Antuzis & Ors v DJ Houghton Catching Services Ltd & Ors [2019] EWHC 843 (QB)

[2019] EWHC 843 (QB)Case No HQ15X04315
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Venue Royal Courts of Justice Strand, London, WC2A 2LLDate 08/04/2019
Before
THE HON. MR JUSTICE LANE
Between
NERIJUS ANTUZIS AND OTHERSTOMAS NECAJUSPRANAS STRIBYLYSClaimants-and-
Between
DJ HOUGHTON CATCHING SERVICES LTDDefendantsJACQUELINE JUDGEDefendantsDARRELL HOUGHTONDefendantsTHE GANGMASTERS LICENSING AUTHORITYDefendants
John Hendy QC, Harry Lambert (instructed by Leigh Day Solicitors) for Claimants Andrew Allen, Mark Greaves (instructed by Brett Wilson Solicitors) for the DefendantsHearing Hearing dates: 19, 20, 21, 22 February 2019
Approved JudgmentMR JUSTICE LANE :
[1]These proceedings concern an application for summary judgment and the trial of a preliminary issue. The claimants are nationals of Lithuania, who contend that they were employed by the first defendant (D1) in an exploitative manner, commonly working extremely long hours and being paid less than the statutory minimum prescribed by the Agricultural Wages Act and the Orders made under it. The claimants were employed at various farms to catch chickens, which were then transported for slaughter and subsequent human consumption.[2]The claimants further contend that they were frequently not paid the sums which were recorded as being due to them on their respective pay slips, which had in any event been calculated on a fictional basis. Payments were often withheld as a form of punishment for alleged transgressions. D1 made no attempt to pay the claimants holiday pay, to which they were entitled, or to pay overtime at the prescribed rates. Nor was a claimant permitted to take absence on account of bereavement.[3]Deductions were also, the claimants say, unlawfully made in respect of so-called employment fees and for rent, in respect of premises at which the claimants were effectively required to reside, with the rent being in excess of the maximum permitted under the legislation. B. THE ORDER OF 8 AUGUST 2018[4]On 8 August 2018, Master Yoxall ordered there to be a trial of a preliminary issue; namely whether the second and third defendants (hereafter D2 and D3) are personally, jointly and/or severally liable to the claimants for the D1’s breaches of contract. The order stated that “for the avoidance of doubt reference to claims under ‘breaches of contract’ includes any related claims under statute or statutory instrument”. The present proceedings do not involve the fourth defendant.[5]So far as concerned summary judgment, the order envisaged that the application for this would be heard immediately after the trial of the preliminary issue. The summary judgment application relates to:- i) paragraphs 74-75 of the generic particulars of claim; ii) paragraphs 19, 26-28 and 55 of the generic defence; iii) paragraphs 17-19 of the individual defences in the cases of Vygantas Bucyms and Edmundas Mikiulkevicius; iv)any other paragraphs identified in the application notice.[6]The claimants categorise the breaches covered by the application for summary judgment as “breaches of express or implied terms of the contracts of employment of the claimants. These breaches arose by reason of unpaid wages, unlawful deductions and fees, and lack of holiday pay”. Certain of these breaches are said to be admitted by D1. C. APPROACH TO SUMMARY JUDGMENT AND PRELIMINARY ISSUE[7]In determining the application for summary judgment, I apply the test set out in CPR 24.2. So far as relevant, this provides for such judgment where the court:- “a) … considers that:(i) the claimant has no real prospect of succeeding on the claim or issue; or(ii) the defendant has no real prospect of successfully defending the claim or issue; and (b) there is no other compelling reason why the case or issue should be disposed of at trial”. (i) the claimant has no real prospect of succeeding on the claim or issue; or (ii) the defendant has no real prospect of successfully defending the claim or issue; and[8]What CPR 24.2 means in practice was described by Lord Woolf MR in Swain v Hillman [2001] 1ALL ER 91 as follows:- “The words ‘no real prospect of succeeding’ do not need any amplification, they speak for themselves. The word 'real' distinguishes fanciful prospects of success …they direct the court to the need to see whether there is a 'realistic' as opposed to a 'fanciful' prospect of success.”[9]I shall explain later the approach I adopt to the preliminary issue. In essence, however, it involves applying the so-called rule in Said v Butt [1920] [3] KB 497, in which it was held that a director of a company is not liable for inducing breach of contract by that company, if the director is acting bona fide within the scope of his authority. D. EMPLOYMENT LEGISLATION REGARDING AGRICULTURAL WORKERS[10]It is necessary to look in some detail at the Agricultural Wages Act 1948 and the Orders (hereafter AWOs) made under it. Until its abolition in 2013, after the events with which we are concerned, the Agricultural Wages Board, established by the 1948 Act, fixed minimum rates of wages for workers employed in agriculture and directed that any such workers should be entitled to be allowed employees’ holidays of such duration as might be specified in such a direction. Section 3(2) empowered the Board to fix minimum rates for time work and piece work and, importantly for our purpose, to fix minimum rates for time-work, to apply in the case of workers employed on piece work, for the purpose of securing for such workers a minimum rate of remuneration on a time-work basis.[11]Section 4 provided that if an employer failed to pay a worker wages at a rate not less than the minimum rate fixed by the AWO, or to pay a worker relevant holiday pay, the employer was to be liable on summary conviction to a fine.[12]Section 4 further provided that in any proceedings against an employer under section 4(1), the court “shall, whether there is a conviction or not, order the employer to pay in addition to the fine, if any, such sum as may be found by the court to represent the difference between the amount which ought at the minimum rate, applicable, to have been paid to the worker by way of wages during the period of six months immediately preceding the date on which the information was laid or the complaint was served, and the amount actually paid to him”. The powers for the recovery of sums due were stated by section 4(4) not to be in derogation of any right of the worker to recover such sums by civil proceedings.[13]Following the enactment of the National Minimum Wage Act 1998, section 3A was inserted into the 1948 Act. This provided for the enforcement provisions of the 1988 Act to have effect for the purposes of enforcing the 1948 Act, including the entitlement to be paid the minimum agricultural wage. Of particular significance is section 17 of the 1998 Act. This provides that, where a worker who qualifies for the minimum wage is remunerated at less than that minimum, the worker shall be taken to be entitled under his contract to be paid as an additional remuneration in respect of the period in question, an amount equal to the difference between the relevant remuneration received and the relevant remuneration which a worker would have received had he been paid the minimum wage. Thus, the entitlement to be paid the minimum wage is a term of the contract between the worker and the employer.[14]At all material times, the claimants enjoyed the benefit of AWOs. For our purposes, apart from the actual amount of the minimum wage (which changed each October), the relevant provisions of the AWOs were in essence the same.