I doubt there is a word to describe the joy of discovering a tort you have not heard of before (five possible words are “need to get out more”), but if there is, I experienced it recently.
The tort in question is the snappily-named “inducing or procuring another to act in wrongful violation of rights under a judgment”. The first judge affirmatively to recognise the existence of this tort was Knowles J in Marex Financial Ltd v Sevilleja, and in view of the full name he gave it, it is perhaps not surprising that it has become known as “the Marex tort” (which is also how I will refer to it in this blog).
Marex of course became much better known as the leading modern authority on the principle of reflective loss, following the decision of the Supreme Court on that aspect of the case. But this other, lesser-known contribution it made to the legal landscape is arguably the more far-reaching.
Many readers will know the simple facts of Marex, but for those who don’t:
- S was the ultimate beneficial owner and shadow director of two BVI-incorporated companies;
- M obtained judgment against those companies for sums due under a contract, and a post-judgment freezing injunction;
- The companies went into liquidation;
- M alleged that S had transferred assets out of the companies into his personal control;
- M obtained permission to serve S out of the jurisdiction on the basis that it had a tortious claim against him;
- S applied to set that permission aside on various grounds, including the ground that (what went on to be known as) the Marex tort did not exist.
Knowles J considered the competing submissions for and against the existence of the tort and, in 11 short paragraphs, held that M had “the better argument” (this being the relevant test). Key parts of the reasoning were that:
- Non-payment of a judgment debt is an actionable wrong;
- Just as procurement of an actionable wrong such as a breach of contract is, itself, actionable, so is the procurement of non-payment of a judgment debt;
- Dicta affirming the entitlement of a defendant to render itself judgment-proof prior to any order being made against him were not applicable to a situation where there is an existing obligation (such as a contractual obligation) to pay the money; and
- It could not be said that S had merely prevented the companies from paying; he had procured a situation in which they could not.
The existence of the tort was then given still more emphatic backing in a decision which is not reported at all – namely, when Asplin LJ refused S permission to appeal against this part of Knowles J’s decision. This is only known because it is recorded, fortuitously, in Flaux LJ’s judgment on the reflective loss issue on which S did get permission to appeal – see paragraphs 1 and 6.
And there matters rested until, in July 2021, Bryan J decided the case of Lakatamia Shipping Co Ltd v Su. Lakatamia was a case in which a mother and son by the name of Su were, erm, sued for conspiring to dissipate two of the son’s assets in breach of a worldwide freezing order. One of the causes of action articulated against them was the Marex tort.
In a slightly fuller exposition (which also has the benefit of appearing in a judgment following a trial, as opposed to at an interim stage as was the case in Marex), Bryan J dealt with the judgment at section B8, paragraphs 116-131. Unsurprisingly, he drew heavily on the reasoning of Knowles J, in particular basing his analysis of the tort closely on the established tort of procuring breach of contract. A key part of the reasoning is that if procuring breach of contract is a tort, why should the same conduct carried out after judgment (when the cause of action has become merged in the judgment) be any less a tort? Absent such protection, Bryan J said, “the law would perversely diminish the protection that it affords to a victim of a breach of contract where the victim has had those rights vindicated by the courts” (paragraph 121).
Bryan J identified, at paragraph 126, five constituent elements of the tort, namely:
(1) The entry of a judgment in the claimant’s favour;
(2) Breach of the rights existing under that judgment;
(3) The procurement or inducement of that breach by the defendant;
(4) Knowledge of the judgment on the part of the defendant, and
(5) Realisation on the part of the defendant that the conduct being induced or procured would breach the rights owed under the judgment.
He went on to articulate five further principles which he considered to be of application to the Marex tort, namely (and here I paraphrase):
(1) D does not need to intend to cause damage to C;
(2) D does not have to have actual knowledge of the contents of the judgment;
(3) Constructive knowledge (or reckless indifference) is sufficient;
(4) Any active step by D which facilitates violation of C’s rights falls within the ambit of the tort;
(5) It is not necessary to establish spite, desire to injure, or ill will on the part of D.
In a further development, in the case of Gee v Gee, HHJ Paul Matthews held that the sale of a farm, in breach of an order made following a claim in proprietary estoppel, amounted to the commission of the Marex tort (see paragraph 14). This is significant because it shows that the Marex tort applies to all judgments and orders, not just those made in claims for breach of contract. On one level, that is logical and to be expected and it would be surprising if it were otherwise; but Marex, and Lakatamia were both contract claims, and the fact that both Knowles J and Bryan J regarded the tort as an extension of procurement of breach of contract might have put its wider application in doubt. So Gee is of significance in that respect.
Inevitably at this stage of its development, however, questions remain unanswered. One such question is whether and to what extent the tort can be commissioned prior to judgment: if (for example) a director simply abandons – or never commences – the defence of a claim, knowing that judgment will follow, and instead concentrates on emptying the company of assets, does he (let’s assume it’s a he) commit the tort? It is hard to see why the fortuitous fact that judgment has not been entered should make his conduct any the less tortious – or why that conduct would be lawful one day but, on entry of judgment the next day, becomes unlawful. On the other hand, if he commits this conduct in the belief (but not the knowledge) that judgment will follow:
- Is that unlawful?
- If so, what level of belief is necessary?
The prevailing view is that a defendant does no wrong by making itself judgment-proof (see for example, Law Debenture Trust Corp v Ural Caspian Oil Corp per Sir Thomas Bingham MR at paragraph 166), and if that is the case than it can hardly be a tort to procure that state of affairs. But the creeping advancement of the Marex tort may soon call that view into question.
So there it is: a shiny new tort which is ripe for deployment and which will surely now start to form an important part of the armoury of the civil litigator.
