The torts to be discussed in this chapter deal with acts done intentionally to cause harm to another’s right to earn a living by wrongful means. They seek to protect the sanctity of contracts and trade generally. For this reason, we have to distinguish between acts done as (1) genuine competition; and (2) pressure which interferes with the trade or contract of another through illegal means. For example, a supermarket which sets up next to a street comer shop and thereby kills another’s business is not committing an economic tort! And we have to keep in mind the fact that the basic concern here is to protect a person’s right to earn a living.
A. PASSING OFF
This is the purest of economic torts. Its purpose is almost exclusively the protection of economic interests. We can begin consideration of this tort by contrasting it with the tort of deceit. While deceit protects a businessman who is the direct target of a fraudulent misrepresentation, passing off protects traders against misrepresentations aimed at their customers, which are calculated to damage their trade or goodwill. The -common law at first confined the action to the use by A of B’s trade name or trade mark in connection with A’s business or goods in a way intended to make B’s customers * believe the goods were produced by B. So the action was aimed at dishonest competitive practices. To drive the point home, let us take some examples:
(a) Reddaway v. Banham
The plaintiff manufactured machine belting for many years, .with the name “Camel Hair Belting.” The defendants, who had previously been in the plaintiff’s employment, went into business and started stamping his goods as “Camel Hair
Beltings.” This was held to be passing off.
(b) White Hudson & Co. Ltd. v. Asian Organisation Ltd.
The appellant sold cough sweets in red paper wrappers called “Hacks.” The majority of their customers were persons not able to read English. They acquired the habit of simply calling for “red paper cough sweets.” Five years later, the respondent began selling sweets in Singapore in similar wrappers but marked “PETCO PECKOS.” The appellants were given an injunction to restrain the respondents from selling their sweets in the same type of wrappers without distinguishing them in some way.
(c) J. Bolingcr v. Costa Brava Wine Co. Ltd.
The plaintiffs produced wine in the Champagne district of France and supplied it in England and Wales. The wine called “Champagne” had a high reputation and had been sold for many years. The defendant imported wine from Spain, which he marketed under the name of “Spanish Champagne.” The plaintiffs sought an injunction to restrain the defendants from passing off, as champagne, wine that was not produced in the Champagne district of France. The injunction was granted.
(d) Reckitt & Colman Products Ltd. v. Borden Inc. (the Jif Lemon Case)
The plaintiffs sold lemon juice in lemon-shaped bottles, a practice developed by them. The defendants began getting them restrained from doing so. The plaintiffs succeeded in getting them restrained from selling juice produced by them in a similarly-shaped bottle.
(e) Warnink v. Townend
Ratio protecting a name exclusively associated with a region in the champagne case noted above was extended to products exclusively associated with a particular method. Injunction was granted against a product not made from eggs and spirit being called advocaat.
In the Jif Lemon case, in answer to the submission that a trader is entitled to expect the public to exercise a reasonable degree of diligence in distinguishing between competing products at p. 888, Lord Oliver said: “The essence of the action for passing off is a deceit practised on the public and it can be no answer, in a case where it is demonstrable that the public has been or will be deceived, that they would not have been if they had been more careful, more literate or more perspicacious. Customers have to be taken as they are found.”
So a trader who discovers from something that the customer says or does that the customer is mistaking his product for a competitor’s though not from anything he has said, may be liable in passing off if he does not correct the customer’s self-induced misapprehension.
B. INTERFERENCE WITH CONTRACTUAL RELATIONS
It is a tort for A to intentionally induce B to break his contract with C, or to prevent B from performing it, both to the damage of C. The damage is what C would suffer in the ordinary course of business, as well as the intended damage.
The point is illustrated by the decision in Lumley v. Gye. Johanna, a niece of the German composer, Richard Wagner, contracted to sing exclusively in the plaintiff’s theatre. The defendant, who was fully aware of this contract persuaded her not to perform. The defendant was held liable in tort.
This was a ground breaking decision in 1853. The difficulty for a court at the time finding a procurer of a breach of contract liable was that the appropriate action for the wrong committed by the contracting party lay in contract; but no such action would be against the procurer. For, as the orthodox rule put it at the time, only a party to a contract could be sued for a breach of contract. The solution settled on by the court to go round this blockade was to allow the procurer to be sued in tort, by an action on the case. The point as the House of Lords stressed recently is that the person procuring the breach of contract was held liable as an accessary to the liability of the contracting party. The procurer’s liability therefore depended on the contracting party having committed an actionable wrong.
In D.C. Thompson & Co. Ltd. v. Deakin, the plaintiffs were publishers. They asked all their employees to undertake not to-become members of a trade union. They dismissed one who did. Other unionised employees of the plaintiffs called out a strike and asked for assistance from other unions. A company which supplied the plaintiffs with paper noticed reluctance on the part of their drivers to deliver to the plaintiffs, so they said they could no longer carry out deliveries because of the “action of trade unions.” The plaintiffs sought an injunction to restrain the unions from procuring this alleged breach of contract. In the course of his judgment, Morris LJ. described the essentials of this tort as follows: “The tort is committed if a person, without justification, knowingly and intentionally interferes with a contract between two other persons.” The plaintiffs’ action failed here because it was not proved that the unions had knowledge of the contract in question. Also no unlawful means had been used to bring about the breach.
