England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION MANCHESTER DISTRICT REGISTRY
His Honour Judge Maddocks
CH1995ONOS.0486AND04

		Royal Courts of Justice Strand, London, WC2A 2LL
		9 February 2005

Lord Justice Peter Gibson:

1. On 8 June 1992 the Third Defendant, Raymond Centriline Ltd. ("Centriline"), purported to appoint the First Defendant, Mr. Allan, and the Second Defendant, Mr. Stevenson, (together "the Receivers") as joint administrative receivers of the First Claimant, OBG Ltd. ("OBG"), and of the Second Claimant, its associated company, OBG (Plant and Transport Hire) Ltd. ("Plant"). On 31 January 2001 His Honour Judge Maddocks, sitting as a judge of the High Court, declared such appointments to be invalid. The principal issue in this case is as to the consequences in law of those appointments. Issues are raised as to the nature of the cause or causes of action to which that invalidity gives rise. We are told that there is no English authority which directly covers those issues. There is also an issue as to the extent to which the remuneration and expenses of the liquidators of OBG and Plant can be claimed as damages.
2. They arise in an appeal by the Receivers and by the Fourth Defendants, the solicitors Penningtons, who advised Centriline on the appointment of the Receivers, from the order made on 24 February 2004 by the Judge giving judgment to OBG and Plant in the sum of £1,854,000 (excluding damages for the costs and expenses of the liquidators of OBG and Plant) plus interest. The Judge also directed an inquiry into, and an assessment of, the liquidators' costs and expenses which OBG had suffered by reason of the Receivers' wrongdoing.
3. The Judge refused the Receivers and Penningtons permission to appeal, but Neuberger L.J. granted such permission on limited grounds and also granted the Claimants permission to cross-appeal, such permission being limited to a single ground.

The facts

4. OBG carried on business in a substantial way as civil engineering contractors specialising in underground pipe work and utilities. Plant supplied plant and transport for OBG's business. By far the main customer of OBG, accounting for 75% to 90% of its turnover, was North West Water Ltd. ("NWW"). But among other contracts not with NWW was a valuable sub-contract which it obtained in September 1991 from Trafalgar House Construction Management Ltd. for services to Strangeways Prison ("the Strangeways Contract").
5. OBG's contracts with its customers were of two types: fixed contracts for identified work and period contracts for work in a particular area over a particular period as and when identified and ordered by its customer. Among the relevant categories of contracts were annual mainlaying contracts and rehabilitation contracts (renovating underground pipes).
6. The procedure for payment under contracts with NWW required the weekly completion by OBG of track sheets, which were checked by the representative of the Engineer under the contract; the track sheets would then be submitted in a monthly statement to the Engineer, who, having checked it, would issue an interim certificate. The net amount certified for payment was due 28 days from receipt of the monthly statement.
7. The NWW forms of contract largely incorporated, or were on the terms of, the Institution of Civil Engineers Conditions of Contract (5^th edition). Those terms included in cl. 63(1) a term allowing NWW, if OBG went into liquidation or had an execution levied on its goods or if the Engineer certified that OBG had abandoned the contract, to give 7 days' notice in writing to OBG to enter on the site and the works and expel OBG and to employ any other contractor to complete the works. They also included in cl. 63(4) the following:

"If the Employer shall enter and expel the Contractor under this Clause he shall not be liable to pay to the Contractor any money on account of the Contract until the expiration of the period of Maintenance and thereafter until the costs of completion and maintenance damages for delay in completion (if any) and all other expenses incurred by the Employer have been ascertained and the amount thereof certified by the Engineer. The Contractor shall then be entitled to receive only such sum or sums (if any) as the Engineer may certify would have been due to him upon due completion by him after deducting the said amount. But if such amount shall exceed the sum which would have been payable to the Contractor on due completion by him then the Contractor shall upon demand pay to the Employer the amount of such excess and it shall be deemed a debt due by the Contractor to the Employer and shall be recoverable accordingly."

The result of that unusual clause is that if NWW as the Employer, having entered and expelled OBG as the Contractor, employed another contractor to do the work more cheaply than OBG, the savings thereby made by NWW became due to OBG. If the other contractor cost more, then OBG had to pay the excess to NWW.

8. OBG was undercapitalised and underfunded and heavily dependent on receiving payments from NWW under its contracts with NWW. In March 1992 NWW took the view that it had been overcharged by OBG. There was even a suspicion, never proved, that there had been corruption in the obtaining of contracts by OBG. NWW suspended OBG from its list of approved contractors and this, once known, damaged OBG's reputation with other employers. NWW withheld payment for work done under continuing contracts, thereby creating an immediate cash-flow crisis for OBG. Following investigation of work done by OBG for NWW on five annual mainlaying contracts, the Engineer under those contracts "de-certified" amounts previously certified for payment, thereby causing sums to become due to be repaid to NWW, and such sums would be set off against further sums later certified as due to OBG under other contracts. NWW held back orders for work under rehabilitation contracts. NWW instructed the accountants, Arthur Andersen, to provide an assessment of the overpayment claim if applied to work done under other OBG contracts and to report on the financial viability of OBG.
9. OBG sought and held meetings with NWW on 25 and 26 March 1992, at which it protested to NWW that if NWW did not pay what it was withholding, OBG would go out of business. It selected new solicitors to adopt a more aggressive approach towards NWW and on 1 May 1992 a winding up petition was issued against NWW. On its solicitors' advice it consulted an insolvency practitioner, Mr. Shierson of the accountants Grant Thornton, to advise on its financial position. At a meeting with him on 24 April 1992 consideration was given to the alternatives of administration and receivership, but neither was pursued. OBG compiled cross-claims against NWW under the annual mainlaying contracts in a total sum of nearly £6.5 million and they were submitted on 29 April 1992. Such claims were never substantiated. An approach was also made to another insolvency practitioner, Mr. Robinson (later to become the liquidator of OBG) of the accountants Begbies Traynor, and, without being formally instructed, he indicated that his advice would be similar to that which Mr. Shierson had given, viz. that there was a need to reach agreement with NWW and to obtain further capital.
10. At about this time OBG owed a substantial sum to its specialist sub-contractor, Centriline, which on 27 April 1992 presented a petition for the winding up of OBG. OBG's bank, the Royal Bank of Scotland ("RBS"), was a secured creditor of OBG and Plant but was unwilling to assist OBG, and other sources of funding were reluctant to assist because of the continuing dispute with NWW. Centriline, however, was a prospective source of finance. It wanted to take an assignment of RBS's securities and to take shares in OBG. OBG needed funding of £1.1. million. A facility of that amount was negotiated and a facility letter accepted by OBG on 22 May 1992. Centriline went ahead with a proposal to take the assignment from RBS.
11. OBG had in the meantime been conducting negotiations with NWW to resolve their dispute. On 15 May 1992 Mr. O'Brien, the managing director of OBG, and Mr. Golden, the procurement director of NWW, had a meeting. From what Mr. O'Brien told him, Mr. Golden saw OBG as "in or near a terminal position". In the meantime and to meet the threat of the winding up petition NWW had instructed the Engineer to proceed with de-certification. As at 19 May £427,000 had been de-certified. This would have resulted in no payments being made in respect of certified sums becoming due in the next two to three weeks. Mr. Golden refused to make payments in advance. On 19 May Mr. Golden indicated to Mr. O'Brien that he would need to be given "extreme confidence" or "extreme comfort" to exclude the de-certified sums. Mr. O'Brien told Mr. Golden that if the £427,000 de-certification was imposed, as he acknowledged was provided for by the contract, it would effectively put OBG into receivership. Mr. O'Brien was given 48 hours to return with proposals to encourage NWW not to apply the de-certification.
12. OBG's position by this time was dire, as the Judge found. Two winding up petitions had been presented. There were arrears of VAT totalling £357,000 and of PAYE income tax and of National Insurance Contributions totalling £540,000. The Revenue had taken walking possession of various assets on 29 April and on 15 May a schedule for payment of £236,000 was negotiated. There were mounting claims from creditors serving statutory demands, writs and County Court summonses. OBG's Financial Controller listed pressing creditors in the week ending 10 April as having debts totalling £310,638 and at 5 June 1992 as having debts totalling £471,956.
13. The position was altered by Centriline's offer of finance. On the basis of that offer Mr. O'Brien arranged a meeting with Mr. Golden on 21 May and informed him of the existence of a restructuring proposal. Mr. Golden was prepared to consider a settlement agreement between OBG and NWW and he authorised payments without deduction of the de-certified sums. Between 21 May and 5 June negotiations took place between Mr. O'Brien and Mr. Golden for an overall settlement of the dispute. NWW required to be satisfied that the refinancing package from Centriline afforded OBG the prospect of survival. For NWW Arthur Andersen investigated OBG's books and they reported on 26 May that there was a short term cash requirement of £1.1 million which was to be satisfied by the loan from Centriline.
14. Also on 26 May there was a meeting between OBG and Centriline at which Centriline indicated its proposed requirements, including a revised shareholding giving it 32.5% of the shares of OBG. OBG was unhappy with what Centriline proposed and in early June the negotiations broke down without any finance being provided by Centriline.
15. NWW was not told of this development when Mr. Golden and Mr. O'Brien met on 5 June to discuss an overall settlement on the basis of a Settlement Agreement proposed by NWW's legal advisers. Provisional agreement was reached, but OBG's solicitors expressed the view that the compromise document was totally unacceptable.
16. It was never executed. On 8 June OBG met Centriline, which demanded a sum in excess of £400,000. Later that day Centriline appointed the Receivers, who accepted the appointment on 9 June. In making the appointment, Centriline acted on the advice of Penningtons. It believed that in obtaining RBS's securities, it had obtained securities for the debt owed to it by OBG.
17. On 9 June, as the Judge found, one of the Receivers, Mr. Stevenson, attended at OBG's premises and "took control of the business". Thereafter the receivership was handled by the other Receiver, Mr. Allan.
18. NWW was informed of the receivership. As appears from one of the internal documents of NWW, privilege in which NWW waived and which were disclosed by NWW pursuant to an order of the court on 24 February 2003, NWW was advised by its solicitors on 9 June that it was open to it to go on with OBG's work being done by the Receivers; but the solicitors advised against it and Mr. Golden told them that he was happy if that was the end of OBG doing the work and another contractor was obtained, and that NWW had the strength in the market to renegotiate the business on better terms.
19. NWW had a meeting with Mr. Allan on 10 June. Mr. Golden's intention was to avoid mention of the existing contracts with OBG and to determine them so as to be free to negotiate new contracts, and that was the policy adopted. On 11 June Mr. Allan asked Mr. Golden for £127,000 to be released by NWW to allow OBG's business to continue, that being the sum which Mr. Allan calculated was required immediately to avoid closing down. NWW was not prepared to pay. As the Judge found, the consequence was that all work on the sites ceased on 12 June. NWW served notices of termination of the contracts with OBG on 17 June and those notices took effect on 25 June.
20. OBG, through its solicitors, consulted Begbies Traynor on 9 June and Mr. Robinson on 10 June. Leading counsel was instructed to advise on the validity of the Receivers' appointment. Junior counsel was instructed to advise on the possibility of an application for an administration order, but he advised that in the absence of an assurance from NWW that it would work with an administrator, an administration was not practicable, and that OBG should proceed by way of a voluntary liquidation. On 19 June 1992 OBG went into a creditors' voluntary liquidation and Mr. Robinson and Mr. Traynor ("the Liquidators") were appointed liquidators of OBG and Plant.
21. Mr. Allan negotiated with Centriline and a company formed by an OBG manager, Mr. Maclaren, Maclaren Construction. Ltd., for there to be a novation of the Strangeways Contract in favour of that company, and such novation was completed on 20 July 1992.
22. In relation to the NWW contracts which totalled 88, Mr. Allan was advised by a quantity surveyor, Mr. Robins of Robins & Sutcliffe, as to what was owed by NWW to OBG and owed by OBG to NWW. He found OBG's paperwork in a disorganised state and incomplete. NWW was advised by another quantity surveyor, Mr. Kerrigan, who drew NWW's attention to the effect of cl. 63(4).
23. Negotiations then ensued between NWW and the Receivers. Mr. Kerrigan advised NWW that its best position was that only £217,259 was owed to OBG. Mr. Robins asked for £1.393 million. Internal file notes of NWW indicate that in June 1993 Mr. Golden was prepared to settle for £900,000. On 12 November 1993 a settlement figure of £400,000 was provisionally agreed. Another internal note of 15 November 1993 records Mr. Golden's pleasure at the settlement because he had been prepared to go to £1 million and the savings NWW had made exceeded £6 million. Mr. Robins' explanation of the acceptance of £400,000 was that NWW had raised a substantial claim against OBG that the work done by OBG did not comply with NWW's specifications and that there were no funds to litigate that dispute with NWW. It was envisaged that there would be a formal settlement agreement executed.
24. NWW was concerned to obtain the participation of the Liquidators in the settlement. When OBG and Plant commenced proceedings against the Receivers and Centriline by issue of a writ on 19 October 1995, Mr. Robinson wrote to advise NWW of the proceedings and of the advice which he had received that the Receivers' appointments were invalid. In his letter he recorded that he had been informed by the former directors and employees of OBG that it had claims against NWW in excess of £2 million and potentially as high as £5 million. However, Mr. Allan, speaking to a lawyer in NWW, said that he did not know the basis on which the Liquidators were claiming more than £400,000 because they had no papers to support their claim and the Receivers had all the papers.
25. The Settlement Agreement was not completed until 15 August 1997. The parties to it were OBG (acting by Mr. Robinson as Liquidator and Mr. Allan as Receiver), the Liquidators, the Receivers and NWW. NWW thereby paid £400,000 in settlement of all liabilities which OBG or the Liquidators or the receivers owed to NWW or which NWW owed to OBG or the Liquidators or the Receivers. Before entering into the settlement the Liquidators required a letter from Robins & Sutcliffe confirming their advice in favour of acceptance.

