University of Lusaka
School of Law
Unit 13 – Economic Torts
Introduction
• Economic torts, also referred to as business torts, are common law principles
relating to unfair business practices, which result in intentional and improper
interference with the economic interests of another, thereby causing losses.
• Economic torts are an exception to the general rule that there is no duty in tort to
avoid causing a purely economic loss, unless it is dependent upon some injury to
person or property.
• Economic torts can result in various losses, including:
• Loss of business opportunities;
• Loss of business clients;
• Damage to, or loss of, business relations; and/or
• Loss of business ideas or protected works.
Malicious Falsehood
• In malicious falsehood, the claimant is complaining that the defendant has
made a false statement to a third party which has damaged his or her
business interests.
• This is distinct from defamation. Defamation protects the business
reputation of the claimant.
Malicious falsehood protects the financial interests of the claimant.
• The distinction can be illustrated in the following example:
• D has told X that the claimant’s shop does not sell paper. This is untrue. X as a
result buys his paper from the defendant’s shop. Such a statement does not
affect the claimant’s trading reputation but will obviously reduce the income
the income of the shop, and affect the claimant’s financial position.
• Look at the case of Ratcliffe v. Evans [1892] 2 Q.B. 524
Cont’d
• To bring a claim for malicious falsehood, there are four main requirements:
1. The Defendant made a false statement concerning the claimant or his
or her property;
2. Maliciously;
3. To some person other than the claimant; and
4. As a result the claimant suffered economic loss.
• The tort is therefore not actionable per se. special damage must be proved,
such as loss of business.
Cont’d
• The statement made must be proved to be false; this unlike in defamation
will not be presumed.
• The claimant must also show that the statement was made maliciously;
that the Defendant knew that the statement was false, or was reckless as
to whether it was true or not, or was actuated by some indirect, dishonest
or improper motive.
• It is always a defence that the statement was made in good faith.
• Damages may extend to distress and injury to feelings consequential on
financial loss - Khodaparast v Shad [2000] 1 All ER 545.
• Generally, defamation is easier to prove than malicious falsehood. There
may nevertheless be advantages to sue for malicious falsehood.
Cont’d
• Firstly, the claimant does not have to show an attack on his or her
business reputation, but simply that the false statement has resulted
in the business losing money;
• Secondly, the tort may prove useful where other causes of action fail -
Kaye v Robertson: CA 16 MAR 1990
Tortof Deceit
• A is liable in tort to B if he knowingly or recklessly (not caring whether its
true or false) makes a statement to B with intent that it shall be acted upon
by B, who does act upon it and thereby suffers damage – this is the tort of
deceit.
• For liability in deceit, the D must make the statement with knowledge of its
falsity or at least reckless whether it is true or false.
• In Eco 3 Capital Ltd v Ludsin Overseas Ltd [2013] EWCA Civ 413, the court
held that the tort of deceit has the following necessary requirements:
1) The defendant makes a false representation to the claimant.
2) The defendant knows that the representation is false, alternatively he is reckless
as to whether it is true or false.
3) The defendant intends that the claimant should act in reliance on it.
4) The claimant does act in reliance on the representation and in consequence
suffers loss.
Cont’d
• A False Statement of Fact:
• can be in the form of representations; this may be oral or in writing;
• It maybe promises and other statements of intention;
• It maybe an opinion i.e. if D says “I believe X is a decent man” knowing that C
is about to engage in some business dealing with X. if what D said is untrue,
he could be liable for deceit.
• Misstatements of law can be deceit provided that the parties are not on equal
footing with respect to knowledge of the law or to general intelligence – see
West London Commercial Bank v Kitson (1884) 13 Q.B.D 360.
• Half truths can be deceit; and
• A person whose true statement becomes false to his knowledge before it is
acted upon should be liable in deceit if he does not correct it.
Cont’d
• The Statement must be made without belief in its truth:
• In Derry v Peek (1889) 14 App. Cas.337, the House of Lords made it clear that
blundering but honest belief in an allegation cannot be deceit.