[15]For present purposes, it is helpful to concentrate on the Agricultural Wages (England and Wales) Order 2012. Article 1(2) provided that the Order applies to every worker employed in agriculture in England and Wales. Article 2 contains a number of definitions, including the following:- “Guaranteed overtime” means overtime which a worker is obliged to work under their contract of employment and in respect of which the worker’s employer guarantees payment to the worker, whether or not there is work for the worker to do; … “night work means work (apart from overtime hours) undertaken by a worker between 7 p.m. one evening and 6 a.m. the following morning, but excluding the first two hours of work that a worker does in that period; … “on-call” means an arrangement whereby a worker who is not at work agrees with their employer to be contactable by an agreed method and able to reach the place where they may be required to work within an agreed time; … “other overtime” means overtime (other than guaranteed overtime) worked by a worker under their contract of employment; “sickness absence” means the absence of a worker from work due to the worker’s incapacity by reason of:(a) any illness suffered by the worker; … (c) an injury that occurs to the worker at the worker’s place of work; … “worker” means a worker employed in agriculture; “working time” means: (a) any period during which the worker is working at their employer’s disposal and carrying out their employer’s activities or duties;(b) any period during which the worker is receiving relevant training; and(c) any additional period which the worker and employer agree shall be treated as working time.” … “other overtime” means overtime (other than guaranteed overtime) worked by a worker under their contract of employment; “sickness absence” means the absence of a worker from work due to the worker’s incapacity by reason of: (a) any illness suffered by the worker; … (c) an injury that occurs to the worker at the worker’s place of work; … “worker” means a worker employed in agriculture; “working time” means: (a) any period during which the worker is working at their employer’s disposal and carrying out their employer’s activities or duties; (b) any period during which the worker is receiving relevant training; and (c) any additional period which the worker and employer agree shall be treated as working time.”[16]Part 2 of the Order set out various grades of workers. The claimants fall within the definition of “standard worker – Grade 2”, contained in Article 5.[17]Part 3 dealt with minimum rates of pay. Article 17 required the worker to be paid no less than the minimum rate of pay as set out in the Order for their grade or category:
“(a) when they are working; or (b) (other than a worker who has a contract of employment which provides for payment at piece rates) when they are available at or near their place of work for the purpose of working and when they are required to be available for such work…”
[18]Article 17 provided that, subject to certain exceptions, a worker is to paid no less than the minimum rate of pay for their grade or category when, for the purposes of their duties, they are travelling. It is common ground that when the claimants were travelling to and from the farms where they were required to catch chickens, they were entitled to be paid travelling time.[19]Article 21 provided that where the worker was paid at piece rates, the wages for each hour worked must not be less than the hourly minimum rate of pay applicable to their grade or category.[20]Article 22 provided for the payment of a “minimum overtime rate” where the worker works more than 8 hours a day for the same employer or works any hours beyond the working hours of their contract of employment.

(d) ”

[21]Article 31 provided that where certain accommodation is provided for the worker, the employer can deduct a specified sum from the workers minimum wage payable under the Order.[22]Article 33 provided for an on-call allowance, whilst article 34 provided for a night work supplement. Article 44 entitled a worker to a rest break on not less than 30 minutes in respect of a period of 5 and a half hours, unless the worker and the employer agree otherwise.[23]Part 10 of the Order provided for annual leave and for holiday pay. Article 54 provided for bereavement leave.[24]Part 11 of the Order provided for an entitlement to agricultural sick pay.[25]The Working Time Regulations 1998 (hereafter WTR) are also applicable to the contracts of employment of the claimants. They provided for maximum working time (including overtime) for a worker of 48 hours per seven days. Regulation IV (of the WTR) required an employer to take “all reasonable steps, in keeping with the need to protect the health and safety of workers to ensure that the limits specified in Regulation 4(1) is complied with in the case of each worker employed, in relation to whom the provision applies”.[26]The WTR required any derogation from maximum hours to be agreed in writing by the worker and the employer. The employer must, in any event, maintain records that, amongst other matters, specify the number of hours worked by the worker.[27]Regulation 35 of the WTR provided that any provision in an agreement, whether a contract of employment or not, is void, insofar as it purports to exclude or limits the operation of the WTR. E. REGULATION OF GANGMASTERS[28]It is common ground that the claimants were employed by D1 in circumstances that meant the claimants’ employment was subject to the regulatory regime of the Gangmasters (Licensing) Act 2004 and the Rules made under it. The regulatory authority for this purpose was at all material times known as the Gangmasters Licensing Authority (hereafter GLA).[29]Section 4 provides that a person is a Gangmaster if he supplies a worker to do work to which the Act applies for another person; and it does not matter whether the work is done under the control of the Gangmaster or another person.[30]As I have mentioned earlier, the claimants were employed by D1 to catch chickens on various farms. The live chickens would then be transported for slaughter and processing. D1 was paid by the relevant food processing company in respect of the work done by the claimants.[31]Section 6 of the 2004 Act prohibits a person from acting as a Gangmaster except under the authority of a licence. D1 lost its licence in 2012, as a result of matters to which I shall turn in due course.[32]The 2004 Act creates a number of offences, including being in possession of false documents. An offence is also committed by a person who makes materially false statements to an enforcement or compliance officer.[33]Section 20 applies the Act to bodies corporate. If an offence committed by the body corporate is shown to have been committed with the consent or connivance of an officer of that body or to be attributable to any neglect on that person’s part, the officer as well as the body corporate is guilty of the offence (section 20).[34]The Gangmaster (Licensing Conditions) Rules 2009 make detailed provision for the licensing scheme established by the 2004 Act. Rule 7 provides that any contravention or failure to comply with the Rules or with the conditions is, so far as it causes damage, actionable. Paragraph 4 of Schedule 1 imposes upon a licence holder the obligation, at all times, to act “in a fit and proper manner”. Where the licence holder is the body corporate, that obligation extends to “every director, manager, secretary or other similar officer”.[35]Paragraph 3 of Schedule 1 defines “work-finding services” and paragraph 7 prohibits the licence holder from charging a fee to a worker for any work finding services.[36]Paragraph 13 states the licence holder must not withhold or threaten to withhold the whole or any part of any payment due to the worker on certain specified grounds. These include “any matter within the control of the licence holder”.[37]The GLA’s Licensing Standards (April 2009) explain, amongst other things, how the licensing system operates and, in particular, how compliance with the regime is assessed. An inspection by the GLA will test relevant licensing standards, resulting in an overall score. The scoring system determines whether an applicant or licence holder has passed or failed an inspection. A fail score for inspection is 30 points. Standards designated as “critical” are worth 30 points. With one exception, all other standards are worth 8 points.[38]During an inspection, an applicant or licence holder may be asked details of any current contracts with labour users. The GLA may also interview a sample of workers under those contracts.[39]Where no issues are identified, a licence will be granted (to applicants) and there will be no change for existing licence holders. Where an inspection score is below 30 points, additional licence conditions will be attached to the licence. If the inspection score is 30 points or above, the application will be refused or the licence revoked.