Northamber PLC v Genee World Limited & Ors.

A director who procures the company’s breach of contract is ordinarily protected by the Said v Butt principle if acting bona fide within the scope of authority and in accordance with duties owed to the company. The protection does not extend to conduct which knowingly causes the company to breach an injunction and is inconsistent with the director’s duty under Companies Act 2006, section 172.

For inducing breach of contract, an order which merely gives a supplier an opportunity to breach its contract does not, without more, amount to inducement. A defendant’s economic self-interest is not lawful justification for inducing a breach. Tort damages compensate actual loss, not a contractual compensation formula which binds only the contracting parties.

Northamber was granted exclusive rights to distribute Genee World Products in the United Kingdom, subject to four excluded accounts. Genee nevertheless made direct UK sales. Its liability for breach of the exclusivity agreement had already been established, and it later entered liquidation.

Northamber sued Genee’s sole director, Mr Singh, and IES. It alleged that they induced Genee’s breach and conspired to injure Northamber. Mr Singh maintained that the agreement permitted a transition period, had been terminated, or could be disregarded because of Northamber’s conduct and Genee’s financial position. IES contended that its direct orders merely followed Northamber’s withdrawal of credit.

The court determined the contractual disputes, the elements of inducing breach of contract, the director’s immunity, conspiracy, justification and recoverable loss.

1. Judgment was entered for Northamber against Mr Singh for £24,567.74. The claims against IES for inducing breach of contract and conspiracy failed.

2. The exclusivity agreement gave Northamber full UK exclusivity from 1 July 2017, save for the excluded accounts. It contained no transition period. Northamber paid within the agreed credit terms, did not breach its stockholding obligation, and validly exercised its contractual set-off rights. The alleged agreement at the Oxford meeting to terminate exclusivity was not made, and Genee’s letter of 25 July 2018 did not validly terminate the agreement.

3. Genee therefore breached the agreement whenever, before liquidation, it supplied Genee World Products in the UK to persons other than Northamber and the excluded accounts. IES knew of the relevant exclusivity terms. However, IES’s placing of orders with Genee, without further persuasion, pressure or procurement, merely gave Genee an opportunity to breach. It did not induce Genee’s breach.

4. Mr Singh, Genee’s sole director, procured Genee’s breaches. The Said v Butt principle protected him for breaches before the injunction of 10 September 2018. Northamber had not established that he acted outside his authority or otherwise than bona fide in what he considered Genee’s interests. After the injunction, inducing sales contrary to it exposed Genee to contempt and reputational harm and could not be consistent with his section 172 duty.

5. Economic self-interest did not justify inducing Genee’s breach. The conspiracy claims also failed: IES had not used unlawful means, Genee and Mr Singh did not commit the same unlawful act, and injuring Northamber was not the predominant purpose of any lawful combination.

6. Northamber proved post-injunction sales to IES of £491,354.75 excluding VAT. Its tort loss was the 5% margin it would probably have earned, rather than the contractual 25% compensation rate. Damages were therefore £24,567.74.

not stated in the judgment.