OBG v Allan [2007] UKHL 21

OBG v Allan [2007] UKHL 21

Tort – Cause of Action – Inducing breach of contract – wrongful interference

Facts:

OBC got into financial difficulties. The defendants were appointed as joint receivers. The receivers took control of the business and terminated all contracts between OBC and their subcontractors and settled claims under the contracts which OBC had made. The receivers were later found to have been invalidly appointed, causing OBC to suffer loss as a result of the receivers’ wrongful interference with their contractual relations. The judge found that but for the receivers’ interference, OBC would have obtained better settlements.

Issues:

Whether the receivers’ actions constituted interference causing economic loss.

Held:

Allowing the appeal, the receivers’ actions lacked the intention to procure a breach of contract causing loss. An intention to procure or cause loss was found to be an essential requirement of a tort of wrongful interference with contractual relations. Lumley v Gye (1853) 2 E & B 216 was distinguished, holding that there had been a confusion of the law where causing loss by unlawful means warranted an extension of tort for inducing a breach. The two were separate torts, each with its own conditions for liability. Inducing a breach of contract was a tort of accessory liability and showed an intention to cause a breach and was a necessary and sufficient requirement for liability. In order to be liable, a person had to knowingly induce a contract even if he was not motivated by malice, but could be motivated by economic gain. The receivers had acted in good faith and had not employed unlawful means nor intended to cause any loss to OBG. There had been no breach or non-performance of any contract by the receivers, thus, no wrong to which accessory liability for procuring a breach of contract could attach.