TORT — Cause of action — Procuring breach of contract — Whether intention to cause loss ingredient of tort
OBG Ltd and others v Allan and others; Douglas and another v Hello! Ltd and others; Mainstream Properties Ltd v Young and others [2007] UKHL 21
HL(E): Lord Nicholls of Birkenhead, Lord Hoffmann, Lord Walker of Gestingthorpe, Baroness Hale of Richmond and Lord Brown of Eaton-under-Heywood: 2 May 2007
Causing loss by unlawful means and inducing breach of contract should be treated as two independent economic torts each with its own conditions for liability.
The House of Lords so held when: (1) dismissing an appeal (Lord Nicholls and Baroness Hale dissenting) by the claimants, OBG Ltd and OBG (Plant and Transport Hire) Ltd, from a decision of the Court of Appeal [2005] QB 762 allowing an appeal by the defendants, Iain John Allan, Michael Francis Stevenson, Raymond International Ltd (formerly Raymond Centriline Ltd) and Penningtons, and dismissing the claimants’ cross-appeal from a decision of Judge Maddox sitting as a judge of the Chancery Division in Manchester on 24 February 2004 giving judgment for the claimants in the sum of £1,854,000 plus interest in their claim against the defendants for wrongful interference with contractual relations, but dismissing the claimants’ claim for conversion; (2) allowing the appeal (Lord Nicholls and Lord Walker dissenting) of Northern & Shell plc, publishers of “OK !” magazine, from a decision of the Court of Appeal [2006] QB 125 allowing an appeal by Hello! Ltd from decisions of Lindsay J on 11 April 2003 and 7 November 2003 awarding the publishers of OK! damages against Hello! Ltd of £1,026,706 for loss of profit from the exploitation of unauthorised photographs of the wedding of Michael Douglas and Catherine Zeta-Jones; (3) dismissing an appeal by the claimant, Mainstream Properties Ltd, from a decision of the Court of Appeal [2005] IRLR 964 dismissing the claimant’s appeal from a decision of Judge Norris QC sitting as a deputy judge of the Chancery Division at Birmingham District Registry on 10 September 2004, dismissing a claim for damages against the sixth defendant, Joseph De Winter, for damages for inducing a breach by the first defendant, Paul Colin Young and the second defendant, Jeffrey William Broad, of their contracts with the claimant.
LORD HOFFMANN said that liability for inducing breach of contract was established by the case of Lumley v Gye (1853) 2 E & B 216, based on the general principle that a person who procured another to commit a wrong incurred liability as an accessory. The important point to bear in mind about Lumley v Gye was that the person procuring the breach of contract was held liable as accessory to the liability of the contracting party. Liability depended upon the contracting party having committed an actionable wrong. The tort of causing loss by unlawful means had a different history and there was no other wrong for which the defendant was liable as accessory. Although the immediate cause of the loss was the decision of a potential customer or trader to submit to a threat and not buy or sell goods, he thereby committed no wrong. The defendant’s liability was primary, for intentionally causing the plaintiff loss by unlawfully interfering with the liberty of others. The Law Lords who formed the majority in Allen v Flood [1898] AC 1 showed a clear recognition that Lumley v Gye and causing loss by unlawful means were separate torts each with its own conditions for liability. However the unified theory was adopted by the Court of Appeal in D C Thomson & Co Ltd v Deakin [1952] Ch 646 by treating procuring breach of contract, the old Lumley v Gye tort, as one species of a more general tort of actionable interference with contractual rights. In his Lordship’s opinion it was time for the unnatural union between the Lumley v Gye tort and the tort of causing loss by unlawful means to be dissolved. They should be restored to the independence which they enjoyed at the time of Allen v Flood. In the Lumley v Gye tort there must be an intention to procure a breach of contract. In the unlawful means tort there must be an intention to cause loss. The ends which must have been intended were different. One might intend to procure a breach of contract without intending to cause loss. Likewise, one might intend to cause loss without intending to procure a breach of contract. In both cases it was necessary to distinguish between ends, means and consequences. One intended to cause loss even though it was the means by which one achieved the end of enriching oneself. On the other hand, one was not liable for loss which was neither a desired end nor a means of attaining it but merely a foreseeable consequence of one’s actions.
On the judge’s finding in Mainstream Properties Ltd v Young, Mr De Winter honestly believed that assisting Mr Young and Mr Broad with the joint venture would not involve them in the commission of breaches of contract. Nor could Mr De Winter be said to have been indifferent to whether there was a breach of contract or not, or made a conscious decision not to inquire in case he discovered a disagreeable truth. He therefore did not intend to cause a breach of contract nor was there any question of his having caused loss by unlawful means.
In OBG Ltd v Allan it was plain and obvious that the requirements for liability under neither the Lumley v Gye tort nor the tort of causing loss by unlawful means were satisfied. There was no breach or non-performance of any contract and therefore no wrong to which accessory liability could attach. And the defendants neither employed unlawful means nor intended to cause OBG any loss. As to the claim for conversion, the whole of the statutory modification of the law of conversion had been on the assumption that it applied only to chattels and not to choses in action. It would be an extraordinary step to extend the old tort of conversion to impose strict liability for pure economic loss on receivers who were appointed and acted in good faith.
In Douglas v Hello! Ltd the judge held that the three well known criteria for liability for breach of confidence were satisfied: (1) the information itself must have the necessary quality of confidence about it; (2) the information must have been imparted in circumstances importing an obligation of confidence; and (3) there must be an unauthorised use of that information to the detriment of the party communicating it. In his Lordship’s the judge was right. The point of which one should never lose sight was that OK! had paid £1m for the benefit of the obligation of confidence imposed upon all those present at the wedding in respect of any photographs of the wedding. Unless there was some conceptual or policy reason why they should not have the benefit of that obligation there was no reason why they were not entitled to enforce it. In his Lordship’s opinion there was no such reason.
LORD NICHOLLS delivered a speech dismissing the appeal in Mainstream Properties v Young, allowing the appeal in OBG Ltd v Allan on the ground that the receivers committed the tort of conversion by their wrongful misappropriation of OBG’s debts and contractual rights, and dismissing the appeal in Douglas v Hello! Ltd.
LORD WALKER delivered a speech dismissing all three appeals.
BARONESS HALE delivered a speech dismissing the appeals in Mainstream Properties Ltd v Young and Douglas v Hello! Ltd and agreeing with Lord Nicholls in allowing the appeal in OBG Ltd v Allan on the ground of conversion.
LORD BROWN delivered a speech agreeing with Lord Hoffmann.
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Appearances: John Randall QC, Alistair Wyvill and Marc Brown (Hammonds, Leeds) for the claimants in the OBG case; Gregory Mitchell QC and Paul Greenwood (Reynolds Porer Chamberlain) for the defendants in the OBG case; Richard Millett QC, Richard Slowe, solicitor, and Paul Stanley (S J Berwin) for Northern & Shell plc; James Price QC and Giles Fernando (M Law) for Hello! Ltd; John Randall QC and John De Waal (Smith Partnership, Derby) for Mainstream Properties Ltd; Gordon Pollock QC and Barry Isaacs (Leigh Davis) for Mr De Winter. |
