Economic Torts Notes

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TABLE OF CONTENTS

Textbook..................................................................................................................................................2
Markesinis and Deakin..........................................................................................................................................2
McBride and Bagshaw...........................................................................................................................................2
Weir, Economic Torts.............................................................................................................................................3

Cases........................................................................................................................................................4
General..................................................................................................................................................................4
- Stevens, Torts and Rights (2007) 297-298.......................................................................................................................5
- Deakin & Randall, 'Rethinking the Economic Torts' (2009) 72 MLR 519.........................................................................6

Inducing a breach of Contract (Lumley v Gye tort).................................................................................................7
- Lumley v Gye (1853) 3 E&B 216........................................................................................................................................9
- *Hill v First National Finance [1988] 3 All ER 801..........................................................................................................10
- OBG v Allan; Douglas v Hello! [2007] UKHL 21, [2008] 1 AC 1.......................................................................................11
- Howarth, 'Against Lumley v Gye' (2005) 68 MLR 195....................................................................................................12
- Carty, The Modern Functions of the Economic Torts (2015, CLJ)...................................................................................13

Intimidation (a species of the "unlawful means" tort? involving threat to commit an unlawful act?)..................14
- *Rookes v Barnard [1964] AC 1129................................................................................................................................14
- OBG v Allen; Douglas v Hello! [2007] UKHL 21, [2008] 1 AC 1, [7], [61] (Lord Hoffmann)............................................15
- Revenue and Customs Commissioners v Total Network SL [2008] UKHL 19, [2008] 1 AC 1174, [99] (Lord Walker),
[124] (Lord Mance).............................................................................................................................................................15

Causing loss by unlawful means ("Indirect Interference" Tort)............................................................................15
- Allen v Flood...................................................................................................................................................................16
- *OBG v Allan; Douglas v Hello! [2007] UKHL 21, [2008] 1 AC 1.....................................................................................17

Conspiracy...........................................................................................................................................................19
- Allen v Flood (1895)........................................................................................................................................................20
- Crofter Hand Woven Harris Tweed Co v Veitch [1942] AC 435.....................................................................................21
- *Revenue and Customs Commissioners v Total Network SL [2008] UKHL 19, [2008] 1 AC 1174.................................22

Deceit..................................................................................................................................................................23
- Edgington v Fitzmaurice (1885) 29 Ch D 459.................................................................................................................23
- *Derry v Peek [1899] 14 AC 337.....................................................................................................................................24
- Smith New Court Securities v Scrimgeour Vickers [1997] AC 254 (remoteness, damages)...........................................24

Injurious Falsehood.............................................................................................................................................25

TORT: ECONOMIC TORTS

Page 1 TEXTBOOK
MARKESINIS AND DEAKIN
The principle that malice against C is not a sufficient basis for liability is established in Allen v Flood largely through concern that the notion of malice was too vague to be applied consistently by the courts and (then) juries - it denotes something more than intention to hurt C, but is not the same as an illegitimate motive...R. Epstein: malice means more than an intention to inflict some injury (all competition and most economic activity will do that). It refers to actions done out of spite or ill will, where someone is prepared to impose costs upon himself solely to make someone else worse off.

American example: Tuttle v Buck (held that D was liable for driving C out of business by setting up a rival barber in his home town for reasons related entirely to a personal grudge).English law would not have followed this because the means were lawful and D acted alone.

American requirement that D should disprove an implication of malice by showing that he acted out of economic self-interest - notion of prima facie tort liability (recognized in English law only in the case of conspiracy to injure):Quinn v Leathem - HL held that acts carried out by a combination of workers with the aim of driving out of business an employer who took on non-union labor could be tortious if the actions were motivated by ill will against C personally and not economic self-protection of Ds.

