Lecture 4 - 313359 Interference with Contract or Business - Notes PDF

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Interference with Contract or BusinessA. IntroductionB. Interference with a subsisting contractC. ConspiracyD. IntimidationE. Passing-offD. Breach of confidenceChapter 3 Interference with Contract or BusinessA. IntroductionThis area discusses the unlawful interference with another person’s intangibl...

Description

Interference with Contract or Business A.

Introduction

B.

Interference with a subsisting contract

C.

Conspiracy

D.

Intimidation

E.

Passing-off

D.

Breach of confidence

Chapter 3

A.

Interference with Contract or Business

Introduction

This area discusses the unlawful interference with another person’s intangible interests rights or interests that arise due to his contract or business. Among those interference are as follows and are called emerging torts:interference with a subsisting contract intimidation conspiracy passing-off breach of confidence malicious prosecution liability for false statement (deceit)

B.

Interference with a subsisting contract

A commits a tort against C if, without lawful justification, he persuades B to break his contract with C. He also commits the tort if he uses some unlawful means to prevent the performance of B & C contract. Can be divided into:inducing breach of contract interference with the performance of the contract interference other than directly inducing breach

1.

Inducing breach of contract

(a) Definition A commits a tort if, without lawful justification, he persuades B to break his contract with C. Lumley v Gye [1853] 2 Bl & Bl 216 - D enticed and persuaded W to refuse to perform in P’s theatre Loh Holdings Sdn Bhd v Peglin Development Sdn Bhd [1984] 2 MLJ 105 FC tort of inducement is defined as “the tort is committed when a third person deliberately interferes in the execution of a valid contract which has been concluded between two or more other parties.” (b) Elements Five conditions: ‘direct’ interference, or an ‘indirect’ interference & use of unlawful means;

-

D had knowledge of the relevant contract; D had the intention to interfere with the contract; In an action other than for a quia timet injunction – P must show special damage; In any quia timet action - likelihood of damage; and No defence of justification.

Irrelevant factors: D may have acted in good faith and without malice. D has acted under a mistaken understanding as to his legal rights. Thus, P should be able to prove:1) the procurer acted with the requisite knowledge of the existence of the contract 2) the procurer intended to interfere with the performance of the contract Intention is to be determined objectively. Direct interference by unlawful means Direct action by A on the person or property of B which caused B to be disable to perform his contract with C Example:A physically detains B’s specialised tools without which B cannot carry out his obligation towards C. Indirect interference by unlawful means If, instead of persuading B to break the contract or causing him to do so by direct unlawful action against him, A brings about the breach of contract between B & C by operating thru a 3rd party. (i) Inducement There must be persuasion directed at a party to the contract. Persuasion v mere advice The fact that an inducement to break a contract is couched as an irresistible embargo rather than in terms of seduction does not make it any the less an inducement: JT Stratford & Co Ltd v Lindley [1965] AC 269 at 333 per Lord Pearce; Greig v Insole [1978] 1 WLR 302. (ii) Knowledge and intent of the defendant Knowledge of the contract and intent to bring about its breach are inherent in the concept of inducement. Recklessness is sufficient intent. Emerald Construction Co Ltd v Lowthian [1966] 1 WLR 691

The exact nature of the breach need not be known. See also Merkur Island Corporation v Laughton [1983] 2 AC 570 HL (indirect interference with contract) (iii) Resulting breach of contract The persuasion must have produced a breach of contract. Actual breach is not required; it is sufficient if the performance of the contract is interfered with: Torquay Hotel Co v Cousins [1969] 2 Ch 106. (iv) Resulting damage Damage is the gist of the action. Where the breach is such as must in the ordinary course of business inflict damage on the P, he may succeed without proof of any particular damage: Goldsoll v Goldman [1914] 2 Ch 603. Where loss of a pecuniary nature is inferred or proved, it is possible that the P may also recover damages for non-pecuniary losses such as injured feelings. (v) Defence of justification Self-interest or altruistic motives is not justification. Possession of an equal or superior right to the P (Edwin Hill v First National Finance [1989] 3 All ER 801) was held to constitute justification, as it was moral duty to intervene (Brimelow v Casson [1924] 1 Ch 302) or the fact that the contract interfered with was inconsistent with a previous contract with the interferer: Smithies v National Association of Operative Plasterers [1909] 1 KB 310. 2. Interference with the performance of the contract An extension to the principle of Lumley v Gye – to deliberate and direct interference with the execution of a contract without that causing any breach. Eg: 3rd persons prevents or hinders one party from performing his contract, even though there is no breach.

