NOTES OF CASES
| Published date | 01 May 1970 |
| DOI | http://doi.org/10.1111/j.1468-2230.1970.tb01276.x |
| Date | 01 May 1970 |
NOTES
OF
CASES
TORTS OUT
OF
CONTRACTS:
TRANSATLANTIC
WARNINGS
ENGLISH law now arguably includes a novel tort liability,
inter-
jerence
with contract which is
‘‘
direct
’’
and
“
deliberate.” The
novelty is twofold. The interference neither induced a breach of
the contract
nor
used any means in itself unlawful.
It
is
mere
interference, including the case where
‘‘
a third person
prevents
or
hinders
one party from performing
his
contract.”
In
so
holding
in
1969
Lord Denning
M.R.
said:
‘‘
The time has come when the principle
[of
Lumley
v.
Gye
‘1
should be further extended to cover
‘
deliberate and direct
interference with the execution of a contract without that
causing any breach
’
. . .
the
common
law would be seriously
deficient
if
it
did not condemn such interference.”
Since any
such
liabilities for hindering performance of contract
need careful consideration, a glance at recent experience in North
America is timely.
Canadian tort liabilities have rested
(in
common law jurisdic-
tions)
on
principles drawn from the English.
In
Einhorn
v.
West-
mount Znvestments Ltd.,B
the opportunity to follow the new English
wave and make torts out of hindered contracts was eagerly seized.
Three defendants, the Belzbergs, controlled certain companies,
including
W.
Ltd. Einhorn had a contract with
W.
Ltd.
under
which he was entitled to payments. The Behbergs transferred to a
newly incorporated company, also under their control, .the sole
valuable asset
of
W.
Ltd. Einhorn’s administratrix sued, alleging
(inter
ah)
a wrongful procurement
of
breach of,
or
interference
with, the contract.
The
Belzbergs replied that the pleaditlgs dis-
closed
in that respect
no
cause of action against them. They failed,
the
court
holding
inter
alia
that
a
cause of action could subsist
because the facts,
if
true, could give rise to liability for actionable
interference with the contract.
Even where a corporation acts in breach of contract, the
directors causing it
so
to act have not normally been made liable
for the tort of inducing breach
if
they acted bona fide within their
authority for the company.*
A
similar principle applies in most
United States jurisdictions
if
the officers
‘‘
acted in good faith to
serve the company,” liability arising only if they procured the
1
(1863)
2
E.
&
B.
216.
2
Torquay
Hotel
Co.
Ltd.
v.
Cou8in.q
r19691
2
Ch.
106. 138.
Winn
L..J.
appare6tIy agreed
obiter
at p.
147.
1
K.B.
419.
SeeLA.
5:
Grabiner (1969)
32 M.L.R.
435.
8
(1969)
6
D.L.R.
(M)
71
(Saskatchewan
Q.B.;
Disbery
J.).
4
Said
v.
Butt
[192Q] 3
E.B.
497;
Scammell
d
Nephew
Ltd.
v.
Hurley
[1929]
809
310
TEE
MODERN
LAW
BEVIEW
VOL
8a
corporate action
“
either maliciously
or
for their
own
personal
gain.”
In
the Canadian decision these principles were swept
aside almost peremptorily by Disbery
J.,
who relied
upon
the
principles enunciated by Lord Denning
M.R.
He added that
if
Saskatchewan law had not yet extended the older principle to catch
“
deliberate and direct interference
’’
with contract,
“
I
so
extend
the application of the principle.”
6
He took the new principle to establish that a
third
party who
renders
“
performance impossible
”
will
be liable for interference
:
‘‘
Where
as
here, the performance by one of the contracting
parties consists
in
making a money payment,
I
am unable to
think of a more effective method of rendering performance
impossible than that of emptying the till by transferring the
contracting party’s assets to other persons.’’
No
clearer example could be given of the need for caution in
accepting the new tort. The decision itself may be just (and could
have
been
achieved by other arguments)
;
but what
of
the principle
?
Even
if,
as the present writer has suggested, the new principle
should be restricted at most to interference inducing frustration
or
impossibility of contractual performance,8 the Canadian case shows
how problematical even that extension might prove
to
be in com-
mercial transactions. Just when and how far can
a
party take
deliberate commercial action for his
own
ends which be knows will
make
it
more difficult, or perhaps impossible, for a rival trader
to
pay
off
a debt to
a
creditor by
“
emptying his till
’’
of money
?
In
a
conglomerate
group
of
companies, when will the controllers
be liable for hindering the performance of contracts by one company
J
Cary,
Cases
and
Materiala
on
Corporations
(4th ed.,
1969),
p.
866,
citing
Slavcnbsrg
Soelling Corpn.
v.
Assomu~l
d?
Co.
Inc.,
Mi%.
(ad)
ma;
213
N.Y.8.
(M)
308
(1961):
corporation assigned accounts to plsintiff and
to
another corporation; officer linble who dishonestly induced this breach of
con-
tract.
See
too
Warnpier
v.
Palmerton
439
P.
(2d)
601
(S.C.
Oreg.)
(1968):
officers acting bona fide for the corporate benefit not liable for inducing
a
bmh
by
corporation even though they had
a
personal
interest 8nd
would
also
benefit from the breach. But honest belief
has
been held
to
be
insufficient
in the bbsence of proven prospective benefit to the corporation:
EhrIich
V.
Alpcr,
145
N.Y.S.
(2d)
263,
254
(S.C.
1955);
8ff’d.
149
NtY.S.
(a)
669
(1966).
He
continued that the
murt
would
not
be frnetrated by
persons
who carry out intentional
torthus
81%:
throyh the
medium
of
8
puppet corporation whose every action they control
. .
.
cloth-
ing themselves in
a
corporate veil of their
own
spinning.” His determination
to rend
the
corporate
veil suggests that he thought the defendants might not
have pursued bona fide the
purpose
of
benefiting the corporation
in
disposing
of
ite
only
valuable
asset.
The amended pleadings alleged that the disposition
wan
a
fraudulent preference and improper
as
being made
mala
jde
without
consideration. These factors were not discussed
in
regard to the pereonal
claim egainst the Belzbergs.
f)
is
for
consideration whether they might
be considered
as
an
“
unlawful means.
7
Zbid.
at p.
76.
It bears repeating that this statement describes acts that fall
short
of
any extraneous wrongdoing, including
any
fraudulent preference
or
the
like.
8
Clerk
and Lindsell
07L
Tofts
(13th
ed.
1969),
p.
386.
6
(1969) 6
D.L.R.
(3d)
at p.,,75
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