Thames Valley Housing Association Ltd & Anor v Elegant (Guernsey) Ltd & Ors

A person may incur personal liability for procuring a company’s breach of contract despite having no formal role in its governance, where the person controls the company informally and satisfies the ordinary requirements for the tort. Actual knowledge, blind-eye knowledge or recklessness may suffice, but the defendant must intend the breach as an end or means to an end. A conspiracy to injure by unlawful means may be established where a company and an outsider combine, and the company’s breach of contract constitutes the unlawful means. A person liable for the same damage as a solicitor who has honoured an undertaking may be required to make a just and equitable contribution.

Elegant acquired a development site subject to a charge in favour of Bank of Scotland and later contracted to sell part of it to Thames Valley Housing Association Ltd and Thames Valley Charitable Housing Association Ltd. Elegant failed to procure the release of the relevant plots from the charge. Its solicitors, Willmett, had given an undertaking to procure that release and paid Bank of Scotland after the undertaking was not honoured.

Willmett sought contribution from Howard Macpherson, alleging that he was the person behind Elegant and had procured Elegant’s breaches of contract and its unlawful means conspiracies. Elegant’s defence was struck out, and judgment in default was entered against it. The issues concerned Macpherson’s effective control, personal liability, contribution and the amount recoverable.

1. Findings of control and fact. Macpherson was the effective decision-maker and economic beneficiary of Elegant, despite having no formal office or direct shareholding. He negotiated the acquisition and bank finance, directed material transactions, caused sale proceeds to be paid to Elegant rather than Bank of Scotland, and failed to arrange the payment required to release the charge. His evidence, disclosure and failure to call material witnesses justified adverse inferences.
2. Inducing breach of contract. Following OBG Ltd v Allen [2008] 1 AC 1, the relevant requirements included actual, blind-eye or reckless knowledge of the breach; an intention that the breach should be an end or means to an end; an actual breach; and a sufficient causal connection between the defendant’s conduct and the breach. Those requirements were satisfied. Elegant breached its contractual obligation to transfer the plots free from encumbrances and its full title guarantee. Macpherson knew the relevant facts, intended or used the breach to obtain the sale proceeds, and caused Elegant to act as it did.
3. Unlawful means conspiracy. The court applied the formulation in Kuwait Oil Tanker Co v Al Bader [2002] 1 All ER (Comm) 271. A breach of contract could constitute unlawful means, and there was no legal impediment to Macpherson and Elegant being co-conspirators. The conspiracy claims concerning TVHA and Willmett were made out, although the former added little to the procuring-breach claim.
4. Contribution and remedy. Under sections 1(1), 2(1) and 6(1) of the Civil Liability (Contribution) Act 1978, Macpherson and Willmett were liable in respect of the same damage. A 100 per cent contribution was just and equitable because Elegant had received the benefit of the transaction and Macpherson had caused the breach. Macpherson was alternatively directly liable to Willmett for conspiracy or procuring breach of the implied term of its retainer. He was ordered to pay the sum Willmett had paid under its undertaking, with interest.

The judgment itself records that TVHA obtained judgment against Willmett for breach of undertaking in [2009] EWHC 2647 (Ch). The present proceedings concerned Willmett’s Part 20 claims against Elegant and Macpherson.