Lord Ashcroft KCMG v Foley & Anor

This litigation has an unfortunately long and tortuous history. The articles sued upon were published in The Independent newspaper on 19 and 20 November 2009. The proceedings were launched promptly on 14 December of that year. Yet now, more than two and a half years later, the pleadings are not closed. I am asked by the Defendants to exercise the court’s discretion to permit them to put forward the latest version of their defence, containing pleas of justification and fair comment. This appears to be the seventh version of a substantive defence although, as seems to have become customary, it is not completely definitive since there are accompanying riffs contained in correspondence, without which the defence cannot properly be understood. This is obviously unsatisfactory, to say the least, and the overriding objective now requires that the matter progress to trial so that the essential issues (which finally seem to have emerged from the surrounding mist) can at last be resolved.

There was always a Reynolds defence and there were arguments to be had on meaning also, but the main problem has centred on the Defendants’ seeming inability to put together cogent defences of justification and fair comment.

It is unnecessary to set out the history of the case, which has now been rehearsed in two judgments of mine dated respectively 18 February and 1 July 2011 and in one of the Court of Appeal dated 4 April 2012. On that date, judgments of Pill and Elias LJJ and Sharp J made clear that the practice of conducting a running commentary alongside the pleading was inappropriate and that, if the contents of a letter from the Defendants’ solicitors dated 27 May 2011 had been properly incorporated into a conventional defence, it would have been possible at last for the Claimant and his advisers sufficiently to know the case they had to meet. The Defendants went away and made another attempt but did not address the criticisms which had consistently been made over the Lucas-Box meanings. Indeed, despite observations about it in the Court of Appeal (at [35], [40]-[41], [44]-[45], [47] and [89]), it resurfaced in this year’s draft. It still opened up a range of possible hypotheses without pinning down exactly what they wished to allege about the agreements entered into with Mr Misick in February and March 2007.

Nonetheless, in the course of submissions on 20 July 2012, I believe that it did finally emerge sufficiently clearly what the Defendants intend to allege. I propose, therefore, to proceed on the basis of what I perceive to be the substance of the Defendants’ case, despite the fact that it has not been crystallised in writing. This is an unusual course to take, but to adjourn the matter for yet further drafts would hardly meet the overriding objective. I hope that the Claimant will know at last from this judgment what case he now has to meet. In these circumstances, I will give permission for pleas of justification and fair comment to go forward. That is not to say that the Claimant’s advisers should not have the opportunity of seeking further clarification in correspondence or by way of requests for further information.

What I understand the Defendants’ case to be is as follows. In relation to the $5m loan of 14 March 2007, it is said that the Claimant authorised or acquiesced in the agreement that the sum should be lent by BCB at an interest rate of 10.9% per month; that the agreement was a sham from the outset because Mr Misick was never expected to repay the loan or any interest; that he has not made any repayments; alternatively, if he has, that any such payments would have been negligible; and that BCB has not sought to enforce payment.

The other loan relied upon is alleged to have been made to Mr Misick in February 2007. It is said that $4.72m was lent to him by a company called Coral Square Ltd. That company is said to have been a subsidiary of Oxford Ventures Ltd and to have been effectively under the Claimant’s control. It is also said that the money in fact came from BCB. In this instance, the interest is alleged to have been repayable over a five year period, having been agreed at 12% per annum. Again, the case against the Claimant is that he authorised this arrangement without ever intending that there should be any repayment and that he did so knowing that Mr Misick was corrupt, with a view to obtaining influence and commercial benefits. It is again said that the lender, with the Claimant’s approval, did not seek to enforce payment. So too BCB, which allegedly was the source of the funds, at no stage sought to enforce payment, this too being with the Claimant’s approval.

The plea of fair (or honest) comment is also subject to criticism but here too, I believe, whatever its defects, that it should now be allowed to proceed to trial where any inadequacies can be addressed. One of the principal paragraphs relied upon in support (8.13) also contains the confused description of the loans made to Mr Misick (corresponding to that in the Lucas-Box meaning). Now that I have spelt out the Defendants’ case, as I understand it, the objections to that subparagraph should also fall away.

At paragraph 13, there appears the subsidiary plea of justification, to the effect that the Claimant lied in his denials of the Defendants’ allegations. That depends to an extent on the earlier parts of the pleading and I believe it should now be possible for the Claimant’s advisers to prepare to meet it.

On this unusual basis I will permit the pleas of justification and fair comment to go ahead.

