursuer may have been able to appeal against the findings, provided that in terms of Rule 62(3) he paid the £5,000 costs. However the pursuer considered that it was unfair in the circumstances that he should have to pay these costs, and he refused to do so. No appeal therefore took place. ICAS could see no other possible form of re-hearing open to the pursuer within the ICAS Rules.

Subsequent press release dated 14 December 2000

Some months later, on 14 December 2000, ICAS issued a press release number 6/4 of process. The press release was placed on the ICAS web-site, and was made available to the media including newspapers such as the Press and Journal. The authorship of the release was not clear from its terms. In the course of the debate in June 2002, counsel for the defenders advised the court that the release had been prepared jointly by Dr. McMorrow and an ICAS press officer.

The release was in the following terms:

"ICAS EXPELS UNTRUTHFUL ACCOUNTANT 14/12/2000

A chartered accountant who showed flagrant disregard for the truth and for professional integrity and conduct has been expelled from The Institute of Chartered Accountants of Scotland (ICAS). ICAS has expelled James Hay from the Institute and ordered him to pay costs of £5000.

Mr. Hay, who will no longer be able to use the designatory letters "CA" or use the title "Chartered Accountant", was found guilty of misconduct on nine separate charges concerning his role as director and owner of Riggertech Ltd.

The ICAS discipline committee investigated claims that Mr. Hay had made a number of false representations to a company and to government departments, had failed to disclose key facts regarding his relationship with a company associated with Riggertech Ltd. and had paid to himself monies which were due to be refunded to H.M. Customs & Excise.

David Brew, Chief Executive of ICAS comments: "The discipline committee had no hesitation in expelling Mr. Hay from the Institute. It deemed that, in the public interest, Mr. Hay should not be allowed to continue in membership."

For further information:

David Brew, ICAS, 0131 347 1268

Gordon Robertson, FMS Public Relations, 0131 624 5035

Notes to Editors:

Mr. Hay was tried, and acquitted of a number of charges involving breach of trust at Aberdeen [sic] High Court on 30 June 1998. However, in the course of his testimony to the court, he gave evidence which tended to show he had been guilty of professional misconduct in relation to some of his actions at the material time to which the charges had related.

The discipline committee found that Mr. Hay was guilty of professional misconduct in terms of Institute Rule 57A(1)(a) in relation to:

Mr. Hay, a non-practising member who had been employed in oil-related companies for some time, started up a small limited company called Riggertech Ltd. which he ran in his spare time from his home in Aberdeen. He had identified a market for second-hand oil-drilling equipment, hoping to buy it cheaply and sell it on quickly for a profit, or to act as an agent or broker in the sale of similar goods, being paid commission when a sale was achieved. The circumstances with which the Institute's disciplinary proceedings were concerned relate to a sale by a major company of sub-sea water injection units to Riggertech Ltd. which Mr. Hay told that company he could effect in the Middle East. He told it he would buy the goods but that it would have to await payment from another to which he would immediately re-sell the same goods. That second company was another small one, located in the Middle East (with which Mr. Hay had a connection) which in turn would sell the sub-sea units to an "end-user".

The purchase price that was eventually to be obtained by Riggertech Ltd. was substantial, about US $5.5m but it was never paid. Riggertech did, however, receive £519,000 from H.M. Customs & Excise in a VAT repayment he had claimed in contemplation of the sale abroad proceeding. The sale never happened and Mr. Hay left the country immediately prior to action being taken to recover the £519,000. He was tried on indictment but acquitted in 1998. Though the material events relate to the early 1990s, the Institute did not become involved till after the court proceedings were concluded.

