Although the reality is that today’s economy drives people to be competitive, the result is that another business may cause harm to yours in ways such as stealing a valuable employee, providing false information or interfering with your business’ future growth. Economic torts seek to offer protection for your trade or business from acts of unacceptable interference.
In this guide, our business dispute solicitors will examine unlawful interference with businesses, including the economic torts of procuring a breach of contract and causing loss by unlawful means.
We'll consider:
- What is the economic tort of procuring a breach of contract?
- How does a claim under this tort arise?
- What is the economic tort of causing loss by unlawful means?
- What are the elements of inducing a breach of contract?
- What are the elements of causing loss by unlawful means?
- Is there any defence?
- How to file a tort claim
- What is the time limit for an economic tort claim?
- What remedies are available if you’re successful with your claim?
- Summary
What is the economic tort of procuring a breach of contract?
Where someone commits a breach of contract, you’ll have grounds for a claim against that individual or business for breach of contract. However, if there’s an incomplete agreement or no contract at all between you and the other party, you can protect your rights and interests by relying on the economic tort of procuring a breach of contract, also referred to as ‘inducing’ (i.e. causing) a breach of contract.
How does a claim under this tort arise?
A claim under this tort arises when the wrongdoer intentionally and knowingly causes loss to another party (you) by interfering with their (your) contractual relations.
Example: A causes third party B to commit a breach of contract against C, and A had the intention of causing the breach of contract. In such circumstances, C is not limited to claiming against A, but can also claim against B.
What is the economic tort of causing loss by unlawful means?
Causing loss by unlawful means exists where the defendant – the wrongdoer – deliberately and wrongfully interferes with the actions of a third party in which you have an economic interest, with the intention to cause loss, and as a result, loss occurs. One important thing to highlight is that the existence of a contractual relationship is not necessary to establish grounds for a claim against the defendant.
This is because the intention to cause damage to you in any form, including economic damage, is enough.
Example: A does and/or threatens to do something unlawful to B. As a result, B never enters into a contract with C, when B would otherwise have done so. A acts with the intention of causing loss to C.
What are the elements of inducing a breach of contract?
This tort has four elements:
- Knowledge of the contract. The defendant must be aware of the contract you’re claiming is being breached. There does not need to be knowledge of the precise terms of the contract, but an appreciation of the broad nature of the contractual relationship is required. It’s important to point out that you won’t be able to defend the claim if you’ve deliberately turned a blind eye by making a conscious decision not to enquire into whether the relevant act would amount to a breach.
- Intention to breach the contract. The defendant must intend to breach the contract or cause its breach and to cause economic harm. It’s not enough for the breach to occur from the natural consequences of the defendant’s conduct or because the defendant acted carelessly; nor will the defendant be liable if unintentionally or unknowingly procuring a breach of contract.
- Actual breach of contract. A contract must exist for the breach to occur. The contract must be valid and enforceable. For this reason, it’s vital to get expert advice and carefully analyse if, technically speaking in the eyes of the law, there has been a breach of contract before you bring a claim.
- Interference with another’s contract. It must be established that the other contractual party was persuaded to breach the contract. The most effective way to prove this point is by determining that there have been inconsistent dealings between the first contract and the second contract.
Example: you had an exclusive relationship with a supplier and that supplier has an exclusive relationship with someone else for similar services. You can assume that the third party’s exclusive relationship with your supply has been involved in procuring the breach of contract.
What are the elements of causing loss by unlawful means?
This tort also has four elements:
- Interference with trade or business. A trade or business interest is a wide term and prospects the economic interests of the claimant (i.e. your business). There is no need for a breach of contract to occur in this situation. Interference with the operation of the business is enough to cause loss by unlawful means. The act of interference must have the effect of hindering the normal operation of the business.
A non-exclusive list of examples that qualify as economic interests are things such as: employment of an employee; the ability to freely market or advertise goods or services to potential customers; acquiring essential goods or services; hiring business; ability of a media outlet to publish or broadcast to the public. - Use of unlawful means against a third party. The loss suffered by the defendant’s action must be both unlawful in respect to the third party and actionable by the third party. For this reason, criminal conduct isn’t actionable.
