Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd

[1995] FCA 31

CATCHWORDS

Tort - inducement of breach of contract - ingredients of cause of action - whether essential to allege that the defendant must have induced the doing of what the defendant knew would be a breach of contract.

Short v The City Bank of Sydney (1912) 15 CLR 148 - cons.

ALLSTATE LIFE INSURANCE CO. & ORS v. AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED & ORS.

No. G381 of 1994

Coram:   Beaumont J.

Place:   Sydney

Date:    10 February 1995

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
NEW SOUTH WALES DISTRICT REGISTRY  )    No.  G381 of 1994
  )
GENERAL DIVISION                 )

BETWEEN:ALLSTATE LIFE INSURANCE CO. & OTHERS

Applicant

ANDAUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED & OTHERS

Respondent

CORAM:    Beaumont J.

DATE:     10 February 1994

MINUTES OF ORDER

THE COURT ORDERS:

Application for leave to amend refused, with costs.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
NEW SOUTH WALES DISTRICT REGISTRY  )    No.  G381 of 1994
  )
GENERAL DIVISION                 )

BETWEEN:ALLSTATE LIFE INSURANCE CO. & OTHERS

Applicant

ANDAUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED & OTHERS

Respondent

CORAM:    Beaumont J.

DATE:     10 February 1994

REASONS FOR JUDGMENT No. 5
   (On application for leave to amend statement of claim)

Application is now made to amend further the claims made in the statement of claim on the subject of alleged inducement of breach of contract.  The application is opposed on the grounds that the amendments proposed do not disclose, even arguably, a reasonable cause of action.

The amendments sought are contained within the document MFI "1" which, for ease of reference is annexed to these reasons.  It will be noted that, by para.159F(1), it is claimed that the State Bank knew of the prohibition there mentioned and that by para.159F(2) and (3), an inducement of breach of contract is alleged.  Further, by para.159F(7), it is claimed that the State Bank "so induced Linter textiles to engage in the said conduct with the intention and/or knowledge that it would result in injury to the Applicants or alternatively with indifference as to whether such conduct would result in injury to the Applicants."  However, it will be seen that it is not alleged that the inducement was something done knowing that it would cause the breach.        

The statement of claim, and the proposed amendments, allege the commission of the tort of inducement of breach of contract both under the law of Australia and that of New York.

(a)The cause of action pleaded under Australian law

In my opinion, the law in Australia as to the ingredients of the tort of inducing a breach of contract is settled.  The law was stated, authoritatively for present purposes, in my view, by Isaacs J. in Short v The City Bank of Sydney (1912) 15 CLR 148 (at 160). His Honour said:

"...to constitute that cause of action, the defendant must have induced or procured the doing of what he knew would be a breach of contract."

Isaacs J. went on to say (at 160):

"A bona fide belief reasonably entertained that it was not a breach of contract would be fatal to the claim.  If the defendant did not know of the existence of the contract, he could not induce its breach;  if he reasonably believed it did not require a certain act to be performed, his inducing a party to the contract to do something inconsistent with it could not be regarded as an inducement or procurement knowingly to break the contract;  if he believed on reasonable grounds that the contract had been rescinded, or performance waived, when in fact it had not, he could not be said to knowingly procure its breach.  If this were not so, no man would be safe in the ordinary transactions of life, because he might find contrary to his knowledge or belief and expectation that some contract or enterprise he entered into was inconsistent with the contractual or other obligation of the party with whom he was agreeing or dealing.  No doubt every man must be understood to intend the natural consequences of his acts;  but that means having regard to the circumstances with which he is or is assumed to be acquainted.  And the terms of an agreement and its true construction, for it may be very complicated, and the acts of the parties in relation to it are circumstances without knowledge of which reasonably brought home to the mind no man can be said to intend consequences regarding the breach of the agreement."

As Isaacs J. here points out, the test is not an entirely subjective one.  It is not merely a question whether the defendant believed that he or she was not inducing a breach;  there is a further, objectively measured, question whether, in all the circumstances, that belief was held on grounds that are judged to be reasonable.

It is true that the question whether the requisite knowledge should be attributed to a defendant in particular situations may present difficulties of proof (see, e.g. Carlton & United Breweries v Tooth & Co. (1986) 7 IPR 581 at 615; Schindler Lifts v Debelak (1989) 89 ALR 275 at 293; Greig v Insole [1978] 3 All ER 449 at 488). But the present issue arises in a pleading context and is substantive or conceptual in character and involves the identification of the ingredients of the tort. In my opinion, Short's case establishes that the interference must be not only intentional but also with knowledge.  How, at the adjectival level, knowledge is actually proved may be a contentious question which may depend upon inferences being drawn from the surrounding circumstances.  That inquiry, as Isaacs J. noted, may call for the application of the general presumption that a person is to be regarded as intending the natural consequences of that person's acts, but this does not arise for consideration in the present application.

It is also true, as Francis Trindade and Peter Cane The Law of Torts in Australia 2nd ed., point out (at 212) that, in this area questions of knowledge and intention often become inevitably intertwined.  However, there is a basic requirement that for the conduct of the defendant to be regarded as an actionable interference, the plaintiff must show that the defendant knowingly induced or procured a breach of the contract;   and that in order that the defendant may be said to have acted knowingly it must be shown by the plaintiff that the defendant had knowledge of the existence of the contract and had also an intention to interfere with its performance.

It follows, in my opinion, that the amendments proposed suffer from two defects:

(1)  It is not alleged that the inducement was something done with the intention and in the knowledge that it would cause a breach of contract.

(2) There is an immaterial allegation in sub-para.(7) of an intention to injure the applicant, even if such an allegation may be an ingredient of an action on the case.

In my view, it is settled, beyond any reasonable argument to the contrary, that the matters described in (1) are essential ingredients of the relevant cause of action (see for example, The Law of Torts in Australia, at p.212;  but that the matters in (2) are irrelevant to that cause of action.  That being so, it would be futile to permit the amendments sought so far as Australian law is concerned.

I turn now to the position under the law of New York where, as will appear, a similar question arises.

(b)  The cause of action pleaded under New York law
         As will be seen, para.163 states, in general terms, the ingredients of the tort under the law of New York.  Although the respondents do not challenge this general statement of an abstract proposition, they say that the anterior claims, relevantly those made in paras. 159F(1), (2), (3) and (7), above, do not constitute such a cause of action.  For the reasons previously given, the same position will apply here also.

ORDERS
         In the result, the application for leave to amend is refused, with costs.

I certify that this and the preceding five  (5) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Beaumont.

Associate

Dated:      10 February 1995

Counsel and Solicitors      Mr. A.R. Emmett Q.C. with

for Applicants:             Mr. W.G. Muddle and

Mr. D.R. Stack instructed by
  Sly & Weigall

Counsel and Solicitors      Mr. P. Hayes Q.C. with

for 12-21st, 23-25, 27      Mr. P. Santamaria instructed by
and 28 Respondents:         Arthur Robinson Hedderwicks

Date of hearing:            9 February 1995

Date Judgment delivered:         10 February 1995