Mainstream Properties Ltd v Young and others
Lord Hoffmann, Lord Nicholls of Birkenhead, Lord Walker of Gestingthorpe, Baroness Hale of Richmond and Lord Brown of Eaton-under-Heywood
Inducing breach of contract – Property development – Employees of appellant developer purchasing development in joint venture with third party – Failure to acquire land for appellant amounting to breach of employment contract – Whether third party liable for inducing breach – Appeal dismissed
The appellant property development company employed Y and B as a working director and a manager respectively. In 2001, a joint venture consisting of Y, B and an outside party, W, purchased an area of development land. The appellant brought proceedings against Y and B. It alleged that they had breached their contractual and fiduciary duties by diverting to the joint venture an opportunity to purchase development land that they should have acquired for the appellant. The appellant also contended that W was liable for inducing their breach of contract.
In the courts below, Y and B were found to be liable but W was not. The judge at first instance found that W’s participation had been causative of the breach of contract by Y and B, since they could not have acquired the property without his financial assistance. He also found that W had known that Y and B were employed by the appellant and, therefore, that there was a potential conflict between their duties to the appellant and their participation in the joint venture. However, the judge recognised that W was a cautious man who had raised that issue with Y and B and had been informed that there was no conflict since the appellant had been offered the site and had refused it. Although that assertion was untrue, the judge found that W had genuinely believed it, having previously been given a similar, truthful assurance by Y and B regarding another project, which had since proceeded smoothly. The judge concluded that W had not intended to procure a breach of the contracts of employment of Y and B or otherwise to interfere with their performance.
Inducing breach of contract – Property development – Employees of appellant developer purchasing development in joint venture with third party – Failure to acquire land for appellant amounting to breach of employment contract – Whether third party liable for inducing breach – Appeal dismissedThe appellant property development company employed Y and B as a working director and a manager respectively. In 2001, a joint venture consisting of Y, B and an outside party, W, purchased an area of development land. The appellant brought proceedings against Y and B. It alleged that they had breached their contractual and fiduciary duties by diverting to the joint venture an opportunity to purchase development land that they should have acquired for the appellant. The appellant also contended that W was liable for inducing their breach of contract.In the courts below, Y and B were found to be liable but W was not. The judge at first instance found that W’s participation had been causative of the breach of contract by Y and B, since they could not have acquired the property without his financial assistance. He also found that W had known that Y and B were employed by the appellant and, therefore, that there was a potential conflict between their duties to the appellant and their participation in the joint venture. However, the judge recognised that W was a cautious man who had raised that issue with Y and B and had been informed that there was no conflict since the appellant had been offered the site and had refused it. Although that assertion was untrue, the judge found that W had genuinely believed it, having previously been given a similar, truthful assurance by Y and B regarding another project, which had since proceeded smoothly. The judge concluded that W had not intended to procure a breach of the contracts of employment of Y and B or otherwise to interfere with their performance.The appellant’s appeal to the House was considered with two other actions. Issues were raised as to the scope and interrelationship of various economic torts.Held: The appeal was dismissed. (1) Liability for inducing breach of contract was accessory to the liability of the contracting party and depended upon that party having committed an actionable wrong: Lumley v Gye (1853) 2 EI&BI 216 applied; Merkur Island Shipping Corporation v Laughton [1983] 2 AC 570 not followed. There was no requirement that the defendant should have used means that were unlawful in themselves, so long as there was the degree of participation in the breach of contract needed to satisfy the general requirements of accessory liability for the wrongful acts of another person: CBS Songs Ltd v Amstrad Consumer Electronics plc [1988] AC 1013 applied. (2) To be liable for inducing breach of contract, a defendant had to know that the act it was procuring would have that effect. It was not sufficient for it to know that it was procuring an act that, as a matter of law or construction of the contract, was in fact a breach. It would not be sufficient that a defendant should reasonably have known if it did not know: British Industrial Plastics Ltd v Ferguson [1940] 1 All ER 479 applied. However, a conscious decision not to enquire whether the act would be a breach could count as knowledge: Emerald Construction Co Ltd v Lowthian [1966] 1 WLR 691 applied.(3) A defendant had also to possess the necessary intention to procure a breach of contract, although it was not necessary for it to have intended to cause damage to the claimant. If a party knowingly caused a breach of contract, it would not normally matter that the breach was only the means of achieving some further end, or even that that party would have preferred to achieve that end without causing a breach. On the other hand, if the breach of contract was neither an end in itself nor a means to an end, but merely a foreseeable consequence, it could not be said to have been intended.(4) The tort of inducing breach of contract was different and separate from that of causing loss by unlawful means, and the two could not be united by a single principle: Allen v Flood [1898] AC 1 applied. Further, there was no liability for “interfering” with contractual relations where the defendant was not an accessory to any breach of contract and had not used unlawful means Quinn v Leathem [1901] AC 495 and GWK Ltd v Dunlop Rubber Co Ltd (1926) 42 TLR 376 considered. (5) W was not liable on the facts of the case because he had not intended to cause a breach of contract. He had honestly believed that assisting Y and B with the joint venture would not involve them in the commission of breaches of contract, he had not been indifferent to whether there was a breach of contract, and he had not made a conscious decision not to enquire in case he discovered a disagreeable truth. Nor was there any question of his having caused loss by unlawful means. He had neither intended to cause loss to the appellant nor used any unlawful means.John Randall QC and John de Waal (instructed by The Smith Partnership, of Derby) appeared for the appellant; Gordon Pollock QC and Barry Isaacs (instructed by Leigh Davies & Co) appeared for the respondents.Sally Dobson, barrister
