Lord Ashcroft KCMG v Stephen Foley and Others
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE EADY,Mr Justice Eady |
| Judgment Date | 01 July 2011 |
| Neutral Citation | [2011] EWHC 1710 (QB),[2011] EWHC 292 (QB) |
| Date | 01 July 2011 |
| Court | Queen's Bench Division |
| Docket Number | Case No: HQ09D05481 |
[2011] EWHC 1710 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Eady
Case No: HQ09D05481
Mark Warby QC and Adam Speker (instructed by Davenport Lyons) for the Claimant
Paul Epstein QC (instructed by David Price Solicitors & Advocates) and David Price QC (of David Price Solicitors & Advocates) for the Defendants
Hearing dates: 7–8 June 2011
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Eady:
I made an order on 17 March, striking out the defences of justification and fair comment for the reasons set out in my judgment of 18 February: [2011] EWHC 292 (QB). The Defendants have now adopted a two-pronged approach, in that they wish to apply to the Court of Appeal for permission to appeal those rulings while seeking, in parallel, to put forward a different version of the defence ("the March draft"). I understand that the Court of Appeal has indicated that the application for permission will not be dealt with until the present application has been resolved. In these circumstances, I am asked to grant permission for defences of justification and fair comment to be reinstated on the basis of new wording, which is intended to deal with the grounds on which I made the striking out order. Naturally, both parties wished to avoid appearing to reargue issues resolved on the previous occasion. I need not set out the background to the dispute in detail, as it is described in my earlier judgment.
Unusually, there was a considerable debate between counsel as to the principles to be applied on such an application. Mr Epstein QC for the Defendants relied inter alia upon certain principles derived, in particular, from McDonald's Corporation v Steel [1995] 3 All ER 615 and Three Rivers DC v Bank of England (No 3) [2003] 2 AC 1. They overlap to a considerable extent:
i) The test to be applied on such an application is whether any given allegation contained in the defence is incapable of being proved.
ii) The court should avoid conducting a mini-trial.
iii) Once a defence of justification has been served, it may in rare circumstances be appropriate for a claimant to suggest that the defence, or any of its supporting facts, is demonstrably untrue. Such an application would be required to be supported by irrebuttable evidence.
iv) Where dishonesty is alleged, it is not necessary as a matter of law for the particulars pleaded to be themselves only consistent with dishonesty.
v) A defendant may only be prevented from inviting an inference from pleaded primary facts if it is plain to the court that such an inference would be perverse (see Gatley on Libel and Slander (11 th edn) at para 33.32).
vi) It is legitimate to invite the court (whether judge or jury) to infer a claimant's dishonesty from certain pleaded primary facts even where it would be reasonably possible to draw a different inference (i.e. one that is consistent with honesty).
vii) In such circumstances, it is not necessary for a defendant to plead facts that are more consistent, as a matter of probability, with the presence of dishonesty than with its absence.
viii) It is not necessary for a defendant to show that the inference of dishonesty which he invites the court to make is "inescapable".
ix) Provided the defendant's allegation of dishonesty is clearly pleaded, the facts pleaded in support of that can be in themselves consistent with the absence of dishonesty.
x) It is not necessary for a defendant at the stage of putting forward a plea of justification to identify the evidence upon which he relies to support that plea.
Mr Epstein invited my attention, first, to a number of passages in Three Rivers.
Lord Hope made the following points at [55]:
"…As the Earl of Halsbury LC said in Bullivant v Attorney General for Victoria [1901] AC 196, 202, where it is intended that there be an allegation that a fraud has been committed, you must allege it and you must prove it. We are concerned at this stage with what must be alleged. A party is not entitled to a finding of fraud if the pleader does not allege fraud directly and the facts on which he relies are equivocal. So too with dishonesty. If there is no specific allegation of dishonesty, it is not open to the court to make a finding to that effect if the facts pleaded are consistent with conduct which is not dishonest such as negligence. As Millett LJ said in Armitage v Nurse [1998] Ch 241, 256G, it is not necessary to use the word 'fraud' or 'dishonesty' if the facts which make the conduct fraudulent are pleaded. But this will not do if language used is equivocal: Belmont Finance Corpn Ltd v Williams Furniture Ltd [1979] Ch 250, 268 per Buckley LJ. In that case it was unclear from the pleadings whether dishonesty was being alleged. As the facts referred to might have inferred dishonesty but were consistent with innocence, it was not to be presumed that the defendant had been dishonest. Of course, the allegation of fraud, dishonesty or bad faith must be supported by particulars. The other party is entitled to notice of the particulars on which the allegation is based. If they are not capable of supporting the allegation, the allegation itself may be struck out. But it is not a proper ground for striking out the allegation that the particulars may be found, after trial, to amount not to fraud, dishonesty or bad faith but to negligence."
