Willers v Joyce case note

Paul Mitchell QC and Tom Shepherd |

Willers v Joyce: the Facts

  1. The Defendants were the executors of the estate of the late Albert Gubay, a dynamic and extraordinarily successful businessman. Mr Gubay created a large number of businesses, all of which were remarkably profitable, including a chain of supermarkets under the brand name “Kwik Save” and a chain of fitness clubs in Ireland and the North of England under the brand name “Total Fitness”. The Total Fitness business was sold in 2004, at which point the operating company Total Fitness UK Ltd changed its name to Langstone Leisure Ltd (“Langstone”). The various businesses and assets were owned by a group of companies, “the Anglo Group” (now known as the Derwent Group), which were in turn owned by a trust settled by Mr Gubay in 1994.
  2. Mr Gubay passed away in January 2016. Mr Gubay had previously referred to his commitment to ensuring that half of the wealth he built up during his lifetime would be used to benefit good causes connected to the Roman Catholic Church. In his later years, Mr Gubay was able to fulfil even greater philanthropic ambitions and realised his dream of a substantial, privately funded charity, supporting Catholic, other faith and secular good causes. On 23 February 2011, Mr Gubay was invested as Knight Commander with Star of the Order of St. Gregory the Great (KC*SG) in recognition of his conspicuous service to the Catholic Church and society. Mr Gubay spent the last years of his life organising his affairs so that on his death The Derwent Group could be left to the Albert Gubay Charitable Foundation.
  3. The Claimant, Peter Willers, a qualified barrister, worked with Mr Gubay for many years and was the chief internal legal advisor to the Anglo Group as well as being a director of several companies in the Anglo Group. He described himself as Mr Gubay’s “right hand man”. Mr Willers ceased working for the Anglo Group in 2009.
  4. The present claim was the fifth round of litigation which dated back to the late 1990s:
    • Round 1: the TFUK Claim. In 1998, Langstone (TFUK as it then was) had contracted with a company Aqua Design & Play Ltd (“Aqua”) for the installation of swimming pools and “hydrodeck” pool covers in some of the Total Fitness gyms. An issue arose with the hydrodeck covers and Langstone sued Aqua for defective workmanship. Langstone obtained judgment against Aqua, which duly went into liquidation (CVL). Mr Simon Haskew of Begbies Traynor was appointed as liquidator.
    • Round 2: the Wrongful Trading Action. In 2005, Mr Haskew brought proceedings against the directors of Aqua for wrongful trading (s.214 Insolvency Act 1986) and reversal of a preference (s.239 Insolvency Act 1986). The Wrongful Trading Action was funded by indemnities provided by Langstone or other companies in the Anglo Group. In early 2010, the Wrongful Trading Action was dismissed by consent with Mr Haskew having to pay the defendants’ costs of the claims.
    • Round 3: the Langstone Action. In 2010, Langstone brought a claim against Mr Willers (“the Langstone Action”) alleging that he had been in breach of the fiduciary duties he owed to Langstone as its director with regard to the conduct of the TFUK Claim and the Wrongful Trading Action (together, the “Aqua Litigation”), because inter alia he had caused Langstone to enter into the indemnities. Mr Willers defended the Langstone Action on the basis, broadly, that it had been Mr Gubay and not him who had been in control of the conduct of the Wrongful Trading Action and who had taken all the relevant decisions in the litigation: Mr Willers brought Part 20 contribution proceedings against Mr Gubay. In addition, the Langstone Action led to linked claims for professional negligence against the solicitors and counsel who had been involved in the Wrongful Trading Action (those actions settled on confidential terms: see para 181). The Langstone Action was listed for a five-week trial in Spring 2013. Mr Willers was represented by the same solicitors and counsel (all of whom acted on CFAs) as acted for him in the present claim. In March 2013, Langstone served notice of discontinuance of all its claims against Mr Willers. Newey J ordered that Langstone pay Mr Willers’ and Mr Gubay’s costs of the action.
    • Round 4: the Langstone Action costs assessment. Mr Willers assigned certain of his rights under the order of Newey J to his solicitors, De Cruz, in exchange for their extending time for payment of their fees. In 2014, Master O’Hare reduced the hourly rates claimed by De Cruz and slashed the uplift under the CFAs to 43%. In 2015, Mr Willers accepted a Part 36 offer on costs which provided for his bill of costs to be assessed at £1.45m (as against the c.£3m+ claimed).
  5. Mr Willers issued the present claim against Mr Gubay alleging that Mr Gubay maliciously prosecuted the Langstone Action against him: it was thus litigation about litigation (the Langstone Action) about litigation (the Aqua Litigation). Mr Willers’ primary head of claim was for damages representing the difference between the sums allegedly due to his solicitors and counsel (who continued to act for him) and the sums he actually received by way of settlement from Langstone. In addition, Mr Willers claimed damages for alleged lost employment opportunities, injury to his health and injury to his reputation. Before the claim proceeded to trial, Mr Willers abandoned a claim for alleged increased borrowing costs.
  6. Mr Willers’ claim was initially struck out by Ms Amanda Tipples QC, sitting as a Deputy High Court Judge, as disclosing no cause of action known to English law: [2015] EWHC 1315 (Ch). The Deputy Judge granted a ‘leapfrog’ certificate to the Supreme Court. In a ground-breaking judgment, the Supreme Court held (by a majority of 5-4) that the tort of malicious prosecution did apply to a civil claim: [2016] UKSC 43. The trial before Rose J was of Mr Willers’ claim for malicious prosecution.
  7. Running in parallel to the above claims was an action in the Isle of Man. Mr Gubay had initially sued Mr Willers who counterclaimed seeking many millions of pounds in damages. In December 2017, Deemster Corlett dismissed every aspect of Mr Willers’ counterclaim in the Isle of Man (save for a small amount relating to an arithmetic error). Mr Willers’ subsequent appeal was also dismissed, save for one issue which was remitted to the Deemster for determination.