3. Interference other than directly inducing breach A incurs liability in tort if he interferes in the performance of a contract between B and C otherwise than by direct persuasion of B, provided he uses unlawful means (for example a tort against B) to strike at C. DC Thomson & Co Ltd v Deakin [1952] Ch 646

C.

Conspiracy

1. Definition The agreement of two or more persons to do an unlawful act or a lawful act by unlawful means: Mulcay v R (1868) LR 3 HL 306, 317 Crofter Hand-Woven Harris Tweed Co Ltd v Veitch [1942] AC 435 To make out a case of conspiracy, the plaintiff must establish:(a) an agreement between two persons, (b) an agreement for the purpose of injuring the plaintiff, (c) that acts done in execution of that agreement resulted in damage to the plaintiff, (d) the acts done which resulted in the damage must be without lawful justification or excuse. Yap JH v Tan Sri Loh Boon Siew & Ors [1991] 3 CLJ 2960

2.

Types

(a) Conspiracy to injure Conspiracy to injure or simply conspiracy, or conspiracy by lawful means: arises where a combination of two or more persons agree to wilfully injure a man in his trade, resulting in damage to him (Thiruchelvasegaram a/l Manickavasegar v Mahadevi a/p Nadchatiram [2000] 2 AMR 1278) (b) Conspiracy by unlawful means Conspiracy by unlawful means: an agreement between two or more persons to carry out an unlawful act or acts, or to carry out a lawful act by unlawful means. Lonrho Ltd v Fayed [1991] 3 All ER 303 HL This form of tort does not require a predominant purpose to injure the P but still requires an intention to injure. 3 essential ingredients of the tort: (i) Agreement/combination between 2 or more persons The essence of conspiracy lies in there being an agreement (or at least an arrangement) between D and other third parties, to cause injury to P: Seagate Technology Pte Ltd v Goh Han Kim [1995] 1 SLR 17 CA Singapore. The word “combination” is generally preferred over ‘agreement” to describe a conspiracy. (ii) Purpose The court must also consider the predominant purpose for which the act or acts are carried out – to injure P

The predominant purpose must be to injure P or to cause damage to P: Iskandar Gayo v Dautk Joseph Pairin Kitingan & Ors [1997] 2 AMR 1264. In an action for conspiracy to injure, once the predominant purpose is established, it is irrelevant that D also has a subsidiary purpose of furthering his own interest. (iii) Damage actionable in a civil action. Actual damage (pecuniary loss not non-pecuniary loss) is an essential ingredient in the tort of conspiracy. Simmah Timber Industries v David Low Se Keat [1999] 5 MLJ 421 - agreement/combination must be proved then to consider the purpose. Most important - to show that the predominant purpose – to deliberately inflict damage on the P Irrelevant consideration - Being aware of the inevitable damage to the P as consequence of D’s action - D also has subsidiary purpose of furthering his own interest. -Where predominant purpose is for advancement of D’s business and injuring P is subsidiary or when D is able to prove purpose behind his action is to further his own interest– no conspiracy - To consider D’s short and long term objectives. - Actual damage (pecuniary loss) is an essential ingredient Stamford Holdings Sdn Bhd v Kerajaan Negeri Johor & Ors [1995] 2 AMR 1138 - No damages – injury to reputation or to feelings

D.

Intimidation

1. Definition Consist of threats by the defendant to a third party that the defendant will use unlawful means against the third party unless the third party does or refrains from some act and the claimant suffers loss as a result. Signifies a threat delivered by A to B whereby A intentionally causes B to act (or refrain from acting) either to his own detriment or to the detriment of C. 4 elements: a) Threat means “an intimation by one to another that unless the latter does or does not do something the former will do something which the latter will not like”: Hodges v Webb [1920] 2 Ch 70 at 89 per Peterson J. The threat must be a threat of an unlawful act. Anything that I may lawfully do I may also lawfully threaten to do, whatever the motive or purpose of my threat: Allen v Flood. Threat v warning. b)

A threat of unlawful act

c)

Submission to threat The third party must submit to the defendant’s threat.

d)

Damage P must suffer damage

2.

