OBG Limited and others (Appellants) v. Allan and others (Respondents) Douglas and another and others (Appellants) v. Hello! Limited and others (Respondents) Mainstream Properties Limited (Appellants) v. Young and others and another (Respondents)

Inducing breach of contract and causing loss by unlawful means are distinct economic torts. The former imposes accessory liability for intentional participation in an actual breach. An honest belief that the induced conduct is lawful defeats the necessary intention.

Causing loss by unlawful means requires an intentional interference with a third party’s freedom to deal with the claimant. The means must be actionable by that third party, or would be actionable had the third party suffered loss.

Conversion remains confined to chattels and does not extend generally to contractual rights. Commercially valuable photographic information may, however, be protected by confidence where it is controlled and imparted under an obligation benefiting an exclusive publisher. Publication of authorised photographs does not necessarily place distinct, unauthorised images in the public domain.

Three appeals raised overlapping questions about intentional economic torts. In Mainstream Properties Ltd v Young, a financier assisted employees who diverted a development opportunity, but honestly believed that their conduct involved no breach of duty. The Court of Appeal dismissed the company’s appeal: [2005] EWCA Civ 861.

In OBG Ltd v Allan, receivers appointed under an invalid floating charge took control of an insolvent company’s assets and contractual claims in good faith. The Court of Appeal rejected claims for interference with contractual relations and conversion of choses in action: [2005] EWCA Civ 106.

In Douglas v Hello! Ltd, a rival magazine knowingly published surreptitious photographs of a private wedding despite another magazine’s exclusive publication agreement. The Court of Appeal rejected the exclusive publisher’s claim in confidence: [2005] EWCA Civ 595. The central questions concerned the elements of the economic torts, the scope of conversion and whether commercially confidential photographic information was enforceable by the exclusive publisher.

1. Disposition. The House dismissed the Mainstream appeal unanimously. It dismissed the OBG appeal by a majority of three to two and allowed the Douglas appeal by a majority of three to two, restoring Lindsay J’s award to OK!.

2. Separate economic torts. Lord Hoffmann and Lord Nicholls gave the principal analyses, with the other Law Lords agreeing on the essential framework. Inducing breach of contract is accessory liability. It requires intentional causative participation in an actual breach. Causing loss by unlawful means is a distinct tort imposing primary liability. The hybrid tort of direct or indirect interference with contractual relations was rejected.

3. Inducing breach. The defendant must know that the induced conduct will breach the contract, although deliberate blindness or conscious indifference may amount to knowledge. Negligence, even serious negligence, is insufficient. A breach must be intended as an end or as a means to an end, rather than merely foreseen. In Mainstream, the financier’s assistance was causative, but his honest belief that no breach would occur defeated liability.

4. Unlawful means. Per Lord Hoffmann, with Lord Walker, Baroness Hale and Lord Brown forming the majority, the conduct must interfere with a third party’s freedom to deal with the claimant and be actionable by that third party, subject to the case where no action lies only because the third party suffered no loss. The defendant must intend the claimant’s loss as an end or means. Mere foreseeability is insufficient. Lord Nicholls preferred a wider definition embracing all conduct prohibited by civil or criminal law.

5. OBG and conversion. The receivers neither induced a contractual breach nor intended loss or used unlawful means. Per Lord Hoffmann, Lord Walker and Lord Brown, conversion remained a tort against chattels. Extending strict liability to contractual claims would be a fundamental change better left to Parliament. Lord Nicholls and Baroness Hale dissented, considering that assignable contractual rights should receive the same proprietary protection.

6. Commercial confidence. Per Lord Hoffmann, Baroness Hale and Lord Brown, OK! had paid for the benefit of an obligation of confidence covering all photographic images of the wedding. Hello! acquired the unauthorised images with notice of that obligation. Each image could constitute distinct commercially valuable information, so publication of authorised photographs did not destroy confidence in the unauthorised images. Lord Nicholls and Lord Walker dissented, considering that the unauthorised pictures disclosed nothing materially different once the approved pictures were published. Although Hello! intended loss to OK! as a means of protecting its own sales, the alternative unlawful-means claim failed because there was no qualifying interference with a third party.

• House of Lords: In [2007] UKHL 21, dismissed the Mainstream Properties Ltd v Young appeal unanimously, dismissed the OBG Ltd v Allan appeal by a 3–2 majority, and allowed OK!’s appeal in Douglas v Hello! Ltd by a 3–2 majority.
• Court of Appeal—OBG: In [2005] EWCA Civ 106, reported at [2005] QB 762, allowed the receivers’ appeal on interference with contractual relations and unanimously dismissed OBG’s conversion cross-appeal.
• Court of Appeal—Douglas: In [2005] EWCA Civ 595, reported at [2006] QB 125, reversed Lindsay J on OK!’s breach of confidence claim while leaving the Douglases’ separate recovery intact.
• Court of Appeal—Mainstream: In [2005] EWCA Civ 861, reported at [2005] IRLR 964, upheld the dismissal of the inducing-breach claim against the financier.
• First instance—Douglas: Lindsay J held Hello! liable to OK! in confidence in [2003] 3 All ER 996 and assessed damages in [2004] EMLR 2.
• First instance—OBG and Mainstream: Judge Maddocks QC upheld OBG’s interference claim but rejected conversion of contractual rights. Judge Norris QC dismissed Mainstream’s inducing-breach claim against the financier.