IS Innovative Software Ltd v Howes

For an unlawful-means conspiracy, the claimant must prove an intention to injure. The intention need not be predominant and may be inferred where the conspiracy is directed at the claimant and injury is reasonably foreseeable. Liability is confined by the actual conduct and ambit of the conspiracy. A participant who reasonably believes that backdated documents merely record existing obligations is not liable for loss caused by an unknown additional term in another document. A written employment contract may be varied by oral agreement or unequivocal conduct. Employees may investigate and discuss prospective alternative employment, including its technical feasibility, provided they do not cross into prohibited work or misuse confidential information. An appellate court should respect first-instance findings, especially credibility findings, and intervene only for a material oversight or a conclusion no reasonable fact-finder could reach.

IS Innovative Software Ltd appealed from the decision of His Honour Judge Yelton, sitting as a Deputy High Court Judge in the Chancery Division, which dismissed its claims against Robert Howes.

The first issue concerned Mr Howes’s participation in arranging backdated employment documents for four employees. The company alleged unlawful-means conspiracy and claimed losses arising from enhanced notice provisions. The second issue concerned alleged inducement of breaches of contract, and alternatively conspiracy, arising from technical discussions between Mr Howes and three employees about a competing business.

The central questions were whether Mr Howes had the necessary intention to injure the company, whether the employees had breached their contracts, and whether the judge’s factual findings could properly be disturbed on appeal.

1. Appeal dismissed. The company’s appeal failed on both issues. The respondent was awarded the costs of the appeal, subject to detailed assessment.
2. On the first issue, the employees’ enhanced responsibilities, salaries and key-employee status, including the associated three-month notice period, had been accepted by conduct and constituted contractual variations. A written employment contract may be varied by subsequent oral agreement or unequivocal conduct. Although the variation had not been expressly pleaded, it was not unfair to give effect to it because the relevant facts and contention were fully ventilated in the evidence, cross-examination and argument.
3. Mr Howes was party to an unlawful-means conspiracy by signing letters backdated to a period when he remained managing director. The conspiracy was directed at the company because the letters were intended to appear binding on it. However, the tort requires an intention to injure; that intention need not be predominant and may coexist with other motives. The relevant intention may be inferred from the evidence, but it remained necessary to establish it. Mr Howes reasonably believed that the letters merely recorded terms already agreed. He neither knew nor had reason to suspect that separate backdated Main Terms would introduce a more onerous quarter-day restriction on the company’s notice. The loss claimed arose from that unknown provision. The judge was therefore entitled, and correct, to conclude that Mr Howes was not liable. It was unnecessary to determine the separate issue of damage.
4. On the second issue, the appellate court restated the high threshold for interfering with first-instance factual findings. It was insufficient that the appellate court might have reached a different conclusion. Interference required a material misunderstanding or omission, or a conclusion which no reasonable and fair fact-finding judge could have reached. The judge had heard and assessed the witnesses, and was entitled to reject the allegation that relevant emails had been dishonestly destroyed. The presumption concerning destruction of evidence was not absolute.
5. On the facts found, Mr Thomas and Mr Laurent had not breached their employment contracts by investigating prospective employment with Accquiant, considering its technical and commercial feasibility, or exchanging general non-confidential information. Whether an employee has crossed the contractual line is primarily a matter for the trial fact-finder. Mr Gorst may arguably have crossed that line, but no damages were claimed in respect of his conduct. The claim for inducing breach of contract therefore failed, and it was unnecessary to consider the alternative conspiracy claim.

• Court of Appeal (Civil Division): In [2004] EWCA Civ 275, the court dismissed the appeal and ordered the appellant to pay the respondent’s appeal costs, subject to detailed assessment.
• High Court, Chancery Division: His Honour Judge Yelton, sitting as a Deputy High Court Judge, dismissed the company’s claims on 16 April 2003.