• Intent:
• The statement must be made with intent that the claimant will act upon it;
• The intent need not be to cause damage to the claimant: it is enough that the
claimant was intended to act on it and did act on it in the manner
contemplated;
• The defendant is liable whether he actually intended damage to ensue or not
• See:
• Polhill v Walter (1832) 3 B & Ad 114
• Langridge v Levy (1837) 2M & W 519
Cont’d
• The claimant must rely on the statement:
• The claimant must be taken in by the misrepresentation; it must induce him
to enter into the transaction;
• If the claimant does rely on the defendant’s statement, it is no defence that
he acted incautiously and failed to take those steps to verify its truth which a
prudent person would have taken.
• See Downs v Chappell (1997) 1 WLR 426
• Damage:
• The claimant must demonstrate that he has suffered some damage due to the
deceit.
The Tort of Passing Off
• The tort of passing off, as an economic tort, seeks to protect the plaintiff, the
owner of a goodwill, from an unlawful conduct of the defendant, the result of
which is the damage caused to the business of the former.
• The tort of passing off has been significantly reduced by the law on trade marks;
Common law governs passing off. Unlike trade mark infringement, there is no
specific legislation to offer protection.
• The tort of passing off is thus mostly used where the law of trade marks is
inapplicable, or the registration is invalid or indeed where there has been no
attempt at registration.
• The tort is based on the simple principle that a person is not to sell his goods or
services under the pretence that they are those of another.
Cont’d
• Mubanga v Chasemah and Advertising Media Ltd [2011] ZMHC 6:-
• Passing off is a common law tort which can be used to enforce unregistered
trademark rights. Passing off is concerned with the protection of business
goodwill and reputation.
• Therefore, the law of passing off prevents one person from misrepresenting
his goods or services as being the goods or services of the plaintiff, and also
prevents one from holding out his goods or services as having some
association or connection with the plaintiff when it is not true.
Cont’d
In Erven Warnink B.V. v. J. Townend & Sons (Hull) Ltd., [1979] AC 731 Lord Diplock
outlines five essential requirements of the pass off tort:
1. A misrepresentation;
2. Made by a trader in the course of trade;
3. To prospective customers of his or ultimate consumers of goods or services
supplied by him;
4. Which is calculated to injure the business or goodwill of another trader;
and
5. Which causes actual damage to a business or goodwill of the trader by
whom the action is brought or will probably do so.
• All these elements are cumulative in order for an action in passing off to succeed.
Cont’d
In Reckitt & Colman Ltd v Borden Inc [1990] 1 All E.R. 873 – three elements were
said to be necessary in order to show passing off:
1. Goodwill or reputation attached to goods and services of C;
2. Misrepresentation by D to public - Such as is likely to lead public to believe
goods or service of D are in fact those of C; and
3. Damage suffered by C due to this belief.
• In IRC v Muller & Co's Margarine Ltd [1901] AC 217, goodwill was defined as,
“.. the benefit and advantage of the good name, reputation and connection of a
business. It is the attractive force that brings in the customer. It is the one thing
that distinguishes an old fashioned business from a new business at its first
start.”
• Goodwill distinguishes an established business from a new business
Cont’d
• Goodwill
• For goodwill to exist, a plaintiff must show that customers are buying his
goods or services as a result of the reputation that he has developed;
• Passing off typically recognises the goodwill that exists in names, symbols or
trade logos that are used by a trader; in packaging and advertising style.
• Misrepresentation
• A representation (express of implied) that the defendant’s goods or services
come from or are connected with the plaintiff’s goods or services.
• The misrepresentation must harm the integrity of the plaintiff’s goodwill in
some way; mere confusion does not suffice.
Cont’d
• The Courts have made it clear that there must be a likelihood of confusion
between the plaintiff’s and defendant’s products - McCambridge Limited v.
Joseph Brennan Bakeries, [2012] IESC 46.
• Damage
• The claimant must be able to demonstrate that the misrepresentation made
by the defendant is likely to cause, or has caused damage to his business. For
example:
➢Loss of profit.
➢Loss of an opportunity to expand.
