In HIH Casualty & General Insurance Ltd v Chase Manhattan Bank, Lord Bingham used the following words in relation to cases of civil fraud: “.... fraud is a thing apart. This is not a mere slogan. It reflects an old legal rule that fraud unravels all: fraus omnia corrumpit. It also reflects the practical basis of commercial intercourse. Once fraud is proved, "it vitiates judgments, contracts and all transactions whatsoever”
The tort of conspiracy has long been recognised to have two forms, ‘conspiracy to injure’ and ‘unlawful means conspiracy’. Both forms require a combination or agreement to injure, coupled with overt acts done in execution of the combination that cause the loss complained of; plus an intent to injure the claimant; plus actual damage. The second form of the tort, unlawful means conspiracy, arises where two or more parties agree to use unlawful means to injure the claimant, as a result of which the claimant suffers damage.
The required intention to injure need not be a predominant intention, but instead could be subordinate to the conspirators’ own self-interest. Carrying out a conspiracy by ‘unlawful means’ only founded a tort if there was an independent actionable tort against at least one of the underlying conspirators. So, for instance, a crime or regulatory offence, giving rise to no right to compensation would not suffice as ‘unlawful means’ for the tort of unlawful means conspiracy; nor would a breach of statutory duty where the statute (properly construed) does not create any civil liability. As a result, the tort of unlawful means conspiracy was relatively little used.
However that position changed in the recent House of Lords (now the Supreme Court) case of: Total Network v HMRC[1] (2008) where the House of Lords redefined the meaning of “unlawful means” so that it included crimes whether or not the defendants' criminal acts were otherwise actionable by the claimant. Lord Walker derived from the authorities “a general assumption, too obvious to need discussion, that criminal conduct engaged in by conspirators as a means of inflicting harm on the claimant is actionable as the tort of conspiracy, whether or not that conduct, on the part of a single individual, would be actionable as some other tort.
It follows that now any form of illegality, whether criminal or civil, will suffice for unlawful means. The effect of this is that such a conspiracy might be relatively easy to establish in highly interlinked transactions, and the unlawful means could be satisfied by a relatively minor breach of regulations, provided that this was the means of inflicting the harm.
In the later case of Novoship (UK) Ltd v. Mikhaylyuk (judgment given on 14 December 2012) where the Commercial Court (which of course followed the binding precedent of the Supreme Court’s Total Network decision), provides some further guidance on this new law:
“The elements of legal liability for conspiracy by unlawful means are (1) a combination; (2) to use unlawful means; (3) with intent to injure the Claimant.
In relation to the requirement of combination:
i) In order to establish a combination it is sufficient if two or more persons combine with a common intention. There is no need for any explicit agreement. The existence, extent and scope of the combination (if any) is to be inferred from the overt acts. It is rare to be able to establish precisely when any agreement or combination began or when various conspirators were recruited
ii) It is not necessary for all the conspirators to join the conspiracy at the same time, but they must be sufficiently aware of the surrounding circumstances and share the same object for it properly to be said that they were acting in concert when the acts complained of were carried out.
In relation to the requirement for unlawful means:
i) There is no requirement that the unlawful means be actionable at the suit of the Claimant
ii) Unlawful means can include, amongst other wrongs, tort, breach of fiduciary duty and breach of contract
iii) The Claimant must establish an intention to injure but this need not be the defendants’ predominant purpose, and the intention will normally be inferred from the primary facts. If the defendants intend to injure the Claimant and uses unlawful means to do so, it is no defence in itself to show that their primary purpose was to further or protect their own interests.”
The standard of proof
Criminal prosecutions for fraud are of course subject to the criminal burden of proof beyond a reasonable doubt. However the standard of proof for the tort of unlawful means conspiracy is the ordinary civil standard of the balance of probabilities and, as referred to above “the intention will normally be inferred from the primary facts” essentially this means that liability can be founded on the duck test[2]. It should also be noted that it has been held[3] that where the claimant can prove acts unlawful in themselves, done in pursuance of the conspiracy, the burden of justifying such acts passes to the defendant.
The Tort of Unlawful Means Conspiracy is a radical change in the law opening the flood-gates for litigation.
[1] [2008] 2 All ER 413.
[2] If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.
[3] [1942] A.C. 435 at 495-496, per Lord Porter; and see Lonrho Plc v Fayed [1992] 1 A.C. 448 HL.
Source: http://www.rrco.co.uk/tort-of-unlawful-means-conspiracy/
