Middleweek v Collins Stewart Ltd

J U D G M E N T

1. LORD JUSTICE NEUBERGER: This is a renewed application for permission to appeal brought by Collins Stewart Ltd against a decision of Andrew Smith J who, in a detailed and careful judgment dated 14th June 2004, gave Mr James Middleweek, the claimant in proceedings against Collins Stewart, permission to amend his claim in three significant respects.

2. Because of the fullness of the judgment and because this is an application ex parte for permission to appeal, I propose to keep my judgment within a comparatively narrow confine. Mr Middleweek was employed by Collins Stewart and claims that he was dismissed in breach of contract. Collins Stewart contend that he was lawfully dismissed on the grounds that he had acted grossly improperly in trying to blackmail them by threatening to reveal wrongdoing by disobeying FSA regulations unless Collins Stewart paid him a very substantial amount of money.

3. The matter was due for hearing in October and the estimate of time was I think three weeks. As a result of Andrew Smith J's decision giving permission to amend, the hearing date has had to be moved, I am told by Mr Andrew Hochhauser QC, who appears for Collins Stewart together with Mr Gerard Clarke on this application, to June 2005 with a time estimate of five weeks.

4. The three contested aspects areas of amendment are, in the order in which the judge dealt with them, as follows. First, a new contention by Mr Middleweek that the blackmail was effected by a solicitor, Mr Langley, at a meeting not attended by Mr Middleweek and without Mr Middleweek's authority.

5. Secondly, many further allegations, in addition to those already made, of fundamental breach of contract on the part of Collins Stewart, which are said to have resulted in what have been called "stigma damages", as recognised by the House of Lords in Malik v BCCI [1998] AC 20, and the mounting of such a claim.

6. Thirdly, also connected with the allegations of fundamental breach, a contention that Collins Stewart's fundamental breaches amounted to a repudiatory breach which Mr Middleweek accepted on 7th July 2003 by letter, or at, or immediately following, a meeting of 9th July 2003 when taken together with the letter.

7. Andrew Smith J refused permission to appeal essentially on the grounds that questions of amendment, whether or not they led to lengthening of the trial and loss of the trial date, were a matter for the trial judge. Pill LJ, to whom the application for permission to appeal was made in writing, refused permission effectively on the same grounds.

8. When I looked at the papers, I have to say that my initial view was very much along the same lines. Although I would readily acknowledge that, at least on some of the points, some judges may not have taken the same view as Andrew Smith J -- and, in particular, in relation to the last of the three points, he himself had very considerable doubts about whether to allow it (see the second part of paragraph 33 of his judgment) -- these could be said to be classic examples of matters for the trial judge with which this court should not interfere.

9. Furthermore, in so far as the loss of the trial date is relied on, unattractive though it may be to Collins Stewart, the trial date has been lost and, even if the appeal is mounted and heard, June 2005 is when the case will be heard.

10. Let me turn then to the merits. On the third point, although logically as Mr Hochhauser says it is the first point, although I quite understand why the judge dealt with in the way he did in the light of what he says in paragraph 33 of his judgment, I am quite satisfied that Collins Stewart have an arguable case which, subject to case management and other considerations, should be permitted to proceed.

11. It seems to me that the letter of 7th July 2003 was written without prejudice, which leads to an obvious difficulty (see Norwest Holst Group Administration Ltd v Harrison [1985] ICR 668). Quite apart from this, it merely expresses a statement of intention in terms of referring to instructions, when those instructions could clearly be changed. In my view there is a powerful argument for saying that this letter represented no more than a provisional indication of current intention to accept repudiation, if repudiation was on offer. Even when taken together with the 9th July meeting and what was said at that meeting, I consider that there is, to put at its lowest, a good arguable case for saying that the point should not have been pleaded because it was hopeless.

12. However, as I put to Mr Hochhauser, on its own this point will not take up much time and may not be worth an appeal, on the basis that the appeal process will take up more time and money than could be justified. The point can be disposed of at trial pretty quickly.

13. Mr Hochhauser makes the point, however, that the allegations of fundamental breaches would, subject to the stigma point, all fall away. They would involve a great deal of time and money, both to prepare for and to argue about and give evidence about at trial. Subject to the stigma argument, I think there is a strong enough point to justify permission to appeal.

