In a recent decision, the Judicial Committee of the Privy Council ruled for the first time that the tort of malicious prosecution is available in the context of civil proceedings. In most jurisdictions, including Canada, the current view is that malicious prosecution is only available against the Attorney General or Crown prosecutors following criminal proceedings instituted for an improper purpose.

Background

The result was driven by the peculiar facts of the case. Mr. Paterson was a chartered surveyor resident in the Cayman Islands. He was appointed by Sagicor to act as a loss adjuster for a claim for property damage caused by Hurricane Ivan.

About one year after Mr. Paterson began work on the reconstruction project, Mr. Delessio joined Sagicor as Senior Vice President. Mr. Delessio was known for having an aggressive personality. He and Mr. Paterson had had previous run-ins and were not fond of each other (for example, in 2001, Mr. Paterson had inquired of the Cayman Immigration Department whether Mr. Delessio held a valid work permit, and Mr. Delessio had found out about the inquiry).

Mr. Delessio became concerned that there was a serious deficiency in the documentation to support payments which had been made to the contractors on Mr. Paterson’s recommendation. Mr. Delessio fired the contractors and stated that he intended to drive Mr. Paterson out of business and to destroy him professionally.

Mr. Delessio hired a loss adjuster to review Mr. Paterson’s work, but instructed the adjuster not to speak to the contractors, the engineers or Mr. Paterson about the work. The adjuster’s report concluded that the contractor had overcharged Sagicor and that this had been approved by Mr. Paterson. Sagicor commenced an action against Mr. Paterson and the contractors, alleging deceit, conspiracy and misrepresentation.

Mr. Delessio then planted an article in the press about the allegations against Mr. Paterson and the contractors. Days before the trial, the plaintiffs discontinued the action and judgment was entered in favour of Mr. Paterson and the contractors. Mr. Delessio committed suicide in early 2009.

The case under appeal arose as a result of the trial of Mr. Paterson’s counterclaim for damages against Sagicor. The trial judge found that:

  • Mr. Delessio knew that the adjuster’s report was not a proper basis for the allegations of fraud and conspiracy;
  • although Mr. Delessio had noticed some issues that might have objectively seemed suspicious, it was unreasonable for him to have concluded that Mr. Paterson had defrauded Sagicor; and,
  • the dominant factor that led Sagicor to make the allegations against Mr. Paterson had been Mr. Delessio’s strong dislike and resentment of Mr. Paterson, his wish to gain revenge on him, and his obsessive determination to destroy Mr. Paterson professionally.

The trial judge concluded that Mr. Paterson had established all of the elements of the tort of malicious prosecution, but that the law did not allow for the extension of the tort to civil proceedings. The Court of Appeal agreed.

The JCPC’s ruling

After an extensive review of the history of the tort of malicious prosecution, a majority of the JCPC panel recognized the tort of malicious prosecution of civil proceedings. The purpose of the tort is to recompense the victims of malicious actions who have suffered substantial damage beyond the costs of defending themselves (e.g. reputational damage), given the inability of a successful defendant to sue for defamation in respect of allegations made maliciously in legal proceedings. Lord Wilson saw no principled reason to preclude recovery for economic loss caused by malicious prosecution of proceedings, whether criminal or civil, where the causation was foreseeable.

The majority’s decision is controversial. The judgment includes two dissenting opinions, which is rare for the JCPC. Lord Sumption was of the view that malicious prosecution is an anomalous tort, justifiable only because the tort is a form of misfeasance in public office. Extending the tort to civil cases offends the well-established principle that things done and said in the course of litigation are immune from civil liability. Lord Neuberger agreed with Lord Sumption, and noted that although “one’s instinctive reaction as a human being is that Mr. Paterson … should be entitled to compensation”, there are sound reasons for not following this instinct.

Significance of the decision

Liability for malicious prosecution following civil proceedings has yet to be established in Canada. The current test for malicious prosecution in Canada requires that (i) criminal proceedings be instituted by the defendant against the plaintiff; (ii) the criminal proceedings be concluded favourably for the plaintiff; (iii) there was a lack of probable cause for the defendant’s conduct; and, (iv) there was an improper purpose underlying the defendant’s conduct, as opposed to an honest belief in guilt: Nelles v. Ontario, [1989] 2 S.C.R. 170.

The JCPC’s decision could open the door for an extension of the tort to the civil context in Canada in appropriate circumstances.

Case information

Crawford Adjusters et al. v. Sagicor General Insurance (Cayman) Limited et al., [2013] UKPC 17, on appeal from the Cayman Islands Court of Appeal

Date of decision: 13 June 2013

The JCPC remains the highest court of appeal for a number of independent nations, British Crown Dependencies, and British Overseas Territories, including the Cayman Islands.