The requirements for a civil malicious prosecution claim

  1. The Judge summarised the requirements for a civil malicious prosecution claim (at para 187) as follows:
    • D was the prosecutor of the relevant action against C;
    • The relevant action was determined in C’s favour;
    • D had no reasonable or probable cause for prosecuting the relevant action;
    • D acted maliciously in prosecuting the relevant action; and
    • C suffered loss as a result of D’s actions.

The decision

Prosecutor

  1. The claimant in the Langstone Action was Langstone. Yet Mr Willers elected to sue Mr Gubay and not Langstone in the present claim. Mr Willers therefore had to establish that Mr Gubay was the prosecutor of the Langstone Action. Mr Gubay was not a de jure director of Langstone and nor was he the legal or beneficial owner of that company (para 188).
  2. Mr Willers contended that Mr Gubay was the “controlling mind” of Langstone (and indeed every company within the Anglo Group) – not to attribute his conduct to the company but rather the other way round; his case was that because Mr Gubay was the “controlling mind” of Langstone, Langstone’s conduct was to be attributed to Mr Gubay so as to make Mr Gubay the prosecutor of the Langstone Action.
  3. The Judge held (at para 196) that it was not enough for Mr Willers to show that Mr Gubay was the controlling mind or directing mind and will or a shadow director of Langstone “in some general sense” in order to establish that he was the prosecutor of the Langstone Action for the purposes of the tort of malicious prosecution. Such “reverse engineering” did not provide a defensible test. It was necessary to take a “more targeted approach” to the issue of whether Mr Gubay was the prosecutor: it was necessary to “examine in detail his role in the particular decision taken, not simply to move from generalised expressions of his dominant – even terrifying – personality to an assumption that he took the decision in question, at least where there is evidence about how the particular decision was actually taken” (para 197).
  4. The Judge held (at para 200) that it was necessary to show that Mr Gubay “had a dominant influence over the board of directors when they decided to bring the Langstone Action”. The Judge gave two bases as to how that test for “prosecutor” would be satisfied in the instant case:
    • If it could be shown that Mr Gubay bullied the directors to take the step that they would not have taken if left to their own independent judgement; alternatively
    • If Mr Gubay had misled the directors with false information, or by withholding information so that they took a decision that they would not otherwise have taken to go ahead with the claim.
  5. On the first basis, the Judge considered the totality of the evidence relating to the directors of Langstone and concluded (at para 215) that they were likely to be properly conscious of their professional and fiduciary duties and would not be prepared to cause the company to bring an action just because they were instructed to do so by Mr Gubay. Although the Judge accepted that Mr Gubay probably expressed his strong view that the Langstone Action should be commenced, she did not accept that the directors did not exercise their independent judgement in coming to the conclusion that it was a proper case to bring. Nor did the Judge accept that the directors would have decided not to bring the Langstone Action if Mr Gubay had not wanted to do so or that they would have automatically agreed to discontinue if Mr Gubay had said he wanted to stop the action. Accordingly, Mr Gubay was not the prosecutor of the Langstone Action on this basis.
  6. On the second basis, the Judge found that even if Mr Gubay had laid his cards on the table and set out a version of events similar to that described in Mr Willers’ evidence (which she did not accept), Langstone would still have brought the Langstone Action (at para 277).