Riggertech Ltd. had been trading for only a very short period when Mr. Hay contended to the interested parties (the owner/seller and H.M. Customs & Excise) that the Middle East contract was formed. On that assertion, Mr. Hay was able to apply for and receive into Riggertech Ltd.'s bank account a refund of VAT on the purchase price and received some £519,000 from H.M. Customs & Excise in August 1992. The price was never paid by the Middle East-based companies and there came a point (around November 1992) when the VAT Riggertech Ltd. had received was due to be repaid to H.M. Customs & Excise (because the sale had not proceeded). When H.M. Customs & Excise came to appreciate that the sum was not going to be repaid, Mr. Hay left the country and assigned his interest in Riggertech Ltd. to his father-in-law who in turn lost all the money in a failed business venture. On H.M. Custom & Excise's complaint, The Crown Office prosecuted Mr. Hay for a number of breaches of trust. He was acquitted by the jury.

The testimony of Mr. Hay to the court was, though, passed to the Institute. The Institute's investigation committee's disciplinary action was predicated largely on that testimony and a number of heads of complaint of misconduct were held made out by its discipline committee (its quasi-judicial forum). These were as follows:

1. He falsely represented to the owner/seller of the sub-sea units that he had a buyer for the goods and that they would need to ensure the date of sale was no later than 31 July 1992 (a date which suited him as it would allow him to receive the £519,000 at the end of the VAT quarter occurring at that date) when he had no contract for sale as at that date or any other; and

2. Falsely represented to the owner/seller that he had travelled to the Middle East on 21 July 1992 to pursue negotiations for the sale (the purpose of that representation being to foster the belief in the owner/seller's mind that the sale was indeed imminent and had to take place by 31 July); and

3. Conceal from the knowledge of H.M. Customs and Excise, the owner/seller and from the Inland Revenue that he had a connection (he had set it up with a friend who lived there) with the Middle East company which was to receive the goods from Riggertech Ltd. (the purpose being to lend credibility to his assertion to all of them that the deal was "at arms' length" and to avoid UK taxation); and

4. He procured an unqualified friend to impersonate a Lloyds of London surveyor (so as to deceive the owner/seller into believing that the ultimate purchaser was taking all the normal steps prior to paying the price for [the] goods and in that way to lead the owner/seller to believe a sale was imminent) and was willing to use a "survey report" written by that friend to further the deception; and

5. Falsely represent to H.M. Customs & Excise in terms of a letter dated 23 October 1992 that the sub-sea units would be exported to Saudi Arabia by 14 November 1992 when he knew that in reality there was no purchaser and that the goods would not be exported (so as to prolong in the mind of H.M. C.&.E. the illusion that the deal was about to go through and that he therefore could hold on to the £519,000 VAT monies);

6. Fail to disclose to the owner/seller in terms of a letter of 23 November 1992 that he had, five days earlier, assigned his directorship of Riggertech Ltd. to his father-in-law so as to prevent it from worrying that the deal was not going to happen and that Riggertech Ltd. could not pay the monies due on the sale he had told it he had effected; and

7. Use some £50,000 of the VAT monies to pay off personal debts when he knew he had no contract for the sale of the sub-sea units, when he also knew that he/Riggertech Ltd. would need to repay the whole £519,000 to H.M. C.& E. and when he knew it could not be repaid. Though, standing the result of the criminal trial, the discipline committee was unable to hold that Mr. Hay had committed a criminal offence in having taken and used for his own ends £50,000 to which he knew he was not entitled, what he had done still constituted a reprehensible departure from his professional obligation of integrity. The remaining £450,000 then fell into the control of his father-in-law, Mr. Hay leaving the country hastily to go and work in the Middle East. He did not inform H.M. C. & E. he had done so and it only discovered his departure when its officers raided his home in Aberdeen."

The press release was not therefore restricted to the formal findings of the discipline committee as set out in paragraphs 1 to 9 of the decision letter dated 21 September 2000 number 6/15 of process. The press release contained additional information, including references to the obtaining of VAT monies amounting to about £519,000 which had (wrongfully) not been repaid to Customs and Excise. There were also references to the pursuer "leaving the country hastily", "immediately prior to action [against the pursuer by Customs and Excise] being taken to recover the £519,000".

