IS Innovative Software Ltd v Howes

For unlawful means conspiracy, the claimant must prove an intention to injure it. The intention need not be predominant, but it must be established from the evidence; foreseeability of harm may support an inference of that intention where the facts justify it. A defendant is not liable for loss caused by an unknown and unforeseeable contractual variation introduced by another conspirator. Employees may investigate and discuss prospective alternative employment, including its technical and commercial feasibility, while remaining employed, provided they do not overstep their contractual obligations. An appellate court should not overturn primary findings, particularly findings on witness honesty, merely because it might have reached a different conclusion.

IS Innovative Software Ltd appealed from the decision of HHJ Yelton, sitting as a Deputy High Court Judge, which dismissed its claims against Robert Howes. The first issue concerned an alleged unlawful means conspiracy involving the execution of employment documents backdated to a period when Mr Howes remained managing director. The company claimed that the documents caused it to incur increased redundancy and retirement payments.

The second issue concerned alleged inducement of breaches of contract by three employees who discussed and investigated possible employment with Mr Howes’s competing company and its proposed IFS project. The company claimed losses arising from the summary dismissal of two employees. The central questions were whether Mr Howes had the requisite intention to injure the company, whether the employees had breached their contracts, and whether the judge’s factual findings could properly be overturned on appeal.

1. Appeal dismissed. The company’s appeal failed on both issues.
2. For unlawful means conspiracy, intention to injure the claimant is an essential ingredient. It need not be the predominant motive or purpose, but it must be established. The fact that a conspiracy is directed at the claimant, and that injury is reasonably foreseeable and occurs, may justify an inference of intention, but that is an evidential question rather than a separate rule defining the tort. The court applied the approach stated in Lonrho Limited v Shell Petroleum Limited (No 2) and Lonrho Limited v Fayed, and explained by Kuwait Oil Tanker v Al Bader.
3. Mr Howes was party to an unlawful means conspiracy by signing letters which appeared to create backdated contractual rights. However, he reasonably believed that the letters recorded terms already agreed, including key-employee status and three months’ notice. He neither knew nor had reason to anticipate the separate Main Terms containing the quarter-day restriction, which caused the alleged loss. He therefore lacked the necessary intention in relation to that loss, and the appeal on the first issue was dismissed.
4. The court reaffirmed the high threshold for appellate interference with primary findings of fact and credibility. It was insufficient that the appellate court might have reached a different conclusion. Interference required a conclusion which no reasonable and fair fact-finding judge could have reached, or a plain mistake or failure to address plainly significant evidence. The judge’s findings were therefore entitled to stand.
5. Employees’ contracts requiring exclusive service and loyalty did not prevent them from seeking or negotiating alternative employment, investigating a prospective employer’s business, or engaging in limited non-confidential discussions about its technical and commercial feasibility. Whether the employee had crossed the line remained primarily a question for the trial judge. On the findings, Mr Thomas and Mr Laurent had not breached their contracts. The alternative conspiracy claim consequently required no separate determination.

• Court of Appeal (Civil Division) [2004] EWCA Civ 171: dismissed the company’s appeal on both issues.
• High Court of Justice, Queen’s Bench Division: HHJ Yelton, sitting as a Deputy High Court Judge, dismissed the company’s claims against Mr Howes on the unlawful means conspiracy and inducement of breach of contract issues.