Claims based on dishonesty or wrongdoing must plead primary facts from which inferences of such conduct can be made and must have a legal basis.
In Complete Facilities Solutions Limited v Livingstone Consulting Limited and others [2023] EWHC 571 (Ch), the Chancery Division has struck out claims in deceit, breach of contract, conspiracy to injure and joint tortfeasorship against the second, third and fifth defendants.
The first defendant, Livingstone, acted as managing agent for the sixth defendant, MCL, which operated around 1,000 retail premises across the UK. The second, fourth and fifth defendants were directors of Livingstone at the material times. The third defendant was a consultant and senior employee.
Livingstone and MCL entered into a contract in June 2020 which provided for third-party contractors to accept maintenance jobs at MCL premises via a web portal, perform the works at an agreed price and send its invoices and work sheets to Livingston.
MCL would approve or reject the works and Livingston would invoice MCL for the approved invoices adding its management fee. MCL would then pay Livingston which would pay the contractor.
CFS, one of the contractors who performed maintenance works for MCL, concluded a contract with Livingstone whereby Livingston agreed to pay CFS when paid by MCL. MCL faced cash flow difficulties refusing to pay Livingstone for works carried out by CFS and others. It went into administration owing Livingstone £2.28m. CFS claimed over £670,000 from Livingstone.
CFS also brought claims against MCL and against the second to fifth defendants alleging, amongst other things, that they procured breaches of contract in failing to pay CFS, that they acted in breach of representations and assurances that CFS would be paid when paid, knowing them to be false and that they conspired to injure CFS by procuring Livingstone to breach the contract.
Allegations of procuring breach of contract, deceit, conspiracy to injure and joint tortfeasorship require the pleading of primary facts from which an inference of dishonesty or wrongdoing can be made. The claim did not include any primary fact which went further than CFS was not paid the sums claimed, by Livingstone.
Equally, there was no legal basis for the claims. A director and employee can only be liable for procuring a breach of contract by the company if acting outside the scope of their duties to the company. No such evidence was pleaded so the claims were not complete causes of action.
None of the claims had more than a fanciful prospect of success and there was no other compelling reason for them to proceed.
Louise Clark is a property law consultant and mediator
