Advertisement hoarding — Dispute as to licences for use of gable wall of shop for advertising purposes — Apparent conflicting licences given to rival advertisers — Claim by one advertiser for injunction and other relief — Notice of motion in the action claiming interlocutory injunctions, prohibitory and mandatory — Whether serious questions to be tried — Whether award of damages at trial would be adequate compensation — Law as to tort consisting of procuring breach of contract discussed
notice of motion claiming interlocutory relief was by the plaintiffs in an
action commenced by writ claiming an injunction and reinstatement of their
advertisement hoarding, also damages from the defendant shopkeeper for breach
of contract and from the defendant advertisers for procuring a breach of
contract — It was accepted for the purpose of the interlocutory proceedings
that there was a serious issue to be tried against the shopkeeper defendant,
but it was submitted that there was no such issue against the other defendants
— Most of the judgment is concerned with consideration of the latter point — On
the law relating to the tort of unlawful procurement of a breach of contract,
the judge referred to passages in the judgments of Diplock LJ and Lord Denning
MR in Emerald Construction Co Ltd v Lowthian
conflict of affidavit evidence as to whether the licence agreement which was
said to have been broken was in fact still subsisting at the date of the
alleged breach — There were also legal points as to whether the agreement had been
effectively determined — These were all, of course, matters to be finally
resolved at the trial — The judge, however, held that there was sufficient
material in the affidavit evidence to raise a serious factual question to be
investigated at the trial in regard to the defendant advertisers — They were
likely to have known all about the usual licensing arrangements for hoardings
and they knew that there had been a licensing agreement in existence in
relation to the site — It appeared, however, that they did not make any
enquiries of the plaintiffs as to the contractual position between them and the
defendant shopkeeper
necessary, in accordance with well-established principles governing
interlocutory injunctions, to consider whether the award of damages at the
trial would be adequate compensation for any loss which the plaintiffs might
suffer in the intervening period — The plaintiffs submitted that, in addition
to a loss of revenue, which could be quantified, there would be unquantifiable
damage to their reputation — There was, however, in the judge’s opinion, no
convincing evidence of such probable unquantifiable loss — Damages for loss of
revenue from the site would be an adequate remedy — The judge also dismissed a
suggestion that the defendants might not be able to pay the damages that might
be awarded at the trial
accordingly refused to grant the interim relief sought by the plaintiffs on the
motion, on the grounds that the plaintiffs, in the event of their success at
the trial, would be able to recover damages in a measure that was adequate to
compensate them for any loss they might have suffered, and that such damages
would not be in an amount that the defendants would be unable to pay — Motion
dismissed
The following
case is referred to in this report.
Emerald
Construction Co Ltd v Lowthian [1966] 1 WLR
691; [1966] 1 All ER 1013, CA
By this motion
the plaintiffs, Arthur Maiden Ltd, sought interlocutory relief in the form of
injunctions against Jasvant Patel, a dispensing chemist, and Lotus Advertising
Ltd, business rivals of the plaintiffs in the field of erecting, maintaining
and hiring outdoor advertising hoardings and sites. The dispute concerned a
hoarding on the gable of Mr Patel’s chemist’s shop at 3 Millbrook Place,
Mornington Crescent, London NW1.
R J
Powell-Jones (instructed by Alsop Wilkinson) appeared on behalf of the
plaintiffs; R J Miles (instructed by Gamlens) represented the defendants.
Giving
judgment, MR JOHN MUMMERY said: The plaintiff, Arthur Maiden Ltd, and
the second defendant, Lotus Advertising Ltd, are business rivals in the field
of erecting, maintaining and hiring outdoor advertising hoardings and sites.
Lotus Advertising have entered into the business more recently, having been
incorporated on June 18 1987, and are in a smaller way of business than Arthur
Maiden.
The first
defendant, Mr Patel, who carries on the business of a dispensing chemist from a
shop at 3 Millbrook Place, Mornington Crescent, signed an exclusive-licence
agreement with Arthur Maiden on May 1 1985 granting them the exclusive right
for an initial period of three years from March 4 1985 to use for advertising
purposes and to have access to the gable at 3 Millbrook Place. The licence was
subject to agreed terms and conditions, including an annual payment to Mr Patel
of £100.
