IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(Sir Maurice Drake)
Royal Courts of Justice
Thursday, 26th February 1998
B e f o r e :
- - - - - - - -
Appellant
-v-
Respondents
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THE APPELLANT appeared in person
MR. C. GRAY Q.C. and MR. J. DEAN (instructed by Messrs Theodore Goddard) appeared
on behalf of the Respondents
- - - - - - - -
This is an appeal by Mr. Rupert Allason (whom I shall call "the plaintiff") from the order dated 2 May 1996 of Sir Maurice Drake, sitting as a High Court Judge, whereby the plaintiff's action for damages for malicious falsehood was dismissed with costs. The action arose out of the publication on page 2 of the issue of the Daily Mirror dated Friday 20 November 1992 of an article under the heading "Maxwell Cash Bid". The article was in the following terms:-
Tory MP Rupert Allason was challenged by 50 MP's last night to demonstrate his concern for Maxwell pensioners by giving them his estimated £250,00 libel damages. Mr. Allason won the money from the Daily Mirror over articles concerning Robert Maxwell.
The defendants in the action at the time of the trial were MGN Limited the publisher of the Daily Mirror, and Mr. Alastair Campbell and Mr. Andy McSmith. Mr. Campbell was the political editor of the Daily Mirror and Mr. McSmith was a political correspondent.
Between 1987 and 1 May 1997 the plaintiff was the Conservative Member of Parliament for Torbay. He is also a well known author writing under the name Nigel West.
In order to succeed in an action
for malicious falsehood a plaintiff has to prove:
(a) That the words complained of were published by the defendant.
(b) That the words were false.
(c) That the words were published maliciously by the defendant.
(d) That the publication of the false words either caused him pecuniary damage
or was calculated to cause him such damage.
In the present case the plaintiff failed in his claims against Mr. Campbell and Mr. McSmith because, apart from any other defences which might have succeeded, the judge held, in regard to the claim against Mr. Campbell, "that he took no active part in publishing the article", and, in regard to the claim against Mr. McSmith, that "he did not even know of the proposal to publish the article." In the case of Mr. McSmith the judge further held that "there was no evidence at all that he had any malice towards the plaintiff".
The judge's findings in relation
to the claim against MGN Limited can be summarised at this stage as follows:-
(1) That publication was admitted.
(2) That the article was false in the respects identified by the judge. I shall
return to this matter later.
(3) That the article was published maliciously by MGN Limited because of the
part played in the publication by Mr. David Bradshaw, the deputy political editor
of the Daily Mirror. I shall return to this matter also later.
BUT
(4) That the plaintiff had failed
to prove that the publication of the article had caused him pecuniary damage
or was calculated to cause him pecuniary damage; and
(5) That in any event the plaintiff's claim had been settled by a compromise
agreement on 24 November 1992 and there were no grounds for setting that agreement
aside.
There is no appeal by the plaintiff against the dismissals of his claims against Mr. Campbell and Mr. McSmith. In regard to the claim against MGN Limited, however, the plaintiff contends (a) that the judge should have found that he suffered pecuniary damage as a result of the publication of the article, or alternatively that the article was calculated to cause him pecuniary damage, and (b) that the judge should have rescinded the compromise agreement because of a material misrepresentation made on behalf of MGN at the time the agreement was made. The plaintiff further contends that the evidence on these two matters was clear and accordingly that this court should allow the appeal and enter judgment for him. In the alternative the plaintiff seeks a new trial.
In order to consider these issues of damage and rescission it will be necessary to examine some of the evidence as well as the pleadings and the submissions made to the judge. First, however, I should say something about the circumstances in which the article came to be published and about some of the subsequent events. For the purpose of this summary of the facts it will be convenient to refer to parts of the judge's judgment.
For many years prior to his death the Daily Mirror was, in the words of the judge, "under the influence of" the late Robert Maxwell. The plaintiff was a strong critic of Robert Maxwell and the plaintiff in turn was the subject of strong attacks in the Daily Mirror. On 23 October 1991 a prominent article about the plaintiff and another MP was published on the front page of the Daily Mirror under the headline "Dishonourable men and dirty tricks". On page 2 of the same issue there was another article, also critical of the plaintiff, written by Mr. Campbell.
Both MPs sued for libel. On 16 November 1992 MGN settled the plaintiff's libel action. He was paid substantial damages, which, as a term of the settlement, the parties agreed not to disclose to the public. The sum was in fact £200,000 plus £30,000 costs. The action by the other MP was settled later.
By the time the settlement with the plaintiff was made Robert Maxwell had died. It had been revealed that he had engaged in serious criminal conduct which included the theft of large sums of money from the Mirror Group pensions fund. As a result, a large number of pensioners were in danger of losing their pensions.
It was against the background of the plight of the Daily Mirror pensioners that some journalists employed by MGN, including Mr. Bradshaw, looked at the settlement made with the plaintiff. These journalists were not privy to the terms of the settlement nor did they know the exact sum, but it seems that they felt that an attempt should be made to force the plaintiff to donate his damages to the pensioners.
