Northamber PLC v Genee World Limited & Ors

A person induces a breach of contract where, with the necessary knowledge and intention, their participation has a sufficient causal connection with the breach to attract accessory liability. Active persuasion is unnecessary. Knowingly entering into and performing a transaction essential to the breach may suffice.

A director is generally protected from personal liability when acting bona fide within the scope of authority. The protection may be lost where all the circumstances demonstrate a serious breach of duty to the company, including causing it to breach both a contract and an injunction.

Silence in response to an offer to mediate is generally unreasonable. Breaching an order requiring reasons for non-engagement aggravates that conduct, although a costs sanction remains discretionary.

Northamber PLC distributed audiovisual products supplied by Genee World Ltd under an agreement giving Northamber exclusivity in the United Kingdom. Genee nevertheless supplied other purchasers, including Interactive Educational Solutions Ltd (“IES”). Northamber claimed against Genee for breach of contract and against IES and Genee’s director, Mr Singh, for inducing breach of contract and unlawful means conspiracy.

The High Court, in [2022] EWHC 3562 (Ch), held Genee liable and imposed limited liability on Mr Singh for transactions after an injunction had been granted. It dismissed the inducement claim against IES, holding that placing purchase orders merely gave Genee an opportunity to breach. It also dismissed the conspiracy claims and made costs orders.

Northamber appealed on inducement, conspiracy, Mr Singh’s liability, contractual construction and costs. Mr Singh cross-appealed against his personal liability. The central issues were whether IES’s necessary participation in sales constituted inducement, whether Mr Singh was protected by the rule in Said v Butt, and how the parties’ refusal to mediate affected costs.

1. Northamber’s appeal was allowed in part and Mr Singh’s appeal was dismissed. IES induced Genee’s breaches when it knowingly placed orders which Genee accepted and fulfilled. Its participation was necessary because a breach of the exclusivity clause required a willing counterparty. By placing orders, paying the price and taking the goods, IES had the sufficient causal connection and causative participation required for accessory liability. Genee’s pre-existing willingness to breach was immaterial because each sale was a separate breach requiring a purchaser.

2. Inducement requires persuasion, encouragement or assistance having a sufficient causal connection with the breach. Mere facilitation remains insufficient, but active persuasion is unnecessary. Knowingly entering into an inconsistent dealing may constitute inducement where the defendant’s involvement or co-operation is necessary to the breach. The authorities on joint tortfeasance did not establish a contrary rule because they concerned defendants who merely supplied a means which others independently chose whether to use unlawfully.

3. IES had no lawful justification. Pursuit of its own economic interests did not suffice, and it possessed no legal right equal or superior to Northamber’s contractual right. The unlawful means conspiracy issue was moot because it could add nothing to the damages recoverable for inducing breach of contract.

4. The rule in Said v Butt generally protects a director who induces the company’s breach while acting bona fide within the scope of authority. Liability does not invariably require dishonesty or conspiracy. The issue depends upon all the circumstances, including the director’s motivation, duties to the company, the nature of the company’s obligation and the consequences of its breach. A director who causes the company to breach both its contract and an injunction commits a serious breach of the duty under section 172 of the Companies Act 2006 and is not protected. Mr Singh was therefore liable for the post-injunction period.

5. The dismissal of the claim against Mr Singh for earlier periods stood. Northamber had not challenged by cross-examination whether he acted bona fide, although bad faith was a material allegation. Mr Singh’s pleading objection to the later-period claim had been waived when his trial counsel agreed that the issue should be determined.

6. The judge correctly construed the exclusivity clause as covering delivery to addresses in the United Kingdom rather than all sales to United Kingdom-based customers. The appeal concerning sales delivered to Vietnam was dismissed.

7. Silence in response to Northamber’s offer to mediate was unreasonable. Mr Singh and IES aggravated that conduct by breaching an order requiring reasons for non-engagement. A costs sanction was not automatic, but the judge had erred by effectively placing the burden on Northamber to chase a response. Northamber’s recovery against Mr Singh was increased from 70% to 75%, and the costs order concerning IES required reconsideration.

8. Permission to appeal against the later slip-rule order was refused because the amount recoverable from the dissolved company was academic and the criteria for determining an academic appeal were not satisfied.

• Court of Appeal (Civil Division): In [2024] EWCA Civ 428, allowed Northamber’s appeal on inducement against IES and allowed its costs appeal to a limited extent. It dismissed Northamber’s challenges concerning Mr Singh’s earlier conduct and the construction of the exclusivity agreement, dismissed Mr Singh’s appeal, and refused permission for an academic appeal against the later slip-rule order.
• High Court: In [2022] EWHC 3562 (Ch), held Genee liable for breach of contract and Mr Singh liable for inducing post-injunction breaches. It dismissed the inducement claim against IES and the unlawful means conspiracy claims.