[40]At this point, it is relevant to note that the GLA’s inspection of D1 in 2012 resulted in a score of 266 points, which accordingly led to the revocation of its licence.[41]In respect of the so-called “fit and proper test”, the Licensing Standards document emphasises the seriousness of a person not being candid and truthful in all their dealings with any regulatory body and the necessity of compliance with other legal, regulatory and professional requirements and standards. Failure against this standard “may lead to a licence being revoked with immediate effect”.[42]Licensing standard 2 describes as “critical” the payment to a worker of at least the national minimum wage or, if applicable, the minimum set by the appropriate AWO. F. COMPANIES ACT 2006[43]The final statutory scheme which is necessary to mention is that contained in the Companies Act 2006. Section 172 (duty to promote the success of the company), so far as relevant, provides as follows:- “(1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to -(a) the likely consequences of any decision in the long term,(b) the interests of the company's employees, … (d) the impact of the company's operations on the community and the environment, (e) the desirability of the company maintaining a reputation for high standards of business conduct, and …” (a) the likely consequences of any decision in the long term, (b) the interests of the company's employees, … (d) the impact of the company's operations on the community and the environment, (e) the desirability of the company maintaining a reputation for high standards of business conduct, and[44]Section 174 (Duty to exercise reasonable care, skill and diligence) provides:- “(1) A director of a company must exercise reasonable care, skill and diligence. (2) This means the care, skill and diligence that would be exercised by a reasonably diligent person with—(a) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by the director in relation to the company, and(b) the general knowledge, skill and experience that the director has.” (a) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by the director in relation to the company, and (b) the general knowledge, skill and experience that the director has.” G. PROCEEDINGS BEFORE SUPPERSTONE J[45]This is not the first time that D1, D2 and D3 have faced proceedings brought by Lithuanian former employees engaged in chicken catching. In Galdikas and others, theDJ Houghton Catching Services Ltd and Others, [2016] [EWHC] (QB), Supperstone J entered summary judgment in respect of the claimants in those proceedings in respect of “the Houghton Defendants” (see below) for failure to pay the claimants in their work in accordance with the terms of the relevant AWO; for breach of condition 7 (prohibition on charging fees) and condition 13 (deductions from wages) of the 2009 Rules as well as the standards 4.3 and 6.3 of the Rules, relating to lack of facilities to wash, rest, eat and drink.[46]Supperstone J referred to D1, D2 and D3 as “the Houghton Defendants”. In his judgment:- “The Houghton Defendants accept that the Second and Third Defendants [here, D2 and D3] were jointly responsible for the First Defendant.”[47]As can be seen from the terms of the preliminary issue to be decided in this case, D2 and D3 have made no such concession in respect of the present claimants. According to D2 and D3, the concession they made to Supperstone J was wrongly made and they are, in any event, not bound by it in the present proceedings.[48]The present proceedings were on foot at the time of Supperstone J’s judgment. Indeed, application 3 made to Supperstone J was the application of D1, D2 and D3 to set aside a stay of the present proceedings (described as “the Antuzis proceedings”), which had been ordered by Master Fontaine on 9 February 2016. Amongst the submissions made by D1, D2, and D3 in support of lifting the stay were that it would be less costly to consider the 16 claimants in both sets of proceedings at the same time and that any findings of fact made in the Galdikas proceedings would not be binding upon the Antuzis claimants.[49]Mr Hendy QC, who appeared for the Galdikas claimants, described the situation as 57. generic issues to be determined first”. The two sets of claims were “plainly broadly the same”.[50]Having regard to the overriding objective and in particular to proportionality and cost, Supperstone J decided that the stay should not be lifted. H. PROCEDURAL MATTERS[51]At the commencement of the hearing before me on 19 February, D1, D2 and D3 objected to the introduction into evidence of certain documentation, set out in the leverarch files prepared by the claimants. Having heard submissions, I dismissed the objection. Leaving aside the issue of a hearsay notice, which was not pursued with any vigour by Mr Allen, and which, in any event, lacked merit, I considered that the great majority of the material objected to had in fact been disclosed in connection with the Galdikas proceedings. I was referred in this regard to a letter dated 21 April 2017 from the previous solicitors for D1, D2 and D3, giving “formal consent to use the disclosure documents in the Galdikas proceedings in the current claim”. I did not consider there to be any merit in the submission that the fact the present proceedings concerned a preliminary issue and summary judgment meant that these proceedings were not to be regarded as part of the proceedings referred to in that letter. I found the fact that D1, D2 and D3 had seen fit to change solicitors on several occasions ought not in fairness to impact adversely on the ability of the claimants to rely upon the relevant material.[52]In any event, I indicated that I would remain alive to any “fairness” issue which might arise in the course of the proceedings, insofar as it touched upon the relevant material. In the event, no such issue arose. I. THE EVIDENCE AND ITS ASSESSMENT[53]The oral evidence was extensive. For the claimants, I heard from Tadas Balciauskas, Robertas Urbonas and Antanas Urnikis, each with the assistance of interpreters in the Lithuanian language. For the defendants, I heard from Samantha Shanks, Darrell Houghton (D3) and Jacqueline Judge (D2). A synopsis of the evidence is set out in the Appendix to this judgment.[54]I turn to assess the evidence. Each of the three claimants who gave oral evidence did so in a calm and measured fashion. Despite skilful cross-examination by Mr Allen, they did not resile in any material respect from their witness statements. It was plain that each was doing his best to assist the court. Thus, when it was put to Mr Urbonas that it was correct that supervisors worked with team members, and they all engaged in catching, he acknowledged that this did happen. He also accepted that if the hours worked shown on one of the payslips were true, that would not be a bad week’s pay; but pointed out that the payslip had actually under-recorded by very many hours. Each of the claimants avoided straying into the realm of speculation.[55]Although the evidence of the three claimants was in accord on many issues, items of detail varied. Far from undermining their credibility, I consider this underscores the fact that each of them was telling the truth.[56]I do not consider anything turns on the absence of text message or similar evidence to show that the witnesses did not at the time complain to friends or relatives in Lithuania. I accept there may have been an element of pride involved. What is far more telling, I find, is that when the claimants attempted to complain to Jackie Judge, the consistent evidence was that she was not only unmoved, but would take action designed to punish those concerned or, frequently, the entire household. So, when Mr Balciauskas and his colleagues refused to work, they were evicted from their premises.[57]I do not consider it damaging at all to the credibility of the claimants’ witnesses that none was able to identify specific weeks when particular malpractice occurred. It was not their legal responsibility to keep relevant records. It does not lie in the mouth of the defendants to say, in these circumstances, that the claimants’ lack of specificity should count against them: see Carol Keefe v The Isle of Man Steam Packet CompanyLtd [2010] EWCA Civ 68.