On Thursday 19 November 1992 Mr. Bradshaw was in the lobby of the House of Commons. He conceived the idea of suggesting to a number of Labour MP's that they should table an Early Day Motion (an EDM) proposing that the plaintiff should donate his damages to the Daily Mirror pensioners. For this purpose Mr. Bradshaw drafted an EDM and then discussed it with some MPs of his acquaintance. At the trial Drake J. heard evidence from several witnesses as to what took place on 19 November and expressed his conclusions in these terms (J.14):-
My findings of fact are that the idea of the EDM was conceived by Mr. Bradshaw and, as he eventually said, he drafted it and enlisted the support of Mr. Caborn [a Labour MP] , who in turn recruited Mr. Jimmy Boyce [another MP] to table it. Mr. Bradshaw was told by Mr. Caborn and Mr. Boyce that he (sic) would get 50 MPs to sign it. Mr. Boyce made some unimportant alterations to the draft and wrote the amended form in his own handwriting and obtained some signatures to it which finally totalled seven. When he showed the amended draft to Mr. Bradshaw there may already have been seven signatures on it but perhaps there were then less. Mr. Bradshaw then wrote the article, referring to 50 MPs having challenged Mr. Allason. He was referring to the draft EDM which at that time was supported by a maximum of 7 MPs, perhaps less. He referred to £250,000 libel damages. That was the maximum sum estimated by the popular press. He took no steps t o check with his own employers the correctness of that sum. He did not speak to Mr. Allason about the matter. Had he spoken to his own employers, he might have been told that, as far as the Mirror was concerned, the amount of libel damages was confidential. At the time of, or very shortly after, writing the article, Mr. Bradshaw told Mr. Campbell about it. Mr. Campbell learned enough about the contents of the article to tell his editor about it.
Later in his judgment the judge summarised the evidence of malice against MGN. He said (J.20-1):-
Mr. Bradshaw's actions in thinking up the EDM and promoting it, by seeking the support of MPs, then in writing the article without at any time asking the plaintiff himself to comment on the subject matter, his haste to have it published before the number of supporters of the EDM was known but, instead, relying on an estimate of the number of MPs who would support it and his failure to state that it was only Labour MPs who challenged the plaintiff, and the untruths he told when later asked about his involvement with the EDM are, in my judgment, all matters which are evidence of malice on his part. MGN Limited were responsible for Mr. Bradshaw's actions, the more so since the truth of the article was not checked and verified.
As I have already mentioned, the article which Mr. Bradshaw had written was published on Friday 20 November 1992.
On Monday 23 November 1992 the plaintiff wrote a letter of complaint to MGN Ltd. It was addressed to Mr. David Maislish, with a copy to Mr. Arthur Davidson QC, who was then the legal director of MGN Ltd. The letter was in these terms:- (55)
I regret that, despite the High Court settlement last week, my recent disagreement with Mirror Group Newspapers does not appear to be at an end.
Last Thursday a Labour MP warned me that two Daily Mirror lobby correspondents had persuaded some of his colleagues to table an Early Day Motion, apparently in the hope that its contents would cause me some discomfort. The EDM which I enclose herewith, implies my recent conduct has been hypocritical.
That Mirror journalists were directly involved in this exercise is demonstrated by the fact that the copy was filed on Thursday afternoon, long before the EDM itself had been released.
Furthermore, the report, which was published on page 2 the following day, Friday 20 November (also enclosed herewith) gave an inaccurate and exaggerated number of Labour MPs as having supported the Motion. It mentions my having been challenged by 50 MPs whereas in fact only 7 had been willing to sign the EDM.
You will note that the offending item also gives an incorrect and exaggerated sum as the damages agreed in last week's case, in direct breach of MGN's undertaking of confidentiality, agreed by me at MGN's request.
This is a blatant and calculated attempt by the Mirror's lobby correspondents to undermine the settlement with MGN which included a promise not to repeat the original allegations made in the articles which were the subject of the first action.
Whilst the content of the EDM itself is privileged, the Daily Mirror's inaccurate report of it is not.
Accordingly, unless I hear by return your proposals to remedy this situation I propose to issue a writ for libel and for breach of MGN's settlement terms.
There then followed a series of telephone conversations between the plaintiff and Mr. Davidson to whom Mr. Maislish had passed the letter of 23 November. I shall have to consider these telephone conversations in more detail later. At this stage it is sufficient to say that by Tuesday evening 24 November a compromise agreement had been reached between the plaintiff and Mr. Davidson acting on behalf of MGN. The judge's conclusion on this aspect of the matter was expressed in these terms (J.31):-
In my judgment, the parties did reach a complete oral agreement which settled the plaintiff's complaint on the terms which the defendants put into effect. There was nothing said in the conversations between the plaintiff and Mr. Davidson to suggest that the agreement made on the telephone was subject to some formal contract. The defendants had agreed to two things the plaintiff had demanded, that is to say the letter of assurance from Mr. Campbell in the terms that the plaintiff had required, and the publication of the agreed correction and apology.
Following this agreement Mr. Campbell wrote a private and confidential letter to the plaintiff dated 25 November 1992. It was in these terms:-
As you know, as an employee of MGN, I obviously associated myself with the apology and undertaking given to you in the High Court on 16 November.
