Directors held liable for inducing breach of contract and unlawful means conspiracy where they placed company into liquidation to avoid outstanding debt

The Technology and Construction Court has upheld economic tort claims against two directors of a limited liability company who placed the company into liquidation in order to avoid the company having to pay its outstanding debts to a building contractor. The building contractor succeeded in establishing that one of the directors had induced the company to repudiate the building contract, and also that they had conspired to injure the building contractor using unlawful means: Palmer Birch (a partnership) v Lloyd [2018] EWHC 2316 (TCC).

The case highlights the risks for individuals who operate through the medium of an undercapitalised limited liability company, in particular that they may not be able to rely on the protection of the company’s distinct legal personality in circumstances where their conduct gives rise to claims under one of the economic torts.

Economic tort claims are not straightforward to establish, in light of the high evidential hurdles that must be met. However, this decision illustrates the potential for bringing an economic tort claim in a relatively novel context, in particular where there is an attempt to abuse the doctrine of separate corporate personality. It seems significant in this case that funds which could have been made available to the company to meet its obligations to the claimant were, instead, diverted to a separate company which was used to complete the works through a different contractor.

Gary Milner-Moore and Catherine Emanuel consider the decision further below. Continue reading

Supreme Court finds contempt of court constitutes unlawful means for the tort of conspiracy

The Supreme Court has held that contempt of court can constitute unlawful means for the purpose of the tort of conspiracy: JSC BTA Bank v Khrapunov [2018] UKSC 19.

The decision is significant as it confirms that third parties may find themselves exposed to litigation and subject to damages if they conspire in the commission of a contempt of court. The Supreme Court made a number of interesting observations on the scope of the economic torts more generally and, on a matter of wider interest, also hinted that the law might develop to allow litigants to recover damages for contempt of court in the absence of a conspiracy.

The latter point could have potentially far-reaching practical consequences. Until now, contempt of court has generally been regarded as a matter between the wrongdoer and the court, rather than a wrong actionable by private parties who have suffered loss as a result. This decision leaves the door open for a litigant to argue that civil damages are recoverable for an opponent’s contempt of court.

Gary Milner-Moore and Kate Emanuel from our disputes team consider the conspiracy aspect of the decision further below.  The decision is also of interest for its consideration of the issue of jurisdiction, which is considered in a separate blog post here. Continue reading

Supreme Court holds English court has jurisdiction over tort claim where conspiracy hatched in England

The Supreme Court has held that the place of the event giving rise to damage in a claim alleging the tort of conspiracy to injure by unlawful means is where the conspiratorial agreement was made. As that was England, the English courts had jurisdiction: JSC BTA Bank v Khrapunov [2018] UKSC 19.

More generally, the decision confirms that when looking for the place of the event giving rise to damage, the court should focus on the events which set the tort in motion.

The decision is also of interest for its consideration of what amounts to unlawful means for the purposes of the tort of conspiracy to injure by unlawful means. That part of the decision will be considered in a separate blog post to be published shortly.

The Supreme Court’s decision upholds the Court of Appeal’s decision on both issues. For our earlier posts on the Court of Appeal’s decision see here and here. Continue reading

Court of Appeal finds third party who conspired with defendant to breach freezing order could be liable for tort of conspiracy to injure by unlawful means

In a claim by JSC BTA Bank against the son-in-law of its former Chairman alleging conspiracy to injure by unlawful means, the Court of Appeal held that breach of the terms of a freezing order could qualify as the requisite unlawful means: Khrapunov v JSC BTA Bank [2017] EWCA Civ 40.

The decision serves as a reminder that those who are not themselves parties to litigation or subject to court orders may remain exposed to claims in conspiracy where they assist in the breach of a court order.

Gary Milner-Moore and Kate Emanuel from our disputes team consider the decision further below.

The judgment is also of interest for its consideration of jurisdictional issues in economic tort claims and, in particular, where the event giving rise to damage takes place in a claim for conspiracy to injure by unlawful means. That part of the decision is considered in a separate blog post here.

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Court of Appeal gives further guidance on how jurisdiction rules apply in economic tort claim

The Court of Appeal has held that the place of the event giving rise to damage in a claim alleging conspiracy to injure by unlawful means is where the conspiracy was hatched. As the claimant bank had far the better of the argument that this was England, the English courts had jurisdiction: Khrapunov v JSC BTA Bank [2017] EWCA Civ 40.

More generally, the decision suggests that when looking for the place of the event giving rise to damage, the court should focus on the events which set the tort in motion, and it is irrelevant for jurisdiction purposes that damage is required before a cause of action is complete.

The test for jurisdiction in tort cases isn’t always easy to apply, particularly in cases concerning economic loss. This is the latest case in which the Court of Appeal has considered the applicable principles. For our posts on the earlier Court of Appeal decisions see here and here.

The decision is also of interest for its consideration of what amounts to unlawful means for the purposes of the tort of conspiracy to injure by unlawful means. That part of the decision will be considered in a separate blog post, to be published shortly.

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Court of Appeal considers jurisdiction test in tort claims against employees under Brussels regime

The Court of Appeal has held that claims in conspiracy against former employees did not come within the employment jurisdiction provisions in the Lugano convention (which require an employer to sue an employee in his or her domicile in matters relating to the employment contract). There was therefore no requirement to bring proceedings against the former employees in Switzerland as their place of domicile and proceedings could continue in England against all the alleged conspirators: Bosworth and another v Arcadia Petroleum & Others [2016] EWCA Civ 818.

The court rejected the argument that previous Court of Appeal and CJEU authorities meant that  conspiracy claims which could be pleaded as a breach of an employment contract necessarily came within the employee protection provisions. The correct approach was to consider whether the reality and substance of the conduct related to an individual’s contract of employment.

On the facts of this case, the court held that the contracts of employment provided the opportunity for the allegedly nefarious activities, but no more than that.

The outcome of this appeal has been awaited with interest as there has been substantial uncertainty over when a tort claim relates to an individual contract of employment within the meaning of the Brussels regime (the same question arises under the Lugano Convention, Brussels I Regulation and recast Brussels Regulation). The decision rejects a mechanistic approach in favour of looking at the substance of the conduct in issue. How it will apply in any particular case may not however always be easy to predict, given that the proper characterisation of the case will be determined by the substance of the matter and the facts of the case. Considerable scope for a jurisdiction challenge therefore remains where proceedings are commenced against an EU or EFTA domiciled employee in a country other than their domicile.

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