On October 21
1988 Mr Patel signed a similar agreement in respect of the same premises with
Lotus Advertising for a period of five years at an agreed yearly rental of
£1,250. As a result of that agreement, there has been standing at 3 Millbrook
Place since about November 6 1988 a Lotus Advertising hoarding instead of the
Arthur Maiden hoarding, which has been removed. Arthur Maiden objected to this
changed state of affairs. On January 20 1989 they issued a writ claiming an injunction
and an order for reinstatement of their hoarding. They also claim declaratory
relief that the agreement of May 1985 has not been determined and they claim
damages from Mr Patel for breach of contract and from Lotus Advertising for
inducing or procuring a breach of contract.
By the notice
of motion dated January 25 1989 Arthur Maiden claim the following relief.
First:
An injunction
until after trial or further order restraining the defendants and each of them
whether by themselves, their servants or agents or otherwise howsoever, from
1. removing
or causing to be removed or damaging or causing to be damaged the plaintiff’s
advertising hoardings situate at any time on the
NW1 or interfering with or causing any interference to occur in any manner
whatsoever to the plaintiff’s possession and/or induce and/or occupation of the
premises by such hoardings or in connection therewith. [sic]
2. Without
prejudice to the generality of the foregoing, displaying or allowing to be
displayed on the premises any advertisements other than those authorised by the
plaintiff.
There is also
a claim as a result of an amendment which was made in the course of the hearing
for an order that the defendants do forthwith remove the second defendant’s
hoarding from the premises.
The motion
came on before me as a motion by order, there having been no undertaking given
or injunction in force in the interim. It is accepted by Mr Miles, who appears
for both defendants, that there is a serious question to be tried as against Mr
Patel. He submits, however, that there is no serious issue to be tried as
against Lotus Advertising, and in any event he submits it is not appropriate to
grant either prohibitory or mandatory orders against either of the defendants.
I will deal
first with the question whether there is a serious issue to be tried as against
Lotus Advertising. The cause of action against Lotus Advertising is procuring
or inducing a breach of contract. The relevant contract is that made between Mr
Patel and Arthur Maiden in May 1985. The initial three-year period of the
agreement expired on March 4 1988; that is, before Lotus Advertising had their
agreement signed by Mr Patel on October 21 1988. There was, however, provision
in the 1985 agreement for it to continue in force after the initial period from
year to year until determined. The provisions for determination are contained
in clause 3 of the licence agreement and, so far as is material, are in these
terms:
3.1 the
licensor shall have the right to determine the licence
— then
subpara(a) is immaterial–
(b) if after the initial period the licensor no
longer wishes the site to be used for advertising purposes, by giving the
licensee not less than twelve months’ notice in writing expiring on a Quarter
Day, and hereby undertakes upon such determination that for a period of not
less than three years from such date of determination he shall not display or
permit or cause to be displayed any form of advertising matter on the site
other than by a new agreement between the parties hereto.
It is the
defendant’s case that the 1985 agreement had been determined by Mr Patel by a
letter dated March 4 1987, with effect from March 4 1988, and that there was
therefore no subsisting agreement between Arthur Maiden and Mr Patel at the
time of the negotiations for and the signing of the agreement with Lotus
Advertising. If it is correct that there was no contract to be broken by Mr
Patel on the persuasion of Lotus Advertising, there would be no cause of
action.
The matter is
not as simple as that, however, for there is a conflict of fact on the
affidavits and there is also a conflict of opposing legal argument as to
whether the 1985 agreement was effectively determined. I do not need to go into
all the details of this because it is implicit in the concession that there was
a serious question to be tried as against Mr Patel, that there is a serious
question to be tried as to whether the 1985 agreement remained in force at the
time when Mr Patel negotiated and signed the agreement with Lotus Advertising
in October 1988.
All that I
need say is that Mr Powell-Jones, on behalf of Arthur Maiden, has contended
that, first, the letter of March 4 1987 was never received by Arthur Maiden,
was not seen by Arthur Maiden until after commencement of these proceedings and
that there are indications in the evidence that this letter may not even have
been sent either at the time it was alleged to be or at all. Second, it was
contended that, if in fact notice was given by that letter, it was premature in
that it was given before the expiration of the initial three-year period
and that, on the true construction of the conditions in the 1985 agreement,
notice to determine could not be validly given before the expiration of the
fixed period.