• Read: Airtel Holdings Limited and Others v Patents and Companies Registration
Agency and Another [2012] ZMHC 45
Cont’d
• Remedies:
• Injunctions -
• The type of injunction granted in a passing off action depends on the circumstances
of the case and is, to some extent, a compromise between protecting the rights of
the claimant and allowing the defendant to trade legitimately;
• If C acts quickly, he may be able to obtain an interim injunction to restrain further
dealings by D pending a full trial. This will prevent further damage to the goodwill of
C’s business during the intervening period.
• Damages
• Delivery up or destruction
• If C is granted an injunction (or if the defendant voluntarily undertakes to cease
dealing in the offending goods) the court may make an order requiring the goods to
be either:
• Delivered to C; or
• Destroyed by D with the destruction verified on oath.
Cont’d
• The following are some of the defences that you will encounter in a tort of
passing off:
a) the mark in question is not distinctive;
b) the mark is generic;
c) D has used carefully and honestly their own name;
d) The claimant doesn’t have goodwill in the mark;
e) The claimant had given consent or encouraged the use of the mark;
f) The claimant can't demonstrate damage or loss.
Inducing/ Procuring a Breach of Contract
• D commits a tort against C if, without lawful justification, he induces or procures
A to break A’s contract with C.
• The origin of this form of liability is the case of Lumley v Gye (1853) 2 Bl. & Bl.
216.
• At common law, a defendant is liable to pay damages in tort for actions intended
to interfere with the plaintiff's contractual relations with a third party.
• In an intentional interference claim, the burden is on the plaintiff to prove the
elements of the claim rather than on the defendant to prove that its acts were
justified.
Cont’d
• To prevail on the claim, plaintiff must prove four elements:
1. that a valid contract existed;
2. that defendant had knowledge of the contract;
3. that defendant acted intentionally and improperly; and
4. that plaintiff was injured by the defendant’s actions.
• Contractual relationships give rise to assurances, on which all parties to a contract
have a right to rely; the assurances offered by a contractual relationship extend
only to those party to the contract.
• The economic tort of inducing breach of contract arises to resolve the exertion of
undue influence by one party, over the contractual relationship of others.
• Thus, the claimant needs to show the existence of a valid contract and the fact
that D had knowledge of the existence of the contract.
Cont’d
• C also needs to establish that there was an act of persuasion by D directed
towards a third party who is contracting with C;
• There must be an act of inducement, which is directed at a third party. The
third party in question must be the party with which the aggrieved has
formed a contract.
• C also needs to establish Intention: the knowledge that the aggrieved would lose
the contractual benefit – consider the following example:
o B has a contract with C to supply services.
o D wants B’s services, but cannot get them without B breaching the contract with C.
o D knows that C will lose the benefit of the contract with B, if it is breached.
o D persuades or induces B to breach the contract and provide services to him.
o In this scenario, D’s knowledge of the contract between B and C amounts to
intention, by way of knowledge. D knows that C is going to lose the benefit of the
supply contract, but induces its breach anyway.
o C can therefore sue D for inducing the breach of a contract
Cont’d
• Like other economic torts, inducing breach of contract only becomes a tortious
issue when it causes loss.
• Notably, that means that unsuccessful attempts by one party to induce another’s
breach of contract, are not actionable.
• A defence that can be raised by D to a claim of inducing a breach of contract is
that of justification - Brimelow v Casson [1924] 1 Ch 302
• Among the remedies that can be granted include damages and injunctions.
Cont’d
• See:
• Kayanje Farming Limited v Rintoul Limited TIA Tobacco, Tobacco Leaf
Brokers Limited, Tobacco Association of Zambia and Solution Tobacco
Alliance Services Limited T/ A Alliance One International, 2006 HPC/0390
• CAA Import and Export Limited v Bidvest Food Zambia and Others [2016]
ZMHC 217
• OBG v Allan (2008) 1 A.C 1 (185)
• Emerald Construction Co Ltd v Lowthian [1966] 1 WLR 691
• Greig v Insole [1978] 1 W.L.R. 302
Conspiracy
• Conspiracy in tort law occurs when two or more persons agree to do something
lawful but with the pre-dominant purpose to injure the interests of another, or to
do something unlawful.
