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Date: Mon, 7 May 2007 04:08 From: Neil Foster Subject: OBG Ltd
Dear Jason et al I was also mildly surprised about lack of comment on OBG Ltd etc [2007] UKHL 21 (or whatever we should call it), which must be the most significant decision in many years on (1) the particular economic torts involved (inducing breach of contract, or what their Lordships call the Lumley v Gye tort; and "causing loss by unlawful means"). The decision is also very significant for its clarification (and difference of views!) on two other primary issues (2) whether there can be conversion of intangible property; and (3) whether "mere" photographic images can be protected by the equitable action for breach of confidence as it has developed on recent years. Perhaps others, like me, were affected by two issues - the length of the decision; and the fact that I don't actually teach the economic torts in any detail in my Torts course, having had to choose to drop some things out. Just because I did it for myself and others might find it helpful, here is my summary of what the decision stands for on these points: (1) All their Lordships agree that there are indeed two separate torts: the Lumley v Gye tort on the one hand, and "causing loss by unlawful means" on the other. (They criticise and demolish earlier cases confusing them.) (a) The Lumley v Gye tort (inducing breach of contract) occurs where the plaintiff claims that the defendant has caused them harm by causing a third party to breach a contract he or she had with the plaintiff. It is a tort of "secondary liability", where the defendant is liable as an accessory to the breach of contract committed by the "'third party". The "mental element" necessary is said to be whatever mental element is necessary to "satisfy the general requirements of accessory liability for the wrongful act of another person" - Lord Hoffmann at [8]. The defendant must know that they are causing a breach of contract - Lord Hoffmann at [39]. But this includes being "recklessly indifferent" as to whether a contact is being breached - [40]. For this tort to be committed there must be an actual breach - merely "interfering" with a contract is not enough - [44]. In general the other members of the House seem to agree with this analysis - see Lord Nicholls at [172], [191]-[192]; Lord Walker at [264]; Baroness Hale (I think) at [302]-[303] (at least she expresses no disagreement with the others on these points); Lord Brown at [319]. (b) On the other economic tort there is a slight disagreement about the name of the tort, and a more fundamental disagreement about a "control mechanism" which should be adopted to prevent the tort operating too widely. Lord Hoffmann calls the tort "causing loss by unlawful mean". The elements are described in para [47] as (a) wrongful interference by the defendant with the actions of a third party in which the plaintiff has an "economic interest", and (b) intention to thereby cause loss to the plaintiff. (The paradigm older cases included driving away potential customers of the plaintiff by threatening to harm them.) Unlike Lumley v Gye, this is a stand-alone tort, not accessorial liability. Lord Hoffmann says it only works where the actions against the third party would have been actionable by the third party (if the third party had actually suffered some loss) - [49]. BUT the control mechanism adopted by Lord Hoffmann is that the unlawful acts must be those which "affect the freedom [of the third party] to deal with the claimant" - para [51]. There are some unusual IP cases which illustrate the point which I won't go into now. Lord Nicholls generally agrees with many of the above points, but argues for a different "control mechanism". He calls the tort something else, too - "interference with the claimant's business by unlawful means". The name stresses the economic aspect of the context, I guess. While his Lordship's argument is (with respect) not very easy to follow, it seems that he prefers a wider statement of what should be regarded as "unlawful means" for the elements of the tort. At para [162] "unlawful means" embraces "all acts a defendant is not permitted to do, whether by the civil law or the criminal law". Hence there is no restriction as in Lord Hoffmann's para [51] to do with "freedom to deal with the claimant". On this point there is in the end agreement by the other members of the House with Lord Hoffmann - so a 4-1 majority for the control mechanism proposed at [51]. I will be much briefer for the other points. (2) By a 3-2 majority the House holds that there can be no conversion of intangible property - Lord Hoffmann at [94]-[107], Lord Walker at [271], Lord Brown at [321]. Lord Nicholls argues to the contrary - see discussion concluding at [238], and is supported by Baroness Hale - at [304]-[317]. Nice to see that her Ladyship is aware of the Supreme Court of NSW decisions on the point - noted at [317] even though they disagree with her. (3) By a different 3-2 majority the House holds that photographic images as such (as opposed to the mere information that a wedding took place, etc) can be protected by the equitable action for breach of confidence, and that OK! magazine should have been awarded damages for being "scooped" by Hello! magazine in publishing unauthorised photos of the Michael Douglas/Catherine Zeta-Jones wedding. (Majority: Lords Hoffmann and Brown and Baroness Hale; dissenting Lord Nicholls and Lord Walker.) As to Jason's question, I will leave it to others for the moment. Perhaps all one can say is that by the process of defining the torts the courts are saying that I have a right that X not intentionally interfere with my freedom to trade with Y by doing something which is unlawful and which Y would have had a legal remedy for. But I see the problem - it would be more satisfactory if my right of "freedom to trade" (as against X) were defined in some pre-existing way.
Regards Neil Foster
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