[58]The claimants’ evidence was also overwhelmingly demonstrative of the use made by D2 and D3 of the manifestly unsavoury and generally problematic individual known as Edikas Mankevicius (hereafter Edikas). The claimants’ evidence shows that Edikas was used by the defendants as an enforcer, to ensure that chicken catchers followed what I have concluded was the gruelling and exploitative work regime that was being imposed upon them by the defendants.[59]In making my findings, I am aware that the defendants point to a small number of individuals, including one Kalinkinas, who provided written testimony to the effect that there were no problems regarding D2 and D3. They did not give oral evidence. Their circumstances and motivation are unclear, save that Kalinkinas was a supervisor, a class of worker who, I am satisfied, was treated better by D2 and D3 than were chicken catchers. I have borne in mind whether a judge, who did hear these individuals, as well as the three claimants who gave evidence before me, would be likely to find that their testimony undermined that of the claimants. I do not consider it would. The claimants’ witnesses spoke to their own experience, as chicken catchers, and that of their colleagues who did the same work. Viewing the evidence before me as a whole, and in the light of my firm conclusions regarding the evidence of D2 and D3, to which I shall shortly turn, it is in my view fanciful to suggest that any oral evidence from these individuals would materially affect the outcome.[60]I also bear in mind that certain of the claimants worked for significant periods for D1 and that some returned to do so, after periods elsewhere. That is, however, an indication of the extent to which the claimants needed to earn money. The fact that they were prepared to work in circumstances where they may have been unaware of their rights under English law does not detract from their credibility.[61]I turn to the defendants’ witnesses. I found Samantha Shanks, overall, to be a witness of truth. She did not seek to escape from the obvious difficulties in which she was placed. She candidly accepted, on several occasions, that the calculations she applied to arrive at the number of hours that a chicken catcher had worked were not merely notional but entirely fictional. I accept what she said in her written statement that D2 had told her it was impossible to ascertain the hours of the chicken catchers. The fact that what D2 said was untrue in theory does not affect my finding that this is what Ms Shanks was told by D2. As it happens, what D2 said was true as a matter of fact because no records were kept of such hours by D2 or D3.[62]Ms Shanks’ evidence does not begin to show that she considered, or ought to have considered, that the hours given to her in respect of the drivers could be used accurately to calculate the hours worked by chicken catchers during a particular week. As the evidence as a whole shows, merely using the drivers’ hours would not necessarily produce reliable figures. In that regard, what D2 is recorded as saying in paragraph 12 of Ms Shanks’ statement is correct; namely, that “it was very difficult to keep track of who was working”.[63]I agree with the claimants that, in one respect, Ms Shanks’ witness statement is not right. At paragraph 13, she said that D2 never instructed her to calculate the chicken catchers’ hours in any particular way. It is fair to say that that statement is, to some extent, qualified in paragraph 13, because Ms Shanks went on to say that “we did discuss how we would calculate the notional hourly rate and adopted that method”. In the event, however, Ms Shanks agreed unequivocally under cross-examination that D2 did, in fact, tell her to do things that way. Although she resiled from this in reexamination, I consider what she said in cross-examination is more likely to represent the truth. Ms Shanks would have had no reason of her own to devise such a system. Her evidence is, in any event, clear that D2 was fully aware of what was going on.[64]Ms Shanks was frank that she did not know the times of day that workers worked, or whether they had worked sufficiently to qualify for the overtime rate. She was also adamant that catchers were not paid for travel time.[65]I regret I found Darryl Houghton (D3) to be a thoroughly unsatisfactory witness. I accept that, in certain very limited respects, he gave reliable evidence. He said that profits of less than £2000 from D1 would be “absolute nonsense”, which was subsequently demonstrated to be the case, when the figure in question was identified as relating to a balance sheet, rather than to profits earned in a financial year. I also accept that he and D2 would, on occasions, make payments from their personal account that were intended to facilitate the cash flow problems faced by D1. That, however, is the extent of my positive findings from D3’s evidence.[66]It is manifest, in my view, that D3 was, at least from July 2007, fully aware of the requirement to pay employees at the minimum rate required under the AWO and, generally, as to the legal obligations of a Gangmaster. He knew, in all likelihood before 2009, that charging work-finding or employment fees would be classed by the GLA as a failure of a critical nature, so far as licensing was concerned. He was aware, at least from 2007, that proper records of hours worked had to be kept by a Gangmaster in respect of chicken catchers. He knew from 2007 that there needed to be a record of annual leave and a record of payments of annual leave. All of this emerges from the effective cross-examination of Mr Hendy, as seen in the synopsis.[67]D3’s awareness of these legal obligations and the consequences of breaching them are underscored by the decision to employ Mr Godfrey to assist with regulatory compliance. D3’s evidence about what he did with the “guidance” and “tools” provided by Mr Godfrey, was however, entirely unsatisfactory.[68]Mr Allen asked me to place limited weight on the GLA inspection reports, which D2 and D3 said they had not seen until the hearing, or very shortly beforehand. This included the draft report of Mr Moorhen. These documents had, however, been disclosed to the solicitors for D2 and D3, much earlier. Be that as it may, the evidence given by D3, in cross-examination, demonstrates clearly that he was aware of the relevant responsibilities of a Gangmaster. That is so, even if one places only limited weight on the details of the reports.[69]I agree with Mr Hendy that the credibility of D3 was undermined by his contention, in respect of a particular payslip, that the hours recorded on it were the actual hours worked by the chicken catcher concerned. It is, frankly, nonsense to believe that, given the fictional basis of the calculation, the hours on the payslip could, in fact, represent reality. They could do so only as a result of unbelievable coincidence.[70]Here and elsewhere, as can be seen from the synopsis of the evidence, D3 was exposed as someone who is prepared to say anything at all which he thinks might serve his purpose. This is further demonstrated by the blatant contradictions between his more recent evidence and his appeal witness statement relating to the GLA licence revocation. It is also demonstrated by his change of tack as to when he was obtaining workers through the auspices of Edikas. The suggestion that, since the GLA’s inception, he had used Edikas only for translating purposes is, in particular, an obvious untruth.[71]D3 denied that workers stayed out on duty overnight, except on one particular occasion when health and safety issues were said to have intervened. But that was plainly not the position in truth, as D3 effectively accepted in cross-examination. D3’s evidence about whether travel time was paid was likewise, totally bizarre.