“Lawfare”, big money divorces,

and the impact of the new tort of

malicious prosecution of civil
proceedings

Paul Mitchell QC
Tom Shepherd

4 New Square

Professional Liability & Regulatory Conference

4 February 2020

This material was provided for the 4 New Square Professional Liability & Regulatory Conference on 4 February
2020. It was not intended for use and must not be relied upon in relation to any particular matter and does not
constitute legal advice. It has now been provided without responsibility by its authors.

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Paul Mitchell QC
Call: 1999 Silk: 2016
“A brilliant advocate. Very tenacious but clear thinking… He gives very robust
advice and is prepared to think out of the box.” – Chambers & Partners
“A very good advocate, who is able to hammer home the strong points of the case.”
– Legal 500

Paul is a commercial litigator with particular experience in claims involving the

liability of professionals, particularly lawyers, accountants, tax advisers, fund
managers and surveyors; disputes regarding professional indemnity insurance;
claims arising from the economic torts, notably malicious prosecution of earlier claims and conspiracy;
and claims arising from and in connection with the conduct or effect generally of earlier litigation (e.g.,
wasted costs applications, loss of chance claims).

Paul acts in a broad variety of general commercial claims, frequently where some problem has arisen,
either from the facts of the case or the way it is being handled, that needs a creative solution to break a
deadlock. He appears regularly before arbitral tribunals and has recently begun to work in investor-state
disputes. He speaks fluent Italian, Russian, French, Spanish and Farsi.

Tom Shepherd
Call: 2008
Tom Shepherd is ranked as a leading junior in the fields of (i)
Commercial/Chancery litigation, (ii) Restructuring/Insolvency and (iii)
Professional Liability. His cases often have a fraud angle and he has experience
of Company, Partnership and Financial Services disputes.
Tom is an experienced trial advocate who is not afraid to back his judgment. Tom
has recently acted in significant, high-value litigation as part of larger legal teams,
both at first instance and in the Court of Appeal. He also appears in his own right
in the High Court and County Court as well as before professional regulatory
panels. Tom is a sophisticated negotiator who is frequently instructed to act at mediation and other forms
of ADR. Tom was appointed as Junior Counsel to the Crown (Attorney General’s B Panel) in June 2016.

Tom’s qualities have been consistently recognised in the legal directories:

• A relentless will to win: “combines a ferocious appetite for work with a really very sharp legal
mind”; “a will to win in every case, however tricky”; “extremely sharp, committed and focussed
on the result”; “meticulous in his preparation and completely dedicated to the case.”
• A skilful advocate: “an unbelievably good advocate for his level of call”; “very punchy”; “a very
tenacious and skilful advocate”; “aggressive when he needs to be and sensible in his deliveries in
court”; “he has the ear of the judge and is a very strong advocate.”
• A first-class lawyer: “extremely good on the law”; “rigorously thorough and responsive”; “very
detailed in his approach”; “intelligent and first rate on the law”; “very authoritative”; “always
keeps a commercial outlook and has very strong tactical judgement.”
• A modern outlook: “tech savvy with his no-paper approach to litigation”; “very user-friendly and
good at staying in touch and being practical.”
• A collaborative approach: “extremely personable, which impresses clients and makes a big
difference in cases”; “extremely accessible, very responsive and very good in court”; “very strong
on his feet and has a good client manner”; “a pleasure to work with.”
 "Lawfare", big money divorces,

and the impact of the new tort of malicious prosecution of civil proceedings.

Paul Mitchell QC and Tom Shepherd

In this talk, we examine the basis of the new tort of malicious prosecution of civil proceedings and the
new lease of life given to the tort of abuse of process since Willers v Joyce [2018] AC 843. The conduct
of legal proceedings against opponents across multiple jurisdictions is referred to by some
Russian oligarchs as "lawfare", and in this talk we look at specific issues arising where personal
commercial rivalries are played out in spurious litigation. We then go on to consider the new
phenomenon of malicious prosecution claims arising from big money divorces, touching finally on the
professional liability exposure of lawyers who have acted for the tortfeasor in maliciously prosecuted
or abusive civil proceedings.

Malicious prosecution

For 350 years or so it seemed the tort could only be committed in the context of malicious
prosecutions of criminal proceedings: it was from the same intellectual stable as the statutory crime
of conspiracy (using the law to get the Crown to execute your enemies by framing them). As at the
time the law was changed, the conservative view was that this tort existed only where the tortfeasor
had abused the coercive power of the State, as, for example, by procuring a criminal prosecution, or
having a ship arrested, or issuing a winding up petition: see Lord Sumption’s speech in Crawford
Adjusters v Sagicor General Insurance (Cayman) Limited [2014] AC 366. In Sagicor and Willers v Joyce,
the basis of the tort was subject to a new analysis. Baroness Hale in Sagicor considered that there
should simply be a single tort of misusing legal proceedings; Lord Toulson in Willers said that the tort
existed “to do justice in various situations in which a person has suffered injury in consequence of the
malicious use of legal process without any reasonable basis”.

