#3669 - Economic Torts - Aspects Of Obligations

The two torts are [a] procuring breach of contract and [b] causing loss by unlawful means

1. Procuring Breach of Contract

Lumley v Gye (1853) (HC) –opera singer X contracted to sing for C, but D made her sing for his theatre instead. D procured her breach of contract with C, thereby causing loss to C. Held that in order for the tort to be made out, D has to know of the existence of the contract and what its terms are (under normal circumstances the conduct would be acceptable). On the facts, D did not know of the contract so no liability

• Howarth – at the time, breach of contracts by servants was a criminal offence so this may give the context as to why inducing somebody was regarded as being so bad

1. Causing Loss by Unlawful Means

Allen v Flood (1898) (HL) –D told X that workers would stop working unless X stopped using C’s services. Since workers were not employees there was nothing to stop them just working away. X stopped using C’s services as a result of D’s pressure. C sued D for causing loss by unlawful means. Held that no wrong had been committed because no threats nor conspiracies were made by D. Therefore there was no unlawful means

• Tarleton v M’Gawley (1790) (HC) –D and C were masters of boats. People from the shore came to trade with C, and every time this happened D fired canons to intimidate them. C could sue D, and this fits well under the unlawful means tort

1. Abuse of Rights

   • Tuttle v Buck (1909) (USA) –banker drove a barber out of business by setting up a barbers shop and undercutting his prices. Held that he was liable for intentionally causing the economic loss

OBG v Allan (2007) (HL) – Lord Nicholls – there is no liability for intentionally causing damage without using unlawful means in English law

1. Unification of the Two Torts

   1. General

In the 20^th Century, the courts tried to unify these two torts

• Quinn v Leathem (1901) (HL) – Lord Macnaghten –gist of Lumley v Gye is violation of a legal right, and such liability arises when interfering with contractual relations. This led to some confusion because it could be said that the dictum does not require a contract. Lord Lindley –Lumley v Gye not confined to breaches of contract –the principle is that all wrongful acts done intentionally to damage a particular individual are actionable

• Mogul Steamship v McGregor (1889) (CA) – Bowen LJ –lumped unlawful means and Lumley v Gye in the same category just because they are wrongful.

Seems wrong because just because they are ways of causing economic damage, doesn’t meant there is a single principle. In addition you could sometimes have liability for both

1. Progression of the Unified Theory

   • GWK v Dunlop Rubber (1926) (HC) –X made motor cars and C made tyres. X had a deal with C whereby X would put C’s tyres on X’s cars and to show the cars at motor shows. The night before a motor show, D changed C’s tyres for D’s tyres. C tried to sue based on intentionally inducing breach of contract. Held that there was a violation of C’s legal rights (so X was in breach as to C) but no inducement

OBG v Allan (2007) (HL) – Lord Hoffman –Dunlop Rubber was a good example of unlawful means; even though not explicitly mentioned by the case it is implied by the statement of principle and separate finding of trespass to goods. Lord Nicholls –in Dunlop Rubber, the use of Lumley v Gye was unfortunate because X was not induced to breach his contract, he was merely prevented from performing it. Thus D was not an accessory to anything and the case, as a prevention case, fitted under unlawful means instead

• DC Thomson v Deakin (1952) (CA) –Jenkins LJ – fully adopted the unified theory. Lumley v Gye extended to all interference with contractual relations by unlawful means: direct persuasion/procurement/inducement was a wrongful act in itself and constituted the primary form of the tort. But other examples such as Dunlop Rubber were examples of the same tort. Sir Evershed MR –not logical to limit it to situations where X persuaded to breach: the situation is the same whether X breaks the contract or whether D interferes

OBG v Allan (2007) (HL) – Lord Hoffman –at the time of DC Thomson there was a lack of appreciation of the unlawful means tort. The court therefore wanted to modify the cause of action to cover cases where unlawful means used to cause damage by interfering with performance of a contract without the participation of X

1. Circular Reasoning

OBG v Allan (2007) (HL) – Lord Hoffmann –treating Lumley v Gye as a case of unlawful means is circular because D’s conduct was only wrongful because the court had said it was tortious; therefore it is circular to say it was tortious because it was wrongful

1. Interference Falling Short of Breach Caused by Lawful Means

OBG v Allan (2007) (HL) –Lord Nicholls – the effect of the extension was that a person who directly prevents performance of a contract by lawful means is liable. There is no reason why a person should be liable in that situation but still has to use unlawful means if he intentionally inflicts damage in any other [non-direct] way. Why is there a distinction between direct and indirect means?