The contents of the press release were published in newspapers and in professional journals such as Accountancy Age. The press release on the ICAS web-site was visited and read by many web-users. The pursuer was very disturbed by the content and tone of the release, and by the reactions it provoked. In the following months, he repeatedly requested ICAS to remove the press release from their web-site, but they refused to do so.

Pursuer's action

The pursuer advised this court that he had decided not to seek judicial review of the disciplinary hearing which resulted in his expulsion. He accepted that he had asked his surveyor friend John Watson to act as "Kenneth Robertson", a surveyor employed by Lloyds of London. He appreciated that there was a possibility that a successful judicial review would be followed by another disciplinary hearing and a fresh expulsion. Accordingly judicial review was not his chosen remedy. The pursuer's case was that there had been genuine negotiations relating to a genuine contract; there had been no scheme to defraud Customs and Excise of half a million pounds; and ICAS had defamed him both at the hearing before the discipline committee on 20 September 2000, and also in the press release issued on 14 December 2000.

The pursuer accordingly, in late 2001, raised the present action seeking to recover damages for defamation and interdict against certain continuing representations.

On 11 January 2002, the pursuer was on the point of seeking interim interdict in the Court of Session, when counsel for the defenders gave an undertaking, and the press release was subsequently removed from the ICAS web-site.

Defenders' submissions

Counsel for the defenders submitted firstly, that much of the pursuer's pleadings appeared to focus on the manner in which the discipline committee had conducted the proceedings, and the refusal to allow some sort of appeal or re-hearing. The pursuer's action was in effect an attempt to invoke the supervisory jurisdiction of the Court of Session, which required a petition for judicial review. The pursuer's action was not a judicial review, and should therefore be dismissed. Alternatively, certain averments relating to judicial review matters should be excluded from probation. Counsel provided a copy of the pursuer's pleadings marked to indicate which averments should be excluded.

Secondly, counsel argued that the pursuer was wrong to aver that the jury's verdict of not guilty barred a subsequent discipline committee from finding him guilty of the charges. The standard of proof in a criminal trial was quite different from that in civil proceedings. A jury in a criminal trial might not be persuaded beyond reasonable doubt that a fraud had taken place, but it did not follow that a disciplinary tribunal, applying the standard "on a balance of probabilities", could not conclude that a fraud had taken place. Reference was made to dicta in Mullen v Anderson, 1993 S.L.T. 835.

Thirdly, the defenders had made averments relating to privilege, and the pursuer's averments in response did not provide an adequate answer. Counsel submitted that the proceedings before the discipline committee attracted absolute privilege in the same way as proceedings in a formal court: cf. Gatley, Libel and Slander (9 ed.) paragraphs 13.15 et seq. The discipline committee was independent of ICAS. It was a quasi-judicial body which had the functions, proceedings, and trappings of a court. The majority of the committee were non-accountants. The committee heard evidence (usually presented by a prosecutor); heard from the professional member and/or his legal representatives; and then made findings of importance both to the public and to the professional member concerned. The committee had certain powers in terms of the Royal Charter under which ICAS had been established. The committee had to decide matters (such as the complaint against the pursuer) which fell within the definitions of "lis inter partes" (paragraph 13.18 of Gatley), "matters of public concern", and "matters of importance to the pursuer's status". As the pursuer had provided no adequate answer to the contention that the discipline committee's proceedings attracted absolute privilege, certain parts of his pleadings should be excluded from probation, all as marked by counsel for the defenders on the copy pleadings.

