The House of Lords’ decision in OBG Limited v. Allan [2007] UK HL 21 was an important one on economic tort. “Economic tort” refers to “inducing breach of contract” and “unlawful interference with trade”.

The leading opinion on economic tort is now that of Lord Hoffmann who drew a clear distinction between two different economic torts, namely “inducing breach of contract” (Lumley v. Gye(1854) 3 E & B 114) and “unlawful interference with trade” – which he referred to as “causing loss by unlawful means”.

Inducing breach of contract is a tort in which the defendant becomes liable as “an accessory” to the breach of contract of another. The essence of this tort is that the defendant has deliberately (i.e. with intent) induced or procured a breach of contract by persuading another to act in breach. It is not enough if, as in OBG, the receivers may have caused a breach of contract or prevented performance without intending to do so. Equally, it is not enough if the defendant has assisted another to break his contract without realising it.

Lord Hoffmann traced the unlawful means tort back to Garret v. Taylor (1620) Cro Jac 567 and Tarleton v. McGawley (1793) Peake 270. In each case, the defendant did an unlawful act with the intention of causing harm thereby to the claimants’ business and was held liable in tort for the damage thus caused. This gives rise to “primary liability” and does not depend upon persuading another to break a contract; i.e. “accessory liability”. Lord Hoffmann further held that “acts against a third party count as unlawful means only if they are actionable by that third party” – the principal qualification to this general rule being where there is no cause of action only because that third party does not suffer any loss. Lord Hoffmann said that just as the tort of inducing breach of contract requires an intention to cause a breach, so the tort of wrongful interference with business requires an intention to cause loss.

Lord Hoffmann rejected “the unified theory” whereby the courts have treated liability for “inducing breach of contract” as “unlawful interference with trade”, stating that the two forms of economic tort must be treated as separate, with different ingredients, because (as outlined above) inducing breach of contract is a form of “accessory liability” whereas unlawful interference with trade is a form of “primary liability”.

Some practical implications of OBG Limited v. Allan [2007] UK HL 21 which are likely to have an impact upon shipping litigation are that:

  • Liability for economic tort now arises where a person intends to do a wrongful act. The test to be applied is fundamentally subjective and depends upon showing that the defendant actually had the relevant intention.
  • There should be fewer cases, such as OBG, in which the claimants select the most favourable features of each tort whilst ignoring their requisite limiting features.
  • It will be easier to strike-out misconceived economic tort claims in respect of which the necessary knowledge and intention have not been pleaded.