The proceedings

26. OBG and Plant each commenced separate proceedings against the Receivers and Centriline. Penningtons were subsequently added as Defendants. Each of OBG and Plant claimed in its Writ a declaration that the appointment of the Receivers was invalid, delivery up of its books and assets, all necessary accounts and inquiries, and "damages for trespass". In para. 40 of the Statement of Claim it was claimed that the appointment of the Receivers was invalid and that "the Defendants and each of them is liable to the Plaintiff for trespass and for the loss and damage suffered as a result of the invalid appointment and the wrongful assumption of control over the Plaintiff's business and property". Declarations and damages were sought.
27. The trial of the Claimants' claims of the liability of the Receivers did not take place until January 2001. By then Centriline had gone into liquidation. It took no part in the proceedings. No oral evidence was heard. Also heard at the same time were separate proceedings brought by the Receivers against Penningtons in negligence for the advice given in respect of the appointment of the Receivers. Penningtons did not contest the invalidity of the Receivers' appointments nor their own negligence. Counsel then appearing for the Receivers put forward without enthusiasm such points as he could. The Judge in a comparatively short judgment on 29 January 2001 found the appointments to be invalid. By his order he made declarations to that effect and ordered the Receivers to account to the Liquidators for the Claimants' property which they still retained. He also ordered the delivery up by the Receivers of assets and books and ordered the Receivers to pay to OBG and Plant damages to be assessed, although he did not indicate the cause of action which gave rise to such damages. He gave directions as to further pleadings and that the Liquidators serve a Statement of Issues on the quantum claim.
28. Pursuant to the Judge's order further pleadings were served. One issue between the parties was whether the Receivers were entitled to claim an allowance in respect of their remuneration and costs. In the Statement of Case of the Receivers on the remuneration and costs issue, the various steps taken by the Receivers on their appointment were set out. They included taking possession of certain property on 9 June 1992 and subsequently selling it, making redundant most of OBG's employees on or shortly after 12 June and terminating the contracts of the majority of its sub-contractors and settling claims under the contracts which OBG had made. In the Statement of Issues dated 27 December 2001 the Liquidators claimed damages for trespass and for wrongful interference with OBG's and Plant's property, loss and damage suffered as a result of the Receivers' invalid appointment and for the Receivers' wrongful assumption of control over the business or property of OBG and Plant and an account of money had and received by the Receivers. The basis of the claim was said to be that but for the invalid appointment OBG and Plant would have obtained orders for administration, and that they would have survived, alternatively there would have been a better realisation of assets. In the further alternative it was stated that OBG and Plant would have gone into a creditors' voluntary liquidation or have been wound up by the court.
29. A Statement of Case was served by the Liquidators' solicitors, accompanied by a letter dated 31 May 2002. They said that in the light of certain Canadian authorities they had varied the way in which the case for damages had been put and that the correct approach to calculating damages in a claim for trespass against a receiver was to value the business as a going concern. The claim for an account was abandoned. In the Statement of Case it was averred that the Receivers committed the following actionable wrongs, viz. on or after 9 June 1992, trespass over and conversion of all the business, assets and undertaking of OBG and Plant, alternatively, all of their land and goods and chattels as at 9 June 1992; further and alternatively, on and after 9 June 1992 unlawful interference with OBG's and Plant's contracts as at 9 June 1992; further and alternatively, on or after 9 June 1992 wrongful or unlawful interference with, and wrongfully taking control of, such of the business, assets and undertaking of OBG and Plant that might not be the subject of claims for trespass, conversion or interference with contractual relations under the earlier heads.
30. The Receivers and Penningtons applied to strike out the Statement of Case on a number of grounds including a failure to plead causation of loss adequately. The Judge on 18 December 2002 rejected those applications. It was made clear by counsel for the Claimants that there was no issue of causation because it was said that causation was obvious. It was recorded in the order (the terms of which were determined at a hearing on 13 March 2003) that "[the Claimants'] case is one of valuation as at 9 June 1992 and not that the Receivers were in breach of the duties which they would have owed to the Claimants or others had they been validly appointed as receivers." Thereafter the Claimants' case has been limited to being that the relevant torts were committed on 9 June 1992 with the consequence that the damages were the difference between the value of the Claimants' business at that date and the actual realisations. Further, the Claimants were not alleging negligence by the Receivers in realising the assets.
31. The quantum hearing took place over 25 days later in 2003. In his judgment of 18 February 2004 the Judge in para. 67 dismissed an attack on the adequacy of the pleadings in relation to claims for interference with contractual rights. He said that it was plain from para. 40 of the Statement of Claim that the Claimants were seeking damages for the Receivers having dealt with the whole of the assets of the business of whatever nature. He described the conduct of the Receivers in this way:

"They simply acted as if they were validly appointed receivers, dismissing employees, terminating contracts, disposing of assets and settling claims. It is not alleged that they had any particular intent other than to do that which they did."

32. In para. 68 of his judgment the Judge rejected the Claimants' primary submission that the conditions for the application of the tort of conversion of chattels can be applied to the 'conversion' of contractual rights. In para. 69 he referred to the Claimants' alternative claim of interference with contractual relations and to the principle of that tort as stated by Lord Macnaghten in Quinn v Leathem [1901] AC 495 at p. 510, viz. "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 Judge acknowledged that the facts of the present case were somewhat different from those where that principle had generally been applied. However, he said that the fact that the Receivers were assuming control of the contracts and purporting to act on behalf of OBG as a party to the contracts served only to create the interference more directly and did not detract from the application of the principle. He held that the conduct of the Receivers was equally actionable in relation to the interference with OBG's contracts as it was in relation to their dealings with the chattels.
33. The Judge then considered whether a defence was afforded by s. 232 Insolvency Act 1986, providing, as it does, that the acts of an individual as administrative receiver are valid notwithstanding any defect in his appointment. The Judge held in para. 73 that it did not.
34. The Judge next turned to the measure of damages. He considered the primary claim advanced by the Claimants that but for the receivership they would have been able to survive by means of an administration with or without a company voluntary arrangement. He noted that the key to any such scheme lay in obtaining the support of NWW, without which it could not have taken place. He concluded in para. 93:

"In my judgment there was no realistic prospect that a settlement with NWW could have been achieved on or after 9 June nor any prospect that NWW would finance an administration. Any such prospect can only be described as fanciful. Far from providing any form of funding for an administration NWW would have withheld funds in order to achieve a termination of the contracts on the grounds of liquidation or abandonment."

Accordingly the primary claim failed.

35. The Judge next looked at the Claimants' alternative claim based on a wind-down under an administration order without the support of NWW or on a liquidation. He considered what OBG would have recovered but for the appointment of the Receivers, and in particular what sum should be included in the damages calculation for recoveries from NWW. The experts were agreed that a limited administration for the purpose only of continuing or novating the Strangeways Contract was feasible. The Judge rejected the Receivers' argument that the best evidence as to the likely recovery was the actual outcome of the negotiations with the Receivers, the figure of £400,000. He concluded in para. 98 that the figure was of little assistance, and gave reasons why that was so. It is unnecessary to state or discuss those reasons as Mr. Gregory Mitchell Q.C., appearing for the Receivers and Penningtons, has not challenged that reasoning.
36. The Judge then considered other assets and claims and expressed his conclusion on the figures in this way in para. 104:

"The final figures therefore will be:

1. Freehold property 97,000

2. Other debtors 16,000

3. Plant and equipment 147,000

4. Trading surplus 0

5. Cash 74,000

6. Contract debtors, stock

and WIP, NWW 1,400,000

7. Contract debtors, stock

and WIP non NWW 420,000

8. Novation premium 0

Total 2,154,000

Less Liquidator's costs and expenses 300,000

1,854,000"

37. Finally the Judge considered the Liquidators' claim for their actual costs and expenses excluding the legal costs and expenses of these proceedings, as part of the damages claimed. He said that the figure of £300,000 had been agreed as the figure to be allowed in the hypothetical liquidation and that it was accepted that the Liquidators were entitled to recover up to that amount in respect of their actual costs and expenses and that those costs and expenses exceeded that amount. He decided in para. 105 that in principle the additional costs and expenses over and above the agreed figure for the notional costs and expenses were recoverable insofar as they could be shown to have been caused by the receivership, and he directed an inquiry as to that item.

The appeal

38. The Receivers and Penningtons sought to appeal to this court on a large number of grounds, some procedural and some substantive. Neuberger L.J. refused permission to appeal on some of the grounds put forward (for example, that the Judge was wrong to find that the Receivers could not rely on s. 232 Insolvency Act 1986). Other grounds on which permission to appeal had been granted, relating to pleading points and to the alleged failure of the Judge to confine the Claimants to their pleaded case, were abandoned in the course of the hearing before us. The Claimants also sought to cross-appeal on a number of grounds, but Neuberger L.J. only gave permission for one. In the event the issues which we are asked to decide are the following:

(1) At the time the invalid appointment of the Receivers took effect, did they commit the tort of wrongful interference with contractual relations?

(2) If not, did the invalidly appointed Receivers at that time commit a tort in the nature of conversion in relation to OBG's contractual rights?

(3) Are the actual costs and expenses of the Liquidators, to the extent that they exceed the agreed figure of £300,000 for the notional costs and expenses of a liquidator as mentioned in para. 36 above, recoverable as damages so far as they can be shown to have been caused by the receivership?

Of those issues the first and third arise as challenges by the Receivers and Penningtons to decisions by the Judge against them while the second arises on the Claimants' Respondent's Notice challenging the Judge's decision adverse to them on that issue.