Third, it was
contended that such notice would be ineffective in any event as a notice of
determination because it did not expire on a quarter day. I refer to clause
3.1(b). Fourth, it was contended that the conduct of Mr Patel was inconsistent
with and tantamount to a waiver of any such determination, since he accepted
quarterly fee payments from Arthur Maiden in April and July 1988 for the
quarters beginning March and June. Alternatively, it was said that such conduct
of Mr Patel created a new agreement on the same terms as the 1985 agreement. It
appears that as late as July 28 1988 Arthur Maiden had informed Mr Patel in an
exchange of letters that in their view the 1985 agreement remained in force.
I have set out
those contentions made on behalf of Arthur Maiden, but the correctness of
otherwise of them must be left to be resolved at the trial. The argument that
there is no serious question to be tried against Lotus Advertising is based on
assertions in the affidavit evidence of Lotus Advertising that they had been
assured by Mr Patel before they erected the advertisement panel on his premises
that he had previously terminated the licence agreement with Arthur Maiden. It
is therefore said that they innocently entered into a five-year agreement with
Mr Patel.
Mr Miles
contends on behalf of the defendants that Arthur Maiden have not shown in their
evidence that Lotus Advertising knew of the existence of the Arthur Maiden
contract at the time of the negotiations with him or the signing of the
agreement or the erection of the hoarding and that there is therefore no cause
of action against Lotus Advertising.
As to the law,
I have been referred by Mr Powell-Jones to the case of Emerald Construction
Co Ltd v Lowthian [1966] 1 WLR 691. In particular, he referred to
passages in the judgments of Diplock LJ and Lord Denning MR. He referred to the
passage in Diplock LJ’s judgment at p 703 where he says:
There are
three essential elements in the tort of unlawful procurement of a breach of
contract; the act, the intent and the resulting damage. In a quia timet action
such as this, it is sufficient to prove the act and the intent and the
likelihood of damage resulting if the act is successful in procuring a breach
of contract. The only issue on this part of the case is one of fact as to the
defendants’ intent. At all relevant times they knew of the existence of a
labour only sub-contract for brickwork between the main contractors and
Emerald, but until it was disclosed to them on the interlocutory application to
the judge in chambers for an injunction, they did not know its precise terms.
They say in somewhat equivocal language that they assumed that it could be
lawfully terminated by the main contractors on short notice and that such
lawful termination was all that they insisted on. Ignorance of the precise
terms of the contract is not enough, however, to show absence of intent to
procure its breach. The element of intent needed to constitute the tort of
unlawful procurement of a breach of contract is in my view sufficiently
established if it be proved that the defendants intended the party procured to
bring the contract to an end by breach of it if there were no way of bringing
it to an end lawfully. A defendant who acts with such intent runs the risk
that, if the contract is broken as a result of the party acting in the manner
in which he is procured to act by the defendant, the defendant will be liable
in damages to the other party to the contract.
Reference was
also made to the passage in the speech of Lord Denning at p 701A:
For it is
unlawful for a third person to procure a breach of contract knowingly, or
recklessly, indifferent whether it is a breach or not. Some would go further
and hold that it is unlawful for a third person deliberately and directly to
interfere with the execution of a contract, even though he does not cause any
breach. The point was left open by Lord Reid in JT Stratford & Son Ltd
v Lindley. It is unnecessary to pursue this today. Suffice it that if
the intention of the defendants was to get this contract terminated at all events,
breach or no breach, they were prima facie in the wrong.
I was also
referred to passages in the 15th ed of Clerk & Lindsell on Torts,
paras 15-02 and 15-07. The law seems, from the authorities referred to in that
textbook and from the passages in Emerald Construction v Lowthian
which I have read, to be this: that a plaintiff is not obliged to prove that
the defendant knew the precise terms of the contract breached. It is enough if
the defendant’s knowledge is sufficient to entitle the court to say that he has
knowingly or recklessly procured a breach, and it is enough for a plaintiff to
prove an intent on the part of the defendant to bring the contract to an end.
It also appears from the authorities that it may be enough for a plaintiff to
show common knowledge of a way in which a business is conducted in order to fix
a party with knowledge of a contract. This certainly seems to be the position
when the plaintiff’s application is, as here, for an interlocutory injunction.
Applying those
principles of law to the circumstances of the present case, I conclude that
there is here a serious question to be tried as against Lotus Advertising. The
state of Lotus Advertising’s knowledge of the Arthur Maiden contract can only
be finally resolved at trial, but there is sufficient material in the affidavit
evidence before me to raise a serious factual question for investigation at
trial. As I have said, Lotus Advertising are engaged in the same line of
business as Arthur Maiden. They would be, therefore, likely to know that
advertising hoardings are placed on premises such as Mr Patel’s under explicit
licence agreements for a fixed term of years which can then continue from year
to year. It is
Advertising’s agreement follow this pattern.