At the heart of the tort is the concept of malice, the misusing of legal proceedings. That element is
also found in the related tort of abuse of process; it seems possible, maybe even probable, that the
two causes of action will in due course merge into the single tort hypothesised by Baroness Hale in
Sagicor. For the moment, though, they remain distinct.

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Elements of the tort of malicious prosecution

In Willers v Joyce, the requirements for a malicious prosecution claim were summarised 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.

Prosecutor

This requirement begs a number of questions:

First, what actually is a ‘prosecution’? Does the tort require a criminal prosecution to take place or
does the tort simply require setting the law in motion with damage being suffered as a result? In the
Privy Council decision of Mohamed Amin v Bannerjee [1947] A.C. 322, it was held that the focus of the
tort was on whether the relevant proceedings had reached such a stage that damage to the claimant
had resulted. The Supreme Court of Canada reached a similar conclusion in Casey v Automobiles
Renault Canada (1965) 54 D.L.R. 600. We suggest that the development of the tort in Sagicor and
Willers has resulted in a less technical definition of ‘prosecutor’ with the focus of the tort being on
damage.

Second, who is a ‘prosecutor’? What about the individual director who commits a company to
litigation: is he the prosecutor or is the company? In Willers, the claimant in the underlying action
(the subject of the malicious prosecution claim) was a company (“Langstone”) yet Mr Willers (the
claimant in the malicious prosecution action) elected to sue Mr Gubay (who was not a director of
Langstone). 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. The trial judge, Rose J (as she then was) held 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

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approach” to the issue of whether Mr Gubay was the prosecutor. Before concluding that Mr Gubay
was not a ‘prosecutor’ for the purposes of the tort, Rose 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”. Rose J gave two bases as to how that test for “prosecutor” would have been
satisfied: (a) 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 (b) 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.

Finally, what of the impact on regulatory proceedings? Such proceedings used not to be capable of
founding an action (see Gregory v Portsmouth CC [2000]). Could the over-aggressive regulator now
fall within the ambit of the tort?

Determination

It is usually not very difficult to satisfy this requirement. In short, we suggest that determination in a
claimant’s favour occurs when the law is no longer in motion against that person.

Absence of Reasonable and Probable Cause

In Willers, Rose J held (at para 223) that there were two limbs, a subjective and an objective limb: (a)
an examination of whether the prosecutor had an honest, subjective belief in the guilt of the accused;
and (b) that objectively there were reasonable grounds for concluding that if the underlying facts were
true the person charged was guilty of the imputed crime.

A would-be claimant faces a number of issues. First, the burden is on the claimant to prove a negative.
Second, difficult issues of privilege arise where the defendant to the malicious prosecution claim
declines to waive privilege in the legal advice received in the underlying/original action. Third, mere
presence of malice will not suffice (people are entitled to prosecute decent claims with all the venom
they can muster and all it will do is sound in costs).

Malice

Malice is a separate element from absence of reasonable and probable cause though the two are
linked. Although the Court did not decide the point in Willers, it is suggested that use of the legal
process for an improper purpose should satisfy the requirement. It is clear, however, that mere spite
and hatred of a defendant is not without more sufficient: something more is required.

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Damage

Note the kinds of damage the tort exists to compensate: damage to reputation, to health and to
wealth. A few questions arise as to the relationship of malicious prosecution with other cognate torts,
particularly libel, which we are not going to attempt to answer here: the take home points are that
the damage the law anticipates to have been caused when a person is ensnared in the legal system is
to his or her reputation, health and wealth, with there being no bar to recovery for pure economic
loss.

In Willers, the economic loss claimed (which was at the heart of the case and later gave rise to the
unusual costs application discussed below) was the difference between the costs recovered following
the allegedly malicious earlier prosecution and the “true” costs owing by Mr Willers to his lawyers. It
is far from clear whether a claim for “extra costs” is actually even permissible (see the analysis of Lord
Mance in Willers in the Supreme Court), but it may be that since the tort exists to give compensation
to the person who has been a victim of an abuse of the legal system, then a claim for “extra costs”
falls naturally enough into the type of loss which ought to be compensated.

The perhaps more intriguing question is what limits there might be on recovery for consequential
losses said to be caused by being embroiled in substantial litigation. The law has no difficulty
recognising that freezing orders can cause loss by their impact on the conduct of ordinary business
(hence the cross-undertaking in damages: see Les Laboratoires Serviers v Apotex [2008] EWHC 2347,
Ch); the first cases seeking very large damages for financial losses are in the pre-action
correspondence stage even as we speak.

Abuse of process

The “elements” of this cause of action are even more imprecise: damages will be awarded where the
claimant has suffered loss as a result of a defendant’s having used the law “predominantly” for an
improper purpose, a purpose being improper if it is extraneous to the relief sought in the litigation
and not reasonable flowing from or connected with the relief sought.

Having regard to the elements of the cause of action, it seems theoretically possible that a claim could
be brought by someone who had lost the claim said to have been pursued abusively, as for example
where a party to litigation settles a case in order to limit the ruinous costs of running it to trial and
winning it.

