Kawasaki Kisen Kaisha Ltd v James Kemball Ltd

Liability for inducing breach of contract is accessory. The defendant must persuade, encourage or assist the contract-breaker, with conduct that causally participates in the breach and is capable of operating on the contract-breaker’s will. Conduct which merely prevents performance, or lawfully makes breach inevitable without influencing that choice, is insufficient.

Inconsistent dealings are not a separate form of liability and must satisfy the same requirements. A lawful omission, without an obligation to act, cannot constitute such a dealing. The defendant must intend the breach as an end or as a means to a further end; knowledge or foresight that breach will result is insufficient. A claim advanced for service outside the jurisdiction or by amendment must be coherent, particularised and supported by evidence giving it a real, rather than fanciful, prospect of success.

Kawasaki Kisen Kaisha Ltd v James Kemball Ltd concerned a claim that the parent company of an international shipping group induced its English subsidiary to breach a haulage service agreement. The group’s container business had been transferred to a new joint venture. That transfer left the subsidiary without the business required to fulfil its minimum haulage obligations to the claimant.

Teare J, in [2019] EWHC 3422 (Comm), dismissed the parent company’s application to set aside permission to serve the claim outside the jurisdiction. He considered that an alleged inference of encouragement had a real prospect of success. On appeal, the claimant also relied on proposed amendments alleging encouragement, persuasion, financial protection and inconsistent dealings. The central question was whether the existing or amended claim had a real prospect of establishing inducement, causative participation and the necessary intention.

1. Appeal allowed. Popplewell LJ, with whom Henderson LJ and David Richards LJ agreed, held that neither the existing pleading nor the proposed amendments disclosed a claim with a real prospect of success. The order granting permission to serve the claim outside the jurisdiction was set aside.

2. The merits test for service outside the jurisdiction and for permission to amend is the same as the summary judgment test. The claim must have a real rather than fanciful prospect of success and must carry a degree of conviction. A coherent and properly particularised pleading must also have evidential support for its material factual allegations.

3. Following OBG v Allan [2008] 1 AC 1, inducing breach of contract is a form of accessory liability. Inducement and causation form a single ingredient. The defendant must persuade, encourage or assist the contracting party to break the contract, and that conduct must participate causally in the breach. Mere prevention or facilitation is insufficient.

4. The formation of the joint venture made the subsidiary’s breach inevitable and left it with no choice about performance. Nothing the parent said or did could therefore operate on the subsidiary’s mind or will. Any financial protection or reassurance would have left the subsidiary in precisely the same position and could not have caused its breach.

5. Inconsistent dealings are only an example of conduct which may amount to persuasion, encouragement or assistance. They remain subject to the requirements of accessory liability and causative participation. The relevant passages in D.C Thomson & Co Ltd v Deakin [1952] Ch 646 had to be read in light of OBG v Allan; a suggestion that actionable interference could occur without the contract-breaker’s knowledge could not survive that authority. Lictor Anstalt v Mir Steel [2011] EWHC 3310 (Ch) was distinguishable because the alleged accessory’s participation was necessary to enable a breach which the contract-breaker wished to commit. A lawful omission to provide business, in the absence of any obligation to do so, was neither an inconsistent dealing nor participation in the breach.

6. The intention requirement was also unsatisfied. The breach must be intended as an end or as a means of achieving a further end. It is insufficient that breach is foreseen or intended merely as a consequence. The joint venture was not aimed at the service agreement, and there was no coherent evidential basis for alleging that obtaining cheaper haulage services or profits from those services was a specific purpose of the restructuring.

• Court of Appeal (Civil Division): In Kawasaki Kisen Kaisha Ltd v James Kemball Ltd [2021] EWCA Civ 33, the court unanimously allowed the appeal and set aside the order granting permission to serve the claim outside the jurisdiction.
• Commercial Court: Teare J, in [2019] EWHC 3422 (Comm), dismissed the defendant’s application to set aside permission for service outside the jurisdiction, holding that the inducement claim had a real prospect of success.