- Intention to injure the claimant. Unlike the tort of procuring a breach of contract, there need not be any intention to cause a breach of contract. Establishing economic expectations is a sufficient foundation for a claim. The loss must be a foreseeable consequence of the defendant’s actions. So, a defendant isn’t liable for a loss that is neither a desired end nor a means of attaining it.
- Occurrence of damages. You must show as the claimant that some loss has stemmed from the action.
Is there any defence?
The only defence available is justification.
For justification to be a valid defence, it must be shown that the defendant’s interference with another party’s contract was to protect an equal or superior right of their own. However, justification must be based on a duty and not merely to protect the defendant’s own interests.
The defence of justification is very much fact-specific. Relevant factors may include the nature of the breach of contract, the position of the parties and the grounds for the breach.
How to file a tort claim
Economic tort claims are fairly uncommon and tend to be brought when there’s no other, more straightforward cause of action available to you as the claimant. This is mainly because it can be very difficult from a practical viewpoint to prove the intention and/or knowledge of the defendant when it comes to gathering together evidence of either or both of these things.
If you do decide that bringing an economic tort claim is the right course of action to take, below is an outline of how you’d go about doing this:
- Follow the correct Pre-Action Protocol: The correct Protocol to follow will depend on the area that your dispute is centred on, for example, it might be in the field of construction or involve a commercial contract. All of the Protocols provide a prescribed framework of steps parties are expected to take with a view to trying to resolve a dispute outside of court where possible, and is highly likely to involve engaging in alternative dispute resolution.
- Gather evidence: Gathering enough strong evidence together in support of your economic tort claim will go a long way towards its success or failure. As we’ve mentioned above, proof of the defendant’s intention and/or knowledge is key here.
- Issue a claim form: If the dispute can’t be resolved at some point throughout the Pre-Action Protocol stage, you’ll need to complete a claim form and issue it at court, after which it will then need to be ‘served on’ (sent to) the defendant. The claim form will need to specify which economic tort you’re alleging and the remedy you’re seeking.
- Undergo the process of disclosure and drafting witness statements: After the court has set a timetable, you and the other party or parties to the claim will be expected to go through the process of disclosure and draft witness statements which back up and explain all of the evidence you’ve gathered together. The court will set a date for when you and the other party or parties will need to exchange these statements by.
- Prepare for and attend a trial: While it’s possible for an economic tort claim to be settled at any point up to the trial date, if this doesn’t happen for any reason, then you’ll need to prepare for and attend a trial. Exactly what’s involved in this will depend on the value and complexity of your claim, but it will probably involve some or all witnesses being called to give oral evidence at a hearing – this may also include expert witnesses. After hearing all of the evidence, the judge overseeing the trial will decide on the outcome and will also address who is paying which of the costs that have been incurred.
What is the time limit for an economic tort claim?
The time limit for an economic tort claim is usually 6 years from the accrual of the cause of action, which generally means the date upon which you suffered a loss. If this date isn’t clear cut, which can often be the case, then it’s definitely best to take specialist legal advice before you formally bring your claim.
What remedies are available if you’re successful with your claim?
The remedies available if you’re successful with your economic tort claim will hinge upon which type of economic tort has occurred and the extent of the harm you’ve suffered. Damages to compensate for the loss at hand is a common remedy, or it could be that an injunction to prevent further harm is more appropriate. Another remedy that might be available is the court ordering an account of profits, with a view to the defendant being forced to show – and potentially hand over – any profits they’ve made through their wrongful actions.
Summary
The area of economic tort claims is a complex one and, as we’ve mentioned above, a fairly rare type of claim to pursue and prove. Gathering strong evidence in support of your claim is crucial in order to have the best chances of success possible, and seeking robust legal advice from a specialist business disputes solicitor will go a long way towards increasing your prospects of achieving the right remedy for your business.
