Inducing breach of contract
Inducing breach of contract
And its labour law history
Today I was one of several lecturers to participate in a “teachout” at Melbourne Law School’s strike action. Thanks to my colleague Julian Sempill for organising it, and to my colleagues, students and friends for coming to my presentation. Here’s the essence of my presentation. It’s based on research for a chapter I provided for John Eldridge, Michael Douglas and Claudia Carr (eds), Economic Torts and Economic Wrongs (Hart Publishing, 2021).
The medieval origins: the Black Death and the Statute of Labourers
Inducing breach of contract is related to (but distinct from) the action of per quod servitium amisit or ‘loss of services,’ an action for trespass to a servant in medieval England.1 The feudal lord owned both the services of his servants and his wife, and was entitled to damages from those who trespassed against them.2
Until the mid-fourteenth century, a master had no legal recourse if a servant left his service. However, this changed after the first Black Death pandemic reached the British Isles in 1348. From 1348 to 1350, it’s estimated that a third to one half of the population of Britain died.3 Prior to this, labour had been plentiful. But after the first wave of the Black Death, labour became scarce, particularly as the lower classes were hit more badly. Servants therefore demanded higher wages, and, if their master refused to pay more, they went to another master. In an effort to stem this, in 1349 the English Parliament passed the Ordinance of Labourers, and then the Statute of Labourers 23 Edw III in 1351. Both the Ordinance and the Statute sought to fix wages at pre-plague rates. The Statute also made it a criminal offence for a servant to break an existing contract of service and allowed a master to force a servant to return to his service. The preamble to the Statute of Labourers acknowledged that the situation had been produced by the scarcity of labour after the Black Death:
[b]ecause a great part of the people and especially of the workmen and servants has now died in that pestilence, some, seeing the straights of the masters and the scarcity of servants, are not willing to serve unless they receive excessive wages, and others, rather than through labour to gain their living, prefer to beg in idleness….
Ultimately, the attempt to fix wages at pre-plague rates was unsuccessful, despite an attempt to strengthen the penalties for contravention with branding and imprisonment from 1361 onwards. Dissatisfaction over wages and changes to the situation of the peasantry as a result of their relatively strong bargaining power was one of the factors which led to Wat Tyler’s (unsuccessful) Peasants’ Revolt in 1381, where rebels occupied London. It did not end well for Tyler; he was killed and his head was put on a pike as a warning to others.
While the Ordinance of 1349 and Statute of 1351 were criminal, the common law judges used the provisions to develop a civil action in circumstances where, if a servant had entered into the service of a second master, the second master would be liable if he had notice of the first master’s retainer.4 Thus, by 1372, it is clear from the following statement of William de Fyncheden, the Chief Judge of Common Pleas, that a civil action was solidly entrenched in the common law:
At common law, before the statute, if a man took my servant out of my service, I should have a write of trespass, where he was in my service bodily: now the statute was made for this mischief, that if he never comes into my service, after he has made covenant to serve me, but he eloignes himself from me, I shall have such writ and suggest that he was retaining in my service and departed, as here is: wherefore it is necessary to traverse the retainer.5
The civil action was not based on the Statute itself, but it was (at first) inferred from the terms of the Statute. It allowed a master whose servant had left to sue the new master for encouraging the servant to leave his service.
You may well be wondering how a medieval tort is relevant to the current day. It was revived in the nineteenth century as a result of legal battles between opera house proprietors over the entitlement to star performers.
Opera House battles
The modern tort of inducing breach of contract was established in Lumley v Gye, an 1853 case.6 The case arose in the context of a notorious and sustained rivalry between nineteenth century London opera houses, where different houses sought to profit from ‘taking’ performers who had agreed to perform for other houses.7
This particular dispute arose when Benjamin Lumley, the manager of Her Majesty’s Theatre, sought to obtain the exclusive services of the famous soprano, Mlle Johanna Wagner for three months. Mlle Wagner was the adopted niece of the composer Richard Wagner.
