Crawford Adjusters v Sagicor General Insurance (Cayman) Ltd [2013] UKPC 17 (13 June 2013)

Loss adjusters sued an insurance company for malicious prosecution after fraud allegations were dropped just before trial. The Privy Council held 3-2 that the tort of malicious prosecution extends to civil proceedings, overturning previous limitations. This landmark decision restored historic common law principles allowing recovery for maliciously prosecuted civil claims.

Facts

Mr Paterson, a loss adjuster in the Cayman Islands, was appointed by Sagicor General Insurance to adjust claims following Hurricane Ivan damage to Windsor Village. Following the arrival of Mr Delessio as Senior Vice President, Sagicor brought civil proceedings against Mr Paterson alleging fraud and conspiracy in approving payments to contractors. These allegations were publicised in local media, causing severe damage to Mr Paterson’s reputation and business. Just before trial, Sagicor discontinued the proceedings when contractor invoices undermined the expert evidence supporting the fraud allegations.

Mr Delessio’s Conduct

The trial judge found that Mr Delessio had stated his intention to drive Mr Paterson out of business and destroy him professionally. He engaged private investigators, met with police about possible criminal activity, and was instrumental in alerting journalists to the allegations. The judge found that Mr Delessio knew the expert reports were not a proper basis for the fraud allegations and concealed this from Sagicor’s attorneys.

Issues

The principal issues were: (1) whether the tort of malicious prosecution extends to civil proceedings generally, not just criminal prosecutions and limited special cases; and (2) whether the tort of abuse of process applied to the circumstances.

Judgment

Majority Decision

The majority (Lord Wilson, Lady Hale, and Lord Kerr) held that the tort of malicious prosecution does extend to civil proceedings. Lord Wilson examined the historical development of the tort, noting that the common law originally recognised malicious prosecution of both civil and criminal proceedings. The limitation introduced by Quartz Hill Consolidated Gold Mining Co v Eyre (1883) was based on reasoning that was no longer valid in modern conditions where allegations in civil proceedings could cause serious reputational damage through media reporting before trial.

Lord Wilson concluded that the four elements of malicious prosecution were established: proceedings determined in Mr Paterson’s favour; allegations made without reasonable cause; allegations made maliciously (with the predominant purpose being Mr Delessio’s determination to destroy Mr Paterson professionally); and substantial damage suffered.

Dissenting Opinions

Lord Sumption and Lord Neuberger dissented. Lord Sumption argued that malicious prosecution was historically a form of misfeasance in public office, concerned with abuse of the state’s coercive powers in criminal prosecutions. He expressed concern about opening floodgates of secondary litigation and noted the House of Lords had declined to extend the tort in Gregory v Portsmouth City Council [2000].

Key Legal Principles

The majority established that:

• The tort of malicious prosecution applies to civil proceedings where the claimant proves: proceedings determined in their favour; brought without reasonable cause; prosecuted maliciously; and causing damage
• The rule of public policy that wrongs should be remedied has first claim on the loyalty of the law
• The historical rationale for limiting the tort to criminal proceedings (that civil proceedings provided simultaneous vindication) is no longer valid given modern media reporting
• Economic loss beyond out-of-pocket expenses is recoverable where it was foreseeable

Implications

This decision significantly expanded tortious liability for malicious civil litigation across common law jurisdictions following Cayman Islands law. It provides a remedy for defendants who suffer serious damage from baseless civil claims brought maliciously. However, the high hurdles of proving both absence of reasonable cause and malice should prevent frivolous claims. The decision represents a return to older common law principles that made no distinction between malicious prosecution of criminal and civil proceedings.

Verdict: Appeal allowed by majority (3-2). Judgment entered for Mr Paterson in the sum of $1.335m (comprising $1.3m special damages for economic loss and $0.035m general damages for distress, hurt and humiliation).

Source: Crawford Adjusters v Sagicor General Insurance (Cayman) Ltd [2013] UKPC 17 (13 June 2013)