Economic Tort of Interference – A Tortious Liability that Could Negatively Impact Business Projections

The tort of interference is
one of the most unpopular tortious liabilities which players in the business
world must be careful of. In simple terms, it means the intentional
interference with contractual or business relations.

Generally, the law of Torts
enforces the breach of a duty imposed by law, to protect the interest of an
affected person. Torts range from Trespass to person, Negligence, Nuisance
which are the more common tortious liabilities. However, there are a number of
tortious liabilities that are not quite popular.

WHEN ARE YOU LIKELY LIABLE
FOR TORT OF INTERFERENCE?

A defendant would be liable
for tortious
interference when he intentionally interferes or damages someone else’s
contractual or business relationships with a third party and by so doing causes
economic harm.

He may be so liable by
persuading a third party to break his contract with the Plaintiff, perhaps for
a better offer, with the intention to cause harm to the Plaintiff. He would
also be liable if he commits an unlawful act capable of interfering with the contract
between two contractual parties.

For example, in Tarleton
v M’Gawley (1793), Peake 270, 170 ER 153, the master of a ship fired its
cannons at a canoe attempting to trade with a competitor’s ship. The Court held
that the Master was liable to the plaintiff for committing an unlawful act
directed at the parties with the intention of preventing trade between the
parties.

WHAT ARE THE VALID ELEMENTS
OF THE TORT OF INTERFERENCE?

A defendant would be held
liable for Tort of Interference if the Plaintiff successfully establishes all
of the following:

1.
The Defendant’s intention to
cause damage to the Plaintiff’s economic relationship with a third party or to
inflict economic harm on the Plaintiff.

2.
The defendant engaged in an unlawful
act.

3.
The Plaintiff has suffered Damage
as a result of the interference.

Presence of incidental
economic harm is not sufficient to impose liability on a defendant. This is so
because incidental economic harm is a usual consequence of legitimate market
competition. A defendant must, therefore, cross the line of incidental economic
harm, to deliberate economic harm.

1.
Establishing Intention To Cause Economic
Damage

There are no ironclad rules
applied to determine the existence of an intention to cause economic harm. The
Court would look at the entire circumstance of the case.

However, if a defendant had
knowledge of an existing contract, yet induces a breach in a manner which, to
his knowledge, would have a negative impact to the interest of the plaintiff, a
rebuttable presumption of an intention to cause economic harm would be
established against him. Such a presumption would be deemed to exist even if
the defendant is not aware of or familiar with the details of the contract. Leitch
& Co. v. Leydon [1931] A.C.90.

In Lumley v. Gye
(1853) 2 El. & Bl.126, the plaintiff, who was the owner of
Queen’s Theatre, contracted the services of a famous singer, to perform
exclusively in the theatre for a period of time. The defendant who was a rival
to the theatre and maliciously intending to injure the plaintiff decided to
persuade the singer to perform for him. The Court found in favour of Plaintiff
and held the defendant liable for Tortious Interference.

2.The
defendant engaging in an unlawful act.

An unlawful Act is one that
can give rise to a civil cause of action against the defendant. Criminal
offenses and breaches of the statute are generally not acts that can give rise
to a right of action for tortious interference, except if the acts can also
give rise to the right of action in a civil case.

A classic example occurred
in AI Enterprises Ltd v Bram Enterprises Ltd, 2014 SCC, where one
out of four brothers dissented to the sale of an apartment co-owned by them all
through their respective companies. The company of the dissenting brother
failed to buy the apartment at the first Appraised value.

Further to this, the
dissenting brother filed caveats on the building’s title and impeded potential
purchasers’ access to the property. Eventually, two years after the earlier
attempts to sell, the dissenting brother’s company bought the building at the
Appraised value.

An action instituted against
the dissenting brother for interfering with the plaintiff’s economic relations
with potential buyers failed. The Supreme Court of Canada held that the acts
committed by the dissenting brother are not acts that can give to a civil
action.

3. Interference
Must Occasion Damage

Damage is the underscoring
factor of tortious interference. Without the proof of damage suffered by the
plaintiff, a case founded on interference with a contractual relationship is
bound to fail.

The damage may be pecuniary
or other loss of a contractual party. Where loss of pecuniary nature is proved,
the plaintiff may still recover damages for non-pecuniary losses, such as
injured feelings. If the defendant is the plaintiff’s competitor, the case may
be a suitable one for the award of exemplary damages. Pratt v. B.M.A (1919)
1K.B. 244.

IS TORTIOUS INTERFERENCE THE
SAME AS PASSING OFF?

The answer is No. Although
both Torts are similar Economic torts, they have striking differences:

1.
In tortious interference, the defendant deals
directly with the contractual partner of the plaintiff, i.e A, the defendant,
deals directly with B who is in a contractual relationship with C. However, in
the tort of Passing off, although the defendant seeks to divert patronage of
the plaintiff’s company, there is no binding relationship between the plaintiff
and the consumers.

2.
In tortious interference, the defendant does
not act like the plaintiff by way of copying his style of business or
trademark. However, the tort of passing off is centered on the defendant’s
attempt to deliberately deceive the public to mistake him for the plaintiff.

IS TORTIOUS INTERFERENCE
WITH ECONOMIC RELATIONS RECOGNISED UNDER NIGERIAN LAW?

Indeed, tortious
interference with economic relations is recognised under Nigerian law. In 2001,
the Supreme Court in Sparkling Breweries Ltd. v. Union Bank of Nigeria
LPELR-3109 2001(S.C) made a pronouncement in an action founded on the Tort
of Unlawful Interference.

In this case, the
appellants, members of a group of companies requested a letter of credit from
the respondent. The respondent granted a letter of credit but later canceled
it. This led to the breakdown of the contractual arrangement between the
appellants and third parties. The appellants sued the respondent on several
grounds, one of which was an unlawful interference with the appellants’
contract with the third parties.

The Court held that damages
for tortious interference cannot be granted to the plaintiff where the act
committed by the defendant is not unlawful.

In Oshiomole &
Anor v. Federal Government of Nigeria & Anor (2006) LPELR-7570 (C.A), the
Court of Appeal also recognised the applicability of tortious interference in
Nigeria. In this case, the appellant objected to the implementation of a price
hike in gas by the respondent and influenced the citizens to proceed on strike
action. The respondent argued that influencing citizens to embark on a strike
action constituted Interference and that in influencing the workers or citizens
to embark on strike, the appellant must have intimated the citizens on certain
details which should be privy to just the respondent and appellant. The court
upheld this argument and gave judgment in favour of the respondent.

DEFENCE TO THE TORT OF
INTERFERENCE

The defence of justification
is the major defence applicable to the tort of Interference. The Court would,
however, examine the nature of the contract and the relationship between the
contractual parties.

Advancement of the
Defendant’s interest alone will not suffice as a ground for justification. The
defense was successfully pleaded in Brimelow v. Casson [1925] 1 Ch. 302. A
theatrical performers’ protection society persuaded a theatre proprietor to
break its contracts with a theatrical manager. This persuasion was justified on
the grounds that the wage paid by the manager to the chorus girls was so low
that the girls were constrained to resort to supplementary means of income,
which led to prostitution.

CONCLUSION:

The tort of Interference is
rather a very restrictive one, with a narrow range of liability. It seeks to
protect contractual relationships from the malicious persuasion of competitors
against the plaintiff.

Competitors must, therefore,
be careful not to incur liability for tortious interference, and be mindful of
the elements of tortious interference in business dealings.