Types

(a) Two-party intimidation (against P) A threatens B with an unlawful act and thereby intentionally causes B to act (or refrain from acting) in a way which causes loss to B himself. A commits a tort, where his threat is of violence: Rookes v Barnard [1963] 1 QB 623 at 689; and also where the threat is of any unlawful act within the meaning of Rookes v Barnard. See various dicta include: Allen v Flood [1898] AC 1 at 17 Hawkins J; Rookes v Barnard [1964] AC 1187, per Lord Evershed; [1963] 1 QB 663 per Sellers LJ; JT Stratford & Sons Ltd v Lindley [1965] AC 269 at 285, per Lord Denning MR, at 302, 305-306, per Salmon LJ, at 336 per Lord Pearce [basically more concerned with the effect of Trade Disputes Act 1906]; D & C Builders Ltd v Rees [1966] 2 QB 617 at 625 per Lord Denning MR.

JT Stratford & Sons Ltd v Lindley [1965] AC 269 “A case where a defendant presents to the claimant the alternative of doing what the defendant wants him to do or suffering loss which the defendant can cause him to incur is not necessarily in pari casu and may involve questions which cannot arise where there is intimidation of a third person.” See the reasons given in Winfield at pp 645-646.

(b) Three-party intimidation (against other person who injured P) A commits the tort of intimidation against C if he threatens B with conduct which is unlawful in relation to B and thereby intentionally causes B to act (or refrain from acting) in a way which causes damage to C. B’s conduct may not be in any way unlawful in relation to C: Rookes v Barnard. The essence of the tort lies in the coercion of B, through whom A intentionally inflicts damage upon C, but obviously the law cannot hold every form of coercion to be wrongful. The law has adopted the natural dividing line between what is lawful and what is unlawful as against B, the person threatened: Rookes v Barnards, at 1207 Lord Devlin Criticism If intimation is extended to threats to break contracts “it would overturn or outflank some elementary principles of contract law” [CA at 695, per Pearson LJ]; notably the doctrine of privity of contract, which holds that one who is not a party to a contract cannot found a claim upon it or sue for breach of it. See the 2 arguments put forwarded in Winfield, at pp 643-644.

3. Defence of justification Read v Friendly Society of Stonemasons [1902] 2 KB 732 Morgan v Fry [1968] 1 QB 521

E.

Passing-Off

1.

Definition

Passing off is a practice of giving consumers the impression that goods or services of one trader come from another trader who has established business reputation and goodwill. - where one trader indicates that his goods are the same quality as those of another trader or where one trader creates the impression of association with another trader. Where an existing trader has a reputable and popular product or service, another trader will hope to take advantage of the goodwill that has been established in that product or service, by confusing consumers into purchasing his goods instead of those of the existing trader. The existing trader will then suffer a loss of sales coupled with a loss of reputation. An action for passing off can be used to prevent an unauthorised imitation of trademarks, trade names and get up by rival traders. Law of passing off is a tortious action which can be used regardless of whether a name or mark has been registered in the Register of Trade Marks and regardless of whether it is capable of being registered. There must be ‘a misrepresentation, made by a trader in the course of trade, to a prospective customer of his or ultimate consumer of goods or services supplied to him, which is calculated to injure the business or goodwill of another trader (in the sense that this is a reasonably foreseeable consequence) and which causes actual damage to a business or goodwill of the trader by whom the action is brought or will probably do so’ per Lord Diplock in Erven Warnink BV v J Townend & Sons (Hull) Ltd [1979] AC 731. The law of passing off has five elements: Erven Warnink BV v J Townend & Sons (Hull) Ltd [1979] AC 731 (Advocaat) at 742 per Lord Diplock a misrepresentation; made by a trader in the course of trade; to prospective customers of his or ultimate consumers of goods or services supplied by him; which is calculated to injure the business or goodwill of another trader (in the sense that this is a reasonably foreseeable consequence) ; which causes or threatens actual damage to a business or goodwill of the trader by whom the action is brought.

Aim of law of passing-off: protection of goodwill associated with a business.

Goodwill is normally created by trading, and very slight trading activities have been held to suffice.

2.

