The Beans Group Ltd v Myunidays Ltd

Liability for inducing breach of contract requires knowledge of the contractual restriction, including reckless or blind-eye knowledge, and an intention to procure the breach. Gross negligence is insufficient. A party may continue an inconsistent transaction after learning of the relevant contract, but liability requires continued active dealing and proved loss. Where those elements are established, the claimant may recover loss caused by the continuation and obtain an injunction restraining further performance. A party responding to a counterparty’s initiative, after asking it to check its legal position, is not necessarily an inducer merely because the resulting contract is inconsistent with an undisclosed contract.

The claimant and defendant supplied competing student-verification and promotional services to retailers. The retailer Shein had entered into exclusive contracts with the claimant covering Australia, the United Kingdom and the United States, and later entered into contracts with the defendant covering overlapping territories.

The claimant alleged that the defendant first induced Shein to breach its contracts by entering into the overlapping arrangements and later committed the tort by continuing to perform after receiving notice of the claimant’s contracts. The court had to determine whether the defendant possessed the necessary knowledge and intention at the time of contracting, and whether its continued performance after disclosure caused the claimant loss.

1. First issue. The governing principles were those restated in OBG v Allan [2008] AC 1. Inducing breach of contract is an accessory tort. The defendant must know that it is inducing a breach and intend to do so. Recklessness or blind-eye knowledge may suffice, but negligence, however gross, does not.
2. The defendant’s employee had reasonably believed that Shein was free to contract in the relevant territories. Shein had taken the initiative, the contractual terms were confidential and not generally accessible, and the employee had asked Shein to refer the proposed terms to its legal department. The defendant therefore lacked the necessary knowledge and intention when the contracts were made. The claims based on the original contracting were dismissed.
3. Second issue. The defendant accepted, for the purposes of the case, the principle that an inconsistent transaction may become actionable where it is continued knowingly and actively and damage is proved. This reflected the reasoning discussed in DC Thomson & Co Ltd v Deakin [1952] Ch 646 and the related authorities. The defendant acquired the necessary knowledge when the claimant served the contracts as exhibits to evidence on 14 December 2018. Its earlier warning on 12 November 2018 did not establish sufficient knowledge of the specific contractual restrictions.
4. The defendant continued actively to provide student-verification technology and promotional services. On the balance of probabilities, if those services ceased, Shein would return to the claimant rather than abandon student-discount marketing or use an incomplete alternative. Continued performance therefore caused the claimant loss.
5. The claimant succeeded on the second issue. Injunctions in the agreed form were granted, effectively preventing the defendant from continuing to service Shein under its contracts.

First-instance decision. No appellate history was stated in the judgment.