Property development – Joint venture – Contract – Procurement of breach – Purchase, development and sale of property – Agreement for flat in developed property to be transferred to respondent in partial payment of her share in the equity of the property – Flat sold to third party – Proceeds partly paid to company of which appellant a director – Whether appellant procuring breach of contract – Appeal dismissed
In February 2003, the respondent entered into an oral agreement with B relating to the purchase and development of a property. B was to fund the purchase costs so far as they were not met by a mortgage and the respondent was to fund the development costs. A suitable property was found at a price of £175,000. The respondent provided £42,000 as a deposit for the purchase; £32,000 of that sum came from funds contributed by a construction firm (GTBC) for which the respondent’s partner worked. B obtained the remainder of the purchase price by means of a mortgage. At the insistence of the mortgagee, the property was transferred into B’s sole name. The respondent was unaware of this at the time.
GTBC carried out the development of the property “at cost”, converting it into two flats. In 2004, the ground floor flat was let on an assured shorthold tenancy and the upper flat was sold on a long lease for £146,000. The mortgage was discharged and B received the net proceeds of £1,482. Subsequently, B and the respondent agreed to vary their oral agreement to provide that the ground floor flat would be transferred to the respondent in partial payment of her share in the equity of the property. Contrary to that agreement, in May 2004, B instructed his solicitor to transfer the flat to a company of which B and the appellant were directors and shareholders. That transfer did not proceed, however, in 2005, B sold the flat on a long lease for £97,000, of which approximately £70,000 was paid to the company and the rest to B.
The respondent brought claims for damages against various parties, including the appellant, who she alleged to have procured a breach of contract or trust by B. In the court below, that claim was allowed by the deputy judge on the evidence: see [2009] EWHC 1259 (Ch); [2009] PLSCS 175. The appellant appealed. He contended that the deputy judge had erred in: (i) finding that he had procured a breach of contract notwithstanding that B had, at the relevant time, already decided to breach his contract and the appellant had no knowledge of it; and (ii) finding him personally liable for acts carried out in his capacity as a director of the company.
Held: The appeal was dismissed.
Liability for procuring a breach of contract could arise only if there was a causal connection with the breach. Accordingly, it was necessary to show that the appellant had committed a relevant act before the breach of contract by B. However, the deputy judge had been entitled to find as a fact that the appellant had caused B to decide to refuse to transfer the ground floor flat to the respondent by acts dating back to early May 2004. The appellant’s involvement in the breach had begun before B’s decision and continued down to, and beyond, B’s breach of contract. There were no grounds for questioning the deputy judge’s finding that the appellant had caused B to break his contract with the respondent and to pass the benefit of the ground floor flat to their company. Further, although it was correct as a proposition of law that there could be no intentional participation in the breach of contract with the respondent if the appellant had no knowledge of her contract with B, that proposition did not fit the facts found by the judge, namely that B had told the appellant that there was a contract and that the “deposit” was contributed to the original purchase of the property as part of a contractual joint venture relating to that property. As a matter of law, that degree of knowledge was sufficient to render the appellant liable for procuring a breach; it was not necessary in law to show that he knew exactly all the terms of the contract or the identity of the contracting parties, such as whether the venture was with GTBC or the respondent. Moreover, the appellant’s actions went beyond mere advice to B regarding the contract and were sufficient to amount to procurement or persuasion to breach it on the facts found by the judge.
It made no difference whether the appellant had been acting in his personal capacity or as a director of the company. Procuring a breach of contract was a tort. In general, an individual tortfeasor was personally liable for his own torts, even if he was a director of a limited liability company, which might also be liable for the tort. The fact that a director had acted as an agent for his company did not give him a defence to personal liability for torts committed by him.
Andre Jumabhoy (instructed by Saracens Solicitors) appeared for the appellant; Robin Howard (instructed by Judge & Priestly, of Bromley) appeared for the respondent.
Sally Dobson, barrister