#16711 - Intentional Economic Torts - Aspects Of Obligations

the ‘sole defendant’ economic torts:

Lord Sumption & Lloyd Jones JSC BTA Bank v Krapunov 18 recognise that econ torts are major exception to rule that no duty in tort avoid causing econ loss

rule exists to allow competitive business - law must be careful when identifying point where such conduct ‘transgresses legitimate bounds’ - a task of ‘exceptional delicacy’

Never been that prominent & not unified - eclipsed by ‘upstart cousin’ (O’Sullivan) Hedley Byrne

but recent resurgence - new role in resolving boundaries of commercial ethics

origins in old-fashioned labour law

The 2 torts:

Intentionally inducing/procuring breach of contract - Lumley v Gye

• opera singer induced to breach contract with L to sing at G theatre instead

  Intentionally causing loss by unlawful means - Allen v Flood

• union officials said iron workers would stop working if ship-rites re-engaged - ER bowed to pressure so stopped work

• no tort committed - no contract breached & no unlawful means - emphasised doing something with bad motive not a tort - no doctrine of rights etc

• origins = Tarleton v M’Gawley 1790 captain of ship fired canon at another boat every time tried go to shore to trade - unlawful! (intimidation)

  During 20C confusion coz courts tried unify the 2 as a single ‘innominate tort’ - muddled their requirements & expanded remit

  relied on circular reasoning to treat Lumley as involving unlawful means - only unlawful coz inducing breach!

  Lumley extended to cover ‘interference’ with contract

  e.g Middlebrook Mushrooms v TGWU protest urging consumers not buy M products by TU - no breach/unlawfulness - overturned by CA

  also expanded liability from ‘intention’ to include mere ‘foreseeability’ - too far

  e.g Millar v Bassey - B pulled out of record deal causing co. break contracts with musos - they sued her & won in CA! Obvs she didn't intend cause them loss/breach etc

  Weir was v critical - upsetting doctrine of privity etc

  Remember, Eng has no doctrine of abuse of rights - contrast US decision (Tuttle v Buck) - there banker opened barbershop with aim of bankrupting the owner - held tortious - wouldn't be in England!

  in OBG v Allan 07 HL clarified & uncoupled the 2 torts - 3 conjoined appeals

  OBG: Ds appointed receivers of a floating charge which turned out be invalid - but in gf took control of C’s assets - argued unlawful means - no - nothing unlawful & no breach contract

  Mainstream Properties v Young: EEs (in breach of employ contract) diverted business opportunity to a co. they ran - D financed transaction - said he didn't believe would = breach - argued inducing breach - HL said no coz no intention procure breach (+ no UM) - overruled Millar!

  Note also relevant they approached him & not other way round

  Douglas v Hello no.3: OK mag exclusive contract for D & Zeta Jones wedding - Hello published pics surreptitiously taken - argued unlawful means but said wasn't - not much discussion

1. inducing breach of contract

   Elements (largely) clarified by OBG but older cases also useful - HL confirmed is tort of secondary liability

   Thomas v Deakin said requirements = direct persuasion/procurement/inducement applied by TP to contract-breaker, with knowledge of contract & intention of bringing about its breach

1. Inducement/Procurement

   orthodox view = direct persuasion - where indirect -> unlawful means

   Lord Hoffman OBG suggested test = did D’s acts of encouragement/threat/persuasion have sufficient causal link with breach to attract accessory liability?

   seems broader - may cause confusion - Carty

   Weir considered ‘persuasion’ key - seems be what court in OBG thought too - mere interference no!

   court rejected indirect intervention & prevention of performance (there look at UM)

   Mere advice insufficient - Lewis v Yeeles

   can be difficult line draw - Neil LJ in Mushrooms noted could infringe Art 10 if go too far

   Hart & Honoré say inducement about making a given course of action more desirable in eyes of another than otherwise would've been

   Mummery LJ in Lewis v Yeeles CA said about persuading/causing act in a way otherwise wouldn't have done

   The ‘inconsistent transaction fallacy’/facilitating breach = suggested enough by Jenkins LJ in Thomson v Deakin

• took support from BMTA v Salvadori - D bought car from C’s co-contractor knowing this breached obligation not to sell within year - held liable - mere inconsistency/facilitation

• approved in Rickless v United Artists

• applied in Lictor Anstalt v Mir Steel 11 - judge thought arguable - declined strike out

