Lonrho Plc v Al-Fayed and Others

JurisdictionEngland & Wales
Judgment Date1988
Date1988
Year1988
CourtQueen's Bench Division
[QUEEN'S BENCH DIVISION] LONRHO PLC. v. FAYED AND OTHERS [1987 L. No. 698] 1988 March 28, 29, 30; June 22 Pill J.

Tort - Cause of action - Take-over bid - Misrepresentations to Secretary of State to prevent bid being referred to Monopolies and Mergers Commission - Competitor prevented from bidding for share capital - Whether unlawful interference with competitor's business assets - Whether merchant bankers acting for rival owing duty of care to competitor - Whether statement of claim to be struck out - Conspiracy - Unlawful act - Cause of action - Business rivals making false statements to prevent take-over bid being referred to Monopolies and Mergers Commission - Whether conspiracy to interfere with unsuccessful competitor's business - Whether pleadings disclosing cause of action

The plaintiff, like the first three defendants, wished to acquire control of a company. The plaintiff obtained just under 30 per cent. of the company's share capital and, since a merger situation had arisen within the meaning of section 64 of the Fair Trading Act 1973, the Secretary of State decided that there would be a reference to the Monopolies and Mergers Commission and required the plaintiff to give an undertaking not to acquire shares in the company which would result in it holding 30 per cent. or more of the company's share capital. In March 1984, the first three defendants through the fourth defendant, a holding company, made a bid for the issued share capital of the company which was recommended by the company's board of directors. By 11 March the holding company had acquired more than 50 per cent. of the company's share capital and, on 14 March, the Secretary of State decided not to order a reference of the defendants' bid to the commission and released the plaintiff from its undertaking.

The plaintiff issued a writ against the defendants and by its statement of claim alleged that the defendants, by false statements about their financial capacity to acquire the share capital and develop the company's business, had persuaded both the board of directors to recommend their bid and the Secretary of State not to refer the bid to the commission; that by such action the defendants had tortiously interfered with the plaintiff's right to bid for the shares, alternatively, had conspired against the plaintiff. The plaintiff also alleged negligence against the sixth defendants, merchant bankers acting for the first four defendants. The defendants unsuccessfully applied to the master for an order striking out the plaintiff's statement of claim on the ground that it disclosed no cause of action.

On appeal by the defendants: —

Held, allowing the appeal, (1) that, although there was a tort of interfering with a business by unlawful means, there had to be a legal right capable of infringement; that the freedom or right to make a bid was a general right open to all and not a business asset which the law protected even if the circumstances disclosed that the competitors had made false statements about themselves to third persons; and that, in any event, there was an insufficient nexus between the alleged misrepresentations and the damage alleged to have been suffered by the plaintiff's business (post, p. 366F–H).

Crofter Hand Woven Harris Tweed Co. Ltd. v. Veitch [1942] A.C. 435, H.L.(Sc.) and Hadmor Productions Ltd. v. Hamilton [1983] 1 A.C. 191, H.L.(E.) applied.

National Phonograph Co. Ltd. v. Edison-Bell Consolidated Phonograph Co. Ltd. [1908] Ch. 335, C.A. distinguished.

Dictum of Lord Watson in Allen v. Flood [1898] A.C. 1, 96, H.L.(E.) considered.

(2) That, since the defendants' alleged actions were not tortious if committed by an individual, there could be no basis for an allegation of conspiracy unless their actions were directed against the plaintiff; that the predominant purpose of the defendants' actions was to gain control of the company and not to injure the plaintiff (post, p. 365G).

Lonrho Ltd. v. Shell Petroleum Co. Ltd. (No. 2) [1982] A.C. 173, H.L.(E.) and Metall und Rohstoff AG v. Donaldson Lufkin & Jenrette Inc. [1988] 3 W.L.R. 548 applied.

(3) That for the plaintiff to have a cause of action against the merchant bankers, it had to establish an assumption of responsibility by them towards the plaintiff; that there was nothing in the pleadings that disclosed that the merchant bankers had assumed such a responsibility and, in any event, there was no relationship of proximity between the plaintiff and the bankers; and that since the statement of claim failed to disclose a cause of action, it would be struck out and the action dismissed (post, p. 369A–B).

The following cases are referred to in the judgment:

Allen v. Flood [1898] A.C. 1, H.L.(E.)

Allied Arab Bank Ltd. v. Hajjar (No. 2) [1988] Q.B. 944; [1988] 3 W.L.R. 533; [1988] 3 All E.R. 103

Business Computers International Ltd. v. Registrar of Companies [1988] Ch. 229; [1987] 3 W.L.R. 1134; [1987] 3 All E.R. 465

Crofter Hand Woven Harris Tweed Co. Ltd. v. Veitch [1942] A.C. 435; [1942] 1 All E.R. 142, H.L.(Sc.)

D. v. W. (unreported), 29 March 1988, Sir Nicolas Browne-Wilkinson V.-C.

Dorset Yacht Co. Ltd. v. Home Office [1970] A.C. 1004; [1970] 2 W.L.R. 1140; [1970] 2 All E.R. 294, H.L.(E.)

Greater Nottingham Co-operative Society Ltd. v. Cementation Piling and Foundations Ltd. [1989] 1 Q.B. 71; [1988] 3 W.L.R. 396; [1988] 2 All E.R. 971, C.A.

Hadmor Productions Ltd. v. Hamilton [1983] 1 A.C. 191; [1981] 3 W.L.R. 139; [1981] I.C.R. 690; [1981] 2 All E.R. 724, C.A.; [1983] 1 A.C. 191; [1982] 2 W.L.R. 322; [1982] I.C.R. 114; [1982] 1 All E.R. 1042, H.L.(E.)