Thus, except for conspiracy, English law has adopted a formal criterion (presence of unlawfulness)
and not substantive criteria:Lord Devlin (writing extra judicially): Allen v Flood has thereby dammed up a stream of liability which could have developed within the common law, though only a "tenuous barrier"
holds it back

But Allen v Flood remains (just) good law, and most of the responsibility for deciding the limits of legitimate competition has shifted to Parliament (competition legislation).
***
Very little unity in the different economic torts - probably because of the context in which most modern caselaw arises (industrial disputes with trade unions and employers):-

Parliament gave trade unions lots of immunity (in Trade Disputes Act 1906) from acts that would otherwise be tortious
But the HL (since Rookes v Barnard) started expending economic tort liability to "outflank" the immunities through creating new nominate torts (esp. interference with trade by unlawful means, inducing breach of contract expanded to cover interference with contractual performance...)
This created a tension between courts and Parliament, which probably resulted in a lack of synthesis as Parliament attempted to neutralize the area of law surrounding economic torts
There is now evidence that in non-trade-dispute contexts, the courts are rowing back from some earlier expansionary decisions

MCBRIDE AND BAGSHAW
Six types of economic torts

1. Inducing a breach of contract: A encourages B to breach contract with C; will be liable to compensate C for loss
TORT: ECONOMIC TORTS

Page 2 2. Intentional infliction of harm by unlawful means: A intentionally harms B by committing/threatening to commit a civil wrong (breach of contract, tort, equitable wrong) in respect of C

3. Lawful Means Conspiracy: A and B together inflict loss on C for no legitimate reason

4. Unlawful Means Conspiracy: A and B together inflict loss on C using unlawful means

5. Deceit: A intentionally lies to B to induce B to do something, and B suffers a loss by doing it

6. Malicious falsehood: A deliberately lies to B about C and C suffers a loss (liable to C)

7. (Outside syllabus) Passing off: A induces people to buy his goods by representing that they are made by B
Economic Torts

1. Termed thus because 1) usually cause PEL, 2) easiest routs to recover compensation for Vs suffering PEL, 3) thus these torts help protect Cs from suffering PEL at others' hands

2. Shouldn't be termed thus because:
a. Can eg. pure distress fall within these torts or are only PEL covered?
b. Giving them same name suggests some other similarity between them - may not exist c. Name suggests that these torts are only relevant to big businesses/commercial law and hide their real value in tort as shown by this case:
i. Allen v Flood:

1. Arguably the most important case in tort because it is about freedom, in holding that despite morality, in law one is free to beggar his neighbor as long as ne doesn't do anything unlawful/get anyone else to do anything unlawful.

2. Facts: Cs employed to do woodwork on a ship on day-to-day basis and D,
whose employees worked on the ironwork, told Cs' employer that if Cs came back the next day his ironworkers would not come back. Cs fired -
held couldn't claim from D because D hadn't induced the employer to breach any contracts and though they intentionally harmed Cs they didn't use unlawful means.

3. 6-3 split: Lord Herschell - one cannot be called upon to justify his acts unless they are in their nature wrongful and therefore require justification

4. Continued debate as to whether this is the right decision: Tuttle v Buck
(SC Minnesota) decided the contrary - diverting customers from rival businesses by lowering prices is prima facie OK but opening a rival store for the sole purpose of undercutting rival business and planning to retire the business after the goal is accomplished is an actionable tort

5. John Finnis (philosopher) said that this is right in that tort law should identify as tortious every act intended precisely to cause harm to another

6. M&B think that the decision in Allen v Flood is correct because:
a. Difficult to ascertain someone's motives (a scenario discussed in
Allen v Flood is if a cook said to the head chef that he would resign if the head chef didn't fire the butler, and thus he fires the butler,
then holding that intention can determine a tort will require exploring the cook's motive for not wanting to work with the butler
(did he just not like the butler, or did he want revenge because the butler refused his advances?)
b. Legitimacy of reasons: controversial to decide whether someone had a good reason to harm C (if A drove B out of business because
B beat up A's son/seduced A's wife/sold drugs to A's daughter)
c. Certainty d. Freedom: Wainwright v Home Office asked HL to consider whether they should recognize A commits a tort if he intentionally causes B distress without reason. Lord Hoffman said no - in the workplace people constantly do/say things that cause distress to others and though it's bad manners litigation isn't the best means of dealing with it
TORT: ECONOMIC TORTS

