MX1 Ltd & Anor v Farahzad

A lawful-means conspiracy claim must identify a combination, an unlawful object and resulting damage. The object is assessed subjectively by reference to the parties’ real reasons. Where there are several purposes, the predominant purpose controls. Damage and its natural consequences do not alone establish the tort.

Under Article 4(1) of the Rome II Regulation, damage occurring in several countries may engage several applicable laws. Financial damage is located where the relevant loss becomes irreversible. An unlawful-means conspiracy claim based on breach of confidence must plead the basis of the duty of confidence and facts showing why the information is confidential.

The claimants alleged that the defendant operated a Twitter account which published damaging allegations and confidential information concerning their businesses. They pleaded lawful-means and unlawful-means conspiracy. They also sought continuation of a preservation order and Norwich Pharmacal relief.

Following an earlier application before the Chancellor, the defendant applied under the Civil Procedure Rules 1998 for strike-out, alternatively summary judgment. The issues were whether the lawful-means conspiracy was adequately pleaded, which law governed the alleged losses under the Rome II Regulation, and whether the unlawful-means conspiracy based on breach of confidence disclosed a viable claim.

The Defendant’s strike-out and summary-judgment application was granted in part. The unlawful-means conspiracy plea was struck out. The lawful-means conspiracy plea was held defective, but the claimants were given 14 days to apply to amend it. The applicable-law ground failed, subject to clarification of the pleading.

1. Lawful-means conspiracy. The tort requires a combination between two or more parties, an unlawful object and damage resulting from the combination. The object is subjective: the question is the real reason in the minds of the parties, not merely the natural result of their acts or damage which they realised or ought to have realised. Natural and probable consequences may assist an inference of state of mind, but must be treated with particular care. Where there are several objects, liability depends on the predominant purpose. Each participant must possess the requisite unlawful object. These principles were drawn from Crofter Hand Woven Harris Tweed Co. v. Veitch [1942] AC 435, Sorrell v. Smith [1925] AC 700, Huntley v. Thornton [1957] 1 WLR 321 and Lonrho Ltd. v. Shell Petroleum (No. 1) [1982] AC 173.
2. The pleading wrongly derived the parties’ purposes from the asserted purpose of the conspiracy. It did not clearly plead the subjective purposes of the alleged conspirators, the scope of the particulars, or, insofar as passive adoption was alleged, the defendant’s knowledge and countenancing of the alleged unlawful purpose. Paragraphs 19–21 of the draft Amended Particulars of Claim were therefore defective.
3. Applicable law. If a foreign law governed the cause of action, it was sufficient at this stage for the defendant to establish that an applicable foreign law existed. The claimants would then have to plead the facts constituting the foreign cause of action. Article 4(1) of the Rome II Regulation refers to the law of the country in which damage occurs. Where damage occurs in several countries, the natural reading is that the laws of those countries apply distributively; the test is not the country where predominant damage occurred.
4. For financial loss, the relevant location is identified by reversibility. Loss occurs where the relevant act becomes irreversible or produces a concrete transaction causing loss. Applying that approach, the pleaded agreements with Kroll and the claimants’ lawyers could constitute irreversible loss incurred in England and Wales. The fact that this represented only part of the overall loss did not prevent English law applying to that loss. The second ground therefore failed.
5. Unlawful-means conspiracy. The pleading did not state how the alleged obligation of confidence arose or plead the facts by which the information was confidential. It merely asserted confidentiality. The court referred to Faccenda Chicken Ltd v. Fowler [1987] 1 Ch 117, but found it unnecessary to examine the law in detail. The court expressed no view on whether the defendant’s appreciation of confidentiality was independently required.

The preservation order was continued by agreement, the Norwich Pharmacal application was dismissed, and the defendant’s undertaking not to publish or facilitate publication of harmful tweets was recorded. Costs remained at large.