[72]A common thread running through the evidence of D2 and D3, not just in these proceedings but in the regulatory appeals, is that they seek to deflect criticism of their activities by blaming professionals whom they have employed. Ms Shanks is a prime victim; but an analysis of her evidence, taken in the round with that of D2 and D3, shows the abject failure of this attempt to shift blame. The GLA noted as much in their reply to the notice and grounds of appeal against the 2012 licence revocation. Their assessment was entirely right. When this was put to D3 in cross-examination, his response was depressingly characteristic: he complained that his counsel had been two hours’ late arriving at the appeal hearing.[73]So far as concerns the visit of Mr Moorhen to D3, the overwhelming likelihood is that he was shown documentation relating to a driver who, it is common ground, generally had their hours properly recorded; or he was shown some of the materials Mr Godfrey had urged D3 to use; or it was a combination of both. The reality of the matter is, I find, is that Mr Moorhen was not given a correct picture of what was, in reality, happening in D1’s business. That finds support from the fact that another officer of the GLA was plainly sceptical about Mr Moorhen’s draft report, as can be seen from the comments annotated upon it.[74]Both D2 and D3 sought to emphasise that Mr Moorhen had spent time with Ms Shanks. That visit is recorded in paragraph 4 of Ms Shanks’ statement. She describes it as not being a long one. Ms Shanks says that she explained the method of calculation of the payslips to Mr Moorhen and that “he seemed to be satisfied with the way I had arrived at those figures”.[75]D3, however, clearly knew that the figures were fictional. He also knew, which Mr Moorhen would not have known, that the hours recorded were a gross underestimation of the hours actually worked by the chicken catchers, as the claimants’ evidence reveals. Given his understanding of the regulatory regime, therefore, D3 cannot rationally have assumed that a lack of any action on the part of the GLA, following Mr Moorhen’s visit, meant that D1 was complying with its legal financial obligations, as regards the claimants. Rather, I find that D3 believed that, at least for a while, he and D2 had succeeded in escaping the regulatory consequences of their actions. In common parlance, they had, for the moment, “got away with it”.[76]Jackie Judge (D2) was also a thoroughly unsatisfactory witness. In oral evidence, she adopted the absurd position (not reflected anywhere else in the evidence - including her own) that chicken catchers would ask her, apparently unprompted, to deduct between £250 and £350 from their wages, at the rate of £50 a week, as an employment fee for Edikas. Her explanation that, as a woman, she did what she was told is entirely inconsistent with the rest of the evidence and with the impression she gave in the witness box. It is, I find, nonsense.[77]Both D2 and D3 were at pains to say that D1 had not been put out of business, as a result of the raid and subsequent events. D2, however, disclosed how exiguous D1’s operations now are, compared with previously. She said they comprised D3 driving a minibus, although she said even this was not anticipated to last much longer.[78]As I found with D3, D2 cannot rationally have assumed that the GLA had sanctioned the approach of D1 to the payments etc to wages; or have honestly believed that what was being done by them to the chicken catchers was morally or legally sound. As the claimants point out, this excuse was run before Judge Sage in the 2012 appeal. Judge Sage identified, in her decision, serious issues regarding the honesty of D2 and D3. Regrettably, nothing at all has changed.[79]D2’s attempt to defend her conduct on the basis that the chicken-catching industry in general pays at piece work rates took her case nowhere. It is not being suggested, still less shown, that others in the industry operated a system of fictional hours, albeit that piecework applied.[80]D2 was seriously evasive in her evidence relating to messages such as “speak Edikas”, written on payslips. Throughout the years of civil and regulatory litigation that preceded this hearing, D1, D2 and D3 have not asserted, as far as I can see, that this was not D2’s handwriting. In any event, the overwhelming inference is that it was her writing or that of her relatives who were doing her bidding. The suggestion that the messages had to do with Edikas’ own affairs, rather than anything to do with D1, D2 and D3, is refuted by the evidence of the claimants, which I find credible.[81]So far as accommodation is concerned, I find the evidence of the claimants represents reality; namely that, as a general matter, chicken catchers recruited for D1 were, in effect, required to live in particular accommodation. A chicken catcher, as opposed to a supervisor, effectively had no choice in the matter. If he was to get regular work, he had to live in one of D2 or D3’s properties or one of the properties of Edikas[82]D2’s claim in oral evidence that she had, at best, only a limited say over where the chicken catchers worked, is inconsistent with the pleaded defence and with the text message evidence; as well as being totally at odds with the credible evidence of the claimants.[83]As with D3, D2’s evidence about deductions from wages was chronologically inconsistent. D2 also had no satisfactory explanation for the terms of the text message sent to Edikas in 2012, at a time when she asserted she was not on good terms with him. Whilst I accept, as the claimants confirmed, that difficulties arose in the relationship between Edikas and D2 and D3, it is plain that the economic aims of D2 and D3 meant their business relationship with Edikas nevertheless continued. J. SUMMARY JUDGMENT[84]As is apparent, the terms of Master Yoxall’s order and the way in which the case has been presented on both sides mean that I have examined a good deal of oral and documentary evidence. To that extent, it would be wrong to deny that there has been some form of trial in respect of the summary judgment issues. I nevertheless keep firmly in mind the fact that, for the purposes of this part of my judgment, I am not merely deciding whose evidence I prefer but considering whether, by reference to that evidence and having regard to my findings in respect of it, D1 has a realistic as opposed to a fanciful prospect of succeeding in its defence to those elements of the claimants’ case that are within the ambit of the summary judgment. In other words, I must consider what a hypothetical judge might conclude on the basis of all the evidence before him or her, which may not be the same as is before me. (1) Underpayment of AWO rates[85]D1 accepts that there was a failure to pay claimants’ Vygantas Bucyms and Edmundas Mikiulkevicius in accordance with the AWO minimum for each specific hour, which may have led to an underpayment in respect of the pay reference period of a week. All other claimants, are however, put to proof of the matter, says Mr Allen. None of the other claimants has specified any particular week when he worked a specific number of hours and was not paid for them at the AWO rates.[86]The evidence, is however, simply overwhelming that D2 and D3 were operating D1 at all material times in a deliberate and systematic manner, whereby chicken catchers were working massively more than the hours recorded on the payslips. If this was not so, then there would have been no need to engage in the fictional exercise which D2 and D3 required of Ms Shanks. That exercise was necessary because (contrary to the assertion that such a thing was impossible) no records were being kept by D2 and D3 of the hours worked by chicken catchers. The reason why no records were being kept was because D2 and D3’s modus operandi involved a flagrant disregard of the AWO requirements as to the minimum pay. The admission (despite D3’s unsuccessful equivocation in oral evidence) that travelling time was not paid further supports this conclusion, as does the evidence that chicken catchers would often complete shifts with more than one driver per week, frequently being home only for very short periods between shifts or sometimes switching from one bus to another whilst still out on duty.[87]I have taken account of the point made by Mr Greaves, in closing submissions, that Ms Shanks had, in fact, generally over-estimated the number of hours that could be classified as night work. This does not, however, begin to overcome the difficulties for D1 in this regard. Given the sheer scale of the evidence relating to enormously long working weeks, it is highly unlikely that this modest error in favour of the chicken catchers will have a material bearing on this aspect of the claims.