Mr Warby QC raised two other points which I did not need to decide at the last hearing (and nor, therefore, did the Court of Appeal) but which he now says that I should determine. The first point is that there is a principle to the effect that a defendant has to show, at the pleading stage, that his particulars are more consistent with the truth of the words complained of than not. This would be analogous with the rule in Somerville v Hawkins (1851) 10 CB 583 in relation to malice, whereby a claimant has to show that his particulars are more consistent with the presence of malice than with its absence. The principle remains valid and has been reaffirmed in modern times by the Court of Appeal on more than one occasion: see e.g. Telnikoff v Matusevitch [1991] 1 QB 102 and Alexander v The Arts Council of Wales [2001] 1 WLR 1840.

When analysed according to modern concepts and terminology, that is a rule which has the effect of reinforcing the rights of defendants under Article 10 of the European Convention on Human Rights and Fundamental Freedoms. It presents a significant hurdle to any claimant seeking to undermine a defence of qualified privilege (and perhaps, even after Tse Wai Chun Paul v Albert Cheng [2001] EMLR 777, also a defence of fair comment). By contrast, the rule for which Mr Warby contends (and which has hitherto not been articulated by any court in this jurisdiction) would introduce a new inhibition on authors and publishers in the pleading of justification.

The rule in Somerville is fairly easy to operate in the context of malice: see e.g. Seray-Wurie v Charity Commission of England and Wales [2008] EWHC 870 (QB). One often used to see particulars of malice which were not only consistent with bad faith but were also explicable on other grounds, such as for example mistake or indeed a strong belief in the truth of the words complained of. A similar rule would be much more uncertain of application in the context of justification, since each case would present a novel set of facts.

It seems to me important to remember the fundamental purpose of justification as a defence. It is to enable defendants to attempt to prove the truth, at trial, on a balance of probabilities, of the defamatory allegation(s) made in the words complained of. Where an inference is invited from a list of particulars, it will ultimately be for the jury (or a fact-finding trial judge) to decide whether it is appropriate for the inference to be drawn in the light of the whole of the evidence, as it has emerged at trial. It is not helpful to insert a separate filtering process, at the pleading stage, where a judge has to make hypothetical assumptions about how the facts may or may not come out, under close scrutiny at a trial, and then to rule that the facts, as a whole, are on paper more consistent with one outcome than with another.

The appropriate test, it seems to me, would be to ask “Would a juror be perverse to find the plea of justification established, on a balance of probabilities, if all the pleaded facts are proved at trial?” I see nothing inconsistent with that approach in any of the speeches in the case upon which Mr Warby now relies: Three Rivers District Council v Bank of England (No 3) [2003] 2 AC 1.

Applying that test, I cannot detect anything in the Defendants’ pleading here (fluid and obscure though it remains in some respects) which would entitle me to say that a juror would be perverse to find the plea of justification established if the pleaded facts were proved, or that it would be perverse to hold that an honest person could, in the light of those facts (if proved), hold the opinion(s) about the Claimant identified in the plea of fair comment.

The other point on which Mr Warby sought a ruling was whether the Defendants should be compelled to identify, at this stage, the evidence on which they relied in satisfying themselves that it was (and remains) proper to plead a defence of justification. I prefer in this context to be guided by the judgment of Neill LJ in McDonald’s Corporation v Steel [1995] 3 All ER 615.

The pleaders are entitled to exercise a professional judgment about what may be relied upon in support of a plea of fraud. They may have come to a conclusion with which others would disagree, but the traditional approach is to allow that degree of latitude and save any criticism of that professional judgment until such time as a fuller picture has emerged at trial. I cannot probe the rationale of their decision here or tease out the confidential advice they have given to their clients in that respect. At most, it seems to me, I can ask whether the pleading is sufficiently clear and, if so, whether it passes the perversity test I have identified above.

At the conclusion of the hearing on 20 July, I suggested that I might not be able to give judgment until next term. In view of the delay which has already occurred, I decided on fuller reflection that any further delay should be avoided. I therefore decided to give this short ruling, which can be read in conjunction with the three earlier judgments for further detail.

The next stage will be for a reply to be served and, in the light of that, disclosure of documents. I am prepared to give directions for the further conduct of the action when the parties have had an opportunity to make a realistic assessment.

As to the Claimant’s applications, it seems to me premature to decide whether preliminary hearings are appropriate. The pleadings are not closed and, therefore, it is impossible to judge yet whether any material advantage would accrue to the parties, or to the court, in making such an order.