I regret the inaccurate report published in the Daily Mirror on Friday 20 November concerning an Early Day Motion referring to you. I played no part in the composition of that motion and I have agreed to abide by the terms of the settlement made by MGN.
On the following day MGN published the following statement on page 30 of the issue of the Daily Mirror dated Thursday 26 November 1992:-
Mr. Rupert Allason MP
On Friday November 20, we published a report of a challenge by 50 MP's to Rupert Allason, the Tory MP for Torbay, concerning libel damages paid to him recently by Mirror Newspapers. The report was inaccurate in that only seven MPs had signed the Early Day Motion. The sum paid to Rupert Allason remains confidential, but in fact it is not the sum reported in the Early Day Motion. We have apologised to him.
Meanwhile, however, on the previous day 25 November the plaintiff had received information which led him to write a further letter of complaint. This letter was addressed to Mr, David Montgomery, who had recently become the Chief Executive of the Mirror Group. This letter was in the following terms:-
As you may know, the article about me published in the Daily Mirror on Friday 20 November threatened to re-open the dispute between MGN and myself which was settled in the High Court earlier that week.
My subsequent complaint has been satisfied by a written apology from Mr. Alastair Campbell and the correction to be printed in the Daily Mirror tomorrow 26 November.
Under normal circumstances this would close the issue, but I regret that a further, much more serious matter has emerged. Firstly, Alastair Campbell had stated in a letter to me today, the contents of which were agreed and scrutinised by Arthur Davidson, that he 'played no part in the composition' of the Early Day Motion referring to me. I now know this assurance to be false.
It is my belief that Alastair Campbell not only inspired the EDM, but that it was submitted to the Table Office in his handwriting. Furthermore, he actively canvassed other journalists to report a story he knew to be fictitious. In support of this charge, which I recognise is a grave one, I would refer you to an article carried prominently on the front page of the Western Morning News on Friday 20 November, a copy of which I enclose herewith.
In terms that are virtually identical to the offending Daily Mirror report, the WMN alleged that 'more than fifty Labour MPs signed a Commons Motion ...', whereas in fact only seven MPs signed the motion, which was not released until the following day. The journalist who wrote this item for the WMN George Parker, was urged by a Mirror lobby correspondent on Thursday afternoon to file copy which he now acknowledges was false. Professionally, he and his newspapers have been placed in an impossible and indefensible position by Campbell.
You know, of course, that the Western Morning News is the main provincial newspaper sold in Torbay and I am bound to conclude that Campbell's conduct amounted to a misconceived and malicious attempt to embarrass me in my constituency.
My acceptance of Arthur Davidson's offer of a published correction and a letter from Alastair Campbell was based upon the belief that Campbell had told the truth, but this new evidence compels me to disbelieve him.
In the light of the above I am seeking legal advice but I am reluctant to extend an already protracted dispute. If you satisfy yourself that Campbell has misled Arthur Davidson or his editor there is a remedy immediately available to you which I invite you to exercise.
On the following day Mr. Montgomery replied saying that he had asked for an immediate investigation into the matter and that he would be in touch shortly. Unfortunately, however, no steps were taken at that stage to carry out an investigation.
Some weeks later, having had no reply to his letter of 26 November, the plaintiff wrote to Mr. Montgomery again. He concluded this letter dated 14 January 1993 by stating that as he had received no explanation for what had occurred he had to bring proceedings. On 19 January 1993 Mr. Montgomery replied. He wrote:-
I am sorry that I have not been able to give you an earlier response to your letter of 29 November. In view of the seriousness of the allegations you make my enquiries have been extensive and taken some time.
Later in the letter Mr. Montgomery stated that a full investigation had found no evidence to suggest that Mr. Campbell had inspired the EDM or that it had been submitted to the Table Office in his handwriting.
The plaintiff, however, was not satisfied with this letter. On 9 February 1993 he issued a writ claiming damages for malicious falsehood and an injunction.
In the statement of claim as originally pleaded there was no plea that the plaintiff had suffered any actual damage as a result of the publication, though in paragraph 13 it was alleged that the article was calculated to cause pecuniary damage to the plaintiff. In June 1993, however, the statement of claim was amended by the addition of a new paragraph 16 in these terms:-
As a direct consequence of the publication pleaded in paragraph 4 above the publishing agreement negotiated with the Holmes Security Group of 440 Ninth Avenue, New York, was cancelled, causing a financial loss of a figure in excess of $75,000 to the plaintiff.
The defence contained an admission of publication and an admission of inaccuracy. Malice was denied. In addition in paragraph 9 of the defence it was pleaded that the plaintiff's right of action had been extinguished and/or satisfied and discharged by the compromise agreement to which I have already referred.
On 25 May 1995 the plaintiff served a reply giving particulars of the malice alleged against each of the three defendants. In paragraph 6 of the reply the plaintiff alleged that no final compromise agreement had been reached, but this is a matter which is no longer pursued and I need say no more about it. I shall, however, have to refer later to the matters set out in paragraph 8 of the reply.
