In its recent decision in Crawford Adjusters v Sagicor General Insurance (Cayman) Ltd [2013] UKPC 17, the judicial committee of the Privy Council decided, by a majority of three to two, to depart from the long-established rule confining actions for malicious prosecution of a civil action to a small category of cases, in favour of restoring a tort of general application. This development significantly broadens the scope for ‘litigation about litigation’, and highlights the difficult questions of public policy that arise in this area.

The facts underlying the appeal were unusual and arose out of damage sustained in Grand Cayman during the passage of hurricane Ivan in 2004. Restoration works at a residential development, funded by its insurer, commenced under the supervision of a local chartered surveyor. However, matters took a turn for the worse when the project was reviewed by a loss adjuster who had a history of animosity towards the surveyor, having been heard to say that he intended to drive the surveyor out of business and to destroy him professionally. The loss adjuster formed the view that the sums paid out by the insurer could not be justified on the basis of the work done: he proceeded to dismiss both contractor and surveyor, and engaged an independent expert to assess progress at the site.

However, the adjuster then deliberately concealed important information about the clear-up works carried out on the site and instructed the expert not to speak to either surveyor or contractor. The resultant report, which significantly undervalued the work carried out, was used as a basis for an action alleging fraud and conspiracy against both surveyor and contractor. The loss adjuster took steps to ensure that the issue of these proceedings was publicised in the local press, arranged for surveillance of the surveyor and informed the police of his suspicions of fraud, with the result that the surveyor’s business collapsed.

Shortly before the claim was listed for trial, the contractor disclosed documentation undermining the expert’s conclusions and the action was abandoned, prompting an award of indemnity costs and a flurry of claims against the insurer, including allegations of abuse of process and malicious prosecution. It was these causes of action that came before the Privy Council.

The claim in abuse of process was unanimously rejected – the board upholding the well-established principle that there is no abuse of process in circumstances where an action is commenced with the intention of obtaining relief that is within its scope. Here, it was determined that the adjuster genuinely wished to have the claim determined at trial and therefore the action was not an abuse of process, notwithstanding that it was founded on improper evidence.

However, there was a significant divergence of opinion between the members of the board when it came to the issue of malicious prosecution. Lord Wilson, Lady Hale and Lord Kerr focused on the need for the law to provide remedies for wrongs, and in the absence of empirical evidence as to a chilling effect on honest claims or the likelihood of interminable litigation, refused to accept these as justifying a bar on relief. As to the possibility that a change in the law might result in a surge of claims, the majority were content that the elements of malice and lack of reasonable and probable cause inherent in the tort posed a ‘formidable hurdle’ to prospective claimants which would in turn act as a deterrent to frivolous claims. As such, there was no reason of policy or principle why a tort of malicious prosecution (and indeed malicious defence) should not be extended beyond the anomalous categories previously recognised so as to cover all civil litigation.

By contrast, the dissenting opinions expressed disquiet about both the legal basis for taking the law in this direction and its potential consequences. Lord Sumption considered that the scope of the tort was both uncertain and potentially very wide, logically applying to malicious disciplinary proceedings any factual case in civil proceedings which maliciously and baselessly discredited another party, or to instances where malicious evidence was given. Noting that, ‘Litigation generates obsession and provokes resentment. It sharpens men’s natural conviction of their own rightness and their suspicion of other men’s motives. It turns indifference into antagonism and contempt’, he considered that the fact that the bar for success was set high did not allay concerns over a proliferation of secondary litigation. The vice was in the attempt and many may try, notwithstanding only a few would succeed. Lord Neuberger, having conducted an extensive review of the case law in the US, came to similar conclusions.

The Privy Council’s approach to this case demonstrates that the activism seen in Jones v Kaney continues, and that the court will not shy away from judicial development of the law, particularly in cases relating to the regulation of court proceedings. To depart from the previous position in relation to malicious prosecution is a radical step and inevitably a calculated risk – if the majority are correct, parties will have an important weapon in achieving justice against those who institute proceedings with malevolent intent. The alternative and less desirable possibility is that unsuccessful claimants will find themselves faced with the prospect of expensive and protracted satellite litigation, and that the action will be used as a threat with which to deter parties from bringing meritorious claims.

Only time will tell which of these competing viewpoints is correct. Trumped-up actions, brought maliciously, remain rare beasts indeed and it would be wrong to anticipate a deluge of successful claims, although in the event that the tort extends beyond formal litigation into disciplinary proceedings, as was thought likely by Lord Sumption, the scope for complaint would be very significantly wider. The more interesting question is the extent to which litigants will be willing to make the attempt, whether upon careful consideration or through a combination of bad blood and the afterglow of victory following the successful defence of a claim. Such a step should not be taken lightly, but the potential for parties to act in haste and repent at leisure is clear.

Further, the extent to which the extension of the tort will be taken into account by potential claimants prior to issuing proceedings, particularly against defendants with the benefit of deep pockets, remains to be seen. In addition to the risk as to costs inherent in any litigation, the risk posed by secondary litigation will be a real consideration in many claims. Ironically, in seeking to provide a remedy for those damaged by malicious actions, the Privy Council may well have inadvertently entrenched the advantages of being a well-funded litigant. The threat of secondary proceedings for malicious prosecution may prove enough to deter not only the spiteful but also the impecunious claimant.

Whatever the rights and wrongs of the policy arguments, what is clear is that those aggrieved by malicious conduct in the course of litigation now have a remedy available to them which, on the view of the majority of the Privy Council, was created in Tudor times but has been in hibernation since the closing years of the 17th century. The two Elizabethan worlds in which the tort has existed are radically different places, and the precise shape of the action for modern purposes is likely to provide fertile ground for argument for some years to come.

SOURCE: http://www.walkersglobal.com/Pages/News.aspx?News=344
END
IMAGE: www.schofields.ltd.uk