Douglas & Ors v Hello! Ltd & Ors

The House of Lords considered three related appeals raising the scope and elements of several economic torts (in particular the torts of inducing breach of contract and of causing loss by unlawful means), the scope of the tort of conversion, and the applicability of breach of confidence to commercially valuable photographic images. The court analysed the distinct elements of (i) accessory liability for procuring a breach of contract (Lumley v Gye), and (ii) primary liability for intentionally causing loss by unlawful means, emphasising that unlawful means must be independently actionable against the third party (subject to a narrow qualification). The court rejected the so-called unified theory that collapsed these torts into one and restated distinct mental and causation requirements for each.

The court also examined whether conversion should be extended to cover contractual choses in action and whether confidential information can include commercially negotiated exclusives in photographs. The House held by majority that the publisher OK! had a cause of action in breach of confidence against Hello! in respect of unauthorised wedding photographs and allowed that appeal; the related appeals about conversion and the wider economic tort claims were, on the facts and by majority, dismissed.

This multi-appeal judgment arose from three consolidated appeals concerning (i) OBG Ltd v Allan (an insolvent company whose assets and contractual claims had been taken by receivers later held invalid), (ii) Douglas & others v Hello! Ltd (OK! magazine's claim against Hello! for publishing surreptitious wedding photographs after paying for exclusivity), and (iii) Mainstream Properties Ltd v Young (a company claiming that a financier induced breach of directors' duties and contracts).

Procedural posture: The cases came on appeal from the Court of Appeal (reported in the consolidated list of appeals [2005] EWCA Civ 106; [2005] EWCA Civ 595; [2005] EWCA Civ 861) to the House of Lords, [2007] UKHL 21.

Relief sought: Claimants sought (i) damages for unlawful interference with contractual relations and in conversion (OBG), (ii) damages and injunctive relief for breach of confidence and for causing loss by unlawful means (OK! against Hello!), and (iii) damages for inducing breach of contract (Mainstream).

Issues framed:

• What are the proper boundaries and elements of (a) the tort of inducing breach of contract (Lumley v Gye), and (b) the tort of intentionally causing loss by unlawful means?
• Whether the unified approach (treating inducement and unlawful means as one tort) should be retained or abandoned.
• Whether conversion (a strict liability tort) can be extended to choses in action / contractual rights.
• Whether confidential information can include commercial exclusivity in photographic images and, if so, whether Hello!'s conduct breached confidentiality or otherwise constituted unlawful means.

Reasoning in brief: The House undertook a detailed historical and analytical review. It concluded the two torts should be treated separately: inducing breach of contract requires knowledge of the contract and an intention to procure its breach; unlawful means is primary liability and requires independently unlawful conduct against a third party (i.e. conduct actionable by that third party, or which would have been so but for absence of loss). The court was cautious about expanding the tort of conversion to cover all intangibles; some Lords favoured extending conversion to contractual rights, but a majority preferred that such a fundamental change be left to Parliament or the Law Commission. On the facts the majority allowed OK!'s breach of confidence claim because the Douglases and OK! had imposed a limited confidentiality in photographic images which Hello! knowingly defeated; the other economic tort and conversion claims failed on the particular facts and orthodox legal principles.

Appeal allowed in respect of the Douglas/OK! breach of confidence claim; the appeals concerning conversion and the economic tort claims (OBG and Mainstream) were dismissed. The House emphasised that (a) inducing breach of contract and causing loss by unlawful means are distinct torts with different elements, (b) unlawful means requires independently actionable conduct against a third party (subject to a narrow qualification), and (c) conversion should not be extended to all choses in action by judicial fiat; such radical extension should be for Parliament or the Law Commission. On the facts, OK! succeeded in breach of confidence and was awarded damages; the liquidator's conversion/economic tort claims failed and Mainstream's inducement claim failed for lack of intention to procure breach.

On appeal from the Court of Appeal (consolidated appeals: [2005] EWCA Civ 106; [2005] EWCA Civ 595; [2005] EWCA Civ 861) to the House of Lords, [2007] UKHL 21. The House delivered multi‑opinion judgments resolving the distinct issues raised and disposing of the three appeals as described above.