[88]It also has to be borne in mind that the evidence shows overwhelmingly that there was complete disregard for entitlement to overtime, to which the claimants would have been almost universally and consistently entitled, given the numbers of hours being worked.[89]Given the enormous problems regarding the credibility of D2 and D3, as discussed above, it cannot, I find, rationally be contended that their evidence regarding chicken catchers being “on call” could be preferred to that of the claimants. The claimants’ witnesses gave consistent and compelling evidence of being regularly required to depart, on very little notice, to the point that one at least felt he could not afford to leave the premises even to go to the shops.[90]Overall, I am in no doubt that there is no realistic prospect of the defendants succeeding at trial in relation to these matters. I agree with the claimants that judgment should be entered for each of the items, with quantification of loss to be determined at an assessment of damages hearing. (2) Employment or work-finding fees[91]For the reasons I have given, the evidence of D2 and D3 on this issue is, likewise, hopeless. There was a systematic process of withholding money at £50 a week up to a maximum of £250 or £350, which continued until 2012. Occasionally, a returning worker would not be required to pay a further employment fee; but that was the exception, rather than the rule.[92]D1 accepts that Mr Balciauskas and Mr Urbonas have given evidence upon which the court “is likely to conclude that they have come up to proof”. As I have said, I consider that the evidence goes much further and that what Mr Balciauskas and Mr Urbonas said demonstrates to a very high degree of likelihood, that the other claimants also suffered these illegal deductions from their wages.[93]I reject the submission that there may be a real issue regarding whether certain payments were made directly to Edikas, the “untangling” of which would be a matter for trial. The evidence points categorically to deductions being made from cheques made out by D2, in order to pay Edikas. The submission that no other claimant has provided a payslip evidencing an employment fee founders on the fact that no proper records were kept by D1, D2 and D3, contrary to D1’s legal obligations.[94]The sheer extent of the systematic abuse under this heading is demonstrated by the evidence of Ms Shanks regarding the average number of new workers each week, which correlates strongly with the payments made to Edikas. The explanation given by D2 for these payments I find no more believable than did Judge Sage.[95]In conclusion, judgment is entered for the claimants in respect of these matters with quantification of loss to be determined at an assessment of damages hearing. (3) Accommodation Fees[96]Here again, the inconsistent and contradictory evidence of D2 and D3 stands in stark contrast to the evidence of the claimants. There is no reasonable prospect of D1 succeeding in showing that accommodation fees of £40 a week were not deducted, on a wholesale basis, from wages due to the chicken catchers. I agree with Mr Hendy that the fact the catchers may have been required to give D2 money for rent in cash cannot enable D1 to escape the legislative prohibition on taking rent beyond the legislative minimum. In any event, the documentary evidence shows multiple wage slips, bearing the £40 deduction, for periods both before and after 2010.[97]The belated assertion of D2, in oral evidence, that part of the £40 related to an element of council tax and water rates, is not credible. It is not supported by any documentary evidence to which my attention has been drawn. Be that as it may, I agree with Mr Hendy that the charge, overall, remains one for accommodation and, as such, subject to the legislative restriction.[98]I agree with Mr Allen that the maximum that can be charged for accommodation is not free-standing but relates to the minimum rate of pay. In other words, a person who is paid only the national minimum rate for a particular week cannot be charged more than the specified sum of £33.74 (for 2012; slightly less in previous years). The issue, therefore, for the purposes of summary judgment is whether there is a realistic possibility of D1 demonstrating that particular deductions were not unlawful because, for the weeks in question, the worker was, in fact, earning above the minimum wage.[99]It is therefore apparent that this issue is directly connected with the head of claim relating to the underpayment of AWA minimum rates of pay. In view of my conclusions on that matter, D1 cannot resist summary judgment relating to the deductions for accommodation. In the light of the strength of the evidence showing a systemic practice of requiring chicken catchers to work below the minimum rates, there is no real prospect of D1 being able successfully to show that the £40 deductions were lawful.[100]Judgment will be entered for the claimants, with quantification of loss to be determined at an assessment of damages hearing. (4) Unpaid Wages[101]I agree with Mr Allen that D1 could not be expected to make good any arrears in pay, at the end of a period of employment, if the worker concerned left no forwarding address. I also accept, as I have earlier indicated, the evidence of D2 and D3 that they would sometimes draw on personal finances for the purposes of paying wages.[102]None of this, however, comes close to addressing the real mischief, compellingly articulated in the claimants’ evidence and not credibly rebutted, that D2 and D3 operated a system of withholding wages for entirely invalid reasons. There is strong and consistent evidence from the claimants that wages were withheld as a form of punishment for alleged transgressions, such as holding parties and drinking alcohol. The witnesses gave evidence that recourse to borrowing was necessary, as a result of them not being paid. Mr Balciauskas identified a second reason in cross-examination; namely, that wages were withheld as a form of leverage. This chimes with the GLA’s view that “the systematic and persistent withholding of wages [was] a way to trap workers and leave them little or no option but to remain… in the hope that they would receive pay in the future”.[103]In this regard, the messages on payslips, telling the recipient to speak to or otherwise contact Edikas, can be seen as the way in which D2 attempted to stifle any complaints in this regard. The evidence strongly demonstrates that Edikas was an unsavoury individual who, as I have indicated, served D2’s and D3’s purposes, albeit that their relationship with him was not without its own difficulties. (5) Holiday Pay[104]In the light of the sheer strength of the evidence, the submission on behalf of D1, in closing, that it is denied D1, D2 and D3 failed to allow workers to take any holidays or failed to pay for holidays taken, is entirely devoid of merit. Both here and elsewhere and elsewhere, there is somewhat desperate attempt on behalf of D1, D2 and D3 to pray in aid of the written evidence of Mr Kalinkinas, who stated that he would always take his full holiday allowance four weeks a year, which finds support in the evidence of Ms Shanks.[105]The obvious problem with this, however, is that Mr Kalinkinas was at all material times a supervisor. The unshakeable evidence of the claimants was that supervisors, although they did engage from time to time in catching chickens, were treated by D2 and D3 in very different way from the other chicken catchers. The same point applies, with even more force, to the drivers of the minibuses. In short, the regime operated by D2 and D3 drew a very clear distinction between those categories of employees and the claimants.[106]There is, moreover, a complete lack of documentary evidence to show that holiday pay was provided to chicken catchers. Indeed, there is no credible evidence to show that the claimants were ever told about an entitlement to holiday pay.