Lotus
Advertising are also likely to have seen Arthur Maiden’s hoarding on the site
and would have seen that it was marked with the name Maiden, a name almost
certain to be known to Lotus Advertising. The evidence indicates that the
Arthur Maiden hoarding was there as late as the early part of October 1988. It
does not appear from the evidence that Lotus Advertising made any enquiries of
Arthur Maiden as to the contractual position between them and Mr Patel. They
were content to rely on Mr Patel’s statement that the agreement with Arthur
Maiden had been determined seven months previously. Lotus Advertising certainly
knew at the very least that there had been an agreement in existence in
relation to this site.
For those
reasons I would hold that there is a serious question to be tried as against
Lotus Advertising.
Applying
well-known principles I now have to consider whether an award of damages at
trial would adequately compensate Arthur Maiden for any loss which they may
suffer between now and the trial as a result of Mr Patel’s alleged breach of
contract and of Lotus Advertising’s alleged procurement of the breach of
contract. It is accepted on behalf of Arthur Maiden that loss of revenue from
this site will be arithmetically quantifiable and can be compensated for by an
award of damages. The evidence does not, however, give any indication as to the
likely extent of the loss of revenue from this site over that period. This is a
point to which I will turn in a moment.
It is said
that Arthur Maiden will also suffer unquantifiable commercial damage to its
reputation as a result of the defendants’ acts. The contention that Arthur
Maiden will find itself in breach of contract if it is unable to use this site
for advertisements for particular clients, such as Pernod, has not been pursued
at this hearing. In those circumstances, all that is left is an
unparticularised allegation that there will be potential damage to Arthur
Maiden’s reputation for reliability with consequent loss of business.
In my
judgment, there is no convincing evidence before the court of unquantifiable
loss suffered by Arthur Maiden. Damages for loss of revenue from the site will
be an adequate remedy for the loss that Arthur Maiden suffer.
Mr Powell-Jones
contends, however, that there is no evidence that the defendants will be able
to pay the damages that may be awarded in his client’s favour at the trial.
Although the defendants’ ability to pay damages was put in issue in the initial
evidence sworn in support of the motion, neither of the defendants has dealt
with this point in a satisfactory manner in their evidence. All that Mr Patel
has said is that his business is an established and successful one and that he
would be able to pay damages to the plaintiff for loss of rental income. Mr
Bueno in his evidence on behalf of Lotus Advertising does not deal with the
point at all. Further, no accounts of Lotus Advertising have been filed at the
Companies Registry.
If I were
satisfied that the damages recoverable by Arthur Maiden were of a substantial
order I would, in the absence of satisfactory evidence of ability to pay, grant
an injunction. The evidence of Arthur Maiden, however, gives no indication at
all of the extent of loss of income and there are difficulties in the way of
Arthur Maiden saying that the defendants are unable to pay the damages that may
be awarded. I refer in particular on this point to a letter that was sent by
the defendants’ solicitors, Gamlens, on January 30 to the plaintiff’s solicitors
raising specifically the question of the level of loss of revenue from this
site and saying on instructions that the net annual income from the site likely
to be produced, after taking into account the licence fee paid, would be in the
region of £380. The letter went on to ask whether the plaintiffs accepted that
this was a fair estimation of their alleged loss of income.
That letter
has never been answered and Mr Shepherd, who swore a further affidavit on
behalf of Arthur Maiden as late as March 10 1989, does not deal with this
question. Recognising the difficulties of his position, Mr Powell-Jones
contended that it was important that agreements of this kind, which were Arthur
Maiden’s stock in trade, should be enforceable specifically by interlocutory
proceedings and that that was a reason for granting an injunction in this case.
I am, however, concerned only with what has happened in relation to this
particular site and the damage that has been suffered or might be suffered as a
result of the specific defaults alleged against the defendants. Further, there
is no solid evidence in the affidavits as to the general effect that this kind
of action would have on Arthur Maiden’s business generally.
In these
circumstances I decline to grant the interim relief claimed, on the grounds
that Arthur Maiden, in the event of their succeeding at trial, will be able to
recover damages in a measure that is adequate to compensate them for any loss
they may have suffered and that such damages would not be in an amount that the
defendants would be unable to pay.
For those
reasons I dismiss the motion.