39. Before I deal with the specific issues, I would make certain preliminary observations about this unusual case. The dispute is not about any land of either of the Claimants of which the Receivers took control. It is conceded by the Receivers and Penningtons that the Claimants have a cause of action in trespass in respect of such land. The dispute is not about any chattels of either of the Claimants of which the Receivers took control. It is accepted that the Claimant has a cause of action in conversion in respect of those chattels. It is not suggested that the businesses of the Claimants have been lost in consequence of the trespass and conversion in respect of the land and chattels. The dispute is not about whether the Receivers became liable in equity in some way, for example as trustees for intermeddling with the assets of the Claimants. No claim in equity is maintained. Nor is the dispute about negligence on the part of the Receivers in dealing with the assets of which they took control. That was conceded by the Claimants as noted in the recital to the order of 18 December 2002. Nor is it alleged that here there has been interference with a trade or business, a tort which requires the presence of an intention to cause loss. The dispute in relation to the first two issues is limited to whether any, and if so what, tort was committed in relation to the Claimants' contractual rights. Moreover the Claimants have limited their case to a tort committed on 9 June 1992 such that the ascertainment of damages resulting therefrom required a valuation of the contractual rights as at that date.

Wrongful interference with contractual relations

40. Since Lumley v Gye (1853) 2 E & B 216 it has been recognised that an actionable wrong is committed by a person deliberately inducing a party to a contract to breach it. In Millar v Bassey [1994] EMLR 44 at p. 62 I described the tort as "a species of the genus of economic torts whereby the common law protects against the intentional violation of economic interests". In Greig v Insole [1978] 1 WLR 302 at p. 332 Slade J. identified 5 conditions for the tort:

(1) either (a) direct interference or (b) indirect interference (if coupled with unlawful means);

(2) knowledge of the contract;

(3) intention to interfere with it;

(4) damage which is more than nominal;

(5) so far as necessary, the rebuttal of any defence based on justification for the interference.

41. The cases in which the conditions for the tort have been fulfilled have all been decided in circumstances where the breach of a contract has been procured or induced or the performance of the contract has been prevented or hindered. However, Mr. Steinfeld submits that the tort should not be confined to cases where the breach of the contract or the prevention or hindrance of its performance is intended. He points to the width of the language used in statements of the ambit of the tort and in particular Lord Macnaghten's reference to interference with contractual relations, on which the Judge relied, as I have noted in para. 32 above. He submits that there is no reason in principle why the displacement of the board of a company by invalidly appointed receivers who take over the business of the company should not fall within the tort when it can be shown that loss, which would not have been suffered by the company but for the receivership, has resulted. That, he suggests, is direct interference with contractual relations. He supports the Judge's conclusion that the requisite mental element is satisfied by the Receivers knowing of the contracts and intending to interfere by assuming control of the contractual rights and purporting to act on behalf of the Claimants in relation to the contracts.
42. Mr. Mitchell accepts that interference is a word of wide meaning which can cover many circumstances, and that the acts of invalidly appointed receivers can be characterised as "interference" as a matter of ordinary language. But he points out that this is not the way the term is used in the authorities where the primary meaning is causing a breach of contract. The most crucial point in any event, he submits, is that the defendant must know and intend his acts to be interference. He relies on the observations of Rix L.J. in Stocznia v Latco [2002] 2 Lloyd's Rep 436 where Rix L.J. set out the policy considerations of what he called the "wide ranging" tort of inducing breach of contract. He said (para. 130):

"The tort is an economic tort designed to place limits on the self-interested rough and tumble of the business world. Its philosophical basis appears to be that contracts should be kept rather than broken. Where, as here, A (Latco) procures B's (Latreefers') breach of his contract with C (the yard), adopting it as his own because he is interested to do so, seeking a benefit for himself or a fortiori a detriment for C, and does so deliberately, knowingly and intending the breach to take place, then A puts himself in the way of incurring a liability, even though not himself a party to the contract, unless (i) he does not directly procure the breach, and (ii) he uses no (relevant) unlawful means, or (iii) he can claim some justification. The significance of (i) is that where A directly procures a breach of contract he makes himself as it were directly privy to the breach. The significance of (ii) is that in the absence of making himself privy to the breach, he cannot be faulted as long as he acts as he is entitled to act, but if (deliberately, knowingly and intending the breach to take place) he commits an unlawful act, by which I have in mind an unlawful act of sufficient causative relevance, then he renders himself liable. It may be that unlawful means ought to be necessary even where there is direct procurement (see the wide-ranging work by Hazel Carty, An Analysis of the Economic Torts, 2001, at 82). The significance of (iii), an area which has not been clearly worked out in the cases, appears to be that there may be moral or perhaps economic factors which may mitigate even to the point of justifying conduct otherwise incurring a prima facie liability."

43. Rix L.J. had earlier (at para. 120) considered in some detail the differing views expressed by this court in Millar v Bassey in which the majority (Ralph Gibson and Beldam L.JJ.) held that the action should not be struck out but should go to trial. Rix L.J., however, pointed out that Ralph Gibson L.J. was in agreement, in terms of principle, with the views which I expressed on the intention needed for the tort, viz. that there had to be the deliberate interference with a contract with a view to bringing about its breach rather than interference causing a breach when that interference was merely the incidental consequence of the defendant's conduct. Those remarks in Millar v Bassey were made in the context of a case where a breach of contract had in fact occurred.
44. As the Judge noted, there do not appear to have been any previous cases in which the tort of interference with contractual rights has been found in circumstances similar to the present. There is no doubt that the tort has been extended from its Lumley v Gye origins of an intentional procurement of a breach of contract to an intentional procurement of a breach of other obligations. Indeed in Lumley v Gye 2 E & B at p. 233 Erle J. stated the relevant principle as being:

"He who maliciously procures a damage to another by violation of his right ought to be made to indemnify; and that, whether he procures an actionable wrong or a breach of contract."

45. Further, in Torquay Hotel Co. Ltd. v Cousins [1969] 2 Ch 106 Lord Denning M.R. extended the tort to include deliberate direct interference in the execution of a contract by preventing or hindering one party from performing the contract even though that would not have been an actionable breach. In that case the contract interfered with contained a clause excluding liability for the relevant breach. That extension has been approved by the House of Lords in Merkur Island Corp. v Laughton [1983] 2 AC 570 at p. 608 per Lord Diplock in a case involving interference by unlawful means with the performance of a contract under which no damages were recoverable for that non-performance. Although these cases have been trenchantly criticised by some academics (see, for example, Weir: Economic Torts (1997) pp. 37, 38), the extension must be accepted as binding on this court.
46. The question to which the present case gives rise is whether the tort should be further extended to cover the interference by a third party with the right of a party to a contract to perform the contract and manage his contractual rights as he chooses when that interference is not directed at procuring an actionable wrong such as a breach of contract nor at hindering or impeding the performance of the contract. In the present case the Receivers would have liked to perform the NWW contracts and to do so in the name and on behalf of the Claimants. But NWW was not willing to let that happen. It is also a tort for a third party directly to do an act, with knowledge of the contract, which, if done by one of the parties to the contract, would have been a breach of contract (see D C Thomson & Co. Ltd. v Deakin [1952] Ch 646 at p. 694 per Jenkins L.J.). That is not this case.
47. I am not aware of any case where the tort has been held to apply to an act of a third party who, although aware of a contract between the contracting parties, was not intending to procure a breach of the contract or other actionable wrong or to prevent or hinder the performance of the contract nor would the act have been a breach of contract if performed by a party. The decided cases are concerned with interference with the performance of a contract where such interference was aimed at procuring a failure to comply with some obligation imposed by a term of the contract (see Cane: Tort Law and Economic Interests 2^nd ed. (1996) p. 119). As is said in Clerk & Lindsell on Torts 18^th ed. (2000) para. 24-05 an interference with contractual performance that causes no breach of contractual obligation on principle cannot be tortious. It is powerfully argued by Hazel Carty in Analysis of Economic Torts (2001) at pp. 63 and 271 that there must be an actionable wrong sought to be procured by the alleged tortfeasor for this tort to arise That, as it seems to me, was the essence of the tort, but cases such as Torquay Hotel and Merkur Island breach that purist principle. However, the present case would extend that breach even further. The fact that the tort has been extended to include prevention of the due performance of a primary obligation even though no secondary obligation to make monetary compensation came into existence does not justify a further extension of the tort to circumstances where the alleged tortfeasor was not intending to prevent the performance of any primary obligation of the contract. That would be to change the nature of the tort which hitherto has had as an essential ingredient the intention to procure a breach, or the non-performance of an obligation, of a contract or a breach of duty. Such intention is lacking in a case such as the present, where the interference is not directed at preventing or hindering the performance of any obligation imposed by a contract. The objection to the interference goes only to who should be managing the contractual rights of one party. No doubt the Receivers did intend to manage the contractual rights of the Claimants, but, whilst that was an intention to interfere with the Claimants' business (though without intending to cause loss or damage), it does not seem to me to amount to an interference with contractual relations in any relevant sense. Accordingly, I would respectfully disagree with the Judge in his holding that the tort of interference with contractual relations was committed. I would allow the appeal on this point.
48. If I am wrong on that and the tort does extend to the invalid appointment of receivers who manage the contractual rights of one of the parties to a contract, I have difficulty in seeing how the damages fall to be assessed by reference to a valuation as at the date of the Receivers accepting their appointment. A necessary ingredient of the tort is damage which must be more than nominal. Although the Judge found that Mr. Stevenson attended at OBG's premises that day and "took control of the business", it is not apparent that the Receivers did anything that day in relation to the Claimants' contractual rights which caused loss. It is not apparent when or how the contractual rights became less valuable because there is no pleading or other allegation identifying how the loss was caused. I find it impossible to escape the conclusion that the Claimants, by making the statement recorded in the order of 18 December 2002, committed themselves to a case based on the valuation of their businesses at 9 June 1992 on the footing that the claim was one of conversion of a business which was destroyed by the Receivers' assumption of control but which would have survived but for the receivership. That is not the claim which the Judge upheld. Again, I respectfully disagree with the Judge on this point.

Is there a tort of conversion of contractual rights?

49. The Judge dealt very briefly with the Claimants' primary submission that the Receivers converted the businesses (with the contractual rights) of the Claimants. He referred to two cases on which the Claimants relied, Foulds v Willoughby (1841) 8 M & W 540, relating to the conversion of horses, and Kuwait Airlines Corp. v Iraqi Airways Co. (Nos. 4 & 5) [2002] 2 AC 883, relating to the conversion of aircraft, but said that they could not be applied to the 'conversion' of contractual rights.
50. The Judge referred to three Canadian authorities, McLachlan v Canadian Imperial Bank of Commerce (1987) 12 BCLR (2d) 300, approved on appeal (1989) 57 DLR (4^th) 687 ("McLachlan"), Bradshaw Construction v Bank of Nova Scotia (1993) 1 WWR 596 and Royal Bank v Got (1994) 17 Alta LR (3d) 23, confirmed on appeal by the Alberta Court of Appeal (1997) 196 AR 241 and by the Supreme Court of Canada (1999) 3 SCR 408 ("Got"). But they were referred to in the context of the measure of damages for the primary claim of the Claimants that they would have survived but for the receivership.
51. In this court the Claimants rely on the Canadian authorities, and in particular McLachlan and Got, not as establishing that invalidly appointed receivers of a company commit the tort of conversion of the company's contractual rights, but as proceeding on the footing that such receivers do incur a tortious liability in respect of such rights as part of the business of which they wrongfully took control. The highest it can be put is that the Canadian decisions assume that trespass and conversion extend to all types of assets in a case where a receiver has wrongfully taken control and the business of the company has in consequence failed.
52. In McLachlan, a bank as a secured creditor appointed an agent to realise the bank's security. The agent seized the assets of the plaintiff's company which in consequence became insolvent. The plaintiff succeeded in claiming that the assets were wrongly seized and that damages should be assessed on the basis of the value of the company as a going concern at the date of seizure. It was found that the company would have survived but for the seizure.
53. In Got a bank as a secured creditor of a company successfully applied ex parte for the appointment by the court of a receiver. The receiver sold the assets of the company. The bank sued the company for its debt. The company counterclaimed for the loss of its assets. It succeeded in its claim that the bank had misled the court in seeking the appointment of the receiver and was liable in damages for trespass and conversion. This liability extended to amounts receivable by the company.
54. Mr. Steinfeld referred us to another Canadian case, Kavcar Investments Ltd. v Aetna Financial Services Ltd., an unreported decision of Hollingworth J. in the Ontario Supreme Court on 11 April 1986. In that case a secured creditor put the debtor company into receivership and sold the debtor's assets. It was held that the receiver was invalidly appointed and the creditor and the receiver were liable for damages for trespass and conversion. In assessing damages the judge assessed the value of the business which the debtor had lost and took account of assets other than land and chattels.
55. However, none of these cases contains any analysis of the relevant torts in relation to such intangible assets. It may well be that the trespass and conversion had the consequence that the entire business of each relevant company was also lost with the result that the value of intangibles such as receivables was correctly included in the damages awarded. I can obtain no assistance from the Canadian cases in determining whether in English law a tort was committed by the Receivers other than trespass and conversion in relation to the land and chattels.
56. In my judgment, as a matter of English law there can be no conversion of a chose in action. Historically that is obvious, the tort of conversion being derived from trover, which required averments of goods lost by their possessor and found by the defendant. No English textbook suggests otherwise.
57. Convenient though it would be for English law to recognise a tort, in the case of invalidly appointed receivers, where the receivers wrongfully took control of a business, I do not think it open to this court to invent such a tort. In my judgment the Judge was right to reject the claim based on conversion.
58. I confess that I arrive at the conclusion which I do on the first two issues with regret. The wrongful taking of control of intangible assets by an invalidly appointed receiver leading to loss which but for the receivership would have been avoided ought to have consequences in law. It may be that had the Claimants pursued other claims such as in equity or in negligence, they could have achieved the result they desired. But for the reasons which I have given, the Claimants, in my judgment, fail on both the ways they frame their case in tort.