The action was heard by Sir Maurice Drake sitting as a High Court Judge between 23 April 1996 and 1 May 1996. On 2 May 1996 Drake J. gave judgment dismissing the plaintiff's claim.
The plaintiff then appealed. His notice of appeal is dated 27 August 1996. In his grounds of appeal the plaintiff stated that he had suffered pecuniary damage and that the agreement with Mr. Davidson had been made "in the erroneous belief that an honest mistake had been made whereas the article was published maliciously".
On 3 December 1996 the defendants applied to strike out the plaintiff's notice of appeal. This application came before another division of this court presided over by Hirst LJ on 9 May 1997. After hearing argument the Court of Appeal, with the concurrence of Mr. Allason, dismissed the plaintiff's appeal against the judge's finding in relation to Mr. Campbell and Mr. McSmith, but the application to strike out the appeal in respect of the claim against MGN Limited was dismissed.
The issues for our determination
can be stated as follows:-
(1) The issue of actual damage.
(2) Whether the publication of the false statements was calculated to cause
pecuniary damage to the plaintiff.
(3) Whether the compromise agreement is capable of rescission.
I shall deal with the first two issues together under the heading "The Issue of Damage". I shall deal with the third issue under the heading "Rescission".
At the trial the case for the plaintiff was that as a result of the publication of the article the agreement he had negotiated with the Holmes Security Group for the publication of a book about the company was cancelled. As a result he suffered a loss in excess of $75,000. In his final written and oral submissions the plaintiff also claimed general damages which he said had been aggravated by the defendant's behaviour.
The case for the defendants was that the plaintiff had not proved that the alleged damage was the direct and natural result of the publication of the falsehoods. First, it was said, no terms for the contract had been agreed with the Holmes Security Group, second, it was very unlikely that Mr. Kohn, who had conducted some negotiations on behalf of the company with the plaintiff, would have cancelled the agreement because of this article even if he had read it. It was to be remembered that one had to concentrate on the falsehoods in the article and not the article itself in determining the effect on the reader. Finally, if the agreement had been cancelled on this ground it would have been a wholly unreasonable step to take. In addition counsel for the defendants referred to the evidence that on 17 November 1992 Mr. Kohn had been having some discussions with another author, Mr. William West, about writing a book about the company.
The plaintiff's alternative claim that the publication of the false statements in the article was calculated to cause him pecuniary damage was not developed by him in his final submissions either in writing or orally. The matter was dealt with briefly by counsel for the defendants who submitted that the publication of the falsehoods was not calculated to cause the plaintiff any pecuniary damage. Indeed, it might have made him more sought after as a speaker.
The judge dealt with the issue of damage on pages 23 to 27 of his judgment. He referred to the negotiations between the plaintiff and Mr. Kohn and to the fact that a contract of this size required the approval of the board of the company. At page 24 the judge referred to a passage in Mr. Kohn's evidence:-
.... When he read that fifty MPs had challenged the plaintiff in the House of Commons he was worried and thought that the board would not agree to employ Mr. Allason. He was not re-assured when the plaintiff told him that he would be taking action against the Daily Mirror to show that the article was false. So reluctantly and as a direct result of the article he did not proceed to submit the proposed contract to the board.
The judge then referred to the discussions between Mr. Kohn and Mr. William West and noted that Mr. Kohn had said that his discussions with Mr. William West were on the basis that he would be employed only if for some reason the proposed contract with the plaintiff did not materialise. The judge added:-
Mr. Kohn said he believed that, but for the offending article in the Daily Mirror, the plaintiff would have obtained the contract with the approval of the Holmes protection board.
The judge then considered the evidence given by Mr. Kohn as to the circumstances in which he had read the article in the Daily Mirror. At 25 the judge continued:-
Clearly it is not certain that the board would have approved the proposed contract with Mr. Allason. I assume that, had Mr. Kohn submitted the contract for approval, he would have informed the board of the alternative possible contract with William West for a lesser sum, and I understand that the group was in a financial position at that time in which it had to consider carefully any expenditure. As I have said, the group made a contract with William West as soon as 2 December 1992, that is to say within two weeks of the publication of the article on 20 November, and probably within a shorter time of Mr. Kohn having read it. So the negotiations with William West were probably at a very advanced stage by the time Mr. Kohn read the article.
In all the circumstances, and although Mr. Kohn was a convincing witness, I am not persuaded that the plaintiff has proved on the balance of probability that he would have obtained the contract. The most that could be said was that he may have lost the chance of obtaining the contract. But, in addition, I do not think that the loss of the contract, even if it were proved, would have been the natural and probable consequence of the falsehood, coupled as it was with an almost immediate correction and apology published on 26 November.
The judge then considered the alternative plea that the publication of the malicious falsehood was calculated to cause the plaintiff damage. At 26 the judge stated his conclusion:-
In the present case, now that I have heard all the evidence, there has been none to support a claim of this nature. The plaintiff has not referred to the loss or possible loss of any paid activities ... , and I do not think that he would or could properly suggest that this particular article, followed by an almost immediate correction and apology, can have had any significant effect upon his prospects at an election held several years later.
