Court of Appeal upholds strike-out of malicious falsehood claim as an abuse of process and because it disclosed no reasonably arguable claim for pecuniary loss

The Court of Appeal has upheld a decision to strike out a malicious falsehood claim on the grounds that the proceedings were abusive and disclosed no reasonable cause of action under s. 3(1) of the Defamation Act 1952: Tinkler v Ferguson [2021] EWCA Civ 18.

The judgment addresses the application of the law on abuse of process where it is alleged that an action has already been substantially litigated and determined in separate litigation involving different parties.

Alan Watts, Chris Cox and Angela Liu, who acted for the Respondents in the appeal, consider the decision below.

Background

The malicious falsehood proceedings which are the subject of this appeal (the “Malicious Falsehood Claim”) arose in the context of a boardroom battle that occurred in 2018 within Stobart Group Ltd (the “Company”). At that time, the Appellant, Mr Tinkler, was a substantial shareholder and director of the Company. The claimant believed that the then chairman, Mr Ferguson, should not continue in his role as chairman. (Mr Ferguson was later re-elected as chairman at the AGM in July 2018.)

The claimant brought the Malicious Falsehood Claim in June 2018, at that time as a claim in both defamation and malicious falsehood, in connection with the Company’s publication of an announcement on the London Stock Exchange’s Regulatory News Service (the “RNS Announcement”). It followed an earlier RNS announcement which gave notice of the boardroom dispute in progress. The claim was brought against Mr Ferguson and three other directors of the Company (together the “Respondents”).

About a week after the Malicious Falsehood Claim was issued, the claimant was dismissed as a director and employee, and the Company launched an action against the Appellant seeking a declaration that his dismissal was justified (the “Stobart Action”). The Appellant counter-claimed in that action for a declaration that his removal was invalid and sought an order for reinstatement. The Stobart Action was expedited and went to trial in November 2018. In a detailed judgment, HHJ Russen QC ruled on a number of issues arising from the boardroom dispute. In summary, the judge found that the Appellant had acted in breach of both his fiduciary duties as a director of the Company and his contractual duties as an employee, and that his dismissal from the Company had been lawful and valid.

Following a hearing in December 2019, the Appellant abandoned his defamation action to leave only the Malicious Falsehood Claim. The Respondents applied to strike out the Malicious Falsehood Claim on the grounds that it was an abuse of process, or alternatively that it disclosed no reasonably arguable or properly particularised claim for pecuniary loss under s. 3(1) of the Defamation Act 1952 nor any claim for special damage.

The High Court (Nicklin J) granted the strike-out application, finding that the continuation of the Malicious Falsehood Claim would be an abuse of process because the Appellant’s complaints had already been substantially litigated and determined in the Stobart Action. Nicklin J also found that the Appellant did not have a properly arguable case that he had more likely than not been caused pecuniary damage as required by s. 3(1) of the Defamation Act 1952. The Appellant appealed.

Decision

The Court of Appeal dismissed the appeal and upheld Nicklin J’s decision to strike out the Malicious Falsehood Claim for the reasons he gave.

Abusive proceedings

In his leading judgment, Peter Jackson LJ provided an overview of the law on abuse of process by reference to the established authorities before considering counsels’ arguments on abuse in some detail.

The Court of Appeal held that the law of abuse is designed necessarily to restrict the right of litigants to seek a determination of their civil rights before the courts by preventing abusive and duplicative litigation. The court has an inherent power to prevent misuse of its procedure where the process would be manifestly unfair to a litigant or would otherwise bring the administration of justice into disrepute.  

Taking into account the private and public interests involved, the court is required to consider the central question of whether in all the circumstances a party is abusing or misusing the court’s process (Johnson v Gore Wood & Co [2002] 2 AC 1). The Court of Appeal in the present case clarified that an abuse of process can arise in a variety of circumstances and that these are not limited to fixed categories.

The Court of Appeal, in dismissing the appeal, ultimately found that:

• The Appellant was making the same substantive complaint about the same individuals in both sets of proceedings. While there was no privity between the Company and the Respondents, there was sufficient proximity between them to make it a distinction without a difference.
• The judgment in the Stobart Action was a “thorough report card on the actions and reactions of both factions” which “did not abstain from considering any aspect of the history”. Further, the underlying matters of fact considered in the two sets of proceedings were the same and so the overlap in the subject-matter was rightly considered by Nicklin J to be substantial, not peripheral. In view of this and the substance of the findings in the Stobart action, Nicklin J was right to decide that there was no more than a conceptual possibility of malice being established in the Malicious Falsehood Claim in relation to the most serious meaning of the RNS Announcement being pursued by the Appellant.
• Nicklin J was also correct that, while the judgment in the Stobart Action had not determined the truth or falsity of the less serious meaning pleaded by the Appellant, such meaning was trivial because it added little to the more serious meaning. The court also had regard to the fact that the Appellant had previously abandoned his defamation claim in relation to the less serious meaning, and it would not be proportionate to revisit these issues by allowing the Malicious Falsehood Claim to proceed to trial.
• Neither the risk of inconsistent findings nor attempting to have a second bite of the cherry was the definitive criterion of abusive proceedings. On closer review, the authorities showed that having a second bite of the cherry was a common form of abuse but not the only one. Similarly, the risk of inconsistent findings would not of itself amount to abuse, albeit such risk would be a factor to consider in the round.
• It would be disproportionate to the expense and time already incurred to allow the Malicious Falsehood Claim to continue. To do so would be unfair on the Respondents and constitute an improper use of the court’s resources.

No reasonable cause of action

The Court of Appeal also held that the Appellant had not sufficiently demonstrated that he had a reasonable cause of action, as he had failed to establish that the requirements of s. 3(1) of the Defamation Act 1952 had been met.

The Court of Appeal noted the lack of specificity in the Appellant’s pleaded case on damage, agreeing with Nicklin J that it was “vague and speculative”. The Appellant also faced certain difficulties in establishing that the RNS Announcement had actually caused him the pecuniary loss complained of, because only two weeks later the Appellant had suffered a high-profile dismissal from the Company. That dismissal was then subsequently justified by the handing down of the widely publicised judgment in the Stobart Action. Both of these later events were considered by Nicklin J (with whom the Court of Appeal agreed) to be objectively more likely than the “fairly anodyne” RNS Announcement to have caused the Appellant pecuniary damage.

The court concluded that, even if it were possible to distinguish the pecuniary loss suffered by the Appellant solely as a result of the RNS Announcement, in so far as that pecuniary loss was reflected by a drop in the Company’s share price, the almost immediate market recovery of the stock in the weeks after the RNS Announcement meant that no substantial tort had been committed. Under the Jameel principle (from Jameel v Dow Jones [2005] EWCA Civ 75), the court can strike out claims where no real or substantial tort has been disclosed; on these facts, the Court decided that Jameel had been engaged because the value of the Appellant’s claim would be entirely disproportionate to the effort and cost required to determine it.

Note: The Supreme Court has refused permission to appeal.