Page 3 WEIR, ECONOMIC TORTS
Arguments

1. Tortious to get X to deliberately break his contract with C, this doesn't extend to interference with people's contracts

2. Requirement of wrongful means is sensible, practical and correct

3. Inducing breach of contract is an instance of wrongful means tort and is not unique
No tort of interference with contracts

1. Economic justification for sanctioning inducement of breach of contract: gives inducer an incentive to negotiate which saves legal fees. But as Fifoot says "it is certainly one of the functions fo law to answer economic needs... But to express law purely in terms of economics is to betray obsession with an idee fixe"

2. Economic torts hardly taught and hasn't received much attention: Allen v Flood described by
Robert Heuston as 'most important in the whole history of the law of torts' but didn't elicit as much debate as Donoghue v Stevenson

3. Priority of human interest over money interest is clear - most case of personal injury are cases where D injures C interested in only saving himself time and trouble. When contracts concern things other than money, they operate quite differently - the profitability of abortions doesn't measure against mother's freedom to decide so a clause in a contract won't bind her into going through with a profitable abortion

4. A version of this can also be found in the differential treatment of physical harm and economic loss

5. In recent years unintentional economic harm has developed, but this doesn't mean that intention economic harm should also be a tort - odd to say that one can be liable for an unintentional act but not same act done intentionally, but there are cases (eg. A case in the
Estates Gazette where D could terminate a lease whenever he wanted without giving reasons,
a part of the property became unusable, and some months later the whole lease was terminated. C successfully sued for loss of profit for the months when the part was unusable)

6. Liability for unintended harm is a constraint on freedom, but not as much as liability for intended harm as that forbids someone from executing a particular plan he has in mind.
Economic torts are a constraint on liberty in light of decided caselaw
On Allen v Flood

1. Had to distinguish Lumley v Gye on the ground that Gye had gotten Wagner to do something unlawful - but was it so material that there was a contract between the two? Lord Herschell was correct in saying that there was a chasm between the two - paying someone to do something they're entitled to is meritorious (bonus/consideration for contract) but same payment for doing something wrong is a bribe

2. Next case was Rookes v Barnard where Ds threatened to strike unless C was removed, so that the employer terminated C's employment. Held that Ds were liable because they weren't entitled to strike without prior negotiation.
Is inducing breach of contract a species of general tort of causing harm by wrongful means?

1. Courts have discussed the two torts separately, even to hold that Ds are liable for the special tort though they were immune to the general tort - IAO this is unacceptable

2. Concurrence of claims is an inherent part of common law, but it doesn't apply if the concurrent tort is a generalized version of the old tort (as with Donoghue v Stevenson)

3. IAO inducing breach is a subspecies of wrongful means and any recent development of separate rules should be reversed

4. Inducing breach started off with Lumley v Gye for which as Allen v Flood shows the contract is crucial - but why?

5. If Lumley has a claim is it because he had a right to Wagner's services or that Gye had gotten her to wrong him? Distinction is crucial because by adopting the incorrect analysis in terms of right the court developed an illegitimate tort of interference with contract.
TORT: ECONOMIC TORTS

Page 4 6. Wrong rationale stated by Lord Macnaghten: 'a violation of a legal right committed knowingly is a cause of action'; right rationale by Lord Lindley: 'principle... reaches all wrongful acts done intentionally to damage an individual and actually damaging him' (assimilates this to wrongful acts tort)

7. In Germany this tort depends not on right but whether D behaved immorally; in France it is seen in terms of a wrong/causing harm by fault; Americans ignore Allen v Flood and treat rights like expectations. English law is out of step and has led us in the wrong direction

8. Contract is concerned with rights not conduct; tort looks to wrongful behavior

9. Lord Denning: principle in Lumley v Gye should be extended to deliberate and direct interference with contract without causing any breach, giving the example of poisoning the opera singer so she couldn't perform. However here it would be a wrongful means tort.