In this court the plaintiff, who conducted his case in person as he had done in the court below, submitted that the judge's conclusion that no damage had been proved could not be supported by the evidence. He developed this argument as follows:-
(a) The only relevant evidence about the agreement with the Holmes Security Group and the reason for its cancellation was that given by himself and by Mr. Kohn. The defendants had obtained a witness statement from Mr. William West and he was in court during the trial but he was not called as a witness and there was no admissible evidence from him.
(b) In his witness statement, to the truth of which Mr. Kohn testified at the trial, he said:-
I had some concerns about some recent controversy surrounding Rupert Allason but he assured me that the difficulties he had experienced with Robert Maxwell were close to conclusion and I should not be worried about the author's reputation diminishing the value of the book itself. I accepted Rupert Allason's assurances with some reservations and was in the last stages of finalizing our contract for presentation to the board of directors for approval, when I learned that far from having put his troubles behind him, he had been the subject of criticism by fifty members of Parliament in a House of Commons motion. ..... I concluded, reluctantly, that in the light of his continuing notoriety, media exposure and criticism, there was a real danger that the proposed second volume of Holmes Corporate History would become a vehicle of controversy with the board of directors and approval would not be given for the project.
(c) Later, in the course of his evidence in chief, in answer to a question from the plaintiff, Mr. Kohn replied that subject to the approval of the board of directors the plaintiff was justified in thinking that he had the contract "more or less in the bag".
(d) The judge had described Mr. Kohn as "a convincing witness". He must therefore have accepted his evidence or at any rate the main thrust of his evidence. There was no evidence tendered on behalf of the defendants to rebut. Mr. Kohn's clear assertion that he had read the article and that the references to the EDM signed by fifty MPs had led him to conclude a contract with Mr. William West instead of with the plaintiff. Furthermore, there was no evidence to support the judge's statement in his judgement that "the negotiations with William West were probably at a very advanced stage by the time Mr. Kohn read the article."
On behalf of the defendants on the other hand it was submitted that the judge was fully justified in reaching the conclusion that damage had not been proved. There was little documentary evidence about the contract and nothing appeared to have happened in the negotiations after the plaintiff sent a draft contract to Mr. Kohn in August 1992. Other officers at the Holmes Protection Group who gave evidence knew nothing about the proposed contract and it might well have been turned down, particularly if the company had been at that time in financial difficulty. It was to be observed that there was no evidence of any contemporaneous communication by Mr. Kohn to the plaintiff that the reason that he had been replaced was connected with the article in the Daily Mirror. It was also to be noted that the claim for special damage was not included in the original statement of claim. I see considerable force in the criticisms made by Mr. Charles Gray QC on behalf of MGN. The evidence about the contract with Holmes Protection Group and the reasons why no final agreement was concluded is not altogether clear. But the general tenor of Mr. Kohn's evidence, which we have seen in the transcript, was to the effect that he had read the article and that the reference in it to the EDM signed by fifty MPs had led him to conclude that the plaintiff was no longer a suitable person to write the book. He had therefore decided to turn to Mr. William West instead. The judge described Mr. Kohn as a convincing witness and, though Mr. Gray invited us not to give too much weight to the word "convincing", I see no escape from the conclusion that on the evidence before him the judge should have decided on the balance of probabilities that the loss had been proved. Moreover, I see no answer to the plaintiff's submission that the judge had no material before him to lead him to think that the negotiations with William West "were probably at a very advanced stage" by 20 November.
In these circumstances it is not necessary to deal with the plaintiff's alternative case that the publication of the false statements was calculated to cause him pecuniary damage.
I turn therefore to the third issue.
Under this heading I shall also have to consider as a separate matter the question raised by Mr. Gray on behalf of MGN whether even if the other ingredients of actionable misrepresentation are made out the remedy of rescission could be available to the plaintiff. First, however, I must look further at the arguments on the facts.
I have found this a difficult issue to resolve.
The case for the plaintiff before us was that the compromise agreement should have been set aside by the judge on the ground that it was founded on the representation by Mr. Davidson that the falsehoods in the article were published because of an honest mistake. This representation itself was untrue, though, as the plaintiff eventually conceded, not to the knowledge of Mr. Davidson.
It is necessary to deal with this issue with some care. The plaintiff invited the court to make findings of fact in his favour on this issue as well as on the issue of damage. I am quite unable to accept this invitation. On the issue of damage, though the evidence is not wholly satisfactory and may look very different if the matter is investigated further, it might have been possible to reach a conclusion on the material before the judge. On that part of the plaintiff's appeal, however, which depends on misrepresentation the position is different. Even if the plaintiff were to persuade us that the judge erred in his consideration of the issue of rescission the circumstances surrounding the compromise agreement are in my judgment too obscure to entitle this court to make a finding of fact.