From D.C. Thompson & Co. Ltd. v. Deakin, the following additional points can be noted about this tort:
a) There must be a valid contract (any kind of contract); contractual expectations are not enough. So if A teaches B dancing in the hope of engaging him and C induces him to sign instead with C, no tort.
b) Carelessness is not enough because the tort is one of intention. The intention here requires knowledge of the contract, or, as Lord Denning put it in Torquay Hotel Co. Ltd. v. Cousins, the defendant must “turn a blind eye to it and intend to interfere with it.”
c) But recklessness is sufficient.
d) No liability if the inducement is to terminate contract lawfully.
e) The plaintiff must be the intended target.
Inducement for purposes of the action may assume three forms:
a) Direct Persuasion, i.e. persuasion of A to break with B. Here the breach must be a reasonable consequence of the inducement. The defendant may act through an intermediary. Liability does not require the defendant to use unlawful means; persuasion is enough; on the other hand mere advice is not persuasion and involves no liability. See also Camden v. Forcey.
b) Direct prevention (intervention) where A docs an unlawful act (e.g. kidnaps B) to prevent B from performing his contract with C: see GWK Ltd. v. Dunlop Rubber Co. Ltd.
c) Indirect prevention or intervention, i.e. when A induces B to breach his contract with C, see J.T. Stratford & Sons Ltd. v. Lindley.1’1 Here, a breach must be a necessary consequence of the defendant’s conduct, and has to be unlawful. “Indirect interference is only unlawful if unlawful means arc used:” per Lord Denning in Torquay Hotel Co. Ltd. v. Cousins.
Defence
The defendant may plead justification. The point is illustrated by Brimelow v. Casson. In that case the plaintiff paid his chorus girls such low wages that, to make ends meet, they had to practise prostitution. The defendants who ran a protection society for theatre workers induced theatre proprietors not to allow the plaintiff to use their theatre, to get the plaintiff to raise wages. Contracts were broken in some cases and, in others, proprietors refused to enter into new ones. It was held that the defendant’s action was justified because the plaintiff’s conduct was compelling the girls to resort to immorality.
Further, if A has a legally enforceable financial stake in IVs affairs, he may be justified in inducing B to break his contract with C. Sec also Merkur Island Shipping Co. v. Laughlon.
C. CONSPIRACY
This action is an off-shoot of the criminal law. It consists in an agreement between two or more persons to injure X by unlawful means or in a combination to do a lawful act to injure X or to do a lawful act by unlawful means. Sometimes an act if done by an individual will be lawful, but becomes unlawful by virtue of the fact that it is done in combination. This is because of the power of the combination. The unlawful acts may be (a) criminal; (b) tortious; or (c) acts in breach of statute.
In case of (c), the plaintiff should have an independent cause of action for the breach of the statute. In the case of conspiracy consisting of a combination to do a lawful act to injure X, it must be clear that the ulterior motive (i.e. the intention) is to damage the plaintiff rather than to serve the bona fide and legitimate interests of the defendants.
As has been said by an eminent judge Viscount Simon in Crofter Hand Woven Harris Tweed Co. Ltd. v. Veitch: “The test is not what is the natural result to the plaintiffs of such combined action, or what is the resulting damage which the defendants realize or should realize will follow, but what is in truth the object in the minds of the combiners when they acted as they did. It is not consequence that matters, but purpose; the relevant conjunction is not ‘so that’ but ‘in order that’.”
In that case and in Mogul Steamship Co. v. Macgregor Gow ‘& Co., it was held lawful to drive the plaintiff out of business in order to protect the defendant’s own business.
But there will be liability if the action taken exceeds the protection of legitimate interests: see Huntley v. Thornton. Where a defendant acts on mixed motives, liability depends on the predominant motive. For the defence of justification:
Scala Ballroom: In this case, the plaintiffs decided to refuse admission to coloured persons. The Musicians’ Union which had many coloured persons among its members gave notice that none of its members would perform in the ballroom till the ban was lifted. The plaintiff sought an injunction to restrain the defendants, officials of the union, from persuading or attempting to persuade their members not to perform. It was held that an injunction would not lie. The defendants’ purpose, the protection of their members’ interests, was legal. See also Lonrho Ltd. v. Shell Petroleum Co. Ltd (No. 2).