Counsel further submitted that, so far as the press release was concerned, the defenders were relying upon qualified privilege (Gatley, op. cit., paragraphs 14.1 et seq.) The defenders relied upon category (2) in paragraph 14.4 in that they contended that the occasion of the issuing of the press release attracted qualified privilege as the release was a statement "made on a subject-matter in which the [defenders] had a legitimate interest". In other words ICAS, as the professional body responsible for the integrity and conduct of chartered accountants in Scotland, had an interest in making known to the accountancy profession and to the world at large any unprofessional and/or dishonest conduct on the part of one of their members, especially when that member was being expelled from the professional body because of that conduct. Fellow professionals and the public had an interest in learning about such conduct, and therefore the necessary reciprocity of interest existed: Gatley, op. cit., paragraph 14.10. Anyone who typed the pursuer's name into a computer search-engine, and who was taken to the ICAS web-site, would be a person who specifically wanted to find out information about the pursuer, for example, for employment purposes, or for the purposes of doing business. That was just the sort of person who was entitled to know about unprofessional or dishonest conduct on the part of the pursuer. In all the circumstances, the defenders were entitled to qualified privilege in respect of the press release. Unless the pursuer could aver and prove malice, he could not overcome the protection given by qualified privilege.

Counsel then submitted, fourthly, that while the pursuer did not use the word "malice" in his pleadings, some of his averments might be construed as being an attempt to invoke the concept of malice. However these averments were not sufficiently specific to be relevant, nor did they give the defenders fair notice of what the pursuer intended to prove by way of malice.

Lastly, the pursuer's averments relating to loss and damage were so lacking in specification or intelligibility as to be irrelevant. There was no formal claim for solatium. In relation to alleged economic loss, the averments disclosed a confusing inter-relationship between the pursuer, a Belize company in which he had a shareholding, and an organisation in Switzerland involved in a lottery. The Belize company's role in the lottery was not clear. In relation to the resignation of the lottery's accountants Deloittes, the averments did not make clear whether Deloittes' resignation had been caused by reading the press release on the web-site, or by the fact that the pursuer had failed to disclose the matter to Deloittes. The various documents lodged by the pursuer did not show any economic loss suffered by him. While one document disclosed the extent of the pursuer's shareholding in the Belize company, it was not apparent how any losses which that company might have suffered constituted a loss suffered by the pursuer. There were no averments that the value of the pursuer's shareholding had decreased; or that his director's emoluments or dividend flow were affected. Also it was not clear whether the company had other ventures in addition to the lottery. There was nothing in the pursuer's averments justifying the sum sought (half a million pounds). The pursuer's action concerned interdict and damages. The interdict had been dealt with by the ICAS undertaking. Only the question of damages remained, and as the pursuer had not pled a relevant loss, the action became irrelevant, and should be dismissed.

Counsel concluded by inviting the court to dismiss the action, failing which, to exclude certain averments from probation.

Pursuer's submissions

The pursuer submitted that the defenders had failed to show that the discipline committee had the necessary prerequisites such that the proceedings attracted absolute privilege. In particular, the pursuer questioned whether the discipline committee was truly independent of ICAS, who were in effect the complainers in the case. Further, the discipline committee was not a body created by statute, and the pursuer's understanding of the authorities was that only bodies created or authorised by statute were entitled to absolute privilege. In any event, the defenders had failed to demonstrate the ten areas of similarity to a formal court listed by Lord Diplock in Trapp v Mackie, 1979 S.C. (H.L.) 38. Accordingly at best for the defenders, the proceedings before the committee attracted only qualified privilege, as did the press release. Reference was made to Gloag and Henderson, The Law of Scotland (10 ed.) paragraphs 35.10 et seq. The pursuer also referred to the Defamation Act 1996 (c.31), and to section 7(2) of the Defamation Act 1952, although counsel for the defenders advised the court that the defenders were not meantime relying upon any statutory protection, but were founding solely upon common law privilege.

The pursuer further contended that the defenders had lost the protection of qualified privilege, as the way in which the complaint had been conducted, the information which must have been placed before the discipline committee, and the nature and content of the press release, demonstrated that ICAS's aim and purpose had been to cause the pursuer and his family suffering and distress, and to make it difficult for the pursuer to obtain employment in the future (i.e. in effect, malice). There were several ways in which that aim or purpose had been revealed:-