14. But what about the stigma point? The stigma point is now slightly further advanced than it was before the judge, because one has an amended schedule of loss (see tab 15 of the bundle which has been provided to me). Stigma damages can be claimed as a matter of principle. In paragraph 9 of the amended claim as allowed by the judge, stigma damages are claimed on the basis that Mr Middleweek had been:

"... employed by a company that conducted its business dishonestly and intentionally broke the rules of the FSA, and/or is stigmatised as a 'whistleblower' in respect of such a company by reason of his Report to the FSA."

15. I am very dubious that stigma as a whistle-blower can be justified and I would certainly be prepared to give permission to appeal in relation to that part of the allegation. the earlier part of the allegation is plainly more strongly arguable in light of the BCCI decision.

16. Nonetheless, I am of the view that it is a point on which I should give permission to appeal. It seems to me that if the stigma allegation goes -- in other words, Andrew Smith J's decision is reversed on the point -- then that will save a lot of time and money, both in terms of preparation and in terms of the hearing, because all the allegations of breach will on the face of it go, assuming always that the first point I have discussed, namely the allegation of accepted repudiation also goes. I consider that it is arguable that the judge may have misdirected himself, as Mr Hochhauser argues, by setting the appropriate test for giving permission in one way in paragraph 4 and in another way in paragraph 20 of his judgment.

17. Furthermore, the law relating to stigma is not well developed and it may be said that on the pleading and such evidence (if any) as can be put in, including the amended schedule of loss, that this is simply not a strong enough case to justify a stigma claim. The notoriousness of BCCI's dishonesty, systematic and world-wide and enormous as it was, is, as Mr Hochhauser says, of a very different nature from what could conceivably be alleged against Collins Stewart in the present case, particularly if it can be taken into account -- and I say nothing about whether it can be -- in light of the fact that he tells me that the FSA have now formally announced that they have closed their file in relation to allegations against Collins Stewart.

18. I bear in mind proportionality. An appeal will take obviously a certain amount of cost, preparation and court time. But if the appeal is refused, the effort that goes into the preparation will not be wholly wasted to the extent that the thought processes in arguing these points will be available for trial. The hearing should last no more than a day and if the appeal is successful it will save a very considerable amount of money in time, both in terms of preparation and in terms of the hearing. In that sense, Mr Hochhauser can rely on the fact that the hearing is not due to take place until June, because there is an opportunity to have the appeal, I would have thought, done and dusted well before intensive preparation for the trial begins.

19. That leaves the remaining allegation, which I have not so far dealt with, which was permitted to be added, namely that the alleged blackmail was effected without Mr Middleweek's authority. Mr Hochhauser has made quite a powerful case for saying why that will fail. Although I see the force of what he says, and the judge clearly saw the force of what he says, it is not a point on which I think I should give permission to appeal. If Mr Middleweek makes out, despite the obvious formidable difficulties that face him, that the threat was made without his actual or ostensible authority -- and Mr Hochhauser is right to emphasise that it is not merely actual authority Mr Middleweek has to deal with but ostensible authority -- then on the face of it, and subject to any other arguments, the whole basis of Collins Stewart's justification for his dismissal falls away. It is a discrete point. It is a point that should not take up a great deal of evidence. It may even throw some light on Mr Middleweek's credibility as a witness and may assist the judge generally. If there is any possibility that Mr Middleweek can make out his case that his solicitor acted without his authority, suspicious though one must be of such an allegation coming so very late in the day and the fact that the solicitor actually telephoned him apparently at the meeting, then it would be quite unfair on Mr Middleweek not to let him raise it. Equally, as I say, if it turns that he is not telling the truth about that, that may provide considerable assistance to the judge on the reliability of his evidence generally.

20. In the circumstances, therefore -- contrary I have to say to my initial reaction on looking at the papers -- I think it right to give Collins Stewart permission to appeal on two of the three controversial points on which the judge gave permission to amend, but not on the issue relating to the solicitor's alleged lack of authority.

ORDER: Application for permission to appeal granted in relation to the constructive dismissal claim and the stigma damages claim, but refused on the issue relating to the absence of authority amendment; costs reserved.

(Order not part of approved judgment)