CASES
GENERAL
ETs must be considered against the background of Allen v Flood (conduct that is otherwise not tortious does not become tortious simply because it was carried out with the deliberate purpose of harming the economic interests of another).
-Exception:
o conspiracy to injure (though that is strictly limited to conduct the predominant purpose of which is to harm C.
o Lumley v Gye tort - D's conduct need not be independently unlawful but becomes tortious when done with the intention of inducing breach
Unclear whether:
(1) D must have "aimed" their conduct at C - though not necessary that D's predominant purpose was to harm C, it must have been more than an incidental side-effect or foreseeable/inevitable consequence of D's action
(2) It is sufficient if D knew that harm to C was an inevitable consequence of D's act
OBG v Allan hoped to restrain the scope of ETs:-

Inducing breach of contract is a form of secondary liability dependent on an actual breach of contract (whereas earlier decisions accepted that liability could exist for interference with performance)
Unlawful means (for the unlawful means tort) must be independently actionable by the third party affected (or at least actionable by him had he suffered loss)
o NB Lord Nicholls dissented on this point and favoured a broader definition of unlawful means)
o NB Revenur and Customs Commissioners v Total Network established that for unlawful means conspiracy the unlawful means could include conduct not in itself independently civilly actionable by C
-- contrast in approaches between OBG and Total = underlying complexity and uncertainty

Sales and Stilitz attempted to unify the area of law (excepting passing off and deceit as sui generis torts) based on presumption that it is a tort to cause harm intentionally by unlawful means.
-"Unlawful means" required because Allan v Flood
They argue that "any act that the defendant is not at liberty to commit" (so civil wrong, breach of criminal statute, breach of statutory duty?) should suffice, though the potentially wide liability can be kept within bounds by requiring that D would have a specific intention to "target" the claimant.
-But problem = the definition of unlawful means used includes types of harm not recognized in tort as civilly actionable
TORT: ECONOMIC TORTS

Page 5 OBG v Allen rejected the unification attempt (by keeping inducement to breach a contract and causing loss by unlawful means) though Lord Nicholls supports the view in his opinion.
But maybe unification should be resisted - divergent decisions in OBG and Total may reflect agreement that the ETs should not and cannot be herded within a single comprehensive framework.
-NB the tort of deceit (in contrast) has a clear and well-established definition, a distinct role in regulating conduct in commerce, and has undergone little judicial reconstruction in recent times.
Important to note that economic torts play a residual but important role in regulating competition between traders and there is a growing awareness of the relevance of the ETs in the context of commercial disputes (and increased willingness to make use of them). Thus the ETs retain important roles in delineating the boundaries of acceptable competitive behaviour in a market economy.
Also NB ETs (except passing off and deceit) largely developed in the sphere of industrial conflict where the fundamental problem has always been the incompatibility between collective industrial action and individualist notions underpinning much of 19C common law.
Recently there has been more of an "abstentionist" approach (Carty):Baroness Hale, OBG v Allan: Drawing the line between fair and unfair trade competition or trade union activity can involve "major economic and social questions which are often politically sensitive and require more complicated answers than the courts can devise" and are better left to parliament. The common law need do no more than draw the lines that it might be expected to draw: procuring an actionable wrong between the third party and the target or committing an actionable ... wrong against the third party inhibiting his freedom to trade with the agent.

- STEVENS, TORTS AND RIGHTS (2007) 297-298.
The traditional grouping together of the 'economic torts' confuses. Lord Wedderburn described them as 'still awaiting their Atkin'. We will be waiting forever because they have no inherent unity. It is a mistake to group these 'torts' together.-

Some are genuine torts relating to specific primary rights

passing off (intellectual property)
o deceit (right not to be lied to))
Others are not properly described as torts at all.
o 'Unlawful means conspiracy': recovery is not limited to economic losses + is not a tort but a rule of attribution (like authorization or procurement) - it is merely a means of participation in the actions of another that is sufficient to have actions attributed to all those taking part

Procuring breach of contract: concerned with the infringement of an accessory right,
good against everyone else, protecting the primary contractual right to performance,
which is only exigible against the promisee - more closely related to the equitable wrong of dishonest assistance in a breach of trust or fiduciary obligation than to any other economic tort + no a priori reason why loss will be economic.
o Intentionally causing loss by unlawful means : concerned with allowing a third party to take the benefit of a right in order to bring a claim. It is one of a number of exceptional cases where the law gives a claimant standing to rely upon the violation of someone else's right.