Island Records Ltd., Ex parte [1978] Ch. 122; [1978] 3 W.L.R. 23; [1978] 3 All E.R. 824, C.A.

Jasperson v. Dominion Tobacco Co. [1923] A.C. 709, P.C.

Lonrho Ltd. v. Shell Petroleum Co. Ltd. (No. 2) [1982] A.C. 173; [1981] 3 W.L.R. 33; [1981] 2 All E.R. 456, H.L.(E.)

Lumley v. Gye (1853) 2 E. & B. 216

Metall und Rohstoff AG v. Donaldson Lufkin & Jenrette Inc. [1988] 3 W.L.R. 548; [1988] 3 All E.R. 116

Mogul Steamship Co. Ltd. v. McGregor, Gow & Co. (1889) 23 Q.B.D. 598, CA

National Phonograph Co. Ltd. v. Edison-Bell Consolidated Phonograph Co. Ltd. [1908] 1 Ch. 335, C.A.

Quinn v. Leathem [1901] A.C. 495, HL(I)

Peabody Donation Fund (Governors of) v. Sir Lindsay Parkinson & Co. Ltd. [1985] A.C. 210; [1984] 3 W.L.R. 953; [1984] 3 All E.R. 529, H.L.(E.)

R.C.A. Corporation v. Pollard [1983] Ch. 135; [1982] 3 W.L.R. 1007; [1982] 3 All E.R. 771, C.A.

Simaan General Contracting Co. v. Pilkington Glass Ltd. (No. 2) [1988] Q.B. 758; [1988] 2 W.L.R. 761; [1988] 1 All E.R. 791, C.A.

Takaro Properties Ltd. v. Rowling [1986] 1 N.Z.L.R. 22

Williams and Humbert Ltd. v. W. & H. Trade Marks (Jersey) Ltd. [1986] A.C. 368; [1986] 2 W.L.R. 24; [1986] 1 All E.R. 129, H.L.(E.)

Yuen Kun Yeu v. Attorney-General of Hong Kong [1988] A.C. 175; [1987] 3 W.L.R. 776; [1987] 2 All E.R. 705, P.C.

The following additional cases, supplied by the courtesy of counsel, were cited in argument:

Acrow (Automation) Ltd. v. Rex Chainbelt Inc. [1971] 1 W.L.R. 1676; [1971] 3 All E.R. 1175, C.A.

Al-Kandari v. J. R. Brown & Co. [1988] Q.B. 665; [1988] 2 W.L.R. 671; [1988] 1 All E.R. 833, C.A.

C.B.S. Songs Ltd. v. Amstrad Consumer Electronics Plc. [1988] Ch. 61; [1987] 3 W.L.R. 144; [1987] 3 All E.R. 151, C.A.

Curran v. Northern Ireland Co-ownership Housing Association Ltd. [1987] A.C. 718; [1987] 2 W.L.R. 1043; [1987] 2 All E.R. 13, HL(NI)

Midland Bank Trust Co. Ltd. v. Green (No. 3) [1982] Ch. 529; [1982] 2 W.L.R. 1; [1981] 3 All E.R. 744, C.A.

Rookes v. Barnard [1964] A.C. 1129; [1964] 2 W.L.R. 269; [1964] 1 All E.R. 367, H.L.(E.)

Stratford (J. T.) & Son Ltd. v. Lindley [1965] A.C. 269; [1964] 3 W.L.R. 541; [1964] 3 All E.R. 102, H.L.(E.)

Torquay Hotel Co. Ltd. v. Cousins [1969] 2 Ch. 106; [1969] 2 W.L.R. 289; [1969] 1 All E.R. 522, C.A.

INTERLOCUTORY APPEAL from Master Topley.

The plaintiff, Lonrho Plc., issued a writ against the defendants of whom the first three were the brothers, Mohamed Fayed, Salah Fayed and Ali Fayed; the fourth defendant was a company now known as the House of Fraser Holdings Plc. and the fifth defendant was a director of the sixth defendants, the merchant bankers Kleinwort Benson Ltd. By its statement of claim the plaintiff alleged that by fraudulent misrepresentations as to the financial ability of the first three defendants to purchase the share capital of the House of Fraser Plc. and to invest capital in that company, they had persuaded the board of directors of the House of Fraser Plc. to accept their bid to buy the share capital in the company and persuaded the Secretary of State for Trade and Industry not to refer the bid to the Monopolies and Mergers Commission thereby tortiously depriving the plaintiff of his right to bid for the company's share capital; alternatively, that the defendants had conspired to injure the plaintiff; and against the sixth defendants that they were in breach of the duty of care they owed to the plaintiff as bankers acting for the first four defendants.

On 30 July 1987 Master Topley dismissed an application by all six defendants to strike out the statement of claim as disclosing no cause of action. The defendants' appeal against that decision was heard in chambers and judgment was given in chambers in Stafford. The report is published with the leave of the judge.

The facts are stated in the judgment.

Andrew Morritt Q.C., David Oliver QC and Alastair Walton for the first four defendants.

Anthony Grabiner QC and Nicolas Bratza for the fifth and sixth defendants.

John Beveridge QC and Edward Bannister for the plaintiff.

Cur. adv. vult.

22 June. PILL J. read the following judgment. This is an appeal by all six defendants from a decision of Master Topley, given on 30 July 1987, whereby he refused to strike out the statement of claim. The defendants claim that the statement of claim discloses no reasonable cause of action. The plaintiff claims that it had a cause of action: first, under an...

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