It expands liability to cover interference with contract by lawful means, falling short of inducing breach. This is because under procuring breach, the means do not have to be unlawful but there does have to be a breach; under unlawful means, the means have to be unlawful but there does not have to be a breach. i.e. causing loss by unlawful means doesn’t involve lawful means if it’s a direct prevention of breach; any other way though does require unlawful means to be used

PROCURING BREACH OF CONTRACT CAUSING LOSS BY UNLAWFUL MEANS

BREACH OF CONTRACT LOSS

LAWFUL MEANS UNLAWFUL MEANS

(effect of merging the two torts)

• Middlebrook Mushrooms v TGWU (1993) (HC) (reversed on appeal) –D organised a campaign outside supermarkets urging public not to buy C’s mushrooms. C got an injunction to prevent this. The decision was overturned.

Middlebrook Mushrooms sees wrong because D was not doing anything unlawful and no breach of contract was being induced

• Torquay Hotel v Cousins (1969) (CA) – D blocked oil supply to C hotel, preventing X from performing obligation to supply oil to hotel. Held that this was actionable. Lord Denning – time had come to cover deliberate and direct interference with the performance of a contract without causing any breach. As long as the interference was direct this is enough, even though there is no breach of contract

Torquay Hotel is also bad because there was no unlawful means nor any breach of contract

1. Mere Foreseeability

It expands liability beyond cases of intention to include mere foreseeability

• Millar v Bassey (1994) (CA) –D pulled out of a recording contract committing a breach of contract. This meant that C backing musicians were ditched by X in breach of contract. The fact that Cs were no longer employed was not D’s intention but she might have been able to foresee it. C did not sue X in breach of contract because they wanted work in the future and sued D instead. Held that the strike-out was resisted and it was arguable they would win

• Weir –seems wrong that you must perform a contract just because a third party may foreseeably suffer if you don’t

1. Uncoupling of the Two Torts

   1. General

The torts were uncoupled in OBG v Allan and related appeals

1. Should the Torts be Uncoupled?

   • Weir – Lumley v Gye should be absorbed into unlawful means tort, and inducing someone to breach a contract is just an example of an unlawful means

OBG v Allan (2007) (HL) – Lord Hoffmann –makes no sense to say that the breach of contract itself has been caused by unlawful means

• Sales and Stillitz –Lumley v Gye is founded on the principle that treats contractual rights as deserving special protection. Therefore, a right is given against the party who breaches but also against the person who induces him. Unlawful means is only concerned with intention and wrongfulness, and is indifferent as to the nature of the interest damaged

1. Intentionally Inducing / Procuring Breach of Contract

   1. Elements

OBG v Allan (2007) (HL)– Lord Hoffmann outlined the elements of the tort:

[1] This is a tort of secondary liability and D is an accessory to a breach between C and X,

[2] D does not need to do something independently unlawful but must induce/procure C to breach his contract (rather than merely prevent or interfere with performance) and this must satisfy the general requirements of accessory liability for the wrongful act of another,

[3] breach of contract between C and X is essential,

[4] D must have intended to induce the breach between C and X, but not necessarily have intended damage to C

1. [2] Inducing / Procuring

OBG v Allan (2007) (HL) –Lord Hoffmann (obiter)–inducement shouldn’t be too narrowly defined, but assistance in financing was enough. Lord Nicholls –negligent interference not enough. Intentional interference presupposes knowledge of the contract. If a party deliberately turned a blind eye and proceeded regardless this is enough. But a desire to injure not essential

Might be that Lumley v Guy is more of a knowing assistance case. In Mainstream Properties, X owed a fiduciary duty to C so the claim could have been brought in equity for knowingly causing a breach of fiduciary duty. There may be a difference between common law and equity in saying that you have to knowingly assist. But it is questionable as to whether the claim...