• under contract A not allowed sell L property, went bust & sold to M

  note GWK & ARM v Dunlop Rubber 26 D put their tyres on GWK car - placed them passively in breach with ARM - held liable - criticised in OBG - Hoffman said no active procurement, suggested UM instead

  comes from ‘interference’ confusion

  note Union Traffic v TGWU CA said picketing could = procurement = encouraging others breach contract

  One Money Mail v Ria 15 CA W approached R, yet R nonetheless liable for inducing breach - R knew of the exclusivity clause in the contract thus knew would be breached - more than ‘active steps’

  Carty: BMTA weak authority coz appeared be organised attack on C - seems be actual inducement

  Hart & Honoré say D’s conduct needs be at least 1 of influencing factors in C’s decision breach

  contrast Batts Combe Quarry v Ford - mere acceptance of gift not procuring

  There is an argument that this line of cases ‘impliedly’ overruled by OBG but not mentioned

  Meretz Investments v ACP Toulson LJ seems deny liability for inconsistent transactions - D’s conduct must have operated ‘on the will’ of contracting party

  Some uncertainty coz of overlap with Equity- inconsistent dealing etc - Carty says unhelpful

  O’Sullivan seems distinguish ‘knowingly making an inconsistent dealing’ - entirely consistent with OBG!

  Lord Macnauhten (Allen v Flood) - D must be person who ‘pulls the strings’

  Carty says inconsistent transactions shouldn't be tortious per se - I agree!

2. Knowledge/Intention

   must know of existence of contract and intend cause breach of that

   Knowledge

• requirement makes sense coz about protecting contractual interests

• Mainstream Properties v Young subjective knowledge - honest doubt as to whether contract/clause exists enough to avoid liability - can’t just say must have been obvs - constructive knowledge insufficient

• but Hoffman endorsed Emerald Construction v Lowthian so reckless indifference does suffice (subjective) i.e deliberately ignoring/wilfully turning blind eye - as opposed to mere neg

• Deakin & Randall say this definition may create undesirable evidential difficulty for C

  Intention to induce breach

• clear from OBG don’t need intend cause loss & foreseeable breach/inevitable insufficient

• Meretz Investments v ACP considered that their reliance on legal advice meant they were entitled to do as they did

• but arguably the key thing instead should be whether they genuinely believed no breach

• unclear whether advised as to ‘breach’ specifically

3. Causation of Breach of Contract

   if no contract then fails/no breach

   breach of restrictive covenant counts - Reckless v United Artists

   C must show willing & able perform - Long v Smithson

• if C’s contract void/voidable then no tort - Proform Sports v Proactive Sports

  also not tortious persuade party terminate the contract lawfully

4. Damage:

   Must be more than nominal damage - Rookes v Barnard

   may be inferred if must inflict damage on ordinary course of business - Goldsoll v Goldman - usually lost profits

   BMTA v Salvadori - expenses incurred in investigating D’s organised undermining of C recoverable coz ‘directly attributable’

   The Nodeshda Krupskaya - cost of substituting vessel recovered

   Noxfoldia v NGA - all intended damage & non-remote consequences recoverable

   here, as result of strike, had to make redundancies - redundancy payments recoverable

   Pratt v BMA - suggests injury to feelings recoverable once pecuniary loss shown

   following Lonrho v Fayed (conspiracy) injury to reputation unlikely

   Note: query - does Lumley extend beyond breach of contract to other breaches? e.g statute? Traditionally yes (Clerk & Lindsell)

   OBG Lord Nicholls left this q open - could apply to stat duties, equitable obligations

   Note: measure of liability under Lumley not restricted to quantum of damages for breach of contract (suggested in Said v Butt/Lumley)

5. Defence of justification:

   In limited circs, D may be able argue conduct justified - must have been carrying out a ‘legal, social or moral duty’ - De Jetley Marks v Greenwood, Glamorgan Coal v SWMF

   not just about saying acted in gf but is flexible - Slade J Greig v Insole

   Romer LJ Glamorgan said have regard to nature of contract, position of parties, ground for breach, means of procurement, relation of procurer to breacher & aim of procurer

   Carty says is about D being able to point to an interest outweighing C’s ‘equal or superior right’

   Hill v First Finance - developer struggling with mortgage - made settlement with bank - bank would take over on condition architect replaced - architect sued bank but held justified coz equal/superior right

   what about when your contract entered into later? Gardner says no defence - need temporal priority

   Swiss Bank v Lloyds says justifiable

   Carty: suggests things like protecting health/safety would suffice

   Also seems like public interest/policy can provide defence

   Stott v Gamble film banned - justified the breach between C & theatre

   Brimelow v Casson TU induced manager of theatre break contract with Chorus Girls -...