The pursuer referred, firstly, to alleged defects in the disciplinary procedures. Those defects included failing to give the pursuer notice of the hearing in September 2000, despite having his correct address in France; proceeding with the hearing in his absence; failing to take into consideration certain important documents which had been given to Dr. McMorrow on the pursuer's behalf (for example, a fax from the pursuer to the seller of the equipment dated 1 October 1992 number 6/6 of process, requesting a credit note which would have permitted Riggertech to repay the VAT monies to Customs and Excise at a time when the company still had the monies in the bank: a copy of that fax had been drawn to Dr. McMorrow's attention by letter dated 31 May 2000, number 6/72 of process); proceeding on the basis of certain misapprehensions (for example, that the pursuer had been acquitted in the High Court merely by a verdict of not proven, whereas the pursuer had in fact been acquitted by a verdict of not guilty - a very different verdict in the eyes of the world); and failing to allow a re-hearing of some sort.

The second factor referred to by the pursuer as in effect indicative of malice was the content and tone of the press release. The press release did not mention that the committee had proceeded in the pursuer's absence. The press release was full of innuendo. There were allegedly explanatory glosses; phrases and words in inverted commas; needlessly emotive language; exaggerations and inaccuracies (for example, describing the pursuer's friend John Watson as unqualified, when he was in fact a qualified surveyor). Furthermore, additional material had been inserted which was not contained in the discipline committee's decision letter dated 21 September 2000 number 6/15 of process. All of the above led the average reader to the irresistible inference that the pursuer had, by means of a premeditated and dishonest fraudulent scheme, managed to obtain £519,000 illicitly from Customs and Excise, and had thereafter hastily fled the country. The Accountancy Age magazine had certainly drawn that inference, and had used the headline "ICAS accountant struck off for VAT fraud" (number 6/6A of process). The pursuer's contention was that the press release was untrue and defamatory. Not only had there been no fraudulent scheme, but dishonest fraud was something which could not be imputed to him, as he had been acquitted of that very charge by a verdict of not guilty in Glasgow High Court.

A third factor said to be indicative of malice was the excessive publicity given to the press release. ICAS had deliberately made the story more newsworthy than the average fairly neutral announcement about the expulsion of a professional from a professional body. ICAS had not restricted publication to those within the accountancy profession who had a legitimate interest in the pursuer's expulsion. On the contrary, ICAS had invited world-wide exposure by placing the press release on their web-site, easily located by typing the pursuer's name into any competent computer search-engine. The pursuer advised the court that the story had been headline news in the Press and Journal. As a result of the publication in the Press and Journal (which, it was submitted, was quite unnecessary for ICAS's purposes, and which was illustrative of the intention to hurt him and injure him), the pursuer's mother had telephoned him in tears. An expatriate Scots friend in Boston, who regularly read the Press and Journal, had also seen the article and had telephoned the pursuer. The notice on the ICAS web-site had done major damage to the pursuer's standing world-wide. The pursuer advised the court that he was now unable to obtain the highly-paid employment formerly available to him in the private aviation industry. Further, as the pursuer averred in his pleadings, Deloittes, the auditors of a newly-created charity lottery in which the pursuer was involved, had insisted on resigning, causing loss and damage because new auditors had to be found, and because revenues decreased through loss of confidence in the lottery. The pursuer's contention was that much less widespread publication of his expulsion was all that was necessary in the circumstances. Had publication been more restricted, the pursuer would not have suffered so badly both in respect of his reputation and his business ventures. By giving his expulsion unnecessarily wide publication, ICAS were simply seeking to hurt him and were therefore by implication motivated by malice.

Opinion
Absolute privilege

As Lord Diplock stated in Trapp v Mackie, 1979 S.C. (H.L.) 38:

"...That absolute privilege attaches to words spoken or written in the course of giving evidence in proceedings in a court of justice is a rule of law, based on public policy, that has been established since earliest times. That the like privilege extends to evidence given before tribunals which, although not courts of justice, nevertheless act in a manner similar to that in which courts of justice act, was established more than a hundred years ago by the decision of this House in Dawkins v Lord Rokeby ..."