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Lawfare

The term “lawfare” has been around for a few years, to describe the use by jihadis of the legal systems
of democracies as weapons against them (in particular by bringing libel actions which permit the
publication of distorted versions of reality set up against the alleged libel). It seems that the term is
also in vogue among some oligarchs to describe the continuation of business rivalries by other means.
There are certainly plenty of cases involving Russian parties that one could imagine fitted into that
schema, and it will be interesting to see what use will be made of the reanimated torts of malicious
prosecution and abuse of process in that context. There is one case we are aware of arising from the
CIS where active consideration is being given to an action for abuse of process and malicious
prosecution following a very long series of claims across various Western jurisdictions.

By way of example of the kind of fact pattern that might be said to be evocative of many claims
brought for trial in England from the CIS there is JSC BTA Bank v Ablyazov (No 6) [2011] 1 WLR 2966.
There Mr Ablyazov asserted that the Bank’s case against him should be stayed as an abuse of process
on the grounds that the Bank had been effectively “put up to” suing him at the behest of the then
president of Kazakhstan, who in turn was motivated (it was alleged) by a purely political desire to
harm a political rival. Teare J decided that there was a legitimate claim to be brought by the Bank and
so it did not matter what role the president of the republic (as major shareholder in the Bank) might
have played in urging the Bank to bring the claim. It was later said, in Sagicor, by reference to Ablyazov
(No 6), that if a person in Mr Ablyazov’s position could show that the claim against him had been made
with the predominant purpose of achieving a collateral purpose, then any legitimate purpose which
also existed would be irrelevant. The effect of that observation is to limit the ability of claimants
bringing abusive claims to use the fig-leaf of some minor legitimate claim to cover up the fact that the
true purpose of proceeding is indeed to do harm and not to seek justice.

As is clear from the numerous law reports of disputes involving companies and citizens from states in
the CIS, a very common feature of the disputes is the allegation that the other side is engaged in lying
and the fabrication, concealment or manipulation of evidence on a heroic scale. Such tactics give rise
to the obvious possibility of a subsequent action in abuse of process or malicious prosecution, as it
were opening another front in the ongoing lawfare.

Big money divorces

There have been no reported cases yet, but there are at least two at the pre-action stage.

5
Example: H owns valuable shares in a company, W brings proceedings against that company seeking
a remedy under the Matrimonial Causes Act 1973, alleging that the corporate veil should be lifted.
Following Prest v Petrodel [2013] 2 AC 415, the court does not accept that it has the jurisdiction to
grant the orders sought against the company and strikes them out as effectively bad in law. The
company then sues W alleging that she maliciously prosecuted the earlier action against it: there was
no reasonable and probable cause, as (the company says) she must have known since she was legal
represented; and malice is alleged by reference to copious evidence from the divorce.

Such litigation could be seen as another front in the divorce war; and it is very effective. W could
defend herself most effectively by waiving privilege to show that she had received legal advice that
she had a reasonable claim; but that in turn would expose her lawyers to a later professional
negligence claim from her if their advice is shown to be negligent. The result is that a conflict arises
between W and her lawyers; and of course she still has to deal with the malicious prosecution claim.

Example two: there is a custody battle between H and W. W makes allegations of sexual abuse against
H in an application made within the custody proceedings. These allegations are later withdrawn; H
sues W for malicious prosecution of that part of the matrimonial proceedings. Even if W has numerous
excellent defences, she is still now facing a stressful further battle with H.

Lawyers’ liability

Following the successful defence of the malicious prosecution claim in Willers, the Executors obtained
a costs order against Mr Willers including an order for an interim payment on account of costs of £1
million. Mr Willers failed to make the payment. The Executors applied for a non-party costs order
against the solicitors and counsel who had acted for Mr Willers in that action (“the Lawyers”).

As noted above, the primary head of loss claimed by Mr Willers was the difference between the
amount of legal fees billed by the Lawyers and the amount of costs Mr Willers had been awarded in
the underlying Langstone Action: a delta of some £1.9m. The Executors contended that the Lawyers
had a direct financial interest in the outcome of the malicious prosecution claim as a result. Mr Willers
had not paid the Lawyers and the only way he was going to pay them was if the malicious prosecution
action succeeded. A curious feature of the case was that the CFA entered into between De Cruz (the
solicitors) and Mr Willers contained provisions which removed De Cruz’s entitlement to recover their
uplift once it had been taxed off on detailed assessment, yet no independent legal advice was sought
prior to the launching of the malicious prosecution claim. In addition, the Lawyers provided Mr Willers
with financial accommodation by agreeing (a) not to enforce their claim for outstanding fees and (b)

6
not to seek payment for their ongoing legal services unless and until Mr Willers came into funds (points
which were all accepted by Rose LJ).

Rose LJ stated (at para 56), “I confess I have found a decision in this case very difficult”. On balance I
have concluded that his is not a case in which De Cruz and the Barristers have acted outside the role
of legal representatives to such an extent as to bring themselves within the costs jurisdiction under
section 51(1) and (3)”.

All aspects of the Willers v Joyce litigation (including any appeals) have now settled on confidential
terms.

Paul Mitchell QC and Tom Shepherd

4 New Square Professional Liability & Regulatory Conference

© 2020 Paul Mitchell QC and Tom Shepherd