Palmer Birch (a partnership) v Lloyd [2018] EWHC 2316 (TCC)

This case concerned a claim in economic torts against the de facto and de jure directors of a limited company. The claimant was a construction business specialising in the refurbishment of large houses. It entered into a contract with a company (‘HHL’) to renovate a house belonging to the sole funder of the company, Michael Lloyd (‘M’). M’s brother, Christopher Lloyd (‘C’) was HHL’s director. M also beneficially owned a second company (‘SHL’). HHL had a leasehold interest in the house, the freehold was owned by SHL. SHL loaned money to HHL so that they could meet the renovation costs. HHL had no independent existence and had been incorporated for tax reasons. It went into liquidation before completion of the works. The Claimant claimed the unpaid value of work carried out under the contract against the brothers. The central issue was whether the defendants had colluded to bring about HHL’s insolvency and procure repudiatory breach so that they would avoid having to pay the Claimant for the work done. The Claimant claimed under three economic torts: inducing breach of contract, unlawful interference and unlawful means conspiracy. The Court allowed the claim on the basis of inducing breach of contract and unlawful means conspiracy. M had (in agreement with C) brought about HHL’s liquidation by diverting sums from HHL, which was an abuse of HHL’s separate corporate personality. The justification defence failed given that M had no ‘equal or superior right’ to that of the Claimant, and had been purely motivated by commercial self-interest, namely to avoid paying the Claimant.