OBG Ltd and another v Allan and Others

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLORD HOFFMANN,LORD NICHOLLS OF BIRKENHEAD,LORD WALKER OF GESTINGTHORPE,BARONESS HALE OF RICHMOND,LORD BROWN OF EATON-UNDER-HEYWOOD
Judgment Date02 May 2007
Neutral Citation[2007] UKHL 21

[2007] UKHL 21

HOUSE OF LORDS

Appellate Committee

Lord Hoffmann

Lord Nicholls of Birkenhead

Lord Walker of Gestingthorpe

Baroness Hale of Richmond

Lord Brown of Eaton-under-Heywood

OBG Limited

and others

(Appellants)
and
Allan

and others

(Respondents)
Douglas

and another and others

(Appellants)
and
Hello! Limited

and others

(Respondents)
Mainstream Properties Limited
(Appellants)
and
Young

and others and another

(Respondents)

Appellants:

OBG Ltd and others v. Allan and others

John Randall QC

Alistair Wyvill

Marc Brown

(Instructed by Hammonds)

Douglas and another and others v. Hello! Ltd

Richard Millett QC

Richard Slowe

Paul Stanley

(Instructed by S J Berwin LLP)

Mainstream Properties Ltd v Young and others and another

John Randall QC

John de Waal

(Instructed by The Smith Partnership)

Respondents:

OBG v. Allan

Gregory Mitchell QC

Paul Greenwood

(Instructed by Reynolds Porter Chamberlain LLP)

Douglas and another and others v. Hello! Ltd

James Price QC

Giles Fernando

(Instructed by M Law)

Mainstream Properties Ltd v. Young and others and another

Gordon Pollock QC

Barry Isaacs

(Instructed by Leigh Davis)

LORD 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):

"It is clear that the procurement of the violation of a right is a cause of action in all instances where the violation is an actionable wrong, as in violations of a right to property, whether real or personal, or to personal security: he who procures the wrong is a joint wrongdoer, and may be sued, either alone or jointly with the agent, in the appropriate action for the wrong complained of."

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):

"It was undoubtedly prima facie an unlawful act on the part of Miss Wagner to break her contract, and therefore a tortious act of the defendant maliciously to procure her to do so…"

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:

"the respondent's action [in calling a strike] made it practically impossible for the appellants to do any new business with the barge hirers. It was not disputed that such interference with business is tortious if any unlawful means are employed."

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...

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