• The tort of conspiracy thus takes two forms:
• conspiracy to injure by lawful means or lawful means conspiracy; and conspiracy
to injure by unlawful means or unlawful means conspiracy.
• Both types of conspiracy require:
1) an agreement between D and a Third ;
2) to do something;
3) deliberately with the intention to injure P; and
4) which, in fact, causes harm to P.
Cont’d
• Conspiracy to injure by lawful means or lawful means conspiracy may be
established where the overt acts done pursuant to the conspiracy may be lawful,
but the predominant purpose is to injure the claimant – Quinn v. Leathem [1901]
A.C. 495
• If there is a combination of persons whose purpose is to cause damage to the
plaintiff, that purpose may render acts unlawful, which would otherwise be
lawful - Crofter Hand-Woven Harris Tweed Co. Ltd. V. Veitch [1942] A.C. 435
• the tort imposes liability on two or more persons acting in concert to pursue a
course of conduct that is otherwise lawful, when committed by an individual.
Cont’d
1. Purpose – the purpose of the combination must be to injure/cause damage to
the claimant; but
• A combination to inure another without the use of unlawful means is not
actionable where it is designed to pursue the legitimate or lawful interests of
the defendants – Crofter case
2. Combination – there must be concerted action between two or more persons.
3. Overt act causing damage – unlike the crime of conspiracy, an Overt act
causing damage is an essential element of liability in tort; the claimant must
prove actual pecuniary loss.
Cont’d
• The elements of unlawful means conspiracy were crystallized in OBG v. Allen as:
a) Unlawful means conspiracy is a tort of primary liability;
b) It involves the use of unlawful means;
c) Liability for unlawful means does not depend upon the existence of
contractual relations and
d) Economic damages caused.
• As opposed to lawful means conspiracy, unlawful means conspiracy does not
require the intention to injure to be predominant - Lonrho plc v. Fayed [1992] 1
A.C. 448
• Unlawful means covers acts or threat of acts which are or would be civilly
wrongful against and actionable by C; for example inducing a breach of contract.
• A criminal offence could be a sufficient unlawful means for the purpose of the
law of conspiracy, provided that it was objectively directed against the claimant,
even if the predominant purpose was not to injure him - Revenue and Customs
Comrs v. Total Network SL[2008] AC 1174
Intentionally causing loss by unlawful means
In order to be liable for the tort of unlawful interference with P’s trade or business,
the following is required:
1. D must use unlawful means against a third person (T). In order to qualify as
unlawful means, D’s actions must be civilly actionable by T (unless the only
reason why they are not actionable is because T has suffered no loss);
2. D’s unlawful means must be such as to interfere with T’s ability to deal with
C;
3. D must intend to damage C (although, again, it need not be the only or the
predominant intention, provided it is the desired end or the means of
attaining it, for example, D is liable even if the primary aim is to protect or
promote his own economic interests, if that will necessarily injure C); and
4. C must be damaged in fact.
• See the case of OBG v. Allen
Intimidation
• The tort of intimidation consists of threatening another that if he does not do
something or abstain from doing something he will be harmed.
• After OBG Ltd v Allan, this tort, it appears is not a separate tort but a variety of
causing loss by unlawful means.
• The tort of intimidation is established where:
1. there is a threat to do something unlawful or illegitimate;
2. it must be intended to coerce the claimant to take or not take certain
action;
3. the threat must in fact coerce the claimant to take (or not take) that action;
and
4. damage must be incurred as a result.
• The key requirement of the tort of intimidation is that there has been a threat to
act unlawfully; a threat to do something one is legally entitled to do will not
amount to intimidation.
Cont’d
• Further Reading:-
• Mwaba v Attorney-General (1974) Z.R. 177 (H.C.) - For the tort of
intimidation to be committed it is necessary that the plaintiff should suffer
actual loss.
• Chimba v Attorney-generaL (1972) Z.R. 165 (H.C.)
• Rookes v. Barnard [1964] A.C