Elements to establish passing off

Elements: 1. P has sufficient goodwill, reputation and presence in the trade name in question, in the local jurisdiction; Dun & Bradstreet (Singapore) Pte Ltd & Anor v Dun & Bradstreet (Malaysia) Sdn Bhd [1994] 1MLJ 32 -1st P is the Singapore subsidiary of the second plaintiff, who are members of an international group of companies known throughout the world, particularly in credit information services. The plaintiffs had proposed to incorporate a company in Malaysia as their subsidiary by using the second plaintiff's trademark but they could not do so as the same name had already been taken up by the defendant. The plaintiffs applied for an injunction to restrain the defendant from using the name 'Dun & Bradstreet'. The defendant maintained that they were in the business of stationery and printing material supply to local entities which has no connection with the scope of the plaintiffs' business. As the plaintiffs were not registered in Malaysia so they had not established any presence, goodwill or reputation in Malaysia. H - P had an interest to protect and the test was whether the public would be confused by the presence of two companies with the same name. Any third party dealing with either of them would have thought that the other party was the same company or a branch or extension thereof. Reputation plus some market activity in the jurisdiction was sufficient to establish a business goodwill that was entitled to protection. 2.

The actions of D are likely to cause, or has actually caused, deception or confusion;

Seet Chuan Seng & Anor v Tee Yih Jia Foods Manufacturing Pte Ltd [1994] 2MLJ 770 - The issue is whether, in carrying on a similar business using the same name, logo and get up, the first appellant was liable for passing off. It was held by the Supreme Court that, in order to create a valid cause of action for passing off, there must be a representation made by the trader in the course of trade to his prospective customers, which was calculated to injure the business the business or goodwill of another trader and which caused actual damage to a business or goodwill by whom the action is brought. The use of the name, logo and get-up was likely to deceive or cause deception to a potential buyer or customer of popiah skin. Further, the damage is essential element of the tort and it is necessary for the plaintiff to establish that he had suffered damage. In this case, where the goods were in direct competition with one another, the court would readily infer the likelihood of damage to the respondent's goodwill through the loss of sale and loss of exclusive use of his name.

Mun Loong Co Sdn Bhd v Chai Tuck Kin [1982] 1MLJ 356 P owned 2 stores under the business name of Mun Loong D operated an optical goods business under the anme of Mun Loong Optical Contact Lens Centre P sought injunction to restain D from using the name Mun Loong H – P’s claim failed. P failed to prove D was guilty of deception because both are of totally different fields of business activities Compagnie Generale des Eaux v Compagnie General Des Eaux Sdn Bhd [1996] 3 AMR 4015. - P applied to the court to restrain the D’s company from using the same name Compagnie Generale Des Eaux ('Compagnie'). H- reading the names of the parties in itself would have caused confusion. The P's involvement in Malaysia was more than sufficient to establish goodwill, reputation and presence in Malaysia. It did not matter that the name was generic because being in French, any person in this country dealing with either party would certainly have thought that the other party was the same company. 3. P has suffered, or likely to suffer damage or injury to his business or goodwill as a result of D’s misrepresentation. Petroliam Nasional Bhd (Petronas) v Ors v Khoo Nee Kiong P- Petronas a well known national petroleum corporation D – sole proprietor of a business, registered several domain names comprising the word petronas, inter alia, petronasgas.com, petronasdagangan.com H- D’s use of domain names comprising the P’s well known trademark resulted in an erosion of the exclusive goodwill in the well known trade mark and would consequently damage the reputation of the trade mark.

3. off

Difference between trade mark infringement and passing

1.

Once trademark is registered, protection against infringement is automatic. Trademarks are considered as a form of personal property and their unlawful use by another is interference or infringement of the registered proprietor's rights. On the other hand, the plaintiff in a passing off action must demonstrate the presence of goodwill in order to have a right of action and the goods need not be registered under trade mark.

2.

Trademark legislation protects rights in the actual name and provides the proprietor with a property right while the tort of

4.

passing off in common law protects the goodwill of a business associated with a trade name. Protection provided in passing off is potentially broader. Business goodwill can cover the name of the goods or services in question, business method, get up and marketing styles. Remedies

- injunction - damages - account of profits made by the D from the passing off. F.

Breach of confidence

Disclosing P’s trade information without consent, which results in P suffer some losses or damages in respect of his business. Schmidt Scientific Sdn Bhd v Ong Han Suan [1997] 5 MLJ 632 at 653 Kamalanathan Ratnam JC stated: … the categories of tortious liability remain ope...