Remuneration

59. I have had some difficulty in discerning what is the true difference between the parties on this issue. The Judge has determined that in principle the Liquidators' actual remuneration and expenses, to the extent that they exceed the agreed figure of £300,000 for the notional costs and expenses of the liquidator on a notional liquidation, can be recovered as damages so far as they are shown to have been caused by the receivership.
60. Mr. Mitchell submitted that the Judge should have held that the Liquidators' remuneration and expenses were only claimable as against the Receivers to the extent that they (1) were caused by the tortious acts of the Receivers, (2) were not too remote, and (3) were not part of the preparation by the Liquidators for this litigation. However, he accepted that damages in tort which are payable to a company may include the additional costs incurred by the company in the form of the remuneration and expenses of the liquidator arising out of the acts of conversion and trespass. Mr. Mitchell said that his clients feared that much of the costs claimed will have been incurred on claims which have failed.
61. Mr. Steinfeld pointed out that the Judge was only concerned with whether the claim was recoverable in principle. He accepts that, whether as a matter of causation, remoteness or failure to mitigate, the Claimants cannot recover remuneration and expenses unreasonably incurred. If, for example, it was found on the inquiry that it was unreasonable for the Liquidators to have prosecuted the unsuccessful claim that the Claimants would have survived but for the receivership, then their remuneration and expenses for that claim would, he accepts, not be reasonable.
62. Mr. Steinfeld also drew attention to the fact that the unusual circumstances of this case meant that the only asset which the Liquidators had was the claim against the Receivers, the Receivers having dealt with the other assets of the Claimants, and that this inevitably meant that the remuneration and expenses of the Liquidators were incurred in preparation for the litigation. I agree that it would be wrong to exclude in advance of the inquiry all remuneration and costs incurred by the Liquidators in preparation for the litigation. Of course, to the extent to which the court in the exercise of its discretion awards costs to the Liquidators, those costs cannot be recovered as damages.
63. I think it premature to try to give further general guidance on the points which will arise on the inquiry which the Judge has directed. It is sufficient to say that the limited decision taken by the Judge on this issue has not been shown to be wrong in principle. I would therefore dismiss the appeal on this issue.

Lord Justice Mance:

Introduction

64. I gratefully adopt the account of the facts contained in paragraphs 1 to 25 of Peter Gibson LJ's judgment. This appeal against the judgment and order of HHJ Maddocks dated 24^th February 2004 raises interesting questions concerning the scope of the tort of wrongful interference with pre-existing – in this case contractual – rights. The two claimant companies, OBG Limited and OBG (Plant & Transport Hire) Limited, were treated as one for all relevant purposes in the judgment and order below, and I will, like the judge, refer to them together as OBG. They carried on a civil engineering business, with as their main client North West Water Limited ("NWW"). On 8^th June 1992, the first and second appellants were purportedly appointed as administrative receivers of OBG by Raymond Centriline Ltd. ("Centriline"), and they acted as such at all material times thereafter. HHJ Maddocks held by an initial judgment and order dated 31^st January 2001 that the appointment was invalid and of no effect, and directed a further trial to establish what if any sum might be due as a result on the taking of an account and/or an assessment of damages.
65. After the appellants' purported appointment as receivers, all work ceased on 12^th June 1992 on all uncompleted contracts with NWW. On 17^th June NWW served a 7-day notice on OBG to terminate such contracts. But the termination of these and OBG's other contracts cannot be attributed causally to the appellants' invalid appointment. Quite independently of that appointment OBG was by 9^th June 1992 insolvent, and relations between OBG and NWW had reached a point where NWW would anyway have refused further support to OBG and have brought about a termination of all OBG's contracts by liquidation or abandonment. HHJ Maddocks rejected OBG's primary case that OBG would, but for the appellants' invalid appointment, have been able to achieve a successful administration. The liquidation into which OBG in fact went on 19^th June 1992 was inevitable.
66. Accordingly, neither the appellants' purported appointment nor their purported activity as receivers caused the termination of OBG's contracts with their customers (apart at least from the Strangeways contract which was novated by the receivers in favour of another company and any others like it). But the contracts continued in existence, not for the purpose of any further work being undertaken under them, but for the purpose of ascertaining their financial implications in either direction. In one respect, their termination proved unexpectedly beneficial to OBG. The contracts contained a provision, the effect of which was that, if NWW could complete the work more cheaply using other contractors, then OBG were entitled to obtain the benefit. NWW's bargaining power, and the nature of the OBG contracts, were such that NWW was indeed able to have the outstanding work completed more cheaply elsewhere than it would have been done by OBG. However, it appears that, in the event, OBG did not obtain the full benefit of this advantage. On 15^th August 1997, the appellants, still acting as receivers, reached a global settlement with NWW, whereby NWW paid OBG £400,000 in full and final settlement of all claims under the NWW contracts. At NWW's insistence, the liquidators were in fact made parties to this settlement. But the liquidators did not negotiate, and were not in a position to renegotiate, the settlement, and there was no pleaded defence or suggestion to the effect that their participation might in any way estop OBG or affect any claim that OBG might otherwise have. As a matter of law, counsel before us were agreed that the appellants, despite the invalidity of their appointment, could by themselves have bound OBG by their acts. This is having regard to s.232 of the Insolvency Act 1986, which provides:

"Validity of office-holder's acts

The acts of an individual as …. Administrative receiver, liquidator or provisional liquidator of a company are valid notwithstanding any defect in his appointment, nomination or qualifications."

67. There is no suggestion of any fault on the part of the appellants as receivers in the actual negotiation or making of the settlement with NWW (or any of the settlements with other customers to which I will come). But the sum of £400,000 which the appellants negotiated now appears to have been a considerable undervalue of the worth of OBG's claims against NWW. The judge has held that, but for the appellants' invalid appointment, OBG would, through their liquidators and with the support of their directors and creditors generally, have achieved a substantially better outcome at a much earlier date than the receivers in fact did. In particular, OBG would have received £1,400,000 (instead of £400,000) in respect of the NWW contracts. They would also have received £420,000 instead of £330,000 in respect of contracts with customers other than NWW. They would have received these sums at a much earlier date, by September 1993 in the case of the NWW contracts and on settlements which took place "from about July 1992" in the case of the other contracts (see OBG's statement of case served 31^st May 2002, paragraph 36). It is unnecessary in this judgment to go into the reasons for these differences (surprisingly large though they may by themselves appear), since there is no appeal before us relating to the judge's factual findings, and no argument that the resulting loss should be regarded as too remote to be recoverable. The judge awarded damages which included the differences, allowing credit for costs of liquidation saved by the receivership in the sum of £300,000. The judge also awarded damages in respect of various smaller losses flowing from the receivership, which are not in issue on this appeal.

The issues

68. The appellants appeal by permission of Neuberger LJ on a number of grounds: They submit that the judge was wrong to regard the wording of paragraph 40 of the re-re-amended statement of claim as covering the tort of wrongful interference (with contractual relations) (ground (b)); that he was wrong to apply the "conversion measure of damages of value at the date of the taking (being the only basis on which damages were claimed)" in relation to that tort (ground (c)); that he failed to identify the requisites for that tort and in particular the necessary mental element (ground (d)); that he failed to confine OBG to their pleaded case as explained on 18^th December 2002, in particular to a claim to the value of assets as at 9^th June 2002 (ground (g)); that he failed to confine them to their pleaded case that they would have gone into administration, and "found in their favour on a case introduced in reply to Closing Submissions" (ground (h)); and that he should have held that the liquidators' additional costs and expenses over and above the agreed sum of £300,000 (representing the costs and expenses that would anyway have been incurred if there had been no receivership) were recoverable only to the extent that they were caused by acts of conversion or trespass of the receivers and were part of the preparation by the liquidators for the present litigation (issue (i)).
69. Ground (b) is therefore a pleading point. Ground (c) and (d) raise issues regarding the nature and elements of the tort of wrongful interference with contractual relations. Ground (c) asserts that the judge measured damages as at 9^th June 1002, but erred in law in doing so, whereas ground (g) proceeds on an opposite factual basis, namely that he measured damages at some other date, but should have confined himself to considering whether in law damages could be measured at 9^th June 1992. Ground (h) asserts that he erred in failing in another respect to confine OBG to what is said to have been their pleaded case. OBG have permission to cross-appeal so as to contend that, if there is any validity in the appellants' grounds (c) and (d), the judge could and should have reached a like result by reference to the tort of conversion.

The issue whether paragraph 40 covered the tort of wrongful interference

70. I start with ground (b). OBG pleaded in paragraph 40 that the receivers' appointment was invalid and that they and each of them "is liable to the Plaintiff for trespass and for the loss and damage suffered as a result of the invalid appointment and the wrongful assumption of control over the Plaintiff's business and property ….". By the beginning of the second day of argument before us, Mr Mitchell for the appellants was minded to accept that there was no separate pleading point, and that, if OBG were right in their analysis of the tort of wrongful interference, their case could be brought within paragraph 40. Mr Mitchell may have intended to limit this concession to the possibility of a tort completed in all its aspects on 9^th June 1992. Whether he did or not, in my view paragraph 40 is also apt to cover the possibility of a tort committed over a period of time. Trespass and the assumption of physical control would not necessarily be immediate or completed on that date in relation to all parts of OBG's property. The receivers' assumption of control after 9^th June 1992 over contracts in a manner involving wrongful interference is likewise, in my view, covered by the general wording. By order reflecting the outcome of an application on 18^th December 2002, the judge directed the trial of all issues raised by OBG's statement of case served 31^st May 2002 (save those in paragraphs 6, 8 and 9 which OBG withdrew).
71. Paragraph 2 and the second schedule of that statement of case put the matter as follows:

"2. By reason of their conduct purportedly as receivers now declared to have been unlawful, the Receivers have committed the following wrongs, actionable in damages at the suit of the Claimants:

2.1 on and after 9 June 1992, trespass over, and conversion of

2.1.1 all the businesses, assets and undertaking of the Claimants;

2.1.2 alternatively, all of the land and goods and chattels of the Claimants;

as at 9 June 1992 as described in the First Schedule.