I have already set out the terms of the letter of complaint sent by the plaintiff to Mr. Maislish on 23 November 1992. This letter was passed to Mr. Davidson who spoke on the telephone to the plaintiff on the afternoon of Tuesday 24 November. We have seen the plaintiff's record of this conversation and of a later conversation at 4 p.m. the same afternoon. We have also seen a fax message sent by Mr. Davidson to the plaintiff probably at some time between the two telephone conversations, and in addition the note of a recorded message sent by Mr. Davidson at 6 p.m. that evening. The judge found as a fact that a compromise agreement was made on 24 November and the evidence before us supports that conclusion. It seems that by about 6 p.m. on 24 November an agreement had been reached on the basis that the Daily Mirror would publish an agreed correction and an apology and that Mr. Campbell would send a letter to the plaintiff in agreed terms containing an assurance that he had played no part in the composition of the EDM.
The plaintiff submitted to us, however, that he had made this compromise agreement in reliance on an assurance by Mr. Davidson that the publication had been an honest mistake and that his case at the trial was to this effect. In support of this submission the plaintiff drew our attention to a number of matters including the following:-
(1) At the outset of his cross-examination by Mr. Gray he had been asked whether any representation by Mr. Davidson had the effect of nullifying the settlement agreement. His answer was that he believed the representation that there had been an honest mistake on the part of the Mirror.
(2) In paragraph 8 of the Reply the plaintiff pleaded that any agreement reached between the plaintiff and MGN was nullified by the false assurance given by Mr. Davidson that the offending publication had been an honest mistake made without malicious intent. The judge had made no finding about this plea.
(3) The record of the first telephone conversation with Mr. Davidson on 24 November included this passage:-
However, he [Mr. Davidson] wants this all sorted out today, this is a simple mistake with a simple remedy. He is to deal with this personally, refers to no one on this. R A [the plaintiff] says if so, assurance required that A C had nothing to do with it. An editorial cock up.
(4) The plaintiff referred to the following passage in the transcript of his final speech:-
The plaintiff submits that if the court decides that there was indeed an agreement, then it was nullified by fraud. Specifically he says that the assurances upon which the terms were negotiated were false, not least because Arthur Davidson was misled. In evidence he stated that his position would have been different if he had known the two key facts - that Alastair Campbell had known of the story prior to publication and that the draft Early Day Motion complained of had been written by David Bradshaw.
(5) It was clear, said the plaintiff, that he was induced to make the agreement because of the representation that the publication had been a "simple mistake". The words "if so" in the report of the telephone conversation on 24 November demonstrated that the whole agreement was based on the representation of a simple mistake.
Mr. Gray on behalf of MGN strongly contested the plaintiff's submissions. It was true that the judge had not dealt in terms with the plea in paragraph 8 of the Reply but this was because this aspect of the case was not pressed by the plaintiff at the trial. The plaintiff's real quarrel was with Mr. Campbell. As the plaintiff's second letter of complaint dated 25 November 1992 showed, the assurance to which the plaintiff attached importance was the assurance that Mr. Campbell had played no part in the composition of the EDM. When the agreement was being negotiated the plaintiff was asking for a correction in the Daily Mirror and a letter from Mr. Campbell. He received what he wanted and the judge was fully justified in reaching the conclusion that an agreement had been made and that it could not be set aside. The final written submissions of the plaintiff at the trial further supported the argument that it was the assurance that Mr. Campbell was not involved in the EDM which prompted the settlement. In these submissions the plaintiff said that the agreement was based on a false premise but in the context it was clear that the false premise to which he was referring was the premise that Campbell had not taken part in the preparation of the EDM. Finally, submitted Mr. Gray, it was now too late for the plaintiff to seek rescission. The parties could not be restored to the position before the agreement was made. The apology had been given and the letter had been written. There could be no restitutio in integrum.
I see great force in Mr. Gray's submission. Moreover, it is clear that the judge approached this aspect of the case on the basis that by the agreement the plaintiff had got what he had asked for. At J.31 he said:-
The defendants had agreed to two things the plaintiff had demanded, that is to say the letter of assurance from Mr. Campbell in the terms that the plaintiff had required, and the publication of the agreed correction and apology. In my judgment that agreement would be nullified if Mr. Campbell's assurance had been falsely given, but otherwise it was binding on both sides.
But the difficulty with Mr. Gray's argument is that the judge did not deal with the plea in paragraph 8 of the Reply. It may be that if the matter is fully investigated hereafter it will be shown that on 24 November the plaintiff's attention was directed exclusively to the part played by Mr. Campbell and that the assurance that the falsehoods in the article were "a simple mistake" had no material effect on the plaintiff's decision to settle. But I have come to the conclusion with some reluctance that unless Mr. Gray is right in his submission that rescission is no longer available to the plaintiff because of the principles underlying the doctrine of restitutio in integrum, the finding of the judge cannot stand. On the material which is presently before the court it is in my view impossible to say affirmatively that the assurance of "a simple mistake" was not a factor in the settlement. I must turn therefore to consider under the heading restitutio in integrum the principles relating to rescission.
Even on the assumption (which of course Mr. Gray contests) that Mr. Allason succeeds in proving the three basic ingredients of actionable misrepresentation (the making of the representation by the defendant, the inducement thereby of the plaintiff, and the reliance thereon by the plaintiff to his detriment) Mr. Gray contends that Mr. Allason cannot be entitled to rescission. For rescission to be ordered, he submits, restitutio in integrum is an essential condition which cannot be met here since the publication of the apology in the newspaper, and the provision of the Campbell letter, are irreversible.