Frederick Gye, the manager of Covent Garden Theatre, persuaded Wagner to perform for him, for a greater sum. This gave rise to two famous cases. First, in Lumley v Wagner, Lumley successfully sued Wagner for the breach of the negative covenant not to perform for anyone else, and obtained an injunction restraining her. Secondly, in Lumley v Gye, Lumley sued Gye for inducing Wagner to breach her contract. While a majority of the Court was willing to develop the tort,8 on the facts of the case, Lumley was unsuccessful, as Gye was found to have lacked the necessary bad faith.9
Lumley v Gye was not followed until 1888, after a brickmaker was enticed to work for another company in breach of negative covenant not to work for a competitor.10 However, the tort was then used to enforce compulsory labour and to suppress trade unions.11
Economic torts and trade unions
During the nineteenth century, trade unions were increasingly active in the United Kingdom, despite the fact that unions and strikes were outlawed.12 In the 1860s, militant trade unionists in Sheffield committed a series of murders and explosions, known as the ‘Sheffield outrages’, to express their dissatisfaction with the poor working conditions of Sheffield grinders, cutlers and tool makers. The ‘Sheffield outrages’ led to a 1869 Royal Commission Report on Trade Unions.13 Ultimately, the Liberal government adopted the minority opinion of the Report, deciding that it was better to work with unions, and allow employees to achieve collective bargaining. Hence the Trade Union Act 1871 (34 & 35 Vict c. 31) was passed to legalise trade unions, on the condition that trade unions ceased criminal conduct. However, in the 1890s, employers began to use the tort of inducing breach of contract to suppress trade unions and strikes,14 along with the contractual doctrine prohibiting restraint of trade,15 and the tort of conspiracy.16
In 1901, economic torts were successfully used against unions in two cases. First, in Taff Vale Railway Company v Amalgamated Society of Railway Servants,17 the tort of inducing breach of contract was used to hold unions liable for losses which companies suffered due to striking workers. This liability was later reversed by legislation.18 Secondly, Quinn v Leathem19 expanded the operation of conspiracy to unions. These private law doctrines were ameliorated by statute in due course in the United Kingdom, although the wide immunity enjoyed by unions from Lumley v Gye was wound back in the early 1980s in the United Kingdom during the Thatcher years.20
The tort of inducing breach of contract has generally been used by employers, either to prevent employees from working for a rival employer, or to prevent unions from encouraging members from refusing to work for certain organisations.
Other applications
Other cases involving inducing breach of contract include a case of third party travel companies inducing the breach of the terms of sale of tickets to a sporting event;21 a newspaper inducing parties to breach the terms of a contract not to discuss discreditable conduct on the part of a company executive;22 a case where third parties induced a boxer to breach a contract to only attend fights promoted by a particular company;23 another case involving a third party inducing a boxer to breach his contract with his manager;24 a company inducing a related company to breach a contract with a promoter;25 a tenants’ association urging tenants not to pay rent to landlords;26 and a trade rival poaching customers by offering unfair incentives.27
I wonder, however, whether the tort of inducing breach of contract can be used in some circumstances to protect an employee from media or social media criticism, perhaps particularly relevant in the context of debates on academic freedom. For example, in 2015, SBS Sports presenter Scott McIntyre was sacked for posting a Tweet which criticised ANZAC Day and Australian soldiers. SBS and McIntyre later settled a claim for unfair dismissal under the Fair Work Act 2009 (Cth). SBS sacked McIntyre after a phone call by the then-Communications Minister Malcolm Turnbull (later Prime Minister). Could the fact that an employer sacked an employee after a telephone call by a Communications Minister be regarded as an inducement to cause the employer to sack the employee? I do not offer a concluded view here, but merely ask the question.
Conclusion
We’ve traced the way in which a fourteenth century criminal offence has developed into a tort which still has salience to the present day. I feel grateful that people eventually recognised that it is in the interests of both employers and employees to come to a bargain which is mutually satisfactory.
As I’ve said before, my ultimate hope is that our current industrial action will make management see that we have to come together, and make our university work more effectively. We’re all in this together: staff, students and administrative staff. I’m proud to be part of such a collegial Law School.