2.2 further and in the alternative, on and after 9 June 1992, unlawful interference with the Claimants' contracts as at 9 June 1992 as described in the Second Schedule.

2.3 Further and in the alternative, on and after 9 June 1992, wrongful or unlawful interference with, and wrongfully taking control of, such of the businesses, assets and undertaking of the Claimants that may not be the subject of claims for trespass, conversion or interference with contractual relations under paragraphs 2.1 or 2.2 above.

…..

Second Schedule

Wrongful Interference with Contractual Rights of the Claimants as at 9 June 1992

The Contracts

1. The building contracts described in Appendix 1 to the report of Naismiths, Quantity Surveyors and Construction Advisors, dated May 2002. …..

Particulars of the acts that constitute the trespass and conversion or wrongful interference

2. The taking of possession of the Claimants' rights under these contracts and treating those rights as being available to them to realize for the benefit of their appointor, including the acts described in paragraphs 13(ii), 17(ii), 18, 19, 21, 23, 24, 25, 29, 32, 33, 34, 36, 38 and 39-41 of the Remuneration Case."

72. Paragraphs 32-34 and 36 of the Remuneration Case read as follows:

"Settlement of the NWW Claims

…..

32. Between June 1992 and November 1993, the receivers and Robins conducted negotiations with NWW for the settlement of OBG's remaining claims against NWW under the contracts identified in Schedule 11 and NWW's claims against OBG.

33. On 14 November 1993, NWW made an oral offer, without prejudice and subject to contract, to pay £400,000 in full and final settlement of OBG's claims. By a report to Mr Allan dated 16 November 1993, Mr Robins on behalf of Robins recommended that the offer be accepted. In reliance on that report, Mr Allan wrote to NWW on 17 November 1993 confirming that the offer was acceptable. On 1 December 1993, Mr Allan wrote to Mr Robinson confirming that the offer had been made and that the Receivers had been advised to accept it.

34. In or about November 1993, the Receivers instructed DWS and NWW instructed Addleshaws to negotiate the detailed terms of the proposed settlement. Those negotiations lasted from November 1993 until about August 1997 when OBG acting by the Receivers, and with the consent of the Liquidators who were parties to the agreement, entered into a settlement agreement pursuant to which the sum of £400,000 was paid by NWW into a joint account held by DWS and DLA.

…..

Claims under Non-NWW Contracts

From about July 1992, the Receivers, with the assistance of Robins, Mr Swarbrick and the other quantity surveyors whose services were retained by the Receivers, negotiated with and settled the claims of OBG under the contracts specified in Schedule 12."

73. The order of 18^th December 2002 reserved to the receivers and Messrs Penningtons a "right to make a further such application if so advised in the light of disclosure of documents by United Utilities PLC [successors to NWW]" to strike out (inter alia) any claims other than for trespass to land, goods and chattels on the grounds stated in an application dated 26^th September 2002, which included allegations that they were not pleaded and would be time barred. The judge heard submissions on this aspect during the trial on the pleadings, and reached the following conclusion:

"67. A preliminary point was taken that the original pleadings confined the damages claim to trespass and conversion in the narrow sense, and were inadequate in their allegations as claims for interference with contractual rights. I invited and received written submissions on this aspect in the course of the trial, but was satisfied that the Claimants were entitled to proceed. At the outset it was perfectly plain from para. 40 that the Claimants were seeking damages for the Receivers having dealt with the whole of the assets of the business of whatever nature. The question whether the allegations made are sufficient to support the wider claim are best considered in relation to the law, but there has never been any issue on the facts as to the actual conduct of the Receivers. They simply acted as if they were validly appointed receivers dismissing employees, terminating contracts, disposing of assets and settling claims. It is not alleged that they had any particular intent other than to do that which they did. The extent to which their conduct is actionable is the question of law to which I turn next.

…..

Measure of damages – the Survival Claim

75. I have indicated the basis of this claim at the beginning of this judgment. The Claimants say that whatever the precise analysis of the legal causes of action in relation to the different assets comprised in the OBG business, whether land chattels or contracts and whether based on trespass, conversion or interference with contractual relations, the damages caused are the same: the loss of the whole of the Claimants' business as an undertaking, against which they have received only the net proceeds of the receivership, for which, following the judgment on liability, the Receivers have accounted to the Liquidator. I accept that approach. It does not seem to me that any purpose would be served or any different result achieved by attempting to separate the claims in relation to land, chattels and contracts, or to look at each individual act by the Receivers and try to trace the damages attributable to that act. By whatever route it would all lead to the same result, as each act would have contributed to the result, which was the loss by 'conversion' of the business as a whole. It is that loss which must provide both the measure and the limit of the damages on whichever basis is appropriate on the facts."

74. I consider that the judge was correct in paragraph 67 (as well as in applying to the claim based on a comparison between the position on a receivership and the position in liquidation a similar general approach to that he indicated in paragraph 75 in relation to the case based on survival as a going concern). Ground (b) fails in my opinion accordingly.

Trespass, conversion and wrongful interference with contractual relations

75. Since grounds (c) and (g) are effectively alternative, and depend upon an analysis of what the judge decided, I shall leave them aside for the moment, and proceed next to consider the judge's approach and its correctness in substantive law. The essential question is whether the judge's decision to award damages in respect of the differences which I have mentioned reflects or can be related to any one or more of the torts of trespass, conversion and wrongful interference with contractual or legal relations.
76. The appellants submit - correctly as I consider - that the strict liability torts of trespass and conversion are generally limited to real property (in the case of trespass) or chattels (in the case of both). Conversion extends by fiction to only a very limited category of intangibles (conversion of a negotiable instrument, where the face value of the instrument is taken to be the value of the piece of paper). I do not find in the Canadian authorities cited to us (McLachlan v. Canadian Imperial Bank of Commerce [1987] 13 BCLR (2d) 300; [1989] 57 DLR (4^th) 687 and Royal Bank of Canada v. W. Got & Associates Electric Ltd. (1994) 17 Alta L.R. (3d) 23; (1997) 196 1R 241; [1999] 3 SCR 408) any significant support for their wider application to purely contractual rights, whether viewed individually or as components of a business. I would not therefore uphold the judge's judgment on the alternative ground advanced by OBG's respondents' notice.
77. In some cases, consequential damage to a company's business or to particular contractual commitments may (subject to ordinary principles of causation and mitigation) be attributable factually to acts of trespass and conversion committed by invalidly appointed receivers. This possibility was recognised (though rejected on the facts) in In re Simms [1934] 1 Ch. 1, 17-18, 22 and 30, per Lord Hanworth MR and Lawrence and Romer LJJ respectively. But here, the acts of trespass and conversion which the appellants, as invalidly appointed receivers, undoubtedly committed in respect of OBG's real property and chattels did not cause the diminution in value of the contracts to which the present appeal relates. No possibility of any such claim existed or was suggested.
78. It follows that OBG, if they are to succeed, have to show that the appellants' handling of the "run-off" of OBG's contracts, leading in fact to less satisfactory outcomes than OBG would otherwise have achieved, gave OBG some other cause of action against the appellants. The label which the judge attached in accepting this proposition was interference with contractual rights (paragraph 67). The possibility of a claim on such a basis was voiced in In re Simms. Lord Hanworth at p.15 records that it was "definitely abandoned" (even though counsel's submissions and Lord Hanworth's own remarks at p.8 do not show the matter this way). Lawrence LJ and Romer LJ dealt with and dismissed it at pp.23-24 and pp.30-31 respectively. But the factual situation in that case was on any view very far removed from the present. The bankrupt builder had been unable to fulfil and had abandoned his outstanding contracts. The receiver took them over and completed and earned monies under them which would not otherwise have been received. Although there are references by Lawrence and Romer LJJ to the absence of any breach, let alone any procured by the receiver, I cannot find in the reasoning or decision in this case any real assistance on the issue which arises on the very different facts of the present.
79. This appeal therefore requires us to consider the boundaries of the economic tort of interference with a pre-existing contractual or legal position. Questions arise as to both the scope of the interest protected by the tort and the state of mind involved in its breach. Viewed very generally, the interest protected is a person's interest in his existing legal position. The core area of protection relates to existing contractual rights, but there is authority that the tort protects some other legal interests, e.g. statutory (Meade v. Haringey B.C. [1979] ICR 494) or fiduciary (Prudential Assurance Co. v. Lorenz (1971) 1 KIR 78). The tort typically relates to situations where a person (A) induces a breach by B of C's rights, but it is not confined 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".

See Merkur Island Corpn v. Laughton [1983] AC 570, 608B, per Lord Diplock, giving the sole fully reasoned speech. Lord Diplock referred with approval to passages in Jenkins LJ's judgment in D. C. Thomson v. Deakin [1952] Ch 646, in which he had spoken interchangeably of causing breach and preventing performance of a contract. Lord Diplock went on to approve the following statement of principle by Lord Denning MR in Torquay Hotel Co. Ltd. v. Cousins [1969] 2 Ch 106, 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 not be a breach."

80. In the Torquay Hotel case, no actionable breach of any contract with the hotel was involved because Esso, the other party to the contract, was exempted by a force majeure clause from any failure to perform beyond their immediate control. But the normal course of performance was interfered with (cf also per Winn LJ at p.147B-C). In the Merkur Island case, the shipowner claimants were party to a contract under which their obligation to prosecute their voyages with the utmost despatch was qualified by clauses providing for the vessel to go off hire and for charterers to have a right after 10 days to cancel, in the event of a labour blockade/boycott of the type which the defendants were pursuing. In each case there was interference with the contractual performance which would otherwise have taken place. What is not sufficient to constitute the relevant element of the tort is a mere reduction in the financial value of a contract to one or both of its parties, without any interference with its performance. An example is provided by R.C.A. Corpn v. Pollard [1983] 1 Ch. 135, where the illegal activities of bootleggers diminished the profitability of contracts granting to the plaintiffs the exclusive right to exploit certain recordings: see especially at pp.153F and 156F-G per Oliver and Slade LJJ.
81. The authorities draw a distinction between cases of direct and indirect interference. The latter can only be actionable if unlawful means are used: Torquay Hotels, p. 138F per Lord Denning. Since the trespass and conversion which the appellants committed to OBG's real property and chattels had no effect on OBG's contracts, they cannot be relied on as relevant unlawful means. And, since the essential question is to what extent the acts of an invalidly appointed receiver in relation to contracts are actionable, it is circular to rely on the invalidity of such appointment alone as amounting to unlawful means. So the judge's conclusion can only be good if the present case is regarded as one of direct interference.
82. Turning to consider the relevant state of mind, Lord Denning in Torquay Hotels said at p.138E that:

"the interference must be deliberate. The person must know of the contract or, at any rate, turn a blind eye to it and intend to interfere with it: see Emerald Construction Co. v. Lowthian [1966] 1 WLR 691"

The motive with which a person intends to interfere with a contract is irrelevant (see South Wales Miners' Federation v. Glamorgan Coal Company [1905] AC 239), unless in that rare category of case, into which the present is not suggested to fall, where justification may constitute a defence to liability for a tort otherwise established on the facts. But Lord Denning's formulation leaves room for lively debate about the extent to which conduct must be directed or aimed at the contract and/or at the claimant. In Millar v. Bassey [1994] EMLR 44, the issue there was whether a claim disclosed a reasonable cause of action, when all that had been pleaded was that Miss Shirley Bassey had breached her contract with a record producer Dreampace (or with her own management company which had in turn contracted with Dreampace), as a result of which Dreampace had been unable to perform a contract with the plaintiffs of which Miss Bassey had known. The issue identified by Peter Gibson LJ at p.59 was:

"Must the conduct of the defendant, the alleged tortfeasor, be aimed directly at the plaintiff, the contracting party, who suffers damage, in the sense that the defendant intends that the plaintiff's contract should be broken, or is it sufficient that that conduct should have the natural and probable consequence that the plaintiff's contract is broken?"