Rescission is of course a discretionary equitable remedy, and the principles applicable to restitutio are set out in two leading House of Lords authorities. In Erlanger v. New Sombrero Phosphate Company (1878) 3 App Cas 1218 at p.1278 Lord Blackburn laid down the principles in what has become a classic statement of the law:-
It is, I think, clear on principles of general justice, that as a condition to a rescission there must be a restitutio in integrum. The parties must be put in statu quo. See per Lord Cranworth in Addie v. The Western Bank Law Rep. 1 H.L., Sc. 165. It is a doctrine which has often been acted upon both at law and in equity. But there is a considerable difference in the mode in which it is applied in Courts of Law and Equity, owing, as I think, to the difference of the machinery which the Courts have at command. I speak of these Courts as they were at the time when this suit commenced, without inquiring whether the Judicature Acts make any, or if any, what difference.
It would be obviously unjust that a person who had been in possession of property under the contract which he seeks to repudiate should be allowed to throw that back on the other party's hands without accounting for any benefit he may have derived from the use of the property, or if the property, though not destroyed, has been in the interval deteriorated, without making compensation for that deterioration. But as a Court of Law has no machinery at its command for taking an account of such matters, the defrauded party, if he sought his remedy at law, must in such cases keep the property and sue in an action for deceit, in which the jury, if properly directed, can do complete justice by giving as damages a full indemnity for all that the party has lost: see Clarke v. Dixon, E.B. & E. 148 and the cases there cited.
But a Court of Equity could not give damages, and, unless it can rescind the contract, can give no relief. And, on the other hand, it can take accounts of profits, and make allowance for deterioration. And I think the practice has always been for a Court of Equity to give this relief whenever, by the exercise of its powers, it can do what is practically just, though it cannot restore the parties precisely to the state they were in before the contract. ...
I have looked in vain for any authority which gives a more distinct and definite rule than this; and I think, from the nature of the inquiry, it must always be a question of more or less, depending on .... and the degree of change which has occurred, whether the balance of justice or injustice is in favour of granting the remedy or withholding it. The determination of such a question must largely depend on the turn of mind of those who have to decide, and must therefore be subject to uncertainty; but that, I think, is inherent in the nature of the inquiry.
In the Scottish case of Spence v. Crawford [1939] 3 All ER 271 at p.290 Lord Wright re-stated these principles as follows:-
On the basis that the fraud is established, I think that this is a case where the remedy of rescission, accompanied by restitutio in integrum, is proper to be given. The principles governing that form of relief are the same in Scotland as in England. The remedy is equitable. its application is discretionary, and, where the remedy is applied, it must be moulded in accordance with the exigencies of the particular case. The general principle is authoritatively stated ln a few words by Lord Blackburn in Erlanger v. New Sombrero Phosphate Co., where, after referring to the common law remedy of damages, he went on to say, at p. 1278:
But a court of equity could not give damages, and, unless it can rescind the contract, can give no relief. And on the other hand, it can take accounts of profits, and make allowance for deterioration. And I think the practice has always been for a court of equity to give this relief whenever, by the exercise of its powers, it can do what is practically just, though it cannot restore the parties precisely to the state they were in before the contract.
In that case, Lord Blackburn is careful not to seek to tie the hands of the court by attempting to form any rigid rules. The court must fix its eyes on the goal of doing 'what is practically just'. How that goal may be reached must depend on the circumstances of the case, but the court will be more drastic in exercising its discretionary powers in a case of fraud than in a case of innocent misrepresentation. This is clearly recognised by Lindley, MR, in the Lagunas case. There is no doubt good reason for the distinction. A case of innocent mis-representation may be regarded rather as one of misfortune than as one of moral obliquity. There is no deceit or intention to defraud. The court will be less ready to pull a transaction to pieces where the defendant is innocent, whereas in the case of fraud the court will exercise its jurisdiction to the full in order, if possible, to prevent the defendant from enjoying the benefit of his fraud at the expense of the innocent plaintiff. Restoration, however, is essential to the idea of restitution. To take the simplest case, if a plaintiff who has been defrauded seeks to have the contract annulled and his money or property restored to him, it would be inequitable if he did not also restore what he had got under the contract from the defendant. Though the defendant has been fraudulent, he must not be robbed, nor must the plaintiff be unjustly enriched, as he would be if he both got back what he had parted with and kept what he had received in return. The purpose of the relief is not punishment, but compensation. The rule is stated as requiring the restoration of both parties to the status quo ante, but it is generally the defendant who complains that restitution is impossible. The plaintiff who seeks to set aside the contract will generally be reasonable in the standard of restitution which he requires. However, the court can go a long way in ordering restitution if the substantial identity of the subject-matter of the contract remains. Thus, in the Lagunas case, though the mine had been largely worked under the contract, the court held that, at least if the case had been one of fraud, it could have ordered an account of profits or compensation to make good the change in the position. In Adam v. Newbigging, where the transaction related to the sale of a share in a partnership, which had become insolvent since the contract, the court ordered the rescission and mutual restitution, though the misrepresentation was not fraudulent, and gave ancillary directions so as to work out the equities. These are merely instances. Certainly in a case of fraud the court will do its best to unravel the complexities of any particular case, which may in some cases involve adjustments on both sides.