Lord Diplock then referred to the authorities cited in Trapp, commenting that the cases

"... provide examples of inquiries and tribunals which have been held to fall upon one or other side of a line which as Lord Atkin said in O'Connor v Waldron [1935] AC 76, 81 "is not capable of very precise limitation"...

No single touchstone emerges from the cases; but this is not surprising for the rule of law is one which involves the balancing of conflicting public policies, one general: that the law should provide a remedy to the citizen whose good name and reputation is traduced by malicious falsehoods uttered by another; the other particular: that witnesses before tribunals recognised by law should, in the words of the answer of the judges in Dawkins v Lord Rokeby, L.R. 7 HL 744, 753 "give their testimony free from any fear of being harassed by an action on an allegation, whether true or false, that they acted from malice ...

So, to decide whether a tribunal acts in a manner similar to courts of justice and thus is of such a kind as will attract absolute, as distinct from qualified, privilege for witnesses when they give testimony before it, one must consider firstly, under what authority the tribunal acts, secondly the nature of the question into which it is its duty to inquire; thirdly, the procedure adopted by it in carrying out the inquiry; and fourthly, the legal consequences of the conclusion reached by the tribunal as a result of the inquiry."

Lord Diplock proceeded to examine the circumstances of the tribunal conducting the inquiry in that particular case, and continued:

"The result of this examination of the nature of the tribunal before which Mr. Mackie gave the evidence on which Dr. Trapp seeks to raise his action in the instant case, is that it shared with courts of justice the following characteristics: (1) It was authorised by law; it was constituted pursuant to an Act of Parliament. (2) It was inquiring into an issue in dispute between adverse parties of a kind similar to issues that commonly fall to be decided by courts of justice. (3) The inquiry was held in public. (4) Decisions as to what oral evidence should be led and what documents should be tendered or their production called for by the adverse party were left to the contending parties. (5) Witnesses whom either of the adverse parties wished to call were compellable, under penal sanctions, to give oral evidence or to produce documents as havers; and were entitled to the same privilege to refuse to answer a question or to produce a document as would apply if the inquiry were a proceeding in a court of law. (6) The oral evidence was given upon oath; if it were false to the knowledge of the witness he would incur criminal liability for the offence of perjury. (7) Witnesses who gave oral testimony were subject to examination-in-chief and re-examination by the party calling them and to cross-examination by the adverse party, in accordance with the normal procedure of courts of law. (8) The adverse parties were entitled to be, and were in fact, represented by legally qualified advocates or solicitors and these were given the opportunity of addressing the tribunal on the evidence that had been led. (9) The opinion of the tribunal as reported to the Secretary of State, even though not of itself decisive of the issue in dispute between the adverse parties, would have a major influence upon his decision either to require the education committee to reconsider its resolution to dismiss Dr. Trapp, or to let the matter rest. (10) As a result of the report, either of the parties to the inquiry might be ordered by the Secretary of State to pay the whole or part of the expenses of appearing at the inquiry incurred by the adverse party; and such expenses would be recoverable in the same manner as expenses incurred in a civil action in a court of law.

My Lords, I am far from suggesting either that the presence of any one of these characteristics taken in isolation would suffice to attract absolute privilege for witnesses in respect of testimony given by them before a tribunal or that the absence of any one of these characteristics would be fatal to the existence of such absolute privilege ..."