83. Peter Gibson LJ would have answered that question in the former sense. He cited a passage from the judgment of Cooke J (as he was) in Van Camp Chocolates Ltd. v. Aulsebrooks Ltd. [1984] 1 NZLR 354, 360, suggesting that it would be stretching the tort too far to impose liability

"[i]f the reasons which actuate the defendant to use unlawful means are wholly independent of a wish to interfere with the plaintiff's business, such interference being no more than an incidental consequence foreseen by and gratifying to the defendant …."

Beldam LJ considered in contrast that it would be sufficient to show that the defendant must have realised that Dreampace would be unable to perform its obligations to the plaintiffs (p.58). Ralph Gibson LJ inclined to the view which had been expressed by both Cooke J and by Peter Gibson LJ, whilst also distinguishing between "an active step taken by a defendant in the knowledge of the covenant by which he facilitates a breach of that covenant, which may be enough to constitute the tort" and "the non-performance of contractual obligations which may be regarded as mere passivity" where "the requirement as to intention may indeed be more than mere knowledge that her refusal will render her co-defendant incapable of performing its contract with the plaintiff" (p.72).

84. Millar v. Bassey was a case where the interference was indirect, and the gist of the cause of action was that the defendant's passive non-performance of her contract with Dreampace (or with her own management company) had caused the non-performance of Dreampace's contract with the plaintiffs. In the present case, if there was in law any relevant interference, it consisted in the appellants' active taking over and conduct of the handling of the "running off" of OBG's contracts with NWW and others. Whatever the position may be in cases of indirect interference, such conduct, if otherwise actionable, must in my view be regarded as sufficiently directed or aimed at any party to the contracts interfered with. However innocent its motivation, it involves interference that is both direct and active. The interference was not intended to cause loss to OBG, but Mr Mitchell accepted, in my view rightly, that that is not a pre-requisite of liability for the tort (transcript Day 2 p.26). As Markesinis & Deakin point out in Tort Law (5^th Edition) at p.519, this is one of the distinctions between the tort of interference with pre-existing rights and the tort of interference with trade or business. It follows that I would reject ground (d) on which the appellants have permission to appeal.
85. Mr Mitchell further submits that to recognise a tort of the width that the judge accepted would involve an unacceptable blurring of the line between this and other economic torts. He points out that the tort of interference with trade or business requires not merely unlawful means, but also a specific intention to harm the claimant - although this need not be the predominant motive as in the tort of conspiracy to injure by otherwise lawful means (compare Quinn v. Leathem [1901] AC 495 with Lonhro plc v. Fayed [1990] AC 479). However, the existence of that important distinction does not answer the question where the boundary between the two torts lies, or what can appropriately be regarded as meriting protection within the scope of the tort of interference with pre-existing legal rights. Mr Mitchell submits, secondly, that the interference suggested in this case bears no relationship with any interference previously recognised as actionable, and that in reality the contracts were performed by the appellant receivers, not broken or left unperformed; the fact that the receivers obtained a lower value than the liquidators would, on the judge's findings, have obtained could give rise to liability, if the receivers had in some way acted negligently, but this was not alleged. Third, Mr Mitchell relies on the absence of any intention to interfere with the contracts or to cause their breach or to do anything except perform them to the best of the appellants' ability as persons acting as and believing that they were receivers. These seem to me objections closely linked, and likely to stand or fall, with the basic objection that the conduct complained of involved performance, rather than non-performance, and cannot and should not be regarded as amounting to any sort of interference calling for legal protection or for the imposition of legal liability in the absence of negligence. Finally, Mr Mitchell submits that there are ample other remedies available in appropriate situations, and that there is no call for any extension of the previously recognised boundary of the tort.
86. A central question is therefore whether the tort of interference in the execution of a contract is capable of covering the situation of an unauthorised agent, who takes over the handling of a contract with a view to its performance by settlement of mutual contractual rights and obligations but with the result that the "principal" suffers a loss which he would not otherwise have suffered. The generality of the phrase "interference in the execution of a contract" has so far only been held to extend to the "procurement of a breach" or the "prevention" or "hindrance" of "performance". The tort is not, however, limited to protecting contractual interests, and it must in my view extend to some situations where a person's pre-existing legal position is adversely affected in a more general manner than falls directly within any of the latter phrases. This is demonstrated by consideration of some of the situations in which a person without actual authority may purport to act on another person's behalf.
87. In many such situations, the supposed principal will be able to disclaim the purported agent's conduct. An innocent third party, with whom the agent has purported without authority to make a contract or to reach a settlement of outstanding liabilities under a contract, will be able to hold the agent liable for breach of the warranty of authority which the law decided long ago should be implied to give a remedy in such a situation: see Collen v. Wright (1857) 8 B & E 647. Liability for breach of warranty of authority is strict. It does not depend on whether the agent has been negligent or not: Chitty on Contracts (29^th Ed. Vol. 2 para. 31-099).
88. There are, however, situations in which a person acting without authority as a purported agent may affect the legal position of the purported principal. On the view accepted before us as to its effect, s.232 of the Insolvency Act 1986 is one. A second situation is where a person who had authority but has had it withdrawn continues to be held out to the world or to a third party as having authority. And a third situation can exist where a person has never had any authority but has been held out to the world or to a third party as having been given it. As an example of the third situation, one can take an intended agent whose appointment has been announced in the trade press, but prematurely so, since his contract has never in fact been finalised. In all such situations the principal may become bound to a third party under the doctrine of ostensible or apparent authority. In a situation like the second, where there had been a contract between the purported agent and his purported principal, the latter could commonly hold the former strictly liable in contract for excess of authority. I do not accept as representing the law the dictum of Lloyd J in Great Atlantic Insurance Co. v. Home Insurance Co. [1981] 2 Ll. R. 219, suggesting that "if the principal has held out his agent as having a certain authority, it hardly lies in his mouth to blame the agent for acting in breach of a secret limitation placed on that authority". This dictum confuses and fuses the relationship of the purported principal and agent with that of the purported principal and the third party; it is contrary to principle, and Mr Mitchell did not press reliance on it. Authority on this point contrary to Lloyd J's dictum can in fact probably be found in Pape v. Westacott [1894] 1 QB 272. There the landlord's agent, in breach of his authority, released a licence to assign a lease taking a cheque (instead of cash) for the outstanding rent due from the existing tenant. This took place in the presence of the assignee, who did not however know of the excess of authority. The court dismissed out of hand a suggestion that the landlord could still have distrained against the assignee (pp.280, 282 and 284) - by inference on the basis that the agent had as far as the assignee was concerned been held out as acting with authority - but it held the agent liable to the landlord for exceeding his authority.
89. In a situation like the third, where there never had been a contract, one would also expect there to be a basis for holding the purported agent strictly liable. If the agent had had no ostensible authority, he would have been strictly liable to the third party. If he had ostensible authority in the eyes of the third party, but no actual authority from his purported principal, he should be strictly liable to the purported principal. The position should be analogous in the first situation, where the agent's power to bind the purported principal vis-à-vis the third parties derives from statute, not from any act of holding out by the purported principal.
90. In any of the three situations which I have identified, it is possible to envisage the purported agent affecting the principal's pre-existing legal position either by cancelling or varying a pre-existing contract or by making an entirely new contract. I do not see that as a relevant distinction. In each case, the principal's pre-existing legal position is interfered with. The tort protects from interference legal interests beyond the merely contractual. A person's interest in not being made party to an unauthorised and unwanted contract is at least as worthy of protection as his interest in not having the execution of a pre-existing contract interfered with.
91. These examples do not answer the more difficult question whether the tort of interference with pre-existing rights extends to cover a situation where what occurs can be described as involving the performance or working out (albeit by an unauthorised agent) of legal rights and obligations existing as between the purported principal and a third party. Here, in particular, it is at the forefront of Mr Mitchell's submissions that the appellants did no more, by taking over the handling and 'run-off' of OBG's contracts, than perform them by working out and settling their legal and financial implications. NWW and the other parties to the contracts could have no complaint against the appellants for wrongful interference with the contracts. But I do not see that as a reason why OBG cannot have cause to complain. In principle, the tort extends to cover any situation where a person's pre-existing legal position is altered, even though this does not involve any breach or non-performance of any obligation to a third party. Suppose that an insurance broker or a ship manager, who has been held out as having an authority which is never actually finalised, in anticipation of the grant of such authority renews an insurance or freight contract or settles a claim under the expiring contract. He does so without negligence, but (for example, because he has less bargaining power) on terms which are less favourable than those which the principal would have obtained if he had used the alternative broker or manager, with better connections or bargaining power, whom he was about to instruct to place the same contract or settle the same claim. In that situation, the principal should be entitled to recover the excess premium or freight or the loss on the settlement from the broker or manager. The fact that the broker or manager was placing a contract which the principal wanted placed, or settling a claim which the principal wanted settled, by another agent should be no answer. The complaint arises from the simple fact that the broker or manager acted without authority and made a contract or settled a claim on terms different from and worse than those which the principal could and would himself have achieved.
92. Here OBG's legal position was altered and OBG were thereby adversely affected, because the appellants took over the handling of the 'run-off' of OBG's contracts without authority. The result was, first, that the settlements of the outstanding contractual position which OBG would otherwise have achieved through their liquidators in 1992 –1993 never occurred and, second, that the settlements which were ultimately achieved in respect of the NWW and non-NWW contracts (cf paragraph 67 above) were not as favourable as those which OBG would through their liquidators themselves have achieved at what would (certainly in the case of the NWW contracts) also have been much earlier dates. The appellants' intervention therefore changed significantly the way in which, the terms on which and the time at which OBG's outstanding contractual rights and duties were ascertained and settled. In my judgment, that constitutes sufficient interference by the appellants for the purposes of the tort of wrongful interference with OBG's pre-existing legal position. The interference was active and direct and it was directly aimed at taking over the handling of the outstanding contractual rights and duties and at achieving the settlements which it eventually did which crystallised the full extent of OBG's loss. That the appellants did not realise that they were acting without authority or intend to cause any harm to OBG are in my view irrelevant factors in the context of this tort: see paragraph 84 above. Further, there is no incongruence about a conclusion which means that an invalidly appointed receiver is strictly liable both for interference with physical property and its consequences and for interference with contractual relations.
93. Mr Mitchell submits that, not only is there no precedent for the application of the tort of wrongful interference with a pre-existing legal position to circumstances such as the present, but that it is unnecessary and inappropriate to recognise any having regard to the other remedies which are available in suitable circumstances but on which OBG have not sought to rely. He pointed out that there would nearly always be a contractual relationship between the person (here Raymond Centriline Ltd. – "Centriline") purporting (invalidly) to appoint a receiver and the company (here OBG) in relation to which the receiver was purportedly appointed, so that the latter could hold the former strictly liable for breach of contract. But that to my mind merely highlights the question whether and why liability for loss suffered following an invalid appointment should in this context depend upon whether or not the claim can be presented as a contractual claim for excess of some pre-existing power to appoint or to act (cf paragraphs 88-89 above). There could in fact be situations where the appointor lacked authority to appoint, because the contract under which the purported appointment was made had never been finalised or was void.
94. With regard to the appellants, Mr Mitchell also referred to the authorities according to which the court will regard a self-appointed agent as having the position and authority which he has held himself out as having, and will hold him accountable as a fiduciary or liable for negligence or other breach of duty accordingly: see e.g. Phipps v. Boardman [1965] Ch. 992, 1017-8 per Lord Denning and 1030D-F per Pearson LJ; English v. Dedham Vale Properties Ltd. [1978] 1 WLR 93, 111B-E per Slade J; Montrod Ltd. v. Grunkotter Fleischvertriebs GmbH [2001] EWCA Civ 1954, paras. 72 and 78 per Potter LJ. But none of those remedies would on the face of it cover the loss suffered on the judge's findings, which was not as a result of any negligence but simply a result of the appellants' unauthorised activities following from their invalid appointment as receivers.
95. A liability to account as fiduciary would lead to OBG receiving (as they have done) the £400,000 and £330,000 which the appellants obtained on the settlement of claims under, respectively, the NWW and the other contracts. A liability on the part of the appellants for any negligence or breach of duty committed when acting as agents would enable OBG to recover any damages suffered, if OBG were able to allege and prove that the appellants had in the course of acting as agents been negligent or committed some other breach of duty. But that has not here been suggested. What is said, and what the judge accepted, is that OBG would through their liquidators have been better placed than the appellants were as receivers to realise the best or a better value in respect of the outstanding contracts. So the suggested alternative causes of action would not cover the loss claimed. In reality, they all depend on a fiction entitling OBG to treat the appellants as under the same duties as they would have had, if they had been properly appointed agents. That fiction reflects both the general right of a person injured by another's tort to waive the tort (see e.g. In re Simms at p.27 per Lawrence LJ), as well as, in the specific context of agency, the principle entitling a purported principal to ratify an unauthorised act of a purported agent: see Chitty on Contracts (29^th Ed.) Vol. 2 paras. 31-026 and 31-031. But the premise in each case is that there has been an unauthorised and wrongful act which would by itself and without more be actionable as between the purported principal and the purported agent. In the present case, that act consists of taking over the handling of OBG's contractual 'run-off' without authority and thereby altering OBG's pre-existing legal position to OBG's detriment. There is no reason why OBG should not, instead of waiving the tort or ratifying the appellants' conduct, hold the appellants responsible for breach of duty, in order to recover full compensation for the loss resulting from that act.
96. The conclusion which I reach is therefore that a claim by OGB against the appellants would fit within the proper scope of the tort of interference with pre-existing legal relations - in this case pre-existing contractual relations; and that the judge was right on this central point. I would reject ground (d) accordingly. That brings me back to grounds (c), (g) and (h). With regard to ground (c), I do not think that it is right to regard the judge as limiting himself to a conclusion based on a conversion measure of damages based on the completion of any tort as at 9^th June 1992. In paragraph 67 he pointed out that there had never been any dispute about the receivers' actual conduct, pointing out that "They simply acted as if they were validly appointed receivers, dismissing employees, terminating contracts, disposing of assets and settling claims". In paragraph 75, he said in effect that it did not make any difference whether the claim was looked at globally or by reference to "each individual act by the Receivers". In my view, that was right. The essential complaint was not that the receivers did anything which would have been wrong if they had been validly appointed. It was that the very fact that they were handling matters, pursuant to their purported appointment as receivers, led to a less favourable outcome than would have otherwise been the case.

