Crawford Adjusters and others v Sagicor General Insurance (Cayman) Limited and another (Cayman Islands)

The tort of malicious prosecution extends to civil proceedings. A claimant must prove that the defendant instituted proceedings which terminated in the claimant’s favour, lacked reasonable and probable cause, were brought maliciously, and caused damage. Malice requires an improper purpose to be the sole or dominant purpose.

Recoverable damage includes foreseeable economic loss beyond the costs of defending the proceedings. Abuse of process remains distinct. It requires use of proceedings for an object outside their proper scope; a wish to harm an opponent through the successful prosecution of the relief claimed is insufficient.

An insurer brought civil proceedings alleging that a loss adjuster had participated in fraud and conspiracy concerning payments for hurricane reconstruction work. The proceedings were discontinued after disclosure undermined the expert reports on which the allegations depended. The loss adjuster suffered substantial professional and financial damage.

The Grand Court dismissed his counterclaim for abuse of process and malicious prosecution. It found all the factual elements of malicious prosecution proved but considered that the tort did not extend generally to civil proceedings. The Cayman Islands Court of Appeal dismissed his appeal.

The central issues before the Board were whether malicious prosecution extended to ordinary civil proceedings, whether abuse of process had been established, and whether consequential economic loss was recoverable.

1. By a majority, the appeal was allowed. Lord Wilson, Lady Hale and Lord Kerr held that malicious prosecution extends to civil proceedings. The common law had originally admitted such liability, and the later restriction associated with Quartz Hill Consolidated Gold Mining Co v Eyre had rested on the obsolete premise that a civil defendant’s vindication and costs arrived simultaneously with the damaging allegation. Modern publicity can cause serious reputational and economic harm long before trial. Lord Steyn’s obiter observations in Gregory v Portsmouth City Council [2000] 1 AC 419 did not prevent recognition of the tort where no alternative remedy addressed a manifest injustice.

2. The applicable elements are that the defendant instituted or continued proceedings which terminated in the claimant’s favour, lacked reasonable and probable cause, were prosecuted maliciously, and caused damage. Malice is established where an illegitimate or oblique purpose is the sole or dominant purpose. The absence of reasonable cause is a separate and demanding requirement. These elements provide substantial protection against retaliatory or unmeritorious secondary litigation.

3. Foreseeable economic loss is recoverable in malicious prosecution and abuse of process. Recovery is not confined to defence costs or other out-of-pocket expenses. The contrary principal reasoning in Land Securities plc v Fladgate Fielder [2009] EWCA Civ 1402 was wrong.

4. Sagicor was liable for malicious prosecution. The underlying proceedings had ended in the appellants’ favour; there had been no reasonable cause for the fraud and conspiracy allegations; the dominant purpose was to destroy the loss adjuster professionally; and substantial loss had resulted. The responsible officer’s subjective belief in fraud did not assist because it lacked reasonable cause.

5. Abuse of process was not established. That tort requires the proceedings to be used to obtain an object outside their lawful scope. Although professional destruction was the predominant motive, the judge had not found that it was to be achieved otherwise than through initiation and successful prosecution of the action. An improper motive for seeking the relief claimed did not itself amount to an improper use of process.

6. Judgment was entered for the appellants for CI$1.335 million. Lord Sumption and Lord Neuberger dissented. They considered that extending malicious prosecution to ordinary civil proceedings was inconsistent with established limits, litigation immunity and the policy against secondary litigation.

1. Privy Council: By a majority, allowed the appeal and entered judgment for the appellants for CI$1.335 million.
2. Cayman Islands Court of Appeal: On 5 April 2012 dismissed the appeal from the Grand Court. Sir Anthony Campbell JA delivered the judgment, with which Sir John Chadwick P and Elliott Mottley JA agreed.
3. Grand Court of the Cayman Islands: On 14 February 2011 Henderson J dismissed the counterclaim. He found the factual ingredients of malicious prosecution proved but held that the tort did not extend to ordinary civil proceedings. He also held that the proceedings had not been used for an object outside their proper scope.