[107]Judgment will be entered for the claimants in respect of this item, with quantification of loss to be determined at an assessment to damages hearing. K. PRELIMINARY ISSUE[108]The general principle is that directors of a company will be liable for the torts of the company, committed at their direction.[109]In Rainham Chemical Works v Belvedere Fish Guano Company Ltd [1921] AC 465, Lord Buckmaster held:- “If the company was really trading independently on its own account, the fact that it was directed by Messrs Feldman and Partridge would not render them responsible for its tortious acts unless, indeed, they were acts expressly directed by them. If … those in control expressly directed that a wrongful thing can be done, the individuals as well as the company are responsible for the consequences.” (467).[110]A somewhat different position obtains, however, where the unlawful act is procuring a breach of contract. In Said v Butt [1920] 3 KB 497, the plaintiff procured a theatre ticket, which was not in his name, knowing that if his true identity had been known, he would have been refused admission, owing to a dispute between him and the theatre company. McCardie J held that non-disclosure of the fact that the ticket was bought for the plaintiff prevented the sale of the ticket from constituting of contract, the identity of the plaintiff being a material element in its formation. For that reason the action failed.[111]However, McCardie J made these obiter observations:- “But the servant who causes a breach of his master’s contract with a third person seems to stand in a wholly different position. He is not a stranger. He is the alter ego of his master. His acts are in law, the acts of his employer. In such a case it is the master himself, by his agent, breaking the contract he has made, and in my view the action against the agent… must therefore fail just as it would fail if brought against the master himself for wrongly procuring a breach of his own contract …. I hold that if a servant acting bona fide within the scope of his authority procures or causes the breach of a contract between his employer and a third person, he does not become liable to an action of tort at the suit of the person who contract has thereby been broken. I abstain from expressing any opinion as to the law which may apply if a servant, acting as an entire stranger, wholly outside the range of his powers, procures his master to wrongfully break a contract with a third person.”[112]The so-called rule in Said v Butt has been the subject of considerable judicial and academic scrutiny, in the years that followed.[113]A useful recent analysis of Said v Butt is to be found in the judgment of the Court of Appeal of Singapore in Arthaputra and others v St Microelectronics Asia Pacific PteLtd and others [2018] SGCA 17. In the judgment of Steven Chong JA, we find the following:- “54 McCardie J’s statement in Said v Butt was made obiter as he had already found that there was no contract between the plaintiff and the theatre. Nevertheless, the Said v Butt principle has been consistently endorsed and applied in the United Kingdom and other jurisdictions such as Australia and Canada (see the High Court of Australia’s decision in O’Brien v Dawson (1942) 66 CLR 18 (“O’Brien v Dawson”) at 34 and the Newfoundland Court of Appeal’s decision in Imperial Oil Ltd v C&G Holdings Ltd (1989) 62 DLR (4th) 261 (“Imperial Oil”) at 266). The principle has also been applied by our courts in Chong Hon Kuan, Nagase (at [8]–[9]), and more recently in M+W Singapore Pte Ltd v Leow Tet Sin and another [2015] 2 SLR 271 (“M+W Singapore”) (at[93]–[97]). Although Said v Butt concerned the tort of inducement of breach of contract, which was the applicable tort in that case, its application has been extended to other torts involving a company’s breach of contract, such as unlawful means conspiracy where the unlawful means pertains to the contractual breach: see O’Brien v Dawson at [58] below. 55 However, there has thus far been no detailed analysis by the courts of what precisely the principle entails, in particular what it means to act “bona fide within the scope of [the director’s] authority”. Previous decisions of our courts have interpreted the Said v Butt principle to comprise two conjunctive requirements namely:(a) acting bona fide; and(b) acting within the scope of the director’s authority, and to apply only to “protect persons in authority within corporate entities who genuinely and honestly endeavoured to act in the company’s best interests”: see Chong Hon Kuan at [49] and Nagase at [9]. Thus in Nagase, where the company’s director, through the company, fraudulently overcharged the plaintiff, the director was held not to be entitled to the protection of the principle. 56 Conversely, a director who acts in good faith and within his authority would be immune from tortious liability, notwithstanding that he may have been genuinely mistaken as to the company’s contractual obligations or even that he had the predominant intention of causing loss to another. An example of the former is the case of Ng Joo Soon (alias Nga Ju Soon) v Dovechem Holdings Pte Ltd and another suit [2011] 2 SLR 1155 (“Ng Joo Soon”), where the plaintiff sued the company’s directors in the tort of inducement of breach of contract and in conspiracy for the wrongful breach of the company’s obligation to pay the plaintiff certain sums under a contract. Philip Pillai J held (at [77]) that the directors were immune from such liability as they had acted within their authority and in good faith, and it thus did not matter that they had been mistaken as to the company’s contractual obligations. For the latter, Woo Bih Li J opined in Chong Hon Kuan (at [46] and [48]) that the requirement of a predominant intention to injure was an essential requirement for lawful means conspiracy. If such an allegation could deprive a defendant of the protection of the Said v Butt principle, such a principle would become emasculated. Something more was thus needed, although it was not necessary for Woo J to consider what that was. 57 A brief examination of the application of the Said v Butt principle in other jurisdictions also reveals scant authority on its precise scope. In the United Kingdom, the principle has been consistently endorsed by the courts but without much judicial exploration: see Scammell G & Nephew Ltd v Hurley [1929] 1 KB 419 at 443 and 449, and DC Thomson & Co Ltd v Deakin and others [1952] Ch 646 at 680–681. Of particular significance is the decision in Ridgeway Maritime Inc v Beulah Wings Ltd and Dr Tunji Braithwaite (The “Leon”) [1991] 2 Lloyd’s Rep 611 (“The Leon”), where Waller J investigated the limitations of a director’s liability for his company’s breach of contract, in particular the definition of bona fide. He stated (at 624 col 2–625 col 1): There certainly are well known circumstances in which an employee may be liable for inducing a breach of contract where the employee is himself acting unlawfully including in breach of his own contract with his employer. … I find the words “bona fide”, if they are meant to add anything to acting unlawfully, quite difficult in this context. Do they contemplate that an individual who knows that what he is doing will lead to the company being in breach of contract being somebody not acting bona fide? Or do the words bona fide relate to the relationship of the individual with the company i.e. if he is seeking to force the company to do something contrary to its own interests? If the latter, I am not satisfied that without the action of the employee also being a breach of contract or legal duty to the employer, it could found an action for tort for inducing a breach. [emphasis added] Waller J thus acknowledged that an employee could be liable in tort for procuring his employer to breach the latter’s contract with a third party, provided that the act of inducement was in breach of the employee’s own contract with or legal duty owed towards his employer. 