The further points on the pleading and/or the judge's approach

97. The complaint in each of grounds (g) and (h) is that this broad approach was not open to the judge. It is said that OBG tied themselves and should have been held to "a claim for the value of the assets" of OBG as at the date of the receivers' appointment, on 9^th June 1992, and/or to a claim on the basis that, but for the receivers' invalid appointment, OBG would have gone into administration, not liquidation. It is in my view useful to start by remembering that the judge had dealt with both the trial establishing the invalidity of the receivers' appointment and the further interlocutory stages leading up to the trial and the judgment now under appeal. He was well-placed to assess the extent to which the parties had tied themselves to any particular case and the requirements of fairness. This is a consideration with particular force in circumstances of evident complexity, and some confusion, where we have been given incomplete extracts from transcripts and correspondence.
98. OBG's statement of case served under cover of a letter dated 31^st May 2002 is in terms which cover the case based on differences that the judge accepted. It claimed damages first for the liquidation of OBG and the irrecoverable loss of OBG's entire businesses, assets and undertakings as going concerns. There was an assertion (abandoned by 18^th December 2002) that their value should be assessed as at 31^st March 1994, and the first alternative case which went to trial was that it should be assessed at 9^th June 1992. It is clear that the wrongs asserted by the statement of case were wrongs occurring not merely on but also after 9^th June 1992. They included the settlements of contractual rights pleaded in the Remuneration Case: see paragraph 2 and the second schedule of the statement of case, and paragraphs 9-10 above. This is so although it was alleged that the loss they caused could be accurately assessed by reason of a valuation as at 9^th June 1992.
99. The statement of case went on to identify a "second alternative case" in the following terms:

"12. Alternatively, if the wrongful acts of the Receivers as described in paragraph 2 above have not caused the liquidation of the Claimants and the irrecoverable loss of the Claimants' entire businesses, assets and undertakings as going concerns (which is denied), the wrongful acts of the Receivers have caused the deficiencies in the liquidations to the substantially greater than otherwise they would have been.

13. The deficiencies that would have resulted had the Receivers not acted wrongfully would have been £817,000, particulars of which are set out in the Fifth Schedule. The present estimated deficiency in the liquidations of the Claimants (excluding any allowances for the damages and costs that will be awarded to the Claimants in these proceedings) is £5,373,900. Particulars of how this figure is calculated are set out in the Fourth Schedule.

14. Further, the wrongful conduct of the Receivers has also caused delay in the completion of the liquidations and in the payment of a final dividend to creditors. Had the Receivers not acted wrongfully, a final dividend would have been paid to creditors by no later than 1 June 1994. The present estimate of the time for payment of a final dividend to creditors from any award in these proceedings is 1 June 2003. The Claimants therefore claim interest at the rate of 8% per annum on the sum of 4,556,900 for this period of delay, namely £3,280,968. The Claimants claim this sum as:

14.1 damages;

14.2 alternatively, interest pursuant to s.35A of the Supreme Court Act 1981.

15. The Claimants therefore claim £7,837,868 being:

Estimate of actual deficiency £5,373,900

Less predicted deficiency in liquidations had (£817,000)

the Receivers not been appointed

Damages or additional interest to £3,280,968

compensate for delay in payment of dividends

to creditors

Total Claim £7,837,868

16. The Claimants will give credit for the sums received by way of interim payment pursuant to paragraph 8 of the Order of HHJ Maddocks QC dated 31 January 2001 a follows:

16.1 £295,00.00 on 14 February 2001; and

16.2 £471,263.67 on 22 March 2001;

and will give credit for any other interim payments received prior to judgment."

100. This case relied on the same wrongs, committed on and after 9^th June 1992 by the receivers by the simple fact that they had been appointed and so acted as receivers, while measuring the loss in terms of an increase in the deficiencies in OBG's liquidation as a result of such wrongs. The letter accompanying the statement of case mentioned that OBG's "materials in evidence" dealt with the hypothetical scenarios, that had the receivers not been appointed, OBG would have gone into administration followed by a successful CVA, adding that this was not an essential aspect of OBG's case, but rather put forward as the most likely model to assist the court to assess damages.
101. The receivers by their application notice dated 26^th September 2002 sought to strike the statement of case out on various grounds, including that the claim was misconceived and/or that a fair trial was no longer possible. There was correspondence, of which we only have extracts, during which some consensus appears to have emerged that OBG's claim to damages would depend upon assessing what if any value OBG had at 9^th June 1992. But it is relevant to note the ambit given by the appellants to this issue in correspondence. Their letters dated 6^th and 11^th December 2002 show that they understood that investigating what would have happened but for the receivership was integral to such an assessment. Thus, they said:

Letter of 6^th December 2002:

"We consider that there are really two issues, firstly there is the question of whether the business had as a matter of fact, any value at all as at the 9 June 1992, having regard to all the circumstances, and in particular their financial position. We consider that this issue can be determined by the Court considering as a matter of fact what would have happened if the Receivers had not been appointed? Would any sum have been realised in all the circumstances in respect of the business of the companies? The second issue is, if so what was the value of the businesses which would have been realised."

Letter of 11^th December 2002:

"21. It appears now to be accepted that the real basis of your claim to damages is the value of the companies' businesses as at the 9^th June 1992.

22. We consider that the liability of our clients is to be determined by finding as a matter of fact the degree to which their purported appointment as Receivers has caused loss, if any, to the value of the companies' assets including the businesses."

102. The transcript of the hearing on 18^th December 1992 shows that OBG's argument was that the receivers' intervention deprived OBG of this value, and that the right approach would be for the court to assess the prospects of OBG achieving a greater value than it did, if the receivers had not been appointed. The judge expressed the view during argument that the basis of OBG's second alternative case was

"clear enough … that without the intervention of the receivers there could have been an orderly wind down of the business" (additional bundle tab 4, transcript p.34D).

In his judgment on 18^th December 2002, he said:

"The essence is that the claimants, at the time of appointment of the receivers, had a business which the claimants say was a going concern and which had a value as a going concern. It is also their case – although the degree of emphasis has varied in the course of the statement of issues and statement of case – it is said that a likely route by which that value would have been saved and realised is an administration order, followed, it may be, by a company administration order.

That case appears to be clear enough but what is equally clear is that the essential question is one of the valuation of the company, given on the one side the fact that it was still trading at the time of the appointment, and on the other that it was plainly in financial difficulties and could properly be viewed as in a state of insolvency. ….. One can well see that a company which is in a situation where it cannot presently pay its creditors as they fall due is necessarily forced into some form of insolvency procedure, but again the consequence of that may not necessarily be that the value of its assets are [sic] not realised so as to at least pay its creditors in full."

103. The judge concluded that the statement of case represented an appropriate basis for the further progress of the case to trial. He said:

"Once it is established that the matter turns on the value of the company at that period of time, both sides are in a position to obtain evidence of matters which affect the value and to obtain experts reports upon it and to make their own calculations. To try to plead to each of those details in a formal pleading appears to me not a helpful way forward; on the contrary it seems to me that the better way is that which the claimants have chosen, and the procedure from this point may indeed be one which can dispense with further pleadings."

104. An order was not drawn up immediately, and there was correspondence in February 2003 in which OBG expressed an understanding that the second alternative case was not to be tried at the forthcoming trial. The receivers and Penningtons disputed this. There was a further hearing on 13^th March 2003 in the context of an application dated 6^th March 2003 to participate in the trial made by Messrs Penningtons (solicitors to the receivers sued by OBG and by the receivers on account of their advice leading to the receivers' appointment). Penningtons accepted that:

"9. ….. To the extent that a claim is made that the mere fact of the appointments caused loss to the Claimants, it is accepted that Penningtons are likely to be liable to indemnify the Receivers in respect of such liability to the Claimants. …..

10. So for example, if …. it were held that the mere fact of the appointments caused the destruction of the entire business which had value as claimed of £4,610,000 and drove the Claimants into liquidation, with a net deficiency of £5,373,900, and that absent such appointment the Claimants would have continued to trade and avoided liquidation, then it is accepted that Penningtons are liable to indemnify the Receivers in relation to such claims, because they arise out of the mere fact of the appointments.

11. However to the extent that a claim is made that the Receivers failed to obtain proper value for the assets over which they took control, or failed to act as they should have done, the position is different. It was a matter for the Receivers to decide they would conduct themselves, and if they failed to obtain proper value for particular assets then the cause of such loss is not Penningtons' advice. To put it another way if the Receivers failed to obtain proper value for assets then this was a break in the chain of causation between Penningtons' advice on appointment and the loss in question.

12. ….. the Statement of Case dated 31^st May 2002 was understood until very recently to be a claim that all of the pleaded losses had been caused by the mere fact of appointment. ….. After analysis of the Statement of Case it appeared that there was common ground between the Receivers and Penningtons in that the entire losses claimed were said to have arisen as a result of the mere fact of appointment. Accordingly there would be no great issue of causation of loss between those parties. There is no suggestion that the Receivers did anything wrong apart from take their appointments.

13. It now appears that it is conceded by the Claimants that their Statement of Case is incomplete and that they wish a further round of pleadings and evidence. …."

