Unlawful Means Conspiracy: Is Knowledge of Unlawfulness Needed?

Lucas Arnold and Hana Kapadia

Claims for unlawful means conspiracy are enjoying a rise in popularity. There are a number of potential reasons for this, including the rise of large scale cross-border fraud where a wide-ranging cause of action may appear attractive to capture increasingly complex commercial wrongdoing.

On the other hand, establishing the cause of action can be evidentially difficult and its scope and elements remain imprecise. For instance, uncertainties persist in relation to whether a defendant must possess knowledge of the fact that the means employed to harm a claimant were unlawful. By reference to recent case law, this blog post considers whether knowledge of unlawfulness is an additional element of the tort, and the implications for pleading and proving an unlawful means conspiracy claim in the future.

Elements of the Tort of Unlawful Means Conspiracy

It is now well established that a claim for unlawful means conspiracy contains the following elements:

  • the existence of a combination between persons (legal or natural);
  • the combination is to use unlawful means;
  • an intention to injure the claimant by the use of those unlawful means; and
  • the use of the unlawful means causes the claimant to suffer loss as a result.

It has been held that to injure the plaintiff by unlawful means requires: (1) the acts involved to be ‘unlawful’ and (2) the unlawful acts to be the means by which the claimant was injured: (Digicel (St Lucia) Ltd v Cable & Wireless Plc [2010] EWHC 774). Significantly, the unlawfulness must be intentional and instrumental, rather than merely incidental, to the defendant’s gain: (Revenue and Customs Commissioners v Total Network SL [2008] 1 AC 1174).

Knowledge of Unlawfulness

There remains uncertainty in the jurisprudence as to whether a defendant must possess knowledge of the fact of unlawfulness as a necessary element to the tort of unlawful means conspiracy.

The conflict between a defendant’s ignorance of the unlawfulness of his or her conduct as being no excuse for liability and a claim for conspiracy requiring knowledge of unlawfulness has persisted since British Industrial Plastics Ltd v Ferguson [1938] 4 All ER 504. In that case, it was held by the Court of Appeal that the defendant’s knowledge of the unlawfulness, specifically the breach of contract, was required in order for him to be held liable in the claim for unlawful means conspiracy.

However, some years later in Belmont Finance Corp v Williams Furniture Ltd (No 2) [1980] 1 All ER 393, Buckley LJ in the Court of Appeal held that in an unlawful means conspiracy, ignorance of, or failure to appreciate the unlawfulness of the conduct, would not excuse a defendant from liability (at [404]).

On the other hand, more recently in Meretz Investments NV v ACP Ltd [2008] Ch 244, Toulson J in the Court of Appeal commented obiter that a defence may be raised to an action for conspiracy by unlawful means if the defendant believed his actions were lawful (at [174]).

Two very recent decisions of the English High Court reveal that it is still not settled whether knowledge of unlawfulness is a requirement of the tort.

In Stobart Group v Tinkler [2019] EWHC 258 (Comm), the claimant listed company brought proceedings to establish that the defendant had been validly dismissed as an employee and removed as a director where his conduct entailed breach of duties as an employee and director amounting to a conspiracy to replace the company’s chairman.

After considering the three Court of Appeal decisions above and the inconsistent lines of authority flowing from them, HHJ Russen QC gave the following reasons explaining why, in his view, knowledge of unlawfulness was not an element of the tort:

  • “To add knowledge of unlawfulness… would also appear to detract from the fundamental point that it is in the fact of the conspiracy (with the requisite intent to injure) that the unlawfulness resides… conspiracy being reprehensible in any context…” (at [555]);
  • “To add knowledge of unlawfulness… would raise a whole host of unanswered questions such as the standard of knowledge (or suspicion) required, the scope for reliance upon patently unrealistic (and possibly self-serving) legal advice and …if [the question of knowledge] goes to a ‘defence’… the legal burden of proof.” (at [555]);
  • “…echoing Belmont Finance, the justification for relieving a defendant from liability for damage by reference to his honest but mistaken view of the law, when all other boxes in respect of the components for liability … are ticked against [the defendant] and any ill-founded belief of a legal right to justify the harm does not mean the intention to injure is not present, is not at all obvious to me… in Quinn v Leathem [1901] AC 495, at 537, Lord Lindley said “[T]he intention to injure the plaintiff negatives all excuses.”” (at [568]); and
  • “The submission for [the defendant] is that the sting of an allegation of conspiracy should only attach to those who have a realisation of the impropriety of their behaviour. In my judgment, when coupled with an intention to injure the claimant, such knowledge of the facts should enable them to have that appreciation regardless of any knowledge or suspicion they may have about the characterisation of them in law.” (at [573]).