In my judgment, contrary to Mr. Gray's argument, these authorities establish that in the exercise of its discretion on restitutio the court enjoys a wide measure of flexibility having regard to the balance of justice or injustice.
In the present case no question arises concerning the ability or otherwise of the plaintiff to restore property or other tangible benefits transferred under the agreement, which is of course the normal situation when problems concerning restitutio have to be resolved, and where the risk of the "obvious injustice" referred to by Lord Blackburn is manifest.
Here, by contrast, we are dealing with the publication in the newspaper of the apology and the provision by Mr. Campbell of his letter. If Mr. Allason succeeds in establishing a right to rescission apart from any question of restitutio, I can see nothing unjust in the circumstances of the present case in his retaining the benefit of these two items, which on that hypothesis would manifestly have fallen far short of his minimum settlement terms, so there is no question here of unjust enrichment.
Mr. Gray laid stress on the contrast drawn by Lord Wright between cases of innocent and fraudulent misrepresentation, and rightly reminded us that the judge acquitted Mr. Davidson of express malice.
He was thus, he submitted, entitled to invoke the well known principle that the court does not recognise any conception of composite fraud, i.e. an action for fraudulent misinterpretation will not lie where a statement is made by an agent who honestly believes it to be true, merely because the principal, or another agent, knew the statement to be false (Chitty on Contracts 27th Edition paragraph 6 -031, citing Armstrong v. Strain [1952] 1 KB 232). Thus, he says, it is not open to Mr. Allason to seek to combine Mr. Davidson's innocent state of mind with Mr. Bradshaw's established malice in order to mount an allegation of fraud.
However in my judgment the case is not quite as simple as that. Chitty goes on later in the same paragraph to state "If one agent makes a fraudulent statement to another agent intending the latter to pass the statement on to a third party and this is done the principal will again be liable, for in these circumstances the first agent is guilty of the complete tort of fraudulent misrepresentation, the second agent being his innocent agent", citing London County Freehold and Leasehold Properties Ltd. v. Berkeley Property and Investment Co. Ltd. [1936] 2 All ER 1039 as explained in Armstrong v. Strain. Here, as was made clear in the evidence, Mr. Davidson consulted Mr. Campbell prior to the making of the alleged settlement agreement on 24 November, but did not speak to Mr. Bradshaw himself at this juncture.
However on the following day (25 November) Mr. Campbell furnished a memorandum to Mr. Davidson in which he passed on Mr. Bradshaw's innocuous and (as it turned out at the trial) false explanation of his conduct in relation to the EDM. This memorandum which was before the judge, was sent to us as an attachment to the chronology helpfully produced on behalf of MGN after the hearing of the appeal. If, as one would expect, Mr. Campbell's oral explanation to Mr. Davidson on 24 November, prior to the settlement, followed the same lines as that given in writing on the following day, then the London County Freehold test might well be met, on the footing that Mr. Bradshaw was guilty of making a fraudulent statement via Mr. Campbell to Mr. Davidson, intending Mr. Davidson to pass that statement on to Mr. Allason.
In that event, the court would, in Lord Wright's words, be the more ready to pull the settlement to pieces.
I have come to the conclusion that the judge's decision cannot stand. The evidence before him on the issue of damage which was given in the main by a witness whom the judge described as "convincing" showed on the balance of probabilities that the plaintiff had suffered actual loss. I should, however, reiterate that the matter may look very different if the full facts emerge at a further hearing. I also consider that the judge's failure to deal with the representation that the publication of the false story was a "simple mistake" means that the finding on rescission cannot stand.
This is not a case where the Court of Appeal can make relevant findings itself. In my judgment the right course is to allow the appeal and order a new trial on the issues of damage and rescission. On the issue of damage the court will be able to consider both the question of actual damage and the question whether the publication of the false statements was calculated to cause the plaintiff pecuniary damage. The precise form of the order may require further argument.
In the course of the hearing before us the plaintiff made an application to adduce further evidence. I have not found it necessary to refer to this evidence. It is sufficient to say that the application to adduce further evidence was bound to fail. The conditions laid down in Ladd v. Marshall could not have been satisfied.
I agree.
I also agree.
Order: Appeal allowed; judgment of Sir Maurice Drake of 2nd May 1996 as between the plaintiff and the third defendant be set aside, save in respect of his finding of falsity and malice against the third defendant; there be a new trial as between the plaintiff and the third defendant to decide whether (1) the plaintiff suffered actual pecuniary damage; (2) the publication was calculated to cause the plaintiff pecuniary damage; (3) the agreement made between the plaintiff and the third defendant was rescinded; there be an exchange of signed witness statements by 8th April 1998; that the matter be set down for trial forthwith; liberty to apply to the judge in charge of the non-jury list; costs of appeal be the plaintiff's in any event and costs in the court below be reserved to the trial judge save in so far as he awarded costs to the plaintiff.