GH Jones, ‘Per quod servitium amisit’ (1958) 74 LQR 39, 39.
Some vestiges of this cause of action still apply in Australian law to employees: see Barclay v Penberthy [2012] HCA 40, (2012) 246 CLR 258.
RC Palmer, English Law in the Age of the Black Death 1348 – 1381 (University of North Carolina Press, 1993) 3.
Jones (above n 1) 40.
Yearbook Michaelmas 47 E 3 fol 14A pl 15 (1373).
Lumley v Gye [1853] EWHC QB J73, [1853] 118 ER 749.
SM Waddams, ‘Johanna Wagner and the Rival Opera Houses’ (2001) 117 LQR 431, 448–49. Previously Lumley had induced the opera singer Jenny Lind to perform at his hall, rather than for Alfred Bunn of Drury Lane Theatre.
Lumley v Gye (above n 6) (Crompton J, Erle J and Wightman J in the majority, Coleridge J dissenting).
Waddams (above n 7) 456–57. Waddams suggests that the Court got the law wrong, as Gye seems to have been reckless or to have turned a blind eye to Lumley’s contract.
Bowen v Hall (1888) 6 QBD 333.
W Page Keeton et al, Prosser & Keeton on Torts, 5th edn (West Publishing Group, 1984) 978–79.
The first Acts were the Combination Act 1799 (39 Geo. 3. c. 81) and Combination Act 1800 (39 & 40 Geo. 3. c. 106). These were repealed by the Combination of Workmen Act 1824 (5 Geo. 4. c. 95) but after a series of strikes in 1824, the Combinations of Workmen Act 1825 (6 Geo. 4. c. 129) was enacted to prohibit trade unions from collectively bargaining for better conditions at work, and to suppress the right to strike.
D Brodie, A History of British Labour Law 1867 – 1945 (Hart Publishing, 2003) 1.
See eg, Temperton v Russell [1893] 1 QB 715 (CA); South Wales Miners Federation v Glamorgan Coal Co [1905] AC 239 (HL); Smithies v National Association of Operative Plasterers [1909] 1 KB 310 (HL).
Hornby v Close [1867] LR 2 QB 153 (QBD) held that union rulebooks were unenforceable as an invalid restraint of trade. This was later reversed by legislation several years later: Trade Union Act 1871 (34 & 35 Vict c 31) (UK) and Trade Union Act 1876 (39 & 40 Vict c 22).
At first, in Mogul Steamship v McGregor [1892] AC 25, the House of Lords declined to extend conspiracy to trade unions. However, Quinn v Leathem [1901] AC 495 (HL) later overturned this. Rookes v Barnard [1964] AC 1149 (CA) held that closed shop agreements by unions with employers constituted ‘unlawful intimidation’. Rookes v Barnard was immediately reversed by legislation: Trade Disputes Act 1965.
Taff Vale Railway Company v Amalgamated Society of Railway Servants [1901] AC 426 (CA).
Trade Disputes Act 1906 (6 Edw 7 c 47).
Quinn v Leathem [1901] AC 495 (HL).
D Howarth, ‘Against Lumley v Gye (2005) 68(2) MLR 195, 200, citing Trade Union and Labour Relations (Consolidation) Act 1992, ss 219–246.
Hospitality Group Pty Ltd v Australian Rugby Union Ltd [2001] FCA 1040, (2001) 110 FCR 157.
ABC v Telegraph Media Group Ltd [2018] EWCA Civ 2329, [2019] 2 All ER 684.
Fightvision Pty Ltd v Onisforou [1999] NSWCA 323, (1999) 47 NSWLR 47.
Warren v Mendy [1989] 1 WLR 853.
Zhu v Treasurer of New South Wales [2004] HCA 56, (2004) CLR 530.
Camden Nominees v Forcey [1940] Ch 352 (Ch D).
Multinail Australia Pty Ltd v Pryda (Aust) Pty Ltd [2002] QSC 105.
Oh yay, I was so disappointed that I couldn’t attend but now I am delighted that I get to read the substance of your presentation!
This is fascinating :).