105. Penningtons went on to refer to communications in which OBG had suggested that, if OBG's second alternative case was in the arena at the forthcoming trial, the issues would expand significantly and new areas of expertise would need to be looked at, and again made clear that their concern was that OBG was trying to introduce allegations of wrongful or unreasonable conduct on the receivers' part, apart from the assumption of control pleaded in paragraph 2 of the statement of case. They repeated their previous understanding of the statement of case (on the basis of which they had evidently been happy that the trial should proceed):

"15. ….. The wrongful acts are pleaded in paragraph 2 in terms of their assumption of control of the businesses on the 9^th June 1992, without any suggestion that they acted unreasonably."

106. In the event the suggestion that OBG's second alternative case was not in the arena clearly did not survive, and the incomplete transcript which we have of proceedings on 13^th March 2003 shows that its implications were discussed. Mr Arden representing the receivers focused on the question whether OBG was intending to allege positive misconduct such as negligence. He sought an admission from OBG in these terms:

"The Claimants do not and will not seek to allege that the receivers were in breach of the duties which they would have owed the companies and/or their appointor had they been validly appointed."

Mr Wyvill for OBG responded:

" …. our position is that our case is a case of valuation and we will make that commitment in absolute terms and the point, and …. we are happy to add that on to it "and the Claimants confirm that their case is one of pure valuation". The difficulty I have with Mr Arden's proposition is this, that part of our claim in relation to pure valuation is to say there would have been a significant gap between the hypothetical realisations in administration and liquidation and the actual realisations at the sale of the property, particularly the contracts, in receivership. My Lord, we have given in the Naismith report contract by contract detail of the gap that we assert in that respect. We say what those contracts would have realised had there been continuation on an on-going trading basis, and what they would have realised in the alternative had there simply been ordinary winding-up. ….. Of course, on a valuation exercise that is, we say, sufficient particulars. We do not need to commit ourselves to an explanation of the gap."

107. Mr Wyvill said that "It may be that the gaps that our expert has identified between the realisation for which we contend and the actual realisation are fully explained by the different contexts" (i.e. the different contexts of receivership and ordinary liquidation). But he then went on to try nonetheless to preserve a right to contend that the receivers "did not do the best job they could have done", as well as to refuse to concede that there no breach of duty or to confirm that OBG would not "make any allegation that what [the receivers] did was below par" although OBG would not seek damages on any other basis that a valuation as pleaded. The judge intervened to say that he was drawing "a very fine line".
108. Following the judge's intervention and at his suggestion the following wording was then agreed by all parties (evidently as introductory wording in the order to be drawn up in relation to the hearing of 18^th December 2002):

"Upon the Claimant stating that the Claimants' case is one of valuation and not that the receivers were in breach of the duties which they would have owed to the companies or others had they been validly appointed as receivers".

The judge added that if, following that statement, an attempt was made at trial to

"slip in a case of negligence I would certainly not be disposed to that but, equally, I do not want to inhibit the case as it is deployed on valuation".

109. This course of events led to the inclusion in the order recording the outcome of the hearing of 18^th December 2002 (approved and initialled by counsel in early April 2003) of the following introductory proviso:

"….. UPON Counsel for the Claimants stating that their case is one of valuation as at 9 June 1992 and not that the Receivers were in breach of the duties which they would have owed to the Claimants or others had they been validly appointed as receivers".

110. It is not clear how the phrase "as at 9 June 1992" came in, but it reflects a point that appears from the statement of case, namely that, on a case which relied solely on an invalid appointment and acts performed without negligence pursuant to such appointment as receivers, damages can be assessed on a global basis, by comparing the value actually realised by receivership with OBG's value apart from receivership. There is nothing to suggest, and no likelihood that I can see, that this phrase was introduced to qualify or exclude the case which Mr Wyvill had (in the response quoted in paragraph 43 above) explained that OBG intended in this regard to mount based on "pure valuation" - by reference to "gap between the hypothetical realisations in administration and liquidation and the actual realisations at the sale of the property, particularly the contracts, in receivership".
111. The appellants submit that the proviso to the order drawn up to reflect the outcome of the hearing on 18^th December 2002 precluded the judge from considering any case based on a comparison between the outcome if there had been no receivership and the outcome under a receivership. But, in the light of the whole course of events, as well as the exchanges between counsel and the judge, set out above, I regard this as an unjustified reading of the proviso. The protection which the proviso was intended to give the receivers and Penningtons was against allegations of conduct which would have amounted to negligence if the receivers had been validly appointed. The concept of a case based on "valuation" was specifically explained to the judge as intended to allow OBG to develop a case based on a comparison between the likely outcomes of a receivership and some other situation not involving receivership; and the transcript indicates that the judge accepted it in this sense. That is the case that he also in the event accepted at trial. In my judgment, it was open to him to do so. I see no unfairness in this respect the way the trial developed. As the judge correctly indicated in paragraphs 67 and 75 of his judgment (and as Penningtons' skeleton of 6^th March 2003 had also indicated), it was irrelevant to go into the detail of events, or precisely when and how the wrongful inducement took place in respect of each contract once all that was relied on was the ordinary course of the receivers' activities as purported receivers in negotiating and settling the outstanding contractual position under such contracts, as opposed to any specific acts of negligence in doing so.
112. This brings me to ground (h). OBG's primary case was always that they would have avoided liquidation, but for the receivers' invalid appointment; and that they would either have continued as a going concern or gone into administration. The judge rejected both aspects of this case. But the case meant that it would always be in issue at trial whether OBG would have been better off apart from the purported receivership. OBG's further alternative case involved no more than a further, parallel comparison between the position under the purported receivership and the position in liquidation. As to the suggestion that this was not covered by any pleading and was only raised in closing submissions, neither part of this appears to be correct. The terms of OBG's second alternative case set out in paragraphs 13-16 of the statement of case of 31^st May 2002, as well as the transcript of 13^th March 2003 and paragraph 9 of OBG's opening submissions for the trial (appeal bundle pp. 238-240) all expressly raised a case on a comparison between the position in receivership with that in a hypothetical liquidation. Paragraph 9 stated:

"9.1 If the court concludes that liquidation was inevitable, the Claimants accept that the losses that result from the liquidation per se cannot be recovered. The correct approach then is to identify how the hypothetical liquidation of the Claimants would have proceeded without the intervention of the Defendants and then to compare that to the actual result of the liquidation to date. …..

9.4 However, the suggestion that the hypothetical liquidation would have proceeded in the same way as the Defendants' tortious conduct actually did is plainly unsustainable for the same reasons as set out in paragraph 8.3 above. ….."

Paragraph 8.3 gave reasons why the actual course and outcome of the receivership were of limited assistance only to what would have happened apart from receivership, or therefore to any assessment of the value of OBG's business apart from receivership, relying inter alia on the approach which Mr Robinson would have taken as liquidator. Mr Robinson also identified the issue in his witness statement as being whether OBG:

"would [i.e. but for the purported receivership] have survived those financial difficulties [i.e. those which it had as at 9^th June 1992] via an administration order and/or a company voluntary arrangement, and if not, whether liquidation would have yielded better results than those achieved by the Receivers".

113. The expert evidence evidently concentrated on the alternative scenario of a successful administration, which the judge rejected. OBG's closing submissions elaborated a case based on a better outcome in liquidation: see e.g. paragraphs 210-223 and the final schedule (appeal bundle tab 20). But I do not see any sound basis for the submission in ground (h) that this case was not even pleaded. Further, even if I had thought that there was any pleading point, the judge's observation on 18^th December 2002 to the effect that "the procedure from this point may indeed be one which can dispense with further pleadings" could have justified his adjudicating upon this issue without demanding a formal amendment, provided that no unfairness resulted therefrom. I also see no basis for a submission that it was in this respect unfair to determine the case in the way the judge did.

Conclusion

114. I would therefore uphold the judge's judgment on the main points argued before us, and dismiss the appellant receivers' appeal on grounds (b), (c), (d), (g) and (h). As to the remaining issue (i), relating to the liquidators' remuneration, I need do no more than concur with Peter Gibson LJ's observations and his conclusion that the appeal on this ground also should be dismissed. It follows that in my judgment both the appeal and the cross-appeal should be dismissed.

Lord Justice Carnwath:
 


115. I have had the advantage of reading in draft the powerful opinions of Peter Gibson and Mance LJJ, and find myself torn between them. My initial instinct at the beginning of the case was that the Receivers should be strictly liable for all the consequences of their unlawful appropriation of the business, by analogy with the long-established principles applied to unlawful receiverships under the law of trespass and conversion (see eg Massey v Sladen (1868) LR 4 EXD 13; Moore v Shelley [1883] 8 App Cas 285 PC). The Canadian cases referred to by Peter Gibson LJ seemed to point in that direction.
116. However, for the reasons given by him I agree that that course is not open to us, and that the Canadian authorities on analysis do not provide support for such an extension. There is the further consideration that in this country the tort of conversion has been largely codified in the Torts (Interference with Goods) Act 1977, in which goods are specifically defined as including "all chattels personal other than things in action and money". Against that statutory background, a major development of the law by judicial decision would be particularly difficult to justify.
117. So far as concerns the tort of interference with contractual relations, I can see considerable theoretical force in the arguments made by Mance LJ, not least the analogy with the law of agency. However the boundaries of economic torts are a sensitive area in which it is difficult to anticipate the consequences of re-definition. The present limits seem to me to have been clearly and authoritatively set by Lord Denning MR in Torquay Hotel Company Limited v Cousins [1969] 2 Ch 106, as approved by Lord Diplock in Merkur Island Corp v Laughton [1983] 2AC 570, 608. I agree with Peter Gibson LJ that it would be a significant extension of those principles to bring within the tort a case where the interference is not directed at hindering performance of the contractual obligations, but "goes only to who should be managing the contractual rights of one party" (para 47). Nor am I persuaded that there is a policy reason for making that extension, beyond cases where negligence can be established.
118. In addition I have doubts whether this is a suitable case for making such an extension, given its very unusual facts. Although we are bound by the Judge's findings that there was a substantial difference between the potential value of the contracts and that which was realised by the Receivers, it seems at first sight a surprising conclusion in the absence of any finding of negligence on behalf of the Receivers. I also remain concerned at the way in which the case was presented. Although Mance LJ's careful analysis of the pre-trial exchanges appears to show that the issue relating to the management of the contracts was in play in some form, the preamble to the order of 18^th December 2002 was unfortunate and potentially confusing. It contained the clear statement that counsel for the claimants were advancing their case as "one of valuation as at 9^th June 1992". There was plenty of time for reflection before that wording was approved by counsel for both parties in April 2003.
119. On no ordinary use of language can the case as finally upheld by the Judge be treated as one of "valuation as at 9^th June 1992". There is a clear conceptual difference between a claim for loss based on the valuation of a business as a going concern at a particular date, and one based on consequential losses, or losses from subsequent but linked events. The distinction is sometimes blurred by arguments about the extent to which hindsight may be taken into account (see Phillips v Brewin Dolphin Bell Lawrie Ltd [2001] 1WLR 143, 153b-c, per Lord Scott; and the discussion in the context of compulsory purchase compensation in the Law Commission final report Law Com No 286 para 3.25 – 3.29). However the purpose of an order such as that of 18^th December 2002 is to make clear to the parties, and the Court, and in due course the appellate courts, precisely what was in issue. It should not be necessary to delve through the surrounding correspondence in order to interpret the order.
120. In conclusion, in spite of some initial doubts, reinforced by Mance LJ's judgment, I find myself in full agreement with Peter Gibson LJ on the principal points in the case, and on the disposal of the appeal and the cross-appeal.

ORDER: Appeal allowed to the extent of removing from the damages and interest (which the judge by paragraph 1 of his order of 24^th February 2004 ordered the receivers to pay the Claimants) such sums as are attributable to what the judge found to be interference with contractual relations; the appeal based on ground 1 of the grounds of appeal is dismissed; the claimant's cross-appeal is dismissed; further questions arising from the judgments to be dealt with at a hearing to be fixed.

(Order does not form part of approved judgment)