INTERFERENCE WITH CONTRACTUAL RELATIONS AND EQUITABLE DOCTRINES*
| Author | Dr. Nili Cohen‐Grabelsky |
| Date | 01 May 1982 |
| Published date | 01 May 1982 |
| DOI | http://doi.org/10.1111/j.1468-2230.1982.tb02479.x |
THE
MODERN
LAW
REVIEW
Volume
45
May
1982
No.
3
INTERFERENCE
WITH
CONTRACTUAL
RELATIONS AND EQUITABLE DOCTRINES
*
I.
INTRODUCTION
AN
owner
of
an asset, whom we shall call
B,
undertakes towards
A
to effect
or
to refrain from effecting
a
transaction in his asset, but
later enters into
a
conflicting transaction with
C.
Can
A
assert any
rights against
C?
English law has been developing along three main streams with
regard to this problem
:
the equitable doctrine, according to which
A,
whose right is
capable
of
specific enforcement, becomes an equitable owner
and thus his right prevails over that of subsequent transferees
unless they
are
purchasers in good faith;
the shaky doctrine
of
restrictive covenants in movables or
immovables which in certain situations subjects C,
a
stranger
to the contract, to
A’s
earlier right;
the tort doctrine according to which knowingly interfering
with contractual right without justification constitutes an
actionable wrong.
The interrelationship and partial overlap between those various
streams has been discerned more than 0nce.l The decision
of
Swiss
Bank
Corporation
v.
Lloyds
Bank
Ltd.
&
Othersa
highlights once
again this doctrinal juxtaposition. The facts can be summarised
as
follows:
A
agreed to lend
a
sum of money in Swiss francs to
B,
in
*
Some remarks following
Swiss Bank Corporation
v.
Lloyds Bank Lid.
[I9791
3
W.L.R.
201; [,1980] 3
W.L.R.
457; I19811
2
W.L.R.
893.
.-
1
Port Line Ltd.
-v.
Ben Line Steamers Lid.
[1958]
2
Q.B.
146, 165;
G.
H.
Treitel,
‘‘
Limited Interests
in
Chattels
”
(1958) 21
M.L.R.
433;
H.
Lauterpacht.
“Contracts to Break a Contract” (1936) 52
L.Q.R.
494, 517
ef seq.;
2.
Chafee,
“Equitable Servitudes
on
Chattels” (1927-28) 41 Harv.L.R. 945, 969
er seg.
See
also
G.
H.
Treitel,
The LW
of
Contract
(5th ed., 19791, pp. 477-481; Cheshire
and Fifoot’s
LW
of
Contract
(9th ed., 1976. ed.
M.
P.
Furmston). p. 450; Crossly
Vaine’s
Personal Praperty
(5th ed., 1973. ed.
E.
L. G. Tayler: and
N.
E.
Palmer),
pp. 145-156.
[Also
Clerk and Lindsell on Torrs
(15th ed. 1982), Chap.
15.-Gen.Ed.]
[11979] 3
W.L.R.
201 reversed in {I9801
3
W.L.R.
457. The House
of
Lords
affirmed the Court
of
Appeal’s decision
in
I19811
2
W.L.R. 893.
241
VOL.
45
(3)
1
242
THE
MODERN
LAW
REVIEW
[Vol.
45
order to enable B to acquire certain securities. One of the terms
of
the loan agreement was that
B
should comply with the Bank
of
England's conditions attached to exchange control consents. Those
conditions, which became part
of
the agreement between A and
B.
included,
inter
uliu,
the following terms:
(1)
the loan
is
to be used
only to acquire the said securities;
(2)
the securities should be held
in
a
separate account by
an
authorised depositary;
(3)
the securities
or their proceeds will serve
as
means for repaying the loan and the
interest. The money was duly lent, and the securities were bought
and deposited according
to
the terms.
Later
B
encountered financial difficulties and requested
a
loan
from
C.
This loan was advanced and, in addition,
B,
by virtue of
his contract with
C,
charged the above securities in favour of
C.
At that time, although
C
knew of the existence of the relationship
between
A
and
B,
C
did not know of the additional terms attached
to the loan agreement by the Bank of England. The exact terms of
that agreement only came to the knowledge of
C
at
a
later stage.
At this stage,
B,
in co-operation with
C,
sold the securities without
the knowledge or consent of
A
and credited the proceeds to
C's
account.
A
claimed,
inter
uliu,
that he was entitled to this sum.3 The ques-
tion that arises is: who is to gain priority, A, who provided the
financial means for acquiring the securities-the property in ques-
tion-which were to serve as a repayment fund, or
C,
a lender who
is claiming for a charge he executed bona fide?
Browne-Wilkinson
J.
considered two arguments
:
The property
interest argument involving equitable doctrines and the
De
Muttos
v.
Gibson
argument relating both to the tortious liability of inter-
ference with contractual relations and the principle concerning
restrictive covenants in movables and immovables.
Each doctrine led the court to a different conclusion. The pro-
perty interest argument granted priority to A. On the other hand,
the
De
Muttos
v.
Gibson
argument, which was based mainly on the
operation of the tort of interfering with contractual relations could
not as such establish
A's
right to the securities and their proceeds
in the light of the factual situation.6
3
The securities were initially sold for
U.S.
dollars and later
on
for sterling.
Due
to
the devaluation
of
the sterling,
A
also claims that he suffered damages. The
question
of
damage arose only after the court had held that C acted tortiously.
This aspect was not dealt with in the Court
of
Appeal
(I19801
3 W.L.R. at p.
470).
as
it rejected
C's
tortious liability,
nor
in
the
House
of
Lords which did
not deal at all with tort doctrines. Seo
infm,
text accompanying notes
77-79.
4
(1858)
45
E.R.
108.
5
Yet, Browne-Wilkinson
J.
decided that the second transaction between
B
and
C
establishing the charge, was void
for
illegality. C could not obtain any right there-
under and his co-operation with B in selling the securities was
an
unjustified inter-
ference with the contractual rights
of
A
both as to the injunction and damages claim
(C1979)
3
W.L.R. at pp. 228-231). The Court
of
Appeal
also
differed on this point.
The significance
of
the illegality argument was as
to
the question, whether the
securities that comprised B's property, were divisible amongst his insecured creditora
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