 House of Lords |
Session 2006 - 07 Publications on the Internet Judgments PDF Print Version 
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| Judgments -
OBG Limited and others (Appellants) v. Allan and others (Respondents)Douglas and another and others (Appellants) v. Hello! Limited and others (Respondents)Mainstream Properties Limited (Appellants) v. Young and others and another (Respondents)
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HOUSE OF LORDSOPINIONS OF THE LORDS OF APPEAL FOR JUDGMENTIN THE CAUSEOBG Limited and others (Appellants) v. Allan and others (Respondents)Douglas and another and others (Appellants) v. Hello! Limited and others (Respondents)Mainstream Properties Limited (Appellants) v. Young and others and another (Respondents)[2007] UKHL 21LORD HOFFMANN My Lords, The three appeals 1. These three appeals are principally concerned with claims in tort for economic loss caused by intentional acts (a) In OBG Ltd v Allan [2005] QB 762 the defendants were receivers purportedly appointed under a floating charge which is admitted to have been invalid. Acting in good faith, they took control of the claimant company's assets and undertaking. The claimant says that this was not only a trespass to its land and a conversion of its chattels but also the tort of unlawful interference with its contractual relations. It claims that the defendants are liable in damages for the value of the assets and undertaking, including the value of the contractual claims, as at the date of their appointment. Alternatively, it says the defendants are liable for the same damages in conversion. (b) In Douglas v Hello! Ltd the magazine OK! [2006] QB 125 contracted for the exclusive right to publish photographs of a celebrity wedding at which all other photography would be forbidden. The rival magazine Hello! published photographs which it knew to have been surreptitiously taken by an unauthorised photographer pretending to be a waiter or guest. OK! says that this was interference by unlawful means with its contractual or business relations or a breach of its equitable right to confidentiality in photographic images of the wedding. (c) In Mainstream Properties Ltd v Young [2005] IRLR 964 two employees of a property company, in breach of their contracts, diverted a development opportunity to a joint venture in which they were interested. The defendant, knowing of their duties but wrongly thinking that they would not be in breach, facilitated the acquisition by providing finance. The company says that he is liable for the tort of wrongfully inducing breach of contract. 2. It will therefore be seen that the claimants in these three appeals rely upon at least five different wrongs, or alleged wrongs, which they say provide them with causes of action for economic loss: inducing breach of contract (Mainstream), causing loss by unlawful means (Hello!) interference with contractual relations (OBG); breach of confidence (Hello!) and conversion (OBG). I shall put aside the last two until I come to deal with the facts of the cases in which they arise. But I propose to start with some general observations on the first three torts. Inducing breach of contract 3. Liability for inducing breach of contract was established by the famous case of Lumley v Gye (1853) 2 E & B 216. The court based its decision on the general principle that a person who procures another to commit a wrong incurs liability as an accessory. As Erle J put it (at p 232):
4. For a court in 1853, the difficulty about applying this principle to procuring a breach of contract was that the appropriate action for the wrong committed by the contracting party lay in contract but no such action would lie against the procurer. Only a party to the contract could be sued for breach of contract. The answer, said the court, was to allow the procurer to be sued in tort, by an action on the case. There was a precedent for this mixing and matching of the forms of action in the old action on the case for enticing away someone else's servant: see Gareth Jones "Per Quod Servitium Amisit" (1958) 74 LQR 39. Some lawyers regarded that action as a quaint anomaly, but the court in Lumley v Gye treated it as a remedy of general application. 5. The forms of action no longer trouble us. But the important point to bear in mind about Lumley v Gye is 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. Wightman J made this clear when he said (at p 238):
Causing loss by unlawful means 6. The tort of causing loss by unlawful means has a different history. It starts with cases like Garret v Taylor (1620) Cro Jac 567, in which the defendant was held liable because he drove away customers of Headington Quarry by threatening them with mayhem and vexatious suits. Likewise, in Tarleton v M'Gawley (1790) 1 Peake NPC 270 Lord Kenyon held the master of the Othello, anchored off the coast of West Africa, liable in tort for depriving a rival British ship of trade by the expedient of using his cannon to drive away a canoe which was approaching from the shore. In such cases, there is no other wrong for which the defendant is liable as accessory. Although the immediate cause of the loss is the decision of the potential customer or trader to submit to the threat and not buy stones or sell palm oil, he thereby commits no wrong. The defendant's liability is primary, for intentionally causing the plaintiff loss by unlawfully interfering with the liberty of others. 7. These old cases were examined at some length by the House of Lords in Allen v Flood [1898] AC 1 and their general principle approved. Because they all involved the use of unlawful threats to intimidate potential customers, Salmond 1st ed (1907) classified them under the heading of "Intimidation" and the existence of a tort of this name was confirmed by the House of Lords in Rookes v Barnard [1964] AC 1129. But an interference with the liberty of others by unlawful means does not require threats. If, for example, the master of the Othello in Tarleton v M'Gawley had deprived the plaintiff of trade by simply sinking the approaching vessel with its cargo of palm oil, it is unlikely that Lord Kenyon would have regarded this as making any difference. Salmond's tort of intimidation is therefore only one variant of a broader tort, usually called for short "causing loss by unlawful means", which was recognised by Lord Reid in J T Stratford & Son Ltd v Lindley [1965] AC 269, 324:
8. The tort of causing loss by unlawful means differs from the Lumley v Gye principle, as originally formulated, in at least four respects. First, unlawful means is a tort of primary liability, not requiring a wrongful act by anyone else, while Lumley v Gye created accessory liability, dependent upon the primary wrongful act of the contracting party. Secondly, unlawful means requires the use of means which are unlawful under some other rule ("independently unlawful") whereas liability under Lumley v Gye 2 E & B 216 requires only the degree of participation in the breach of contract which satisfies the general requirements of accessory liability for the wrongful act of another person: for the relevant principles see CBS Songs Ltd v Amstrad Consumer Electronics plc [1988] AC 1013 and Unilever v Chefaro [1994] FSR 135. Thirdly, liability for unlawful means does not depend upon the existence of contractual relations. It is sufficient that the intended consequence of the wrongful act is damage in any form; for example, to the claimant's economic expectations. If the African canoeists had been delivering palm oil under a concluded contract of which notice had been given to the master of the Othello, Lord Kenyon would no doubt have considered that an a fortiori reason for granting relief but not as making a difference of principle. Under Lumley v Gye, on the other hand, the breach of contract is of the essence. If there is no primary liability, there can be no accessory liability. Fourthly, although both are described as torts of intention (the pleader in Lumley v Gye used the word 'maliciously', but the court construed this as meaning only that the defendant intended to procure a breach of contract), the results which the defendant must have intended are different. In unlawful means the defendant must have intended to cause damage to the claimant (although usually this will be, as in Tarleton v M'Gawley 1 Peake NPC 270, a means of enhancing his own economic position). Because damage to economic expectations is sufficient to found a claim, there need not have been any intention to cause a breach of contract or interfere with contractual rights. Under Lumley v Gye, on the other hand, an intention to cause a breach of contract is both necessary and sufficient. Necessary, because this is essential for liability as accessory to the breach. Sufficient, because the fact that the defendant did not intend to cause damage, or even thought that the breach of contract would make the claimant better off, is irrelevant. In South Wales Miners' Federation v Glamorgan Coal Co Ltd [1905] AC 239 the miners' union said that their intention in calling a strike (inducing miners to break their contracts of employment) was, OPEC-like, to restrict production of coal and thereby raise its price. So far from wishing to cause the mine owners loss, they intended to make both owners and miners better off. The House of Lords said that this made no difference. It was sufficient that the union intended the employment contracts to be broken. It was no defence, as Lord Macnaghten put it (at p 246), that "if the masters had only known their own interest they would have welcomed the interference of the federation". Allen v Flood: the torts kept separate 9. The Law Lords who formed the majority in Allen v Flood [1898] AC 1 showed a clear recognition that Lumley v Gye 2 E & B 216 and causing loss by unlawful means are separate torts, each with its own conditions for liability. The difficulty for the plaintiffs in Allen v Flood was that, although the jury found that the defendants had acted "maliciously" in procuring the shipyard not to employ them, the defendants had neither used unlawful means nor procured any breach of contract. In the Court of Appeal the plaintiffs had argued successfully that the essence of Lumley v Gye was that the defendant had acted maliciously. A breach of contract was not essential. But the majority in the House of Lords said that liability had been as accessory to the breach of contract. Lord Watson quoted from the judgments in the Court of Queen's Bench and said (at p 106) that they embodied "an intelligible and a salutary principle":
10. Likewise Lord Herschell said (at p 123) that he was satisfied that —
11. Lord Macnaghten reserved his opinion on whether Lumley v Gye had been rightly decided but there can be no doubt about what principle he thought it laid down (see pp 151-152):
12. When the case was argued before the House of Lords (see Lord Herschell at p. 132), the weight of the plaintiffs' argument was shifted to the Garret v Taylor Cro Jac 567 and Tarleton v M'Gawley 1 Peake NPC 270 line of authority, which were said to support the proposition that any unjustified interference with trade or employment was actionable. But the majority said that it was essential to liability in those cases that the defendant had injured the plaintiff by using unlawful means against a third party. Lord Watson (at p. 104) described them as "cases in which an act detrimental to others, but affording no remedy against the immediate actor, had been procured by illegal means." Lord Herschell said (at p 137):
13. Thus the facts of Allen v Flood did not fall within Lumley v Gye because no breach of contract or other unlawful act had been procured and did not fall within the unlawful means tort because no unlawful means had been used. The majority did not accept that there was any other basis for liability. In particular, the fact that the defendant deliberately caused damage "maliciously" in the sense of having a bad or improper motive was rejected as a ground for imposing liability. As Lord Watson (whose, views, said Lord Macnaghten in Quinn v Leathem [1901] AC 495, 509 "represent the views of the majority better far than any other single judgment delivered in the case") summed up at p 96:
(Like Lord Macnaghten in Quinn v Leathem (at p 510), I think that the reference to Lumley v Gye in support of the second cause of action is a slip - "a rare occurrence in a judgment of Lord Watson's" - because it obviously applies to the first cause of action). 14. Some writers regret the failure of English law to accept bad motive as a ground for liability, as it is in the United States and Germany: see for example Dyson Heydon, Economic Torts 2nd ed (1978) p 28. But I agree with Tony Weir's opinion, forcibly expressed in his Clarendon Law Lectures on Economic Torts (OUP 1997) that we are better off without it. It seems to have created a good deal of uncertainty in the countries which have adopted such a principle. Furthermore, the rarity of actions for conspiracy (in which a bad motive can, exceptionally, found liability) suggests that it would not have made much practical difference. Quinn v Leathem: the seeds of confusion 15. Quinn v Leathem [1901] AC 495 is nowadays regarded as a case on lawful means conspiracy, which established that an improper motive can anomalously found a cause of action which, under the principle in Allen v Flood, would not lie against an individual. But this was by no means clear at the time and the case contains some discussion of both Lumley v Gye and causing loss by unlawful means. Lord Macnaghten, in a well-known passage (at p. 510), considered the basis of Lumley v Gye:
16. I rather doubt whether Lord Macnaghten's view of what Lumley v Gye decided had altered since his opinion in Allen v Flood three years earlier. But the Quinn v Leathem formulation is open to the construction that there can be liability for "interfering" with contractual relations without being accessory to any breach of contract. Of course if this is done by unlawful means with the intention of causing damage, it will fall within the unlawful means tort. But Lord Macnaghten made no mention of unlawful means and in any case, under that tort, interference with contractual relations is not a necessary part of the cause of action. Any intentionally inflicted damage will do. The dictum was therefore capable of giving rise to confusion. 17. Lord Lindley went even further and said, at p 535, that the Lumley v Gye tort was an example of causing loss by unlawful means:
18. There are two objections to this analysis. First, it reflects neither the reasoning of the court in Lumley v Gye nor the analysis of the case in Allen v Flood. Secondly, to say that the defendant in Lumley v Gye did a wrongful act is circular. It was only wrongful because the court in Lumley v Gye said that inducing a breach of contract was tortious. It is circular then to say that it was tortious because it involved a wrongful act. 19. One reason, I think, why it seemed to Lord Lindley and others that Lumley v Gye and the unlawful means tort were illustrations of the same principle was that quite often, particularly in cases of torts committed in the course of commercial competition or industrial disputes, both could be regarded as unlawful ways of carrying on the competition or the dispute. That was how it appeared to Bowen LJ in Mogul Steamship Co Ltd v McGregor, Gow & Co (1889) 23 QBD 598, 614:
20. These are, it is true, all instances of unlawful ways of causing economic damage. But that does not mean (and I do not think that Bowen LJ meant) that there is a single principle which makes them all unlawful. Disturbing the wild fowl may have been unlawful because it constituted a nuisance (compare Hollywood Silver Fox Farm Ltd v Emmett [1936] 2 KB 468); the people who hissed in the theatre may have been liable for malicious Quinn v Leathem conspiracy; Lumley v Gye was accessory liability and Tarleton v. M'Gawley was true primary unlawful means liability. 21. Furthermore, there is no reason why the same facts should not give rise to both accessory liability under Lumley v Gye and primary liability for using unlawful means. If A, intending to cause loss to B, threatens C with assault unless he breaks his contract with B, he is liable as accessory to C's breach of contract under Lumley v Gye and he commits the tort of causing loss to B by unlawful means. The areas of liability under the two torts may be intersecting circles which cover common ground. This often happened in 20th century industrial disputes, where, for example, a union would use unlawful means (inducing members to break their contracts of employment) to put pressure upon the employer to break his contract with someone else who was the union's real target. Leaving aside statutory defences, this would make the union liable both under Lumley v Gye as accessory to the employer's breach of contract and for causing loss to the target by unlawful means. That does not make Lumley v Gye and unlawful means the same tort. But the close proximity of the circumstances in which they could be committed, particularly in industrial disputes, may explain why they were often thought to be manifestations of the same principle. Muddle: GWK Ltd v Dunlop Rubber Co Ltd 22. Muddle set in with the influential case of GWK Ltd v Dunlop Rubber Co Ltd (1926) 42 TLR 376. The GWK company made motor cars and the ARM company made tyres. GWK contracted to fit all their new cars with ARM tyres and to show them with ARM tyres at trade exhibitions. On the night before a motor show in Glasgow, Dunlop employees removed the ARM tyres from two GWK cars on the exhibition and substituted Dunlop tyres. The evidence showed that Dunlop knew of ARM's contractual right to have their tyres displayed. | ||||||||||||||||
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