Shortly after Stobart, in The Racing Partnership Ltd v Done Brothers [2019] EWHC 1156 (Ch), Zacaroli J drew a distinction between criminal cases of conspiracy, in which ignorance of the law is no excuse for liability, and civil cases, in which pursuit of commercial self-interest needs to be balanced against improperly inflicting harm on another. His Lordship reasoned (at [277]):

It might well be said that it is consistent with enforcing basic standards of behaviour to find a person who conspires to perform criminal acts liable even if, as in Belmont, he or she did not know that the acts were unlawful. But where, as in Ferguson or in this case, the unlawful conduct consists of infringing the claimant’s private law rights, then I consider it is consistent with enforcing basic standards of civilised behaviour that a person is liable for conspiring to injure through such unlawful means only if he or she knows (to the requisite standard) that the claimant’s rights are being infringed.” (emphasis added)

Squarely addressing, and diverging from, the decision of HHJ Russen QC in Stobart, Zacaroli J in The Racing Partnership held that an intention to harm is the crucial element required to distinguish between legitimate competitive business practice and reprehensible conduct, and that such an intention must be coupled with knowledge of unlawfulness (at [282]-[284]):

“282 … to find persons liable for conspiracy where the conduct which they have agreed to consists of a breach of the claimant’s private law rights risks tipping the balance too far against legitimate business activities unless those persons know that the claimant’s rights are infringed …

284 … a combination is only ‘reprehensible’ if its object is either (predominantly) to injure the claimant, or to use unlawful means in order to injure the claimant. Importantly, a non-predominant intention to harm the claimant is not in itself a sufficient guilty state of mind for the purposes of the tort. I consider that to find a person liable, where that person knows that a (non-predominant) purpose of the combination is to injure the claimant but honestly believes, for example, that on its true construction the contract between the claimant and one of the conspirators does not prohibit the relevant action, would risk trespassing on legitimate competitive business practices.” (emphasis added)

Analysis

There is a tension that arises in the tort of unlawful means conspiracy when defining whether the defendant’s conduct can be deemed legitimate competitive practice or reprehensible conduct. Lord Sumption in JSC BTA Bank v Khrapunov [2018] UKSC 19  considered this tension, observing that (at [6]):

“The successful pursuit of commercial self-interest necessarily entails the risk of damaging the commercial interests of others. Identifying the point at which it transgresses legitimate bounds is therefore a task of exceptional delicacy.”

Lord Sumption further observed that it is the use of unlawful means which is the trigger for curtailing the right of a person (acting in combination) to damage the interests of others by advancing his own (at [10]):

“A person has a right to advance his own interests by lawful means even if the foreseeable consequence is to damage the interests of others. The existence of that right affords a just cause or excuse. Where, on the other hand, he seeks to advance his interests by unlawful means he has no such right…”

However, no express suggestion was made in Khrapunov that knowledge of unlawfulness was an element of the tort of unlawful means conspiracy. HHJ Russen QC in Stobart, in deciding that knowledge of unlawfulness should not be an additional element of the tort, noted the absence of any express suggestion in Khrapunov that knowledge of unlawfulness is an integral part of the tort (at [558]).

In The Racing Partnership, Zacaroli J considered Lord Sumption and Lord Lloyd-Jones’ reasoning in Khrapunov in relation to what may constitute the unlawful means for the purposes of unlawful means conspiracy and applied this reasoning in the course of finding that knowledge of unlawfulness should be an element of the tort (at [277]):

“The Supreme Court has commented, in the different context of what might constitute unlawful means, that different considerations may well apply in the case of breaches of the criminal law, and breaches of the civil law such as torts or breaches of contract, because “legal duties in tort or equity will commonly and contractual duties will always be specific to particular relationships”: [Khrapunov] at [15]. I consider that the same can be said in the context of whether knowledge of unlawfulness is a requisite part of the tort. It might well be said that it is consistent with enforcing basic standards of behaviour to find a person who conspires to perform criminal acts liable even if, as in Belmont, he or she did not know that the acts were unlawful. But where, as in Ferguson or in this case, the unlawful conduct consists of infringing the claimant’s private law rights, then I consider it is consistent with enforcing basic standards of civilised behaviour that a person is liable for conspiring to injure through such unlawful means only if he or she knows (to the requisite standard) that the claimant’s rights are being infringed.”

Considering the above, what sets unlawful means conspiracy apart from a lawful means conspiracy is the degree of intention to injure. Put another way, if a defendant genuinely believed they had a right to act as they did, the requisite ‘reprehensible’ intention may be lacking, such as to defeat the tort.  Indeed, Zacaroli J observed that what sets the tort of conspiracy apart is the ““intense focus” on intent” (at [282]).

In an earlier conspiracy case of Palmer Birch v Lloyd [2018] EWHC 2316, HHJ Russen QC, in rejecting a defence of justification (in relation to unlawful interference and unlawful means conspiracy), had reasoned (at [186]):

Any argument over the defendants’ actions having been lawful (when judged by reference to their own rights) or carried out without the requisite intention to harm (when his intention falls to be assessed in the light of those rights) is one that will therefore surface within the in-built ingredients of liability for each of those torts. No discrete defence of justification is required to limit further the proper boundary of liability.

Thus, it seems that a defence of justification is best viewed as a way of the defendant showing that the requisite intention to injure was lacking.

If this is correct, concerns about introducing a ‘knowledge of unlawfulness’ requirement outlined by HHJ Russen QC in Stobart Group may not be material. That is because, regardless of whether there is a ‘knowledge of unlawfulness’ requirement, a claimant in establishing the requisite level of intention to harm on the defendant’s part needs to establish that the defendant was acting reprehensibly (or without justification).

Whilst permission to appeal in Stobart was refused, the decision in The Racing Partnership is currently under appeal (to be heard mid-2020) thereby leaving room for appellate authority to determine whether Zacaroli J’s reasoning as to requiring knowledge of unlawfulness should be upheld. Until higher courts definitively resolve the outstanding question regarding ‘knowledge of unlawfulness’, when advancing a case of unlawful means conspiracy it would be prudent for a claimant to plead expressly and to seek to prove at trial that the defendant not only acted unlawfully, but was aware that what they were doing was unlawful, in order to identify the reprehensible nature of the defendant’s conduct.

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