At [124] Lord Hutton addressed the matter in these terms:
"In Armitage v Nurse [1998] Ch 241, 256G Millett LJ said: 'It is not necessary to use the word 'fraud' or 'dishonesty' if the facts which make the conduct complained of fraudulent are pleaded; but, if the facts pleaded are consistent with innocence, then it is not open to the court to find fraud'. Later in his judgment, at p259G, he said: 'I am of opinion that, as at present drawn, the amended statement of claim does not allege dishonesty or any breach of trust for which the trustees are not absolved from liability by clause 15'. In Taylor v Midland Bank Trust Co Ltd (unreported) 21 July 1999 Buxton LJ referred to the first observation of Millett LJ, at p256G, and said:
'That, however, was an observation about pleading, not about substance. If (unlike the pleader in our case) the claim does not expressly allege dishonesty, but stands on facts alone, those facts on their face will meet the requirement of a specific allegation of dishonesty only if they can bear no other meaning.'
But in the present case, unlike in Armitage v Nurse, the pleader does expressly allege bad faith because paragraph 37 pleads that 'the motives of the Bank in acting as pleaded above were improper and unlawful and in the premises the Bank acted in bad faith' and the paragraph sets out particulars in support of that allegation. In my opinion those particulars are not consistent with mere negligence."
A little later, at [148], Lord Hutton continued:
"The fact that a plaintiff does not have direct evidence as to the belief or foresight or motives of the defendant is not in itself a reason to strike out the action. In Taylor v Midland Bank Trust Co Ltd…the plaintiff alleged dishonest breach of trust and the defendant applied for the dismissal of the claim without trial under rule 24.2 (a) (i). Upholding the decision of Carnwath J to dismiss the application Buxton LJ stated:
'[Counsel for the defendant] appeared at one stage to argue that the case must be made good by direct evidence, and could not rely, as it does, on inference. If that was the submission, I cannot agree with it. Where the motives or knowledge of a party is in issue, it may often be necessary to rely on inference rather than direct statements or admissions by that party. There is nothing objectionable in principle in that, however much an inference may be less cogent than an admission. Nor is it right that, in drawing inferences, a court can only infer this form of dishonesty if the primary evidence admits of no other explanation. That puts the test too high. The process of reasoning should be constrained only by the court's appreciation of the seriousness of the charge and the substantiality of the evidence therefore necessary to make it good.'"
It is to be noted that at [1] Lord Steyn agreed with the reasoning of both Lord Hope and Lord Hutton.
Mr Epstein also invited my attention to certain passages in the judgment of Neill LJ in the McDonald's case, cited above, at pp.618–622. This is the classic exposition as to what a pleader needs before entering a plea of justification (including one alleging a claimant's dishonesty). It is perhaps unnecessary for present purposes that I should quote anything other than the well known passage at p.621–2 (part of which was relied upon by Lord Hope in Three Rivers at [47]):
"In the light of these arguments and as a matter of principle I am satisfied that the suggested test of 'clear and sufficient evidence' cannot be accepted. If applied literally, it would impose an unfair and unrealistic burden on a defendant. Furthermore, it does not appear to be supported by what Darling J said [in Mangena v Edward Lloyd Ltd (1908) 98 LT 640 at 643]. It is true that a pleader must not put a plea of justification (or indeed a plea of fraud) on the record lightly or without careful consideration of the evidence available or likely to become available. But, as counsel for the plaintiffs recognised in the course of the argument, there will be cases where, provided a plea of justification is properly particularised, a defendant will be entitled to...
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