Page 1

Status:

Positive or Neutral Judicial Treatment

*152 Law Debenture Trust Corporation v Ural Caspian Oil Corporation Ltd. and
Others
Court of Appeal
9 March 1994

[1994] 3 W.L.R. 1221

[1995] Ch. 152
Sir Thomas Bingham M.R. , Beldam and Saville L.JJ.
1994 Feb. 15, 16; March 9
ContractCovenantBreachCompensation moneys to be held by trustee on behalf of
shareholdersShareholders transferring shares to company on company covenanting with trustee to
pay over any compensation receivedCompany in breach of covenant transferring shares to another
partyOther party with knowledge of breach making subsequent transfer to third partyWhether
trustee having remedy against third party in law or equity
EquityInducement of breach of contractViolation of plaintiff's rightsContract subject to
covenantBreach of covenant by others not party to contractWhether equitable principles
applicable
The first four defendants were English companies which had traded in Russia until 1917.
Following the Bolshevik revolution the Soviet government had confiscated their assets and had
refused to pay compensation. L. Ltd. entered into an agreement by which it acquired the
companies' shares and, together with the four companies, covenanted with the plaintiff trust
company that they would pursue claims for compensation and pay the net amount of any
compensation received to the plaintiff, as trustee for the four companies' shareholders. L. Ltd.
also covenanted that it would not part with the shares unless the proposed transferee entered
into similar covenants. It later transferred the shares in breach of that covenant to the fifth
defendant, which subsequently transferred the shares to the sixth defendant. The plaintiff brought
proceedings against the defendants to recover as damages the sums received in compensation.
It asserted, in particular, by paragraph 9(a) of its statement of claim, that the fifth defendant with
knowledge of the agreement had caused or procured L. Ltd. to act in breach of its covenants
and, by paragraph 9(b), that the fifth defendant had come under an implied collateral obligation,
which was contractual, to observe and perform the covenants. The plaintiff alleged that the sixth
defendant, by accepting transfer of the shares with knowledge of the agreements, had also come
under an implied collateral obligation. On applications by the fifth defendant to strike out
paragraph 9(b) and by the sixth defendant to strike out the whole claim against it the plaintiff
sought to amend the statement of claim to allege that both defendants, with knowledge of the
agreements and their breach by L. Ltd., had taken the burden of the covenants and thereby
come under a legal or equitable obligation to perform them. The judge refused the plaintiff's
application on the ground that the proposed amendment disclosed no cause of action. On a
further application the plaintiff sought to amend the statement of claim to allege that the sixth
defendant, by causing or procuring or accepting transfer of the shares from the fifth defendant,
had knowingly, intentionally and/or wrongfully rendered ineffective the plaintiff's potential claim
against the fifth defendant for retransfer of the shares to L. Ltd. and had interfered with its
remedies against the fifth defendant in respect of that *153 defendant's tortious conduct. The
judge concluded that the general principle, giving a plaintiff a cause of action against a person
who procured the violation by an actionable wrong of the plaintiff's right against a third party,
applied where the right violated was a secondary right to a remedy for the tortious inducement of
a third party's breach of its primary obligation under a contract. He therefore held that the plaintiff

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could rely on its secondary right to injunctive remedy arising from the sixth defendant's
inducement of the breach by the fifth defendant of its contract with L. Ltd. and accordingly that
the facts pleaded disclosed a cause of action in tort against the sixth defendant.
On the sixth defendant's appeal:Held, allowing the appeal and dismissing the claim against the sixth defendant, that although the
fifth defendant was liable for its tortious conduct in procuring L. Ltd.'s breach of contract with the
plaintiff so that the plaintiff might have sought and obtained injunctive relief to restrain onward
transfer of the shares and to secure their retransfer to L. Ltd., no such injunction had been
sought; that there was, therefore, nothing unlawful in the onward transfer of the shares by the
fifth defendant and the sixth defendant's conduct, in accepting the transfer, did not constitute an
actionable wrong which amounted to a violation of the plaintiff's rights; and that, accordingly, the
plaintiff's further proposed amendment disclosed no reasonable cause of action against the sixth
defendant (post, pp. 166C-E, 170F-G, 172H-173A).
Lumley v. Gye (1853) 2 E. & B. 216 and Esso Petroleum Co. Ltd. v. Kingswood Motors
(Addlestone) Ltd. [1974] Q.B. 142 considered.
Decision of Hoffmann L.J. sitting as an additional judge of the Chancery Division [1993] 1 W.L.R.
138; [1993] 2 All E.R. 355 reversed.
The following cases are referred to in the judgments:
*154
Acrow (Automation) Ltd. v. Rex Chainbelt Inc. [1971] 1 W.L.R. 1676; [1971] 3 All E.R. 1175,
C.A. .
British Motor Trade Association v. Salvadori [1949] Ch. 556; [1949] 1 All E.R. 208
De Mattos v. Gibson (1858) 4 De G. &; J. 276
Esso Petroleum Co. Ltd. v. Kingswood Motors (Addlestone) Ltd. [1974] Q.B. 142; [1973] 3
W.L.R. 780; [1973] 3 All E.R. 1057
F. v. Wirral Metropolitan Borough Council [1991] Fam. 69; [1991] 2 W.L.R. 1132; [1991] 2 All
E.R. 648, C.A. .
Lep Air Services Ltd. v. Rolloswin Investments Ltd. [1973] A.C. 331; [1972] 2 W.L.R. 1175;
[1972] 2 All E.R. 393, H.L.(E.) .
Lumley v. Gye (1853) 2 E. &; B. 216
Merkur Island Shipping Corporation v. Laughton [1983] 2 A.C. 570; [1983] 2 W.L.R. 778;
[1983] 2 All E.R. 189, H.L.(E.) .
Photo Production Ltd. v. Securicor Transport Ltd. [1980] A.C. 827; [1980] 2 W.L.R. 283;
[1980] 1 All E.R. 556, H.L.(E.) .
Quinn v. Leathem [1901] A.C. 495 , H.L.(I.)
Stratford (J.T.) & Son Ltd. v. Lindley [1965] A.C. 269; [1964] 3 W.L.R. 541; [1964] 3 All E.R.
102, H.L.(E.) .

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Thomson (D.C.) & Co. Ltd. v. Deakin [1952] Ch. 646; [1952] 2 All E.R. 361, C.A. . *154

The following additional cases were cited in argument:

Allen v. Flood [1898] A.C. 1, H.L.(E.) .
Associated British Ports v. Transport and General Workers' Union [1989] 1 W.L.R. 939 ;
[1989] 3 All E.R. 796, C.A. .
Best v. Samuel Fox & Co. Ltd. [1952] A.C. 716; [1952] 2 All E.R. 394, H.L.(E.) .
Boulting v. Association of Cinematograph, Television and Allied Technicians [1963] 2 Q.B.
606; [1963] 2 W.L.R. 529; [1963] 1 All E.R. 716, C.A. .
Channel Tunnel Group Ltd. v. Balfour Beatty Construction Ltd. [1993] A.C. 334; [1993] 2
W.L.R. 262; [1993] 1 All E.R. 664, H.L.(E.) .
Chase Manhattan Bank N.A. v. Israel-British Bank (London) Ltd. [1981] Ch. 105; [1980] 2
W.L.R. 202; [1979] 3 All E.R. 1025
C.B.S. Songs Ltd. v. Amstrad Consumer Electronics Plc. [1988] A.C. 1013; [1988] 2 W.L.R.
1191; [1988] 2 All E.R. 484, H.L.(E.) .
Jasperson v. Dominion Tobacco Co. [1923] A.C. 709, P.C. .
R.C.A. Corporation v. Pollard [1983] Ch. 135; [1982] 3 W.L.R. 1007; [1982] 3 All E.R. 771,
C.A. .
Siskina (Owners of cargo lately laden on board) v. Distos Compania Naviera S.A. [1979] A.C.
210; [1977] 3 W.L.R. 818; [1977] 3 All E.R. 803, H.L.(E.) .
South Carolina Insurance Co. v. Assurantie Maatschappij "De Zeven Provincien" N.V. [1987]
A.C. 24; [1986] 3 W.L.R. 398; [1986] 3 All E.R. 487, H.L.(E.) .

The following cases, although not cited, were referred to in the skeleton arguments:
Henderson v. Henderson (1843) 3 Hare 100
Jones v. Lipman [1962] 1 W.L.R. 832; [1962] 1 All E.R. 442
Metall und Rohstoff A.G. v. Donaldson Lufkin & Jenrette Inc. [1990] 1 Q.B. 391; [1989] 3
W.L.R. 563; [1989] 3 All E.R. 14, C.A. .
Prudential Assurance Co. Ltd. v. Lorenz (1971) 11 K.I.R. 78
Temperton v. Russell [1893] 1 Q.B. 715, C.A. .

Page 4

Torquay Hotel Co. Ltd. v. Cousins [1969] 2 Ch. 106; [1969] 2 W.L.R. 289; [1969] 1 All E.R.
522, C.A. .

APPEAL from Hoffmann L.J. sitting as an additional judge of the Chancery Division.
On 15 November 1990 the plaintiff, Law Debenture Trust Corporation Plc., began proceedings
against six defendants, Ural Caspian Oil Corporation Ltd., North Caucasian Oil Fields Ltd., New
Schibaieff Petroleum Co. Ltd., Grozny-Sundja Oil Fields Ltd., Hilldon Ltd. and Caspian Resources
Ltd. the first four defendants being English registered companies which had carried on business in
Russia before the Bolshevik revolution in 1917. The plaintiff claimed, inter alia, (1) against the first
four defendants payment of the net amount of certain sums of money received by them as
compensation for losses; and (2) against the fifth and sixth defendants damages. By a summons
dated 25 July 1991 the sixth defendant applied for an order under R.S.C., Ord. 18, r. 19 and/or the
inherent jurisdiction of the court striking out the plaintiff's claim against it on the ground that the
statement of claim disclosed no reasonable cause of action. By a summons dated 24 January 1992
the fifth defendant applied for an order under R.S.C., Ord. 18, r. 19 and/or the court's inherent
jurisdiction striking out specified paragraphs of the plaintiff's *155 statement of claim on the ground
that they disclosed no reasonable cause of action. On 9 March 1993 Hoffmann J. granted the fifth
defendant's application and directed that the claim against the sixth defendant be struck out but he
declined to dismiss the action against the sixth defendant.
By an application dated 29 September 1992 the plaintiff applied to amend the statement of claim to
allege that the sixth defendant, by causing or procuring or accepting transfers of shares from the fifth
defendant, had knowingly intentionally and/or wrongfully rendered ineffective the plaintiff's potential
claim against the fifth defendant for the retransfer of the shares to Leisure Investments (Overseas)
Ltd., and had interfered with the remedies available to the plaintiff against the fifth defendant for its
tortious conduct and to claim (1) damages against the fifth and sixth defendants and (2) a mandatory
injunction requiring the sixth defendant forthwith to retransfer the shares to Leisure Investments
(Overseas) Ltd. or alternatively to the fifth defendant and in the latter event requiring the fifth
defendant to transfer the shares to that company. By his judgment given on 2 November 1992
Hoffmann L.J. concluded that the proposed amendment disclosed a cause of action against the sixth
defendant and granted the plaintiff leave to amend the statement of claim.
By a notice of appeal dated 27 November 1992 and with leave of the judge the sixth defendant
appealed on the ground that the judge was wrong in law to hold that the proposed amendment to the
statement of claim gave rise to a cause of action in tort against the sixth defendant.
The facts are stated in the judgment of Sir Thomas Bingham M.R.
Robin Potts Q.C. and Richard Snowden for the sixth defendant. There is a clear distinction in the law
relating to economic torts between procuring injury to the interests of another person by lawful acts
and doing so by violation of his legal rights: see Allen v. Flood [1898] A.C. 1 and Clerk and Lindsell on
Torts , 16th ed. (1989), pp. 785-791, para. 15-01. It is not a tort for A to cause injury to B's interests
where A's acts are in themselves lawful and B's legal rights are not violated. But it is a tort for A to
procure the violation by an actionable wrong of B's legal rights: the tort of "interference with rights."
Such a tort is distinct from the tort of using unlawful means to injure the interests of another: see Clerk
and Lindsell on Torts , pp. 785-828, 850-871, paras. 15-01 to 15-12, 15-19 to 15-20.
The three elements of the tort of interference with rights are (1) a right in the plaintiff; (2) its violation
by an actionable wrong; (3) and the procuring of that violation by the defendant: see Lumley v. Gye
(1853) 2 E. & B. 216 . In the absence of any one element the defendant is not liable.
As to primary right, see Allen v. Flood [1898] A.C. 1 ; Quinn v. Leathem [1901] A.C. 495 ; Merkur
Island Shipping Corporation v. Laughton [1983] 2 A.C. 570 ; Associated British Ports v. Transport and
General Workers' Union [1989] 1 W.L.R. 939 and R.C.A. Corporation v. Pollard [1983] Ch. 135 . A
secondary right is merely a remedy in respect of a cause of action. It presupposes a cause of action
but is not itself a cause of action: see Siskina (Owners of cargo lately laden on board) v. Distos
Compania Naviera S.A. [1979] A.C. 210 and Channel Tunnel Group Ltd. v. Balfour Beatty
Construction Ltd. [1993] A.C. 334 . The judge was wrong to conclude that it was sufficient for the
plaintiff to demonstrate violation of a secondary right.
As to actionable wrong, see D.C. Thomson & Co. Ltd. v. Deakin [1952] Ch. 646 , 679, 696-697. The

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test is whether a plaintiff can maintain an action in respect of the relevant act. The only actionable
wrong which the fifth defendant committed was the anterior procurement of L. Ltd. to break its
contract with the plaintiff by transferring the shares in the Russian companies to the fifth defendant.
That act was in no way prompted by the sixth defendant. The subsequent sale of the shares by the
fifth defendant to the sixth defendant was not an actionable wrong because the fifth defendant had
become the legal and beneficial owner of the shares and was entitled to sell them to the sixth
defendant unless restrained by injunction granted in respect of its antecedent tortious act. The judge
neither could, nor did, identify an actionable wrong on which a cause of action against the sixth
defendant could be founded.
As to procurement, its requirements differ, depending on whether the interference is categorised as (i)
direct inducement (ii) other direct intervention or (iii) indirect procurement. In (i) and (ii) the plaintiff
need not establish that the act of procurement is itself unlawful. In (iii), where the defendant acts
indirectly through a third party to disable another from performing his contract with the plaintiff, the
defendant's act in relation to the third party must be shown to be unlawful: see D.C. Thomson & Co.
Ltd. v. Deakin [1952] Ch. 646 and Merkur Island Shipping Corporation v. Laughton [1983] 2 A.C. 570 .
The judge wrongly categorised the present case as one of direct procurement because he ignored the
need for there to be an act by a person, namely, the fifth defendant, which was itself unlawful as an
act procured by the defendant which violated the plaintiff's primary right. Even if the case was one of
indirect procurement, the judge's conclusion was equally wrong since the sixth defendant, in
purchasing the shares from the fifth defendant, committed no wrongful act. The sixth defendant could
not therefore be liable either for the tort of interference with rights or for the tort of interference by
unlawful means.
The judge's decision cannnot be sustained on grounds of public policy for it leads to the proposition
that a defendant can be held liable although he neither causes anyone to commit an actionable wrong
nor himself commits such a wrong. That violates the principle in Allen v. Flood [1898] A.C. 1 .
The scope given by the judge to reliance on "secondary rights" is inconsistent with the prevailing
judicial attitude which looks with disfavour on attempts to extend the law of torts into areas covered by
equitable doctrine.
Elizabeth Gloster Q.C. and R. Gillis for the plaintiff. The principal issue is whether violation of a
secondary right is an unlawful act sufficient to ground liability under the principle in Lumley v. Gye, 2
E. & B. 216 .
There can be a secondary right in law to obtain compensation for the infringement of a primary right.
Both the primary and secondary rights are substantive and one is not subservient to the other. The
secondary right may be described as a "remedy" but no clear antithesis exists between rights and
remedies: see Walker, The Oxford Companion to Law *157 (1980), pp. 1070-1073; C.B.S. Songs
Ltd. v. Amstrad Consumer Electronics Plc. [1988] A.C. 1013 ; Salmond on Jurisprudence, 12th ed.
(1966), pp. 100-104, para. 16; Chase Manhattan Bank N.A. v. Israel-British Bank (London) Ltd. [1981]
Ch. 105 and Photo Production Ltd. v. Securicor Transport Ltd. [1980] A.C. 827 .
The principle in Lumley v. Gye is not limited to the procurement of breach of contract. It applies
whenever the violation of a right gives rise to an actionable wrong, and also to the procurement of that
violation: see Jasperson v. Dominion Tobacco Co. [1923] A.C. 709 ; Best v. Samuel Fox & Co. Ltd.
[1952] A.C. 716 ; Quinn v. Leathem [1901] A.C. 495 and Associated British Ports v. Transport and
General Workers' Union [1989] 1 W.L.R. 939 . [Reference was also made to Boulting v. Association of
Cinematograph, Television and Allied Technicians [1963] 2 Q.B. 606 .]
Immediately before the transfer to the fifth defendant the plaintiff had a contractual primary right in the
ownership of the shares remaining with L. Ltd., which was under a correlative primary contractual
obligation to the plaintiff. The fifth defendant was under a primary obligation to the plaintiff in tort not
to interfere with that obligation. After the transfer to the fifth defendant, L. Ltd. was under a secondary
contractual obligation to the plaintiff to pay damages for breach of its primary contractual obligation.
The fifth defendant was also under a secondary obligation in tort to pay the plaintiff damages for
having procured the breach by L. Ltd.; and further the fifth defendant was under a secondary
obligation in tort to the plaintiff to undo the consequences of its tort by a retransfer of the shares. The
plaintiff had the correlative secondary right to require the fifth defendant to remedy its tort. That right
could be enforced by injunction.
The relevant right to the plaintiff violated by the sixth defendant by knowingly taking a transfer of the
shares from the fifth defendant is that which the plaintiff would have had against the fifth defendant to

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require it to retransfer the shares to L. Ltd.: see Esso Petroleum Co. Ltd. v. Kingswood Motors
(Addlestone) Ltd. [1974] Q.B. 142 ; Acrow (Automation) Ltd. v. Rex Chainbelt Inc. [1971] 1 W.L.R.
1676 and Lep Air Services Ltd. v. Rolloswin Investments Ltd. [1973] A.C. 331 . [Reference was also
made to Fleming, The Law of Torts , 8th ed. (1992), pp. 689-690.] The actionable wrong constituted
by the fifth defendant's transfer to the sixth defendant is the breach by the fifth defendant of its
obligations. The sixth defendant is under a secondary obligation to pay damages to the plaintiff as a
joint tortfeasor in the fifth defendant's wrongful interference with the plaintiff's right to injunctive
remedy. The sixth defendant is also under a secondary obligation in tort to the plaintiff to undo the
consequences of its tortious conduct by retransferring the shares to the fifth defendant and the
plaintiff has the correlative right to an injunction against the sixth defendant.
The constituent elements of the tort are satisfied since the plaintiff can demonstrate a right, there has
been an actionable wrong, and it has been procured by the sixth defendant in entering into a contract
inconsistent with the fifth defendant's obligations: British Motor Trade Association v. Salvadori [1949]
Ch. 556 . [Reference was also made to Quinn v. Leathem [1901] A.C. 495 ; D.C. Thomson & Co. Ltd.
v. Deakin [1952] Ch. 646 ; Allen v. Flood [1898] A.C. 1 and Associated British Ports v. Transport and
General Workers' Union [1989] 1 W.L.R. 939 .]
R.C.A. Corporation v. Pollard [1983] Ch. 135 is distinguishable on its facts and F. v. Wirral
Metropolitan Borough Council [1991] Fam. 69 is irrelevant. Nor can the Siskina case [1979] A.C. 210
apply: see South Carolina Insurance Co. v. Assurantie Maatschappij "De Zeven Provincien" N.V.
[1987] A.C. 24 and Channel Tunnel Group Ltd. v. Balfour Beatty Construction Ltd. [1993] A.C. 334 .
Public policy must support the plaintiff for the reasons given by the judge. The existence of a remedy
in the present case does not outflank the principles of privity of contract or involve an extension of
contractual obligations.
Potts Q.C. replied.
Cur. adv. vult.
9 March. The following judgments were handed down
SIR THOMAS BINGHAM M.R.
At issue in this appeal is the scope, today, of the rule in Lumley v. Gye (1853) 2 E. & B. 216 . Does it
(as one side says) cover interference by a defendant with a plantiff's secondary right to relief against
a third party? Or is it limited (as the other side says) to cases where the defendant has interfered with
a plaintiff's primary right to performance by the third party? The issue has never been raised before
and the authorities accordingly give no direct answer to this conundrum.
The facts giving rise to the issue have been summarised in the sixth defendant's skeleton argument
with admirable lucidity and comprehensiveness and I adopt that summary almost verbatim.
The first four defendants in this action ("the Russian companies") are companies incorporated in
England which formerly owned oil producing assets in the former Soviet Union. Those assets were
expropriated following the Bolshevik revolution of 1917. In about 1928 each of the Russian
companies registered with H.M. Government claims for compensation in respect of the expropriated
assets. The claims were for amounts in excess of 27m. Down to 1986 the Shell Petroleum Company
Ltd. ("Shell") had a controlling shareholding in each of the Russian companies. However, each of the
Russian companies also had several hundred "outside" shareholders. None of the Russian
companies had any substantial assets other than the compensation claims. Shell provided
administrative services to each company which meant, in effect, that Shell was subsidising each
company.
In 1984 Leisure Investment plc. ("Leisure") approached Shell with a view to acquiring Shell's interest
in the Russian companies. The acquisition was to be made by a subsidiary of Leisure, namely Leisure
Investments (Overseas) Ltd. ("Overseas"). The negotiations were protracted. Shell were prepared to
proceed but on the footing that (1) Overseas was to offer to buy the shares of outside shareholders
on the same terms as it was to buy Shell's shareholdings; and (2) arrangements were to be made
with the Russian companies such that any compensation payments received by the Russian
companies would pass to Shell and the outside *159 shareholders in proportion to their interests
before the sale of the shares to Overseas.
Following such negotiations, in April 1986 Overseas made a bid for the share capital of each of the

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Russian companies and on 2 May 1986 the interested parties executed a series of documents. Each
Russian company entered into an agreement dated 2 May 1986 with (1) Leisure (2) Overseas and (3)
Law Debenture. These agreements are hereinafter described as "the compensation agreements." In
addition, also on 2 May 1986, Law Debenture executed a trust deed which took the form of a deed
poll ("the trust deed").
The material terms of each of the compensation agreements were as follows. (1) It was recited, inter
alia, that the Russian company making the compensation agreement ("the relevant company") had
compensation claims, that an offer had been made on behalf of Overseas for the whole of the issued
share capital of the relevant company, and that Law Debenture was the present trustee of the trusts
declared for the benefit of, inter alia, the shareholders of the relevant company by the trust deed. (2)
The relevant company agreed with Law Debenture that in consideration of the payment of 250 to it
by Law Debenture the relevant company: (a) would from time to time, and within 30 days of the
receipt of the compensation, pay to Law Debenture sums measured by reference to the amount of
any compensation received by the relevant company in respect of the compensation claims (i) within
the period of 10 years after the date of the compensation agreement or (ii) as a result of a claim
submitted pursuant to an Order in Council under the Foreign Compensation Act 1950 made within
that period; (b) would duly and promptly make and pursue any claim for compensation in respect of
the compensation claims. (3) Law Debenture agreed with the relevant company to retain a proportion
of the sums received from the relevant company pending final determination of the amount of any tax
payable by the relevant company in respect of its receipt of the compensation, and upon that final
determination to repay to the relevant company a sum measured by reference to that amount. (4)
Each of Leisure and Overseas jointly and severally undertook to and covenanted with Law
Debenture: (a) to procure that the respective Russian companies complied with and performed any
actions to be taken in respect of their covenants in the compensation agreements; and (b) not to part
with control of or to sell or otherwise to dispose of any shares in the Russian companies acquired
pursuant to the offers except on terms that any buyer, transferee or new controller entered into like
covenants, mutatis mutandis, with Law Debenture.
The trust deed provided that Law Debenture would hold any payment received from any of the
Russian companies pursuant to the compensation agreement with that company on trust for the
persons who at the date of the trust deed were shareholders in that company, the compensation
payment being apportioned between those persons according to their respective interests in the
assets of that company commencing on that date.
Following execution of the compensation agreements and the trust deed and pursuant to the offers,
Shell sold its shares to Overseas. Many *160 outside shareholders also accepted the offers but a
considerable number did not. On 14 December 1989 Leisure sold its 100 per cent. holding of the
shares of Overseas to Hilldon. On 15 December 1989 and 4 June 1990 the Russian companies
received compensation in respect of the expropriated assets. The total received was over 13m. On 5
March 1990 Overseas transferred to Hilldon the shares which had been acquired from Shell and from
the outside shareholders who had accepted the take-over offers. Overseas did not require Hilldon to
enter into any covenants with Law Debenture and Hilldon did not do so.
On 20 June 1990 Caspian made a general take-over offer for all shares in the issued share capital of
each of the Russian companies. Hilldon and certain other shareholders in the Russian companies
accepted Caspian's take-over offers. In about October 1990 Hilldon gave effect to its acceptance by
transferring the shares held by it to Caspian.
Each of the Russian companies has refused to make any payment to Law Debenture in compliance
with the terms of the compensation agreements. The Russian companies assert that the
arrangements were entirely invalid and illegal on a number of grounds which need not be considered
at this stage.
Law Debenture instituted this present action by writ issued on 15 November 1990. By writ issued on
22 March 1990 Shell sued their solicitors for negligence in respect of the advice given by the solicitors
in relation to the compensation agreements, the trust deed and otherwise in relation to the
arrangements concluded in respect of the take-overs by Overseas. Shell's action against the solicitors
has now been settled. A hearing is fixed for June to decide whether the compensation agreements
can be enforced.
Law Debenture's original claims against Hilldon and Caspian, which were not parties to the 2 May
1986 arrangements, were set out in paragraphs 8 to 13 of the original statement of claim. The effect

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of these claims can be summarised as follows. (1) Leisure and Overseas jointly and severally
undertook to and covenanted with Law Debenture: (a) to procure that the respective Russian
companies complied with and performed any actions to be taken in respect of their covenants in the
compensation agreements; and (b) not to part with control of or to sell or otherwise to dispose of any
shares in the Russian companies acquired pursuant to the Overseas offer except on terms that any
buyer, transferee or new controller entered into like covenants, mutatis mutandis, with Law
Debenture. (2) Overseas breached the above covenants by transferring the shares in the Russian
companies to Hilldon. (3) By causing or procuring or accepting the transfers, Hilldon knowingly
caused or procured or induced Overseas to breach the relevant covenants. (4) Alternatively, by
causing or procuring or accepting the transfers, Hilldon itself came under an "implied collateral
obligation" (which was said to be contractual) to Law Debenture to observe and perform the like
covenants, mutatis mutandis, as Overseas. (5) In transferring the shares to Caspian, Hilldon acted in
breach of the supposed "implied collateral obligation." (6) By causing or procuring or accepting the
transfers, Caspian knowingly caused or procured or induced Hilldon to breach the "implied collateral
obligation." (7) Alternatively, by causing or procuring or accepting the *161 transfers, Caspian itself
came under an "implied collateral obligation" (which was again said to be contractual) to Law
Debenture to observe and perform the like covenants, as originally imposed upon Overseas and as
allegedly "transmitted" to Hilldon. (8) Further or alternatively, Caspian failed to comply with its own
alleged "implied collateral obligation" to procure the Russian companies to make payment to Law
Debenture.
In 1991 Caspian applied for the claims against it to be struck out in their entirety. In 1992 Hilldon
applied for all claims against it other than in relation to the claim in tort under sub-paragraph (3) above
to be struck out. On 9 March 1992 Hoffmann J. held that the allegations by Law Debenture against
Hilldon (other than under subparagraph (3)) and against Caspian disclosed no reasonable cause of
action and struck them out: see [1993] 1 W.L.R. 138 , 141-148. Hoffmann J. held, at p. 142G-H, that
there were no grounds for implying any contract between Law Debenture and either Hilldon or
Caspian.
Law Debenture then applied for leave to amend the statement of claim so as to add additional causes
of action on two bases (see pp. 143A-C, 146E-G and 147H): (1) that because Hilldon and thereafter
Caspian took the shares with knowledge of the breach of the compensation agreements by Overseas,
they took the shares subject to an obligation to perform the covenants therein, either under the
principle of De Mattos v. Gibson (1858) 4 De G. & J. 276 , 282, or under the principle that he who
takes the benefit of a transaction must also take the burden; (2) that as an extension to the relief
available to Law Debenture as a consequence of Hilldon having committed the tort of inducing a
breach of contract by Overseas, Law Debenture was entitled to an order requiring Caspian to
retransfer the shares to Hilldon.
In the course of the same hearing Hoffmann J. held, on 9 March 1992, that these allegations
disclosed no reasonable cause of action and refused leave to amend. Put briefly, he held (1) that the
principle in the De Mattos case applied only to the grant of a negative injunction restraining a
purchaser from acting inconsistently with covenants, but could not extend to Caspian which was not
proposing to do anything inconsistent with the covenants given by Overseas to Law Debenture (see
[1993] 1 W.L.R. 138 , 146); (2) that section 50 of the Supreme Court Act 1981 added nothing as it
presupposed as a condition to the granting of damages "in substitution" for an injunction that an
injunction could have been granted. As there were no grounds for an injunction there are no grounds
for damages either (see p. 146); (3) that the principle of benefit and burden could not apply where the
right and burden arose under different instruments; where the covenants entered into by Overseas
with Law Debenture were unconnected with the transfers of shares to Hilldon and Caspian; and
where there was no inference from the transfer of shares that either Hilldon or Caspian was intended
to assume the burden of the covenants given by Overseas to Law Debenture (see pp. 146-147); (4)
that in order to give the court any jurisdiction to make any injunctive order against Caspian, Law
Debenture had to have a cause of action against it. In addition to the fact that there was no cause of
action in contract, or under the equitable principle in the De Mattos case, as noted above, there was
also no cause of action against Caspian for the tort of interfering with *162 Law Debenture's
contractual relations with Overseas. These contractual obligations had been irretrievably broken
before Caspian appeared on the scene. Accordingly there was no jurisdiction to grant an injunction
against Caspian on any of these grounds: see p. 148.
However, following a suggestion by Hoffmann J. at the end of the judgment on 9 March 1992 (which
had not previously been canvassed in argument between the parties (see pp. 148-149 and 150), on

Page 9

29 September 1992 Law Debenture sought leave to amend the statement of claim for a second time
to add a new cause of action in tort. The proposed amendment is included in paragraph 11 of the
amended statement of claim. It alleges:
"In the premises by causing or procuring or accepting such transfers [from Hilldon to
Caspian], Caspian . . . knowingly intentionally and/or wrongfully: (a) rendered ineffective
or sought to render ineffective the potential claim by the plaintiff against Hilldon for the
retransfer of the shares in the Russian companies to . . . Overseas so that . . . Overseas
would be able, or could be ordered, to comply with and perform its obligations [under
the compensation agreements]; and/or (b) interfered with or sought to interfere with the
remedies available to the plaintiff against . . . Overseas and/or Hilldon for the breaches
of contract [by Overseas] and/or for the tortious conduct of Hilldon [in inducing a breach
of contract by Overseas]."
The relief sought against Caspian is identified in paragraph 2 of the prayer:
"(a) damages; (b) further or alternatively, a mandatory injunction that Caspian do
forthwith transfer or retransfer to . . . Overseas, alternatively, that Caspian do forthwith
transfer or retransfer to Hilldon and that Hilldon do thereupon forthwith transfer or
re-transfer to . . . Overseas all such shares in the Russian companies now held by
Caspian as were originally acquired by . . . Overseas pursuant to the offers . . . or
subsequently acquired . . . in right of such shares; (c) further or alternatively, damages
pursuant to section 50 of the Supreme Court Act 1981 in addition to or in substitution for
such injunctive relief."
In his judgment of 9 March 1992, Hoffmann J. approached the proposed amendment as one which
sought to extend the scope of the principle in Lumley v. Gye, 2 E. & B. 216 beyond interference with
contractual relations to interference with remedies arising out of a broken contract. He readily
accepted that there was no authority supporting any such liability: see [1993] 1 W.L.R. 138 , 148H. In
his judgment delivered on 2 November 1992 Hoffmann L.J. commented that although the principle in
Lumley v. Gye is normally termed "procuring a breach of contract" it is in fact a wider principle. He
cited the following formulation of Erle J. in Lumley v. Gye, 2 E. & B. 216 , 232: "It is clear that the
procurement of the violation of a right is a cause of action in all instances where the violation is an
actionable wrong . . ." He then proceeded to set out what he concluded were the three essential
elements to the tort. They were (1) a right in the plaintiff (2) violated by an actionable wrong (3)
procured by the defendant.
*163
He stated that the rights capable of being violated and giving rise to a tort have been held to include
rights conferred by statute and fiduciary obligations imposed in equity, such as a company director's
duty of fidelity to the company. He referred to what he characterised as a "debatable extension" to the
principle that the actionable wrong must involve an actual breach of contract (or of statutory duty or of
an equitable obligation), namely that the actionable wrong could be extended to non-performance by
the contracting party which does not involve a breach of contract, and held (as is accepted) that this
"debatable extension" was not relevant in the instant case: [1993] 1 W.L.R. 138 , 151. He then
referred in passing to the extension of the concept of procurement to include knowingly entering into a
transaction inconsistent with the contracting party's obligation (at p. 151E-F), which he accepted as
well-established. Having made these three points, the judge concluded that the general principle in
Lumley v. Gye (and also that formulated by Ralph Gibson L.J. in F. v. Wirral Metropolitan Borough
Council [1991] Fam. 69 , 107) was wide enough to cover a case in which the right of the plaintiff
which had been violated was the secondary right of the plaintiff to a remedy arising out of the
antecedent tortious inducement of a breach by a third party of its primary obligation under a contract:
see [1993] 1 W.L.R. 138 , 151F-H. In using that language he borrowed and adapted Lord Diplock's
well known analysis of contractual obligations in Photo Production Ltd. v. Securicor Transport Ltd.
[1980] A.C. 827 , 848. This analysis itself developed earlier observations of Lord Diplock in Lep Air
Services Ltd. v. Rolloswin Investments Ltd. [1973] A.C. 331 , 350-351. The judge accordingly ruled
that the facts pleaded in the draft amended statement of claim gave rise to a cause of action in tort
against Caspian and he gave leave to amend.
Against this second decision Caspian now appeal. There is no appeal against the earlier decision and

Page 10

no appeal by Hilldon (who were not represented before us). The sole question is whether Law
Debenture's amended statement of claim discloses a cause of action in tort against Caspian.
Law Debenture's argument in support of the judge's decision proceeded by a series of steps, some of
which were challenged and some of which were not. I hope the steps are fairly summarised as
follows. (1) Law Debenture had a primary contractual right against Overseas requiring that company
not to part with the shares save to a transferee bound by the same covenants as itself. This was
common ground. Plainly Law Debenture was entitled to due performance of the May 1986
agreements by the other parties to them. (2) Hilldon was under a primary duty in tort to Law
Debenture not to interfere with Law Debenture's primary contractual right against Overseas. This was
so on a simple application of Lumley v. Gye , and Hilldon never challenged that allegation in Law
Debenture's original pleading. In accepting a transfer of the shares Hilldon infringed Law Debenture's
right and so became liable to Law Debenture in tort. This also was common ground. (3) Having
tortiously interfered with Law Debenture's primary contractual right to performance by Overseas,
Hilldon became subject to a secondary liability to pay damages to Law Debenture. This proposition
was not challenged. (4) As a tortfeasor, *164 Hilldon also became subject to a personal liability to
undo the consequences of its tort. The transfer to it could have been restrained before it was made.
After it was made, Hilldon could and on appropriate facts would be ordered to retransfer the shares to
Overseas. This step of the argument depended on the decision of Bridge J. in Esso Petroleum Co.
Ltd. v. Kingswood Motors (Addlestone) Ltd. [1974] Q.B. 142 . Caspian did not challenge the
correctness of that decision or throw doubt on the court's jurisdiction to order retransfer by Hilldon to
Overseas. But it did contend that Law Debenture had no legal right to have the shares retransferred
and that Hilldon was subject to no legal duty to retransfer them unless and until the court made the
necessary order. (5) Law Debenture's right to injunctive relief against Hilldon, although a secondary
right, was no less a right recognised and entitled to protection in law than a primary right. Caspian did
not accept this. (6) Law Debenture's right was matched by duties on Hilldon, a positive duty to
retransfer the shares to Overseas and a negative duty not to transfer the shares elsewhere and so
put it out of its power to perform its positive duty. Caspian challenged this. (7) Hilldon's transfer of the
shares to Caspian was a breach of these duties and accordingly amounted to the commission of a
tort additional to and independent of the tort committed at step (2) above. Thus by making the transfer
Hilldon committed an actionable wrong. This was the proposition which Caspian most strongly sought
to refute. (8) By accepting the transfer from Hilldon in this situation, with the requisite knowledge and
intention, Caspian also violated Law Debenture's right and was itself a tortfeaser guilty of an
actionable wrong. It was therefore properly joined as a defendant on this ground. Caspian rejected
this conclusion.
I embark on consideration of the legal issues in this case with a strong inclination towards the
conclusion at which the judge arrived. It is alleged that Overseas, Hilldon and Caspian were at all
material times under common control and Caspian does not deny that it had full knowledge of the
terms of the contract between Law Debenture and Overseas and of the nature and effect of the
transaction between Overseas and Hilldon. Denial of a remedy against Caspian might, as the judge
observed [1993] 1 W.L.R. 138 , 151G, allow the introduction of an additional company under the
same control as the original contract-breaker to provide an easy escape from the salutary remedy
devised by Bridge J. in the Kingswood Motors case. The suspicion must exist that these transfers
were designed, all along, to deprive the majority of shareholders in the Russian companies of the
benefit for which alone they were willing to part with their shares. No attempt has however been made
in this action to pierce the corporate veil which protects Hilldon and Caspian, and we must resist the
temptation to speculate on other claims which might perhaps have been made by Law Debenture. We
must rule on the legal issues raised. It seems to me that these are essentially twofold. (1) Does the
rule in Lumley v. Gye apply to the right which Law Debenture asserts (as in steps (4) and (5) above)
against Hilldon? (2) Did the transfer between Hilldon and Caspian amount to an actionable wrong by
either of them?

(1) The right

Many of the cases dealing with the application of Lumley v. Gye have referred to contractual rights,
because the cases were concerned with *165 alleged inducement or procurement of contractual
breaches. But Erle J.'s original formulation was not so limited, 2 E. & B. 216 , 232:
"It is clear that the procurement of the violation of a right is a cause of action in all

Page 11

instances where the violation is an actionable wrong, as in violations of a right to

property, whether real or personal, or to personal security: he who procures the wrong is
a joint wrongdoer, and may be sued, either alone or jointly with the agent, in the
appropriate action for the wrong complained of."
Early summaries of the rule accepted this. Thus Lord Macnaghten said in Quinn v. Leathem [1901]
A.C. 495 , 510:
"Speaking for myself, I have no hesitation in saying that I think the decision was right,
not on the ground of malicious intention - that was not, I think, the gist of the action - but
on the ground that a violation of legal right committed knowingly is a cause of action,
and that it is a violation of legal right to interfere with contractual relations recognised by
law if there be no sufficient justification for the interference."
The present state of the law is in my judgment well summarised by Professor John Fleming in The
Law of Torts , 8th ed. (1992), pp. 689-690, where he writes:
"Since then the action has been actively promoted by the courts. Leaving behind its
original link with personal service, it now applies to every kind of contractual relation,
including purely commercial. Viewed as an illustration of the generalisation that
unjustified 'violation of a legal right committed knowingly is a cause of action,' it is now
wide enough to include even civil rights existing independently of contract: thus it would
be an actionable wrong to induce a common carrier to refuse, in breach of his common
law duty, goods tendered to him for carriage. More doubtful is the role of the action for
vindicating non-economic relations; it has been denied for the right of parental access in
custody disputes because it would likely be exploited for spiteful litigation and is better
left to matrimonial proceedings."
I would not be willing to hold that interference with a secondary right to a remedy (as opposed to a
primary right to performance) could never attract the application of the Lumley v. Gye principle. For
example, if, following default by the principal debtor, a third party induced a guarantor to dishonour his
secondary obligation to pay the creditor, I would need much persuasion that the third party was not
liable in tort. But it does not seem to me to follow that a third party is necessarily liable in tort for any
interference with any right properly regarded as secondary, particulary where that right is contingent.
So I think it is perhaps preferable to avoid elaborate analysis of secondary rights and obligations and
instead to ask, perhaps at the price of some circularity, whether violation of the right in question is an
actionable wrong.

(2) The wrong

It is not in dispute that Hilldon could, on timely application, have been ordered to retransfer the shares
to Overseas and restrained from *166 transferring them on to Caspian or anyone else. It is said that
Hilldon could only be restrained from acting unlawfully and that it would not be liable to such restraint
if such onward transfer were lawful. Therefore onward transfer is to be regarded as unlawful, as
violating Law Debenture's right that it should not take place. As a party to this onward transfer
Caspian are party to the unlawfulness and so liable.
To my mind this chain of reasoning harbours a fallacy. It is of course true that the courts restrain the
commission of unlawful acts such as threatened breaches of contract or torts or breaches of trust and
grant mandatory orders for the doing of things which it would be unlawful not to do. But all injunctive
orders are not of this kind. The court will restrain a defendant and potential judgment debtor from
making himself judgment-proof by dissipating his assets and may order him to give disclosure of
assets in support of the injunction. But the defendant violates no legal right of the plaintiff if he makes
himself judgment-proof by dissipating his assets before he is enjoined from doing so and he does not
act unlawfully in failing to give disclosure before he is ordered to do so. These are measures the court
adopts to protect the efficacy of its orders. The Kingswood Motors injunction was, I think, of a similar
kind.
Caspian can be liable to Law Debenture if and only if Hilldon's transfer of the shares to it was tortious.

Page 12

But at the time this transfer was made Hilldon was the full legal and beneficial owner of the shares. It
had no contractual relationship of any kind with Law Debenture. It was liable to Law Debenture for its
tortious conduct in procuring Overseas' breach of its contract with Law Debenture, but that was all. It
was open to Law Debenture to seek an interlocutory injunction restraining Hilldon from making
onward transfer and a final injunction ordering retransfer, but application had not been made and
injunctions had not been granted. Until some injunction was granted, Hilldon was in my judgment
entitled to do what it would with its own. I cannot regard the onward transfer as an actionable wrong,
and it would in my view defeat the ingenuity of any pleader to frame a plausible statement of claim
based on that transfer alone.
Mr. Robin Potts for Caspian criticised the judgment of Hoffmann L.J. on the ground that although the
judge listed an actionable wrong as one of the ingredients of the cause of action he failed to identify
any relevant actionable wrong on the part of Hilldon and Caspian. That seems to me a fair criticism. In
concentrating on the right, it seems to me that the judge did take his eye off the wrong.
I would accordingly allow Caspian's appeal, refuse Law Debenture leave to amend and dismiss this
action against Caspian.
BELDAM L.J.
In the circumstances set out fully in the judgment of Sir Thomas Bingham M.R., did the sixth
defendant, Caspian, commit the common law tort of actionable interference with the contractual rights
of the plaintiff, Law Debenture?
The elements of the tort were stated by Jenkins L.J. in D.C. Thomson & Co. Ltd. v. Deakin [1952] Ch.
646 , 696. He said:
"Nevertheless, I think that in principle an actionable interference with contractual
relations may be committed by a third party who, *167 with knowledge of a contract
between two other persons and with the intention of causing its breach, or of preventing
its performance, persuades, induces or procures the servants of one of those parties, on
whose services he relies for the performance of his contract, to break their contracts of
employment with him, either by leaving him without notice or by refusing to do what is
necessary for the performance of his contract, provided that the breach of contract
between the two other persons intended to be brought about by the third party does in
fact ensue as a necessary consequence of the third party's wrongful interference with
the contracts of employment."
As Lord Diplock pointed out in Merkur Island Shipping Corporation v. Laughton [1983] 2 A.C. 570 ,
607, the only interference with contractual rights relied on by the plaintiff in D.C. Thomson & Co. Ltd.
v. Deakin was procuring a breach by a third party of a contract between the third party and the
plaintiff. But Lord Diplock said that Jenkins L.J., though using the expression "breach," was not
intending to confine the tort of actionable interference with contractual rights to the procuring of such
non-performance of primary obligations under a contract as would necessarily give rise to secondary
obligations to make monetary compensation by way of damages. He said, at p. 608:
"All prevention of due performance of a primary obligation under a contract was
intended to be included even though no secondary obligation to make monetary
compensation thereupon came into existence because the second obligation was
excluded by some force majeure clause. If there were any doubt about this matter, it
was resolved in 1969 by the judgments of the Court of Appeal in Torquay Hotel Co. Ltd.
v. Cousins [1969] 2 Ch. 106 . That was a case in which the contract the performance of
which was interfered with was one for the delivery of fuel. It contained a force majeure
clause excusing the seller from liability for non-delivery if delayed, hindered or prevented
by (inter alia) labour disputes. Lord Denning M.R. stated the principle thus, at p. 138:
'there must be interference in the execution of a contract. The interference is not
confined to the procurement of a breach of contract. It extends to a case where a third
person prevents or hinders one party from performing his contract, even though it be not
a breach.' (The emphasis is that of Lord Denning)."
Thus it is an actionable tort knowingly to interfere with another's right to performance of a contractual

Page 13

obligation by preventing or hindering the other party from performing his obligations under the
contract and as Lord Diplock in Merkur Island Shipping Corporation v. Laughton said of the common
law tort of interfering with the trade or business of another person by doing unlawful acts, at p. 609:
"To fall within this genus of torts the unlawful act need not involve procuring another
person to break a subsisting contract or to interfere with the performance of a subsisting
contract."
*168
The type of case was described by Viscount Radcliffe in J. T. Stratford & Son Ltd. v. Lindley [1965]
A.C. 269 , 328 as:
"one in which the defendants have inflicted injury on the plaintiffs in the conduct of their
business and have resorted to unlawful means to bring this about. It cannot be denied
that to induce breaches of contract is to employ unlawful means."
The question in the present case is whether the action of Caspian in taking a transfer of shares from
Hilldon which could impede the plaintiff's rights against Hilldon can be categorised as unlawful means.
In the present case the plaintiff has asserted a cause of action against Hilldon alleging that by
accepting the transfers of the shares in the Russian companies with knowledge of the terms of the
agreements, it caused or procured Leisure Investments (Overseas) Ltd. ("Overseas") to breach its
covenants with the plaintiff. Hilldon does not dispute that this allegation discloses a cause of action.
Although at the material time Overseas, Hilldon and Caspian are alleged to have been under common
control, it is not suggested that there was in this case a conspiracy to injure the plaintiff nor that
Caspian was party to Hilldon's conduct constituting the tort of interfering with the plaintiff's contractual
rights.
The plaintiff originally attempted to base claims against Caspian on Caspian's action in taking a
transfer of the shares in the Russian companies from Hilldon. The plaintiff argued that Caspian then
became liable to perform the covenants either by implication or by the principle formulated by
Knight-Bruce L.J. in De Mattos v. Gibson (1858) 4 De G. & J. 276 , or alternatively that in law or
equity Caspian could not take the benefit of the shares without assuming the burden of the
covenants. For the reasons given by the judge he held that the plaintiff had failed to make out a cause
of action against Caspian on any of these grounds. Finally the plaintiff claimed as an extension of the
relief available for the tort of inducing a breach of contract a mandatory order first against Caspian to
retransfer the shares to Hilldon and then against Hilldon to retransfer them to Overseas.
The judge rejected these claims. Against Hilldon such an order was no longer possible because it had
transferred its shares to Caspian and against Caspian the plaintiff could demonstrate no independent
cause of action on which to found jurisdiction in the court to make an injunctive order. The judge
decided the plaintiff had not demonstrated a cause of action in tort against Caspian. Caspian had not
played any part in inducing Overseas to break its covenant to the plaintiff and accordingly no arguable
case had been raised that Caspian had interfered with the plaintiff's contractual rights. But the judge
added [1993] 1 W.L.R. 138 , 148:
"The effect of the transfer to Caspian was not to interfere with contractual relations but
to deprive the plaintiff of the remedy which it would have had for the inducement of the
earlier breach of contract by Hilldon. It rendered ineffective the potential claim to a
retransfer [of the shares]."
Thus the question was raised whether interference with contractual rights extends to interference with
or hindrance of remedies available for a *169 breach of contract, and the scene was set for the final
amendment which is the subject of this appeal.
The judge held that the general principle that "where there is a right the law gives a remedy" and that
knowingly entering into a transaction inconsistent with a contracting party's obligations as the
defendant had done in the case of British Motor Trade Association v. Salvadori [1949] Ch. 556
established a general principle wide enough to cover a case in which the plaintiff could show that it

Page 14

had been prevented or impeded from exercising a secondary right to a remedy available for the
tortious inducement of a breach by a third party of its primary obligation under a contract. Holding that
on grounds of policy there were no reasons to deny the suggested extension of the cause of action,
he allowed the amendment.
Mr. Potts argues that the proposed amendment discloses no actionable wrong because the test for an
actionable wrong arising from breach of primary right is whether the plaintiff can maintain an action in
respect of the relevant act. There was no direct interference with the performance of an obligation
which the plaintiff was entitled to expect from Overseas because no right of the plaintiff was violated
by the sale of the shares in the Russian companies by Hilldon to Caspian. Nor was there any indirect
interference with such obligations because there was no independently unlawful act on the part of
Caspian in taking a transfer of the shares from Hilldon.
The plaintiff supports the judge's decision that the plaintiff had a right to performance of the secondary
obligation by Hilldon which it could enforce by seeking a mandatory restoratory injunction. The
circumstances were similar to those in which Bridge J. granted an injunction in Esso Petroleum Co.
Ltd. v. Kingswood Motors (Addlestone) Ltd. [1974] Q.B. 142 . In that case Bridge J. granted a
mandatory order against the second and third defendants ordering them to reconvey property which
they had procured to be transferred to them in direct breach of the first defendant's contractual
obligations to the plaintiff. Bridge J., however, emphasised the discretionary nature of the remedy of
mandatory injunction: see p. 157.
Sir Thomas Bingham M.R. has listed the steps in the argument of Miss Gloster for the plaintiff. In
essence her argument was that by accepting a transfer of the shares from Hilldon, Caspian had
interfered with the plaintiff's right to obtain a mandatory injunction against Hilldon or alternatively had
prevented or hindered Hilldon from performing a correlative obligation to retransfer the shares to
Overseas.
In so far as the plaintiff's argument depends upon the analysis of the contractual obligations as
primary or secondary by Lord Diplock in Photo Production Ltd. v. Securicor Transport Ltd. [1980] A.C.
827 and which arise by implication from the terms of the contract at common law, it is not irrelevant
that Lord Diplock began his exposition by saying, at p. 848:
"Leaving aside those comparatively rare cases in which the court is able to enforce a
primary obligation by decreeing specific performance of it, breaches of primary
obligations give rise to substituted or secondary obligations on the part of the party in
default, and, in some cases, may entitle the other party to be relieved from further
performance of his own primary obligations."
*170
A party whose contract can give rise to a claim for specific performance in equity may nevertheless
prefer to claim damages for breach. Although a court will not decree specific performance of some
contracts, for example contracts of service, it may grant injunctions to restrain conduct which is
inconsistent with the performance of primary contractual obligations. I can see the force of the
argument that, if a plaintiff can obtain an injunction to restrain action inconsistent with the
performance of a contractual obligation, he ought equally to be able to obtain an injunction to restrain
a third party from procuring action inconsistent with his primary right to performance of the obligations
under the contract. That is because the third party is threatening to commit a tort which is actionable.
Equally, if as in the case of Acrow (Automation) Ltd. v. Rex Chainbelt Inc. [1971] 1 W.L.R. 1676 , it is
to be regarded as unlawful to do an act which amounts to contempt of court because it interferes with
the rights of a party who has obtained an injunction , it is difficult to see why it should not similarly be
regarded as unlawful to do acts which might prevent or hinder the obtaining of an injunction .
But I am not persuaded that an act, otherwise lawful but which to the knowledge of the person doing it
might prevent a third party from seeking equitable relief against breach of a primary obligation under a
contract, is in itself capable of giving rise to a cause of action in tort.
The claimed extension of the cause of action would appear to be confined to equitable remedies
arising from breach of primary obligations. Although a secondary obligation to pay damages will on
Lord Diplock's analysis arise, the right to claim equitable relief by way of injunction is conditional upon
the secondary obligation being inadequate to vindicate the plaintiff's primary right. Injunctions
compelling the performance of positive obligations have much in common with specific performance,

Page 15

excluded from Lord Diplock's analysis. So have mandatory restorative injunctions which compel the
undoing of a wrong. They are remedies which a plaintiff may seek from the court, either to compel
performance of a primary obligation or to restrain the defendant from actions inconsistent with the
primary obligations under the contract. In my view they are not themselves secondary rights arising
by implication from the terms of the agreement. Whilst I consider that, if an injunction had been
obtained by the plaintiff against Hilldon, action taken by Caspian which prevented or impeded Hilldon
from complying with its terms would under the principle in Acrow's case [1971] 1 W.L.R. 1676 have
amounted to an unlawful act actionable by the plaintiff, until such an injunction had been obtained the
transfer of the shares from Hilldon to Caspian and their acceptance by Caspian was not actionable by
the plaintiff and therefore not tortious. I accordingly agree with Sir Thomas Bingham M.R. that the
appeal should be allowed.
SAVILLE L.J.
For the purposes of the appeal it is assumed that Hilldon, by taking an unencumbered transfer of
shares from Overseas, committed the tort of inducing Overseas to break a legal contractual obligation
owed by the latter to the plaintiff not to make any such *171 transfer. Caspian were not party to this
tort, but afterwards took a transfer of the shares from Hilldon. It is also assumed for the purpose of
this appeal that Caspian procured Hilldon to make this further transfer in order to put it out of the
power of the plaintiff to seek an order requiring Hilldon to transfer the shares back to Overseas, by
way of a remedy for the tort committed by Hilldon.
The plaintiff has pleaded that this act of inducement by Caspian was itself a tort. It accepts that in
order to sustain this pleading it must establish that what Caspian procured Hilldon to do was
something unlawful, that is, a violation of a legal right of the plaintiff.
Miss Gloster for the plaintiff submitted that when Hilldon committed the first tort, that company came
under a legal obligation to the plaintiff to make recompense for that tort. The plaintiff therefore had a
correlative legal right to such recompense, which included a right to have the shares transferred back
to Overseas. Caspian procured Hilldon to put it out of their power to perform this obligation, by the
further transfer of the shares. Miss Gloster submitted that the transfer must have been an unlawful act
on the part of Hilldon, since the plaintiff, had it known that it was about to take place, could have
obtained a permanent injunction to restrain it, on the grounds that in consequence of the tort it had
the right to require the shares to be returned whence they came: see Esso Petroleum Co. Ltd. v.
Kingswood Motors (Addlestone) Ltd. [1974] Q.B. 142 . A permanent injunction will only issue to
prohibit acts which the law categorises as unlawful. Thus it must follow that the transfer was an
unlawful act. Since it was knowingly procured by Caspian, all the relevant ingredients of a tort by
Caspian are present.
Mr. Potts for Caspian submitted that the transfer by Hilldon was not an actionable wrong, and that
only unlawful acts that are actionable wrongs can form the basis of the tort under consideration. The
transfer of the shares from Hilldon to Caspian was not in itself an actionable wrong. The plaintiff could
not sue Hilldon and obtain a retransfer of the shares without relying on a different actionable wrong,
namely the procurement of the transfer from Overseas. The latter actionable wrong was one for which
it is not alleged that Caspian were responsible.
In my judgment this is not conclusive. It seems to me that the basis of the tort is that it is wrong to
procure another to do something unlawful by way of a violation of the rights of the plaintiff. The fact
that what is done is unlawful by reason of some prior unlawfulness seems to me to be neither here
nor there. Two wrongs do not make a right. For my own part I would respectfully accept and adopt the
proposition of Lord Macnaghten in Quinn v. Leathem [1901] A.C. 495 , 510 that unjustified "violation
of a legal right committed knowingly is a cause of action." The question therefore is whether Caspian
did knowingly violate a legal right of the plaintiff by procuring Hilldon to transfer the shares.
The suggested legal right in the present case must be (if anything) what has been described as a
secondary right, to distinguish it from the primary legal right to performance of the contract or other
primary legal obligation. If the primary obligation is not performed then as a matter of law there arises
a right to recompense. In the context of contract, for example, the contracting parties make promises
to each other. It is their primary *172 obligation to perform those promises. To the extent that they fail
to do so, the primary obligation is (subject to contractual provisions to the contrary) replaced by a
secondary obligation to make recompense for the breach. Both primary and secondary obligations
give rise to correlative rights and I accept that both can properly be described as legal rights and
obligations.

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In the present case the suggested legal right is the secondary right to obtain an order against Hilldon
for the return of the shares. Mr. Potts submitted that until such an order was actually obtained, it was
not unlawful for Hilldon to dispose of the shares, so that in truth at the material time there was no
violation of the plaintiff's legal rights.
Mr. Potts supported this submission by examining the case of another secondary right, namely that of
damages. If the plaintiff was right in contending that there was a violation of a legal right in the
present case, then the same would follow where, before a Mareva injunction was obtained, a third
party procured the defendant to dissipate his assets. This, submitted Mr. Potts, cannot be right, for
the defendant only acts unlawfully, in violation of the plaintiff's secondary right to damages, if he
seeks to dissipate his assets after the grant of a Mareva . Given this is the position, a third party
procuring the defendant to dissipate his assets before the grant of a Mareva is not procuring the doing
of anything unlawful at all.
Not without some doubts I am convinced by this argument. It might be suggested that there is some
distinction between a Mareva injunction and the type of injunctive relief under discussion in the
present case. It could be said that Mareva relief is not by way of recognising and enforcing a
secondary right of damages, but a means of protecting the value of that right, by way of temporarily
creating a new right and obligation in respect of the defendant's assets. In other words, a Mareva
injunction is not (unlike the injunction under consideration) the remedy for an existing wrong, but a
means of temporarily preserving that remedy. Since the right does not exist until a Mareva injunction
is granted there is indeed no question of the defendant being under any pre-existing legal obligation
with regard to his assets so that a third party would not be violating any right of the plaintiff by
procuring their disposal before a Mareva was granted.
This distinction has some attractions, but in my view it contains a logical flaw. The plaintiff has to
assert that it had the right, from the time of the original tort, to an injunction requiring Hilldon to
transfer back the shares. An injunction is a discretionary remedy. As to this the plaintiff submits that
on the pleaded facts the court would have exercised its discretion in its favour. Thus it asserts the
existence of a legal right and obligation predating the grant of such an injunction. However, by exactly
the same process of reasoning, a plaintiff who has all the material required to obtain a Mareva
injunction could say that he too therefore has a right (and the defendant a corresponding obligation)
with regard to the defendant's assets even before a Mareva was granted; yet it seems to me clear
that this cannot be the law.
In the end therefore I am driven to the conclusion that the fallacy in the plaintiff's argument lies in the
assertion that to dispose of the shares *173 before an order was made prohibiting this and requiring
their return, amounts to a violation of the plaintiff's legal rights. It seems to me that the right asserted
by the plaintiff only arises when the court makes the order in question.
For these reasons I, too, would allow this appeal, refuse leave to amend and dismiss the action
against Caspian.

Representation
Solicitors: Nabarro Nathanson ; Linklaters & Paines .
Appeal allowed with costs. Leave to appeal refused. (D. E. C. P. )

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