58 In Australia, the Said v Butt principle was approved by the High Court of Australia in O’Brien v Dawson but without specifically addressing the bona fides requirement, ie, that directors who exercise their functions as directors and act within their authority are immune from the tort of inducing the breach of contract. The plaintiffs in O’Brien v Dawson sued a company and two of its directors for conspiracy to injure the plaintiffs when the defendants ejected the plaintiffs from certain theatres, even though the plaintiff had been occupying the theatres pursuant to an agreement with the company. The court held that the directors could not be held personally liable either for conspiracy with the company or for procuring the company to breach its contract because a director acting within the scope of his authority in the exercise of his functions acted in the capacity of and as the company, and not himself. The company should thus be properly liable for such acts, and not its directors. 59 The uncertainty of the scope of the principle, in particular whether it protects directors ordinarily acting within their authority but not in good faith or in the best interests of the company, was recently canvassed by the Supreme Court of Western Australia in Knights Capital Group Ltd v Bajada and Associates Pty Ltd [2016] WASC 69. The plaintiff sued the company’s directors for inducing the company to wrongfully repudiate a management agreement with the plaintiff. The defendant-directors applied under O 16 r 1 of the Rules of the Supreme Court 1971 (WA) for summary judgment on the basis that they had a good defence on the merits, namely that they had acted within their authority in taking the decision to terminate the management agreement and were entitled to immunity on the basis of the principle in O’Brien v Dawson. The plaintiff argued that the defendant-directors were not entitled to immunity because their conduct, although ordinarily within their authority as the company’s directors, was not engaged in good faith or in the best interests of the company, and their conduct was thus an exception to the Said v Butt rule. Pritchard J, in considering the plaintiff’s argument, stated (at [80]– [81]) that the scope of the rule in Said v Butt remained “largely unexplored” and that the rule did not sit comfortably with the body of law recognising that a director may be personally liable for procuring other wrongs by the company. However, as there was no evidence to suggest that the directors had not acted in the best interests of the company, summary judgment was granted in favour of the defendant directors and the case did not progress any further. This case is however useful in demonstrating, first, that the scope of the principle in Said v Butt should be more clearly demarcated, and second, that there is a question as to the consistency of the Said v Butt principle with the other body of law which provides that a director is generally liable for other torts he has procured the company to commit (we address the latter at [74]–[79] below). 60 In Canada, the Said v Butt principle was approved by the Newfoundland Court of Appeal in Imperial Oil. The court interpreted the principle to mean that a director was immune when he acted bona fide within the scope of his authority in the best interests of the company. However, even when the director was not so acting, he would only be personally liable if the circumstances additionally showed that his dominant concern was on depriving the third party of its contractual benefits. Marshall JA reasoned that the director’s duty to act bona fide was owed to his company and was of no concern to third parties. To require directors to justify their corporate actions to third parties such that they would obtain immunity from suit would “extend the concept of piercing the corporate veil beyond the limits prescribed by law” (at 266). Thus, even where a director was not acting bona fide, the additional factor of a dominant purpose to deprive the plaintiff of its contractual benefits was required. 61 The Ontario Court of Appeal in ADGA Systems International Ltd v Valcom Ltd [1999] OJ No 27 (“ADGA Systems”)44 similarly approved the Said v Butt principle as an exception to the general rule that directors are personally liable for their tortious conduct even though their conduct may be bona fide in the best interests of the company. But Carthy JA held (at [43]) that the exception did not apply in that particular case. The plaintiff and defendant were competitors. The plaintiff held a contract with the Canadian prison services for technical support and maintenance of security systems, which was expiring, and fresh tenders were called. The defendant company’s sole director and senior employees convinced the plaintiff’s employees to permit their names to be used in the defendant’s tender documents (such that the defendant could show that they had technicians with the requisite experience) and to work for the defendant if the defendant won the tender. The plaintiffs sued the defendant company’s director and senior employees for inducing a breach of contract and breach of fiduciary duties between the plaintiff and its employees. Carthy JA noted that the Said v Butt exception applied to exempt only directors acting bona fide within the scope of their authority from personal liability for the tort of inducement of breach of contract. In that case, the plaintiff’s claim was premised on the inducement of breach of fiduciary duties and not inducement of the breach of contract (at [4]). The Said v Butt principle also did not apply to protect the defendantdirectors because the defendant-directors were not causing a breach of a contract between their company and the plaintiff, but between the plaintiff and its employees. The plaintiff there had no contractual relationship with any of the defendants. The defendants’ appeal to the Supreme Court of Canada was refused. 62 Having reviewed the authorities, we find that the scope of the Said v Butt principle should be more clearly demarcated and defined to provide certainty for directors in the performance of their duties. In our judgment, the Said v Butt principle should be interpreted to exempt directors from personal liability for the contractual breaches of their company (whether through the tort of inducement of breach of contract or unlawful means conspiracy) if their acts, in their capacity as directors, are not in themselves in breach of any fiduciary or other personal legal duties owed to the company.”[114]The conclusion of Waller J in The Leon, cited in paragraph 57 of the judgment, points towards the conclusion I draw: namely, that it is the officer’s conduct and intention in relation to his duties towards the company - not towards the third party - that provide the focus of the “bona fide” enquiry to be undertaken pursuant to the rule in Said v Butt.[115]This does not, however, mean that the nature of the breach of contract which occurs between the company and the third party is irrelevant. On the contrary, the nature of the breach, and its consequences, may directly inform whether the officer of the company has breached his or her duties towards the company.[116]In the present case, Mr Hendy drew particular attention to the fact that the breaches of contract which were committed by D1, as I have found in the summary judgment, also involved breaches of statutory duties. The requirements to pay the minimum wage under the AWO and not to make various deductions, as set out in the summary judgment above, did not arise as a result of arms-length agreements struck between the claimants and D1. They were statutorily imposed by Parliament in order to protect vulnerable workers from exploitative employers.[117]Mr Allen made the valid observation that merely procuring a breach of contract of this kind cannot be the touchstone for deciding if the director is liable. If it were, then directors would, in the employment field, regularly face personal liability because many aspects of employment contracts have a statutory element. Such a conclusion, he said, cannot be right.[118]I agree. However, Mr Hendy’s submission cannot be so easily circumvented. As we have seen, section 172 of the Companies Act imposes important duties on directors to act in good faith so as to promote the success of the company and, in so doing, to have regard to matters such as “the likely consequences of any decision in the long term: the interests of the company’s employees; the impact of the company’s operations on the community; and the desirability of the company maintaining a reputation for high standards of business conