Rackham v Sandy & Ors (1)

Qualified privilege protects a communication made pursuant to a legal, social or moral duty, or to protect a legitimate interest, where the recipient has a corresponding interest or duty. The privilege is defeated by express malice. The claimant must prove that the defendant’s dominant motive was improper, or that the defendant lacked an honest belief in the truth of the publication in a way which supports that inference. Knowledge of falsity is not a separate head of malice, although it will usually be powerful evidence of an improper motive. An unreasonable belief, inadequate investigation or carelessness does not by itself establish malice. Where directors report suspected misconduct, the report must be accurate and appropriately expressed; exaggeration, misrepresentation and an ulterior dominant purpose may abuse the occasion.

The claimant brought a libel action against three senior officers of Waste Recycling Group concerning a letter sent to the company’s chairman and copied to other non-executive directors. The letter alleged that the claimant had committed serious regulatory, legal, accounting and fiduciary breaches, and threatened senior resignations unless action was taken against him and another executive.

The claimant accepted that the occasion was protected by common-law qualified privilege. The sole issue on liability was whether the defendants had abused that occasion through malice, by publishing allegations they knew to be false or exaggerated, or for the dominant improper purpose of securing the claimant’s removal and protecting their own positions.

1. Privilege and malice. The publication was made on an occasion of qualified privilege because the defendants and the recipients shared a common and legitimate interest. Under Adam v Ward [1917] AC 309, reciprocity of interest or duty is essential. The existence of an established relationship, as discussed in Kearns v General Council of the Bar [2003] 1 WLR 1357, makes privilege more readily applicable and calls for caution before malice is found.
2. The claimant bore the burden of proving malice by evidence commensurate with the seriousness of the allegation. Following Horrocks v Lowe [1975] AC 135, malice required proof that the defendant’s dominant motive was improper, or that the defendant did not honestly believe the publication to be true in circumstances supporting that inference. The court accepted the clarification in Roberts v Bass [2002] HCA 57 that knowledge of falsity or lack of belief is not an independent head of malice. It is evidence from which an improper motive may be inferred.
3. An honestly held belief is not displaced merely because it was unreasonable or reached after inadequate investigation. Lack of care is not equivalent to malice: Telnikoff v Matusevitch [1991] 1 QB 102. A director who becomes aware of possible misconduct may be bound to report it, but must present the supporting information accurately and in appropriate terms.
4. Mr Sandy knowingly exaggerated and misrepresented material allegations, including the alleged diversion of Fornham Park, the competitors’ lunch, the Allington project and the advice of solicitors. His dominant improper motive was to procure the removal of the claimant and another executive and thereby avoid the threat to his own position. Judgment was therefore entered for the claimant against Mr Sandy.
5. The evidence did not establish an improper motive on the part of Mr Etheridge or Mr Hardman. The claim against them failed. The claimant was awarded £2,000 damages against Mr Sandy.