Tortious interference with contract – what must be proven?

Unlawful interference with contractual relations (Interference) is a tort that allows  damages to be claimed against a Defendant who has induced or procured a third party to breach their contractual obligations to the Plaintiff in the proceedings.  In essence, a Defendant’s intention to induce or procure an entity to act or refrain from acting whilst being aware that such an action would result in said entity breach its contractual obligations to the Plaintiff gives rise to the Interference.^[1]  This article outlines the elements needed to be proven in order to establish an Interference.

The elements of the tort to be established

In the case of Daebo Shipping Co Ltd v The Ship Go Star [2012] FCAFC 156 (Daebo) Keane CJ, Rares and Besanko JJ provide at [88]:

“[t]he tort of inducing a breach of contract consists of the following elements:

(1) there must be a contract between the [P]laintiff (or applicant) and a third party;

(2) the [D]efendant (or respondent) must know that such a contract exists;

(3) the [D]efendant must know that if the third party does, or fails to do, a particular act, that conduct of the third party would be a breach of the contract;

(4) the [D]efendant must intend to induce or procure the third party to breach the contract by doing or failing to do that particular act;

(5) the breach must cause loss or damage to the [P]laintiff.”^[2]

Defendant must know the conduct they induce the third party to do would breach the contract

Keane CJ, Rares and Besanko JJ in Daebo at [89] reference Lindgren J Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd [1995] FCA 1368 (Allstate) at [68] to provide:

“…the [D]efendant must have “a fairly good idea” that the contract benefits another person in the relevant respect.  [Lindgren J] said that knowledge of the contract may be sufficient for the purpose of grounding the necessary intention to interfere with contractual rights, even though the [D]efendant does not know the precise term that will be breached.”

Keane CJ, Rares and Besanko JJ in Daebo also state at [89] that “reckless indifference” or “wilful blindness” can amount to knowledge of an act or omission resulting in a breach of contract in this instance.^[3]

Intention

Lindgren J in the case of Allstate provides at [67]-[68]:

“…[b]oth this intention to interfere with contractual rights and the necessary supporting knowledge of the contract refer to the “actual” or “subjective” state of mind of the alleged tortfeasor…

knowledge of the contract may be sufficient for the purpose of grounding the necessary intention to interfere with contractual rights although the precise term breached is not known…”^[4]

Therefore, the Court will look at the subjective state of mind of the Defendant when looking at their intention to procure or induce an Interference.  Additionally, an inference of intention can be drawn from knowledge of the contract.

Takeaways

Interference as a tort arises when a Defendant induces or procures a third party to breach a contract they have with the Plaintiff.  The elements needed to be proven are:

• a contract between Plaintiff and third party;
• Defendant is aware of contacts existence;
• Defendant’s knowledge that an act or omission by third party will result in a breach of their contract with the plaintiff;
• Defendant induces or procures the third party to do such act or omission; and
• such a breach results in actual loss or damage to Plaintiff.

The Defendant need not know the precise term of the contract being breached but rather have “a fairly good idea”.  “Reckless indifference” or “wilful blindness” can amount to knowledge of an act or omission resulting in a breach of contract in this instance.  The Court will look at the Defendant’s actual state of mind to subjectively determine intention.  An inference of intention can be drawn from knowledge of the contract.

Links and further references

Legislation

Competition and Consumer Act 2010 (Cth)
Corporations Act 2001 (Cth)

Cases

Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd [1995] FCA 1368
Carlton and United Breweries Ltd v Tooth and Co Ltd (1986) 7 IPR 581
0Daebo Shipping Co Ltd v The Ship Go Star [2012] FCAFC 156
Daily Mirror Newspapers Ltd v Gardner (1968) 2 QB 762
Emerald Construction Co v Lowthian (1966) 1 WLR 691
Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473
LED Technologies Pty Ltd v Roadvision Pty Ltd [2012] FCAFC 3
Woolley v Dunford (1972) 3 SASR 243

Further information on tortious interference with contract

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Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

[1] Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd [1995] FCA 1368, [68] (Lindgren J); Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473, [159]-[171] (Sheller, Stein and Giles JJA); LED Technologies Pty Ltd v Roadvision Pty Ltd [2012] FCAFC 3, [40]-[54] (Besanko J).

[2] See also News Limited v Australian Rugby Football League Limited and New South Wales Rugby League Limited and Others [1996] FCA 1256.

[3] See also Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd [1995] FCA 1368, [68] (Lindgren J); see also Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473, [171] (Sheller, Stein and Giles JJA); see also LED Technologies Pty Ltd v Roadvision Pty Ltd [2012] FCAFC 3, [54] (Besanko J).

[4] See also Emerald Construction Co v Lowthian (1966) 1 WLR 691, 700-1 (Lord Denning MR), 704 (Diplock LJ); see also Daily Mirror Newspapers Ltd v Gardner (1968) 2 QB 762, 780-1 (Lord Denning MR), 784 (Davies LJ); see also Woolley v Dunford (1972) 3 SASR 243, 282 (Wells J); see also Carlton and United Breweries Ltd v Tooth and Co Ltd (1986) 7 IPR 581, 625-6 (Young J).

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