It has been suggested that the intentional causing of loss by unlawful means is the genus economic tort, of which the other economic torts are merely species. This is not correct.The procurement of a breach of contract is not independently wrongful.
Unlawful means conspiracy does not require an intent to injure and what is meant by 'unlawful'
is not the same as in the context of intentionally causing loss by unlawful means

TORT: ECONOMIC TORTS

Page 6 This does not mean that no generalization is possible.-

Both intimidation and most forms of malicious falsehood are best seen as species of the wider rule that the intentional causing of loss by unlawful means is actionable.
Malicious falsehood is something of a hybrid, the examples not covered by the general principle being most closely related to the protection of the right to reputation afforded by the torts of defamation and passing off.
The tort of conspiracy to cause loss through lawful means is simply anomalous, but survived because no more anomalous than other economic torts grouped together so inexplicably.

- DEAKIN & RANDALL, 'RETHINKING THE ECONOMIC TORTS' (2009) 72 MLR 519
Proposes a revised conceptual basis for economic torts focusing on 1) economic interests they protect,
2) kinds of interferences that trigger liability, 3) nature of justifications that should be accepted as defences. This is truer to the torts' historical role of regulating competitive process + should be preferred over claims that they are part of a wider principle of prima facie liability for intentional harm or a theory of accessory/secondary liability.
Introduction

1. Economic torts defy synthesis, especially since Rookes v Barnard initiating the expansion of liability that changed after OBG v Allan, Douglas v Hello, Mainstream Properties v Young where HL reversed many extensions since Rookes

2. After Mogul (C put out of business by concerted effort of competitors in rival shipping conference but liability denied because the right to trade freely doesn't place one at a special advantage compared to others) and Allen v Flood and Lumley v Gye left the law in a defensible and quite clear state with three torts:
a. Direct interference with pre-existing legal right (eg. Inducing breach of contract like
Lumley v Gye but also inducing breach of statutory/fiduciary duty). "The wrong here consisted of intentionally depriving the plaintiff of legal rights b. Unlawful means interference with C's trade/business/livelihood (Rookes v Barnard)
c. Lawful means conspiracy

3. Net effect: individual/collective action distinction crucial, and whether collateral/independent unlawfulness is involved

4. Then came the extensions...
a. Torquay Hotel: extended liability beyond inducement of breach to interference with contractual performance falling short of breach b. Dimbleby: Both parties to the relevant contract could bring a claim in interference cases - promisee (denied expectations under contract) and promisor (if shown that D's action had in hindering performance, caused/threatened to cause loss)
c. Falconer v Aslef: Foreseeable/incidental victims of industrial action could likely succeed in a claim for damages/injunction against organizers of the action

5. Entire line of cases cast in doubt by OBG which appears to revert (for the purpose of the
Lumley v Gye tort) to the classical position that an actual breach of contract is sine qua non for liability - overruling Torquay Hotel and deciding that there is no tort of wrongful interference with contractual relations (only inducing/procuring breach of contract)
a. Rationale: the "main function [of tort] is to identify and protect the rights that every person is entitled to assert against ... others" (Lord Scott), but with economic torts there is controversy as to whether they protect rights in a meaningful sense because the "right to pursue a trade or livelihood" is doctrinally incoherent - "not conceptually possible to have a right to trade in a capitalist society (as this would entail a duty not to compete)" (J. Neyers)
i. - But if we see the right as to "take part in certain economic activity without interference which the law regards as illegitimate" then it's less obviously incoherent
(but what is "economic activity" and what is "illegitimate")
ii. - Two broad types of justifications (R. Epstein)

1. Libertarian approach: economic torts are an extension of the common law protection of property and contract rights (and thereby to individual autonomy)
- implies that state has a legitimate role in 1) preserving property rights and
TORT: ECONOMIC TORTS

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