In the present case, I do not consider it possible, without some inquiry into the facts, to form a view whether the proceedings before the discipline committee on 20 September 2000 attracted absolute privilege. The proceedings of a disciplinary tribunal set up within a profession in order to supervise and discipline members of that profession may, or may not, attract absolute privilege. Relevant considerations may include: how ICAS and the discipline committee are constituted; the identity and qualifications of the chairman and the members of the discipline committee on 20 September 2000; the degree of independence of the discipline committee from ICAS; whether the hearing was open to the public; whether witnesses could be compelled to attend to give evidence (the recent decision of Institute of Chartered Accountants of Scotland, Petitioners, 2002 S.L.T. 921 may assist); whether any evidence was taken, and if so, whether it was it taken on oath, with the usual pattern of examination, cross-examination and re-examination; whether any documents were formally lodged and numbered as productions; whether there were closing submissions; whether the proceedings and evidence were recorded by tape-recorder or short-hand-writer; whether there was any provision or practice similar to Court of Session Rule 30.2, whereby a litigant whose agent has withdrawn from acting is personally notified and advised that he must intimate whether or not he intends to proceed with his case, under certification that if he fails so to intimate, the court may grant such decree or make such order or finding as it thinks fit; the role or roles fulfilled by Dr. McMorrow at the hearing on 20 September 2000; the documents actually made available to the committee; and the procedures actually followed that day.

It will be seen therefore that I consider that some inquiry into the facts is necessary before determining whether or not the proceedings on 20 September 2000 attracted absolute privilege.

If, after inquiry, the court were to conclude that the proceedings on 20 September 2000 attracted absolute privilege, then the pursuer could not succeed in that part of his case alleging that ICAS (or their representative) defamed him before the committee.

If, on the other hand, the court were of the view that the proceedings on 20 September 2000 attracted only qualified privilege, then the pursuer, in order to succeed, would have to aver and prove malice on the part of ICAS or their representative (presumably Dr. McMorrow) in the presentation of the case to the committee on 20 September 2000.

Qualified privilege and malice

As indicated above, malice may be relevant in relation to the disciplinary hearing which took place on 20 September 2000. Further, as both parties submitted (correctly, in my view) that qualified privilege attached to the press release, the issue of malice is important in that context also. I therefore turn to address the defenders' contention that the pursuer has failed to make sufficient relevant averments of malice in either context.

As noted in paragraphs [35] to [39] above, the pursuer focused on three areas in his pleadings which he in effect submitted gave rise to an inference of malice on the part of ICAS. These three areas were the alleged flaws in the disciplinary procedure; the content and tone of the press release; and the excessive and unnecessary publicity given to his expulsion from ICAS.

The alleged flaws in the disciplinary procedure: The pursuer drew attention to the fact that the hearing on 20 September 2000 had proceeded in his absence; the fact that the committee was apparently not given certain significant documents which had been tendered on his behalf (as production number 7/1 demonstrated); the fact that the committee appeared to proceed on the misapprehension (presumably induced by the Summary of Facts or Matters and/or Dr. McMorrow) that the pursuer had been acquitted by a verdict of not proven, whereas the verdict had been one of not guilty; and the fact that no appeal or re-hearing was allowed.

Some of these factors do not, in my view, give rise to any inference of malice on the part of ICAS or their representative. For example: the committee was prima facie entitled, in the light of ICAS Rules 57 and 60(1)(a) together with Mr. Reid's letter number 6/65 of process, to conclude that the pursuer had failed to attend despite having received due notice of the hearing. In such circumstances the decision to proceed in the pursuer's absence cannot readily be construed as imputing malice to ICAS or their representative, particularly if the decision to proceed in absence was in fact the committee's.

In relation to the lack of an appeal or re-hearing, standing the pursuer's refusal to pay the costs in terms of ICAS Rule 61(1)(a)(ii), I am unable to draw an inference of malice from the correspondence advising the pursuer and his lawyers that no other re-hearing opportunity was available within the ICAS rules.

However, in relation to the question of the documents made available to the committee, there may at least be a question why Dr. McMorrow chose to compile a Summary of Facts and Matters with certain appendices attached without including documents which the pursuer or his agent had specifically drawn to Dr. McMorrow's attention indicating that they constituted part of the pursuer's defence - a fortiori bearing in mind the tenor of ICAS Rule 59(3)(b)(iii).

Also, in relation to the inaccurate reference to a not proven verdict, while that may have been a bona fide error, it nevertheless requires some explanation, and prima facie the error is also consistent with an inference of malice. It may well be that the members of the committee were considerably influenced by the thought that the jury's verdict had been "not proven".