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OBG Ltd v Allan [2007]

OBG Ltd v Allan [2007] UKHL 21 was a significant case in English law, dealing with economic torts and the liability of receivers. It was a combined appeal that included the cases of Douglas v Hello! Ltd and Mainstream Properties Ltd v Young, and it is considered a leading case in the field of economic torts.

OBG Ltd v Allan [2005] QB 762: the defendants were receivers who had been purportedly appointed under a floating charge, but it was later acknowledged that the appointment was invalid. These receivers, acting in good faith, took control of the claimant company's assets and business. The claimant argued that this amounted to trespass on their land, conversion of their property, and the tort of unlawful interference with their contractual relations. They sought damages for the value of their assets and business, including the value of their contractual claims at the time of the receivers' appointment.

Douglas v Hello! Ltd [2006] QB 125: OK! Magazine had an exclusive contract to publish photographs of a celebrity wedding where all other photography was prohibited. However, the rival Hello! Magazine published photographs that had been secretly taken by an unauthorised photographer who had posed as a waiter or guest at the wedding. OK! Magazine claimed that this was an unlawful interference with its contractual and business relations or a breach of its equitable right to confidentiality in the wedding photographs.

Mainstream Properties Ltd v Young [2005] IRLR 964: two employees of a property company, in violation of their employment contracts, redirected a development opportunity to a joint venture in which they had a personal interest. The defendant, aware of their contractual duties but mistakenly believing they were not in breach, provided financial support to facilitate the acquisition. The company claimed that the defendant was liable for wrongfully inducing the breach of contract.

The main legal issues in the case included whether the receivers, despite the invalid appointment, could be held liable for wrongful interference with contractual relations, and whether intangible property (such as contractual claims) could be the subject of a claim for conversion.

The House of Lords ruled that an agent, like the receivers in these cases, cannot be sued for interfering with contractual relationships between a principal and another contracting party. The Court explained that invalidly appointed receivers were not liable to the company for wrongful interference with contractual relations. The Court reasoned that such a receiver, acting in good faith, uses no unlawful means and intends to cause no loss. The Court insisted that intangible property, such as contractual claims, cannot be the subject of a claim for conversion because conversion typically involves interference with tangible, chattel property, not intangible contractual rights.

Regarding the tort of inducing or procuring a breach of contract, The Court outlined five requirements:

  • There must be a valid contract in place.
  • The contract must have been breached.
  • The defendant's conduct must have procured or induced the breach.
  • The defendant must have known about the breached term or turned a blind eye to it.
  • The defendant must have actually realised that the conduct procuring the breach would have that result.

This case has had a significant impact on the development of economic torts in English law. First, it clarified the limits of liability for receivers who act in good faith and without unlawful means. Second, it established the principle that intangible property, like contractual rights, cannot be the subject of a claim for conversion. Third, it provided a clear framework for establishing liability for the tort of inducing or procuring a breach of contract.

This case is often cited in discussions of economic torts and agency law, as it set important legal precedents in these areas. It helps define the boundaries of liability in cases involving interference with contractual relations.

You can learn more about this topic with Tort Law notes.

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