Absence of reasonable and probable cause

  1. The Judge addressed this issue on the assumption that Mr Gubay was indeed the prosecutor of the Langstone Action (which she had held he was not). The test to be applied was the same as for a criminal malicious prosecution claim (at para 223): there were two limbs, a subjective and an objective limb:
    • An examination of whether the prosecutor had an honest, subjective belief in the guilt of the accused; and
    • That objectively there were reasonable grounds for concluding that if the underlying facts were true the person charged was guilty of the imputed crime.
  2. The Judge first considered Mr Gubay’s involvement in the Aqua Litigation (which had formed the basis for the Langstone Action) as a matter of law. There were three aspects to Mr Willers’ case:
    • The de facto / shadow director / “controlling mind” argument. The Judge was prepared to assume – without deciding – that Mr Gubay was a de facto or shadow director of Langstone at the time of the Aqua Litigation, alongside Mr Willers and the other de jure director – and even that Mr Gubay was the “controlling mind” of the company in a general sense. However, the Judge held (at para 228) that this did not mean that Mr Gubay must have known that Langstone had no case against Mr Willers for the purposes of the Langstone Claim, simply because Mr Willers could say that he was told to pursue the Aqua Litigation by Mr Gubay. The Judge found that the argument (in the Langstone Action) that a de jure director could defeat an action brought against him by the company for breach of fiduciary duty by showing that he was unable or unwilling to stand up to a shadow director forcing him to commit the company to a course of conduct which was contrary to the interests of the company would have been “a novel development of the law”.
    • The Re Duomatic argument: Mr Willers contended that Mr Gubay was also the directing mind and will of the Isle of Man company (“Cashtal”) that owned all the shares in Langstone at the material time and that any breaches by Mr Willers of the duties he owed to Langstone were therefore approved or ratified by Cashtal. Yet Mr Gubay was not a director of Cashtal at the time and was not the owner of it.  The Judge held (at para 233) that the answer to the “knotty company law problem” raised by Mr Willers’ reliance on Re Duomatic was “not so clear as to demonstrate that Mr Gubay in the guise of Langstone had no reasonable and probable cause to bring an action for breach of fiduciary duty against Mr Willers”.
    • The agency argument. Mr Willers contended that Mr Gubay had authority to act for Langstone in giving instructions to Mr Willers about the conduct of the Aqua Litigation. Again, the Judge found that it was “impossible to say that it was so clear as a matter of law that Mr Gubay’s involvement in the Aqua Litigation absolved Mr Willers of any liability for the alleged breaches of fiduciary duty as to lead to the conclusion that Mr Gubay had no reasonable and probable cause for causing Langstone to bring the Langstone Action against Mr Willers”.
  3. The Judge then turned to consider Mr Gubay’s involvement in the Aqua Litigation as a matter of fact. There were six aspects to the Judge’s findings of fact:
    • Mr Willers had been unable to produce to the court any emails from Mr Gubay or attendance notes written by him or the solicitor acting for Langstone showing that Mr Gubay was directing Mr Willers or giving instructions about how to conduct the Aqua Litigation (para 240). Instead, Mr Willers’ case turned on general propositions as to Mr Gubay’s alleged approach to litigation. Mr Gubay was not as closely involved with the running of the Aqua Litigation as Mr Willers claimed (para 246).
    • It was impossible to say at the time the Langstone Action was brought that Mr Willers had a strong defence based on Mr Gubay’s detailed knowledge and appreciation of the risks and costs involved in the Aqua Litigation (para 259).
    • The Aqua Litigation was not an uncommercial vendetta pursued by Mr Gubay to punish the directors of Aqua. The three matters relied upon by Mr Willers had “loomed much larger” in his recollection than they could possibly have done in Mr Gubay’s mind at the time (para 262).
    • The Aqua Litigation was not designed to demonstrate to other suppliers that the Anglo Group was an implacable litigator. If that had been its aim, it was a failure: far from giving the directors of Anglo a “bloody nose, it was Langstone that came out much the worse” (para 268).
    • The judge rejected the suggestion that Mr Gubay indirectly caused the collapse of the Aqua Litigation by dismissing Mr Willers so that he would not be prepared to give evidence in the Wrongful Trading Proceedings and by withdrawing instructions from Pannone (para 271).
    • The argument that another company in the Anglo Group had discharged the liability under the indemnity was not such a clear point in Mr Willers’ favour as to enable the court to conclude that it removed any reasonable and probable cause in bringing the Langstone Action (para 275).
  4. The Judge therefore concluded (at para 276) that there was a clear reasonable and probable cause underlying the Langstone Action.

Malice

  1. Malice is a separate element from absence of reasonable and probable cause though the two are linked. The Judge cited a number of authorities in the criminal sphere and noted that it was difficult to transpose the element of malice or improper motive from the criminal case law to the civil context (at para 280). The Judge considered that Mr Willers had correctly conceded that spite and hatred on the part of Mr Gubay to Mr Willers was not enough to constitute malice for this purpose before holding (at para 284) that “no extraneous motivation for the bringing of the Langstone Action has really been put forward convincingly”.
  2. Ultimately, the Judge concluded that the question of what constitutes a proper or improper motive for the bringing of an unsuccessful civil claim is a question that the Supreme Court had not answered and that she did not need to answer in view of her judgment on the other elements of the tort: “I will leave to a future case the question whether Mr Gubay’s conduct amounts to malice for the purpose of this tort”.

Abuse of process

  1. The Judge noted (at para 288) that what distinguishes the tort of abuse of process from that of malicious prosecution is that abuse of process does not require that the action should have been brought without reasonable cause nor that it was terminated in favour of the claimant. Abuse of process required “a purpose not within the scope of the action” – a ‘collateral’ or ‘improper’ purpose.
  2. The Judge could not see any evidence of collateral or improper motive behind the bringing of the Langstone Action, such that the abuse of process claim also failed.

Loss

  1. The judge briefly considered Mr Willers’ case on loss. The damage to health claim was not supported by the expert evidence. The loss of earnings claim was “speculative” and would have been “quantified at a very modest sum”. Finally, had it been a live issue, the claim for excess costs of the Langstone Action would have required a further hearing with further legal and factual argument. However, given the analysis of Master O’Hare, it would not have been right to assume that Mr Willers could recover everything he had to pay his solicitors and his counsel (para 323).

Conclusion

  1. Subject to any appeal, the claim that gave rise to the new tort has failed, but the fact is the new tort remains and its parameters are now much clearer following the comprehensive and scholarly judgment of Mrs Justice Rose. It is anticipated that claims will soon start to emerge from matrimonial and regulatory proceedings as well as from certain types of commercial claim; and the question of precisely what constitutes malice within the ambit of this tort will soon have to be grappled with.
  2. Paul Mitchell QC and Tom Shepherd were instructed by Geraint Thomas and Rebekah Parker of Laytons LLP: please click here for more information.

Disclaimer: this article is not to be relied upon as legal advice. The circumstances of each case differ and legal advice specific to the individual case should always be sought.

©  Paul Mitchell QC and Tom Shepherd of 4 New Square, December 2018.


Paul Mitchell

Paul Mitchell is ranked as a leading silk in Chambers and Partners. His clients say that he “often pulls things out of the hat” “you can ring him up and he will give you really good advice on very difficult points. He is fantastic and really commercial”. “I will take him work on things that are likely to go to trial” “He is extremely bright, clear, concise, commercially astute and to top it all – a lovely guy to deal with“. “He is very strong on tactics and strategy and a great team player.

Tom Shepherd

Tom Shepherd is ranked as a leading junior in Legal 500 and Chambers and Partners in the fields of Commercial Chancery and Restructuring/Insolvency. He is described as “an unbelievably good advocate for his level of call”; “very punchy”; “extremely good on the law”; very authoritative”; “a pleasure to work with”; and a barrister who “combines a ferocious appetite for work with a really very sharp legal mind'”.