D. INTIMIDATION
This tort is committed if the defendant threatens to use unlawful means to compel A to comply with his wishes and does so to his detriment; or threatens to use unlawful coercion against A and compels him to act to the detriment of B. In Rookes v. Barnard the BOAC case, the plaintiff, an employee of BOAC (being dissatisfied with the union) resigned from his union but continued to work for BOAC. Union officials, some of whom were employees of BOAC and were anxious to maintain a closed shop, threatened BOAC with strike action, unless they dismissed the plaintiff. Strike action would have involved breaches of contract by the employees concerned. BOAC dismissed the plaintiff and he sued the defendants for intimidating BOAC. The House of Lords held the plaintiff could recover. Also, in Tarleton v. M’gawky2’1 the defendants fired guns at Africans in order to frighten them away from trading with his rival. He was held liable in the tort. (How about employing flatulence!)
E. CAUSING LOSS BY UNLAWFUL MEANS
The tort of intimidation, it has been suggested, is only a variant of a broader tort known as “causing loss by unlawful means.” The broader tort was recognised by Lord Reid in J.T. Stratford & Son Ltd. v. Lindley when he says: “The respondents’ action (in calling a strike) made it practically impossible for the appellants to do any new business with the barge-hirers. It was not disputed that such interference with business is tortuous, if any unlawful means are employed.”
This tort was by the decision in OBG v. Allan separated from the principle of accessory liability laid down in Lumley v. Gye, namely inducing breach of a contract.
The tort of causing loss by unlawful means differs from the tort of inducing breach of contract, the Lumley v. Gye principle, as originally formulated, in at least four respects.
First, unlawful means was a tort of primary liability, not requiring a wrongful act by anyone else, while Lumley v. Gye created accessory liability, dependent upon the primary wrongful act of the contracting party.
Secondly, unlawful means required the use of means which were unlawful under some oilier rule (independently unlawful), whereas liability under Lumley v. Gye required only the degree of participation in the breach of contract which satisfied the general requirements of accessory liability for the wrongful act of another person.
Thirdly, liability for unlawful means did not depend upon the existence of contractual relations; it was sufficient that the intended consequence of the wrongful act was damage in any form, for example, to the claimant’s economic expectations. Under Lumley v. Gye the breach of contract was of the essence. If there was no primary liability, there could be no accessory liability.
Fourthly, although both were described as torts of intention, the results which the defendant had to have intended were different. In unlawful means the defendant had to have intended to cause damage to the claimant (although usually that would be a means of enhancing his own economic position).
The elements of this tort as stated by Lord Hoffman in OBG v. Allan are:
A wrongful interference with the actions of a third party in which the plaintiff has an economic interest, and
An intention thereby to cause loss to the claimant.
The most important question here is what constitutes “unlawful means.” Acts against third parties count as unlawful means only if they are actionable by that third party. To quote Lord Hoffman: “Unlawful means … consists of acts intended to cause loss to the claimant (i.e. plaintiff) by interfering with the freedom of a third party in a way which is unlawful as against that third party and which is intended to cause loss to the claimant. It does not … include acts which may be unlawful against a third party but which do not affect his freedom to deal with the claimant.”
F. INJURIOUS FALSEHOOD
Care should be taken not to confuse this tort with defamation. The tort protects interests in the reputation and goodwill of one’s business. The law was thus stated by the Court of Appeal in Ratcliffe v. Evans: “An action will lie for written or oral falsehood … where they are maliciously published, where they are calculated in the ordinary course of things to produce, and, where they do produce, actual damage.” Originally, this tort addressed unwarranted attacks on title to land; hence it was known as slander of title. Later, it was extended to goods — slander of goods. Since Ratcliffe’s case, it is now referred to as “injurious falsehood.”
Any type of interest in land, trademarks, patent, trade names, copyright, company shares — all can found action in this tort. For this proposition, see Joyce v. Motor Surveys. Here, the plaintiff was a tenant of the defendant. To evict him and be able to sell the entire property with vacant possession, the defendant told the Post Office not to forward any more mails to him at that address and told the tyre manufacturers’ association that he was no longer trading there. The court held the defendant liable for injurious falsehood.
The action will also be available, where business reputation is maliciously disparaged; but no imputation entitling action in defamation is made. Interference with prospective advantage, even social, comes within the ambit of this tort. Thus, to deprive A of a marriage by falsely informing the intended husband that A is already married is tortious: see Shepherd v. Wakeman.
For this action, the test is whether a reasonable man will take the defendant’s claim in denigration of the plaintiff’s goods seriously. Thus in White v. Mellin32 W bought bottles of infant’s food made by M for sale in his shop. He affixed to it a label that said Dr. V’s food for infants and invalids, a product of W, was better than any other. Held no injurious falsehood. Just mere puff.
By way of a summary, for the action for injurious falsehood to succeed the following requirements must be established:
a) The plaintiff must prove malicious statement, by showing, for e.g. absence of belief in the truth of the statement on the part of the maker, the defendant.
b) The statement must be a false one about the plaintiff or his property. Not just that a false statement has caused him harm.
c) There must be publication i.e. the statement must be made to a third party.
d) The plaintiff must prove that the false statement caused him pecuniary loss.