Birch v Lloyd & Anor

On an application to strike out, a claim should proceed where it has a real, rather than fanciful, prospect of success. The court should avoid a mini-trial and should consider evidence reasonably expected to be available at trial. Where the assessment is finely balanced, caution generally favours the party resisting summary disposal.

The economic torts require distinct pleaded ingredients. Procuring breach requires an induced breach, knowledge, intention and consequential loss. Unlawful interference requires actionable wrongdoing affecting a third party’s freedom to deal with the claimant and an intention to cause loss. Conspiracy to injure requires a predominant intention to injure. A corporate structure is not a sham merely because it was commercially unviable or used to limit personal liability.

Palmer Birch, a building contractor, brought claims against Michael Lloyd and Christopher Lloyd arising from the collapse and termination of a building project conducted through Hillersdon House Limited. The claims included procuring breach of contract, unlawful interference with contractual relations, unlawful means conspiracy, conspiracy to injure, trespass to goods and conversion.

The defendants applied under CPR 3.4(2)(a), although the application had initially been expressed as one for summary judgment under CPR 24. They argued that the economic tort claims disclosed no reasonable grounds and had no real prospect of success. The central issues were whether the alleged conduct was sufficiently pleaded, whether the corporate structure was unlawful as a sham, and whether the pleaded facts supported causation and intention.

1. Strike-out test. A claim or allegation should be struck out where it has no real prospect of success, meaning that its prospect is fanciful. The court must not conduct a mini-trial. It must consider both the evidence before it and evidence reasonably expected to be available at trial. A plausible claim may proceed where disclosure or cross-examination could materially clarify the facts. In an evaluative borderline case, caution generally favours the party resisting strike-out.
2. Corporate structure and sham. The claimant accepted that HHL had a separate legal personality and did not seek to pierce the corporate veil. The asserted structure was not an unlawful sham. Its commercial purpose, funding arrangements, poor viability and use as a vehicle for contracting did not establish a common intention to deceive third parties or the court. The sham allegations based on the contract structure were therefore struck out.
3. Procuring breach. Applying the ingredients identified in OBG v Allan [2008] 1 AC 1, the pleaded allegations that Michael Lloyd directly prevented payment of Interim Certificates 34 and 35, or prevented issue of Interim Certificate 36, were sufficiently arguable. Intention and causation could be inferred from the evidence and required investigation. The allegations concerning the sub-contractors were different: their terms, the timing of any breach and the resulting loss could have been particularised, but had not been. That part of the claim was struck out without a further opportunity to amend.
4. Unlawful interference. Withdrawal of funds, without a legal obligation to provide them, was not itself actionable by HHL. A positive instruction not to pay, or pressure preventing certification, could arguably be actionable by HHL if it caused breach of the Building Contract. The pleaded intention to rid HHL of further obligations while completing the works by cheaper means was sufficiently arguable. The claim survived to that extent, but the sham-structure and sub-contract allegations were removed.
5. Conspiracy. The alleged concerted procurement of breaches of the Building Contract and intention to injure the claimant were sufficiently arguable for unlawful means conspiracy. The alternative conspiracy-to-injure claim was inadequately particularised: asserting that refusal of payment would cause damage did not plead the required predominant motive to injure, particularly as it said nothing about Christopher Lloyd’s involvement or motive. It was struck out.
6. Order. The application succeeded to the extent identified. The claims for trespass to goods and conversion remained for trial, subject to the judge hearing further submissions about references to those claims in the conspiracy pleading.

This was a first-instance application in the High Court (Technology and Construction Court). The judgment does not state any subsequent appellate decision.