James Kemball Ltd v "K" Line (Europe) Ltd & Anor

For the tort of inducing breach of contract, mere prevention of contractual performance is insufficient. The claimant must show an arguable case that the defendant participated in the breach, for example through encouragement, persuasion or equivalent conduct. Whether communications amount to encouragement is context-sensitive and normally requires a trial where the pleaded facts support a realistic inference.

At the permission-to-serve-out stage, the court must avoid a mini-trial. A claim with a real, rather than fanciful, prospect of success may proceed even where causation and the precise communications remain uncertain. Applicants for permission must give a fair and frank presentation of the cause of action and likely defences. A material omission may be marked through an indemnity costs order rather than setting aside permission.

James Kemball Ltd claimed against K-Line (Europe) Ltd for breach of a haulage services agreement and against its Japanese parent, Kawasaki Kisen Kaisha Ltd, for procuring or inducing that breach. The claim against the parent arose from a joint venture which took over the relevant container-shipping operations and left the subsidiary unable to perform the agreement.

Moulder J had granted permission to serve the parent outside the jurisdiction. The parent applied to set that permission aside, arguing that the tort claim had no reasonable prospects of success and that the claimant had failed to give full and frank disclosure on the ex parte application. The issues were whether the pleaded case disclosed a realistic inference of participation in the breach and what procedural consequence followed from the disclosure failure.

1. The application was dismissed. Permission to serve Kawasaki Kisen Kaisha Ltd outside the jurisdiction remained in force. The claimant was ordered to pay the costs of the application on the indemnity basis.
2. The governing distinction was that an inducement case requires the defendant to participate in the contractual breach by joining with the contract-breaker. Mere prevention, where the defendant acts independently, is insufficient. The relevant question was whether the alleged acts had a sufficient causal connection with the breach to attract accessory liability, and whether the breach was intended as a means to an end rather than merely a foreseeable consequence.
3. The pleaded facts made the alleged inference realistic. The parent owned the subsidiary, acted as its principal, shared senior personnel with it and was closely involved in the joint venture. It was therefore arguable that discussions had occurred and that what passed might have amounted to encouragement. The distinction between information and encouragement depended on factual context. The court declined to conduct a mini-trial, and causation was also premature because an event may have more than one cause.
4. The alternative case based on dealings inconsistent with the underlying contract was not decided. The judge considered that it appeared to conflict with the principle that mere prevention is insufficient, but regarded the issue as difficult and relatively uncharted without the full facts.
5. The claimant had failed to give full and frank disclosure. Its evidence did not fairly explain the participation or encouragement case, nor identify the likely defence based on OBG v Allan [2008] 1 AC1, despite the parent having said that it did not understand the basis of the claim. The duty required investigation of the cause of action, the facts relied upon and likely defences.
6. The failure did not make it useful to set aside permission where there was no time bar and the claim had a real prospect of success. The court could mark the breach through an indemnity costs order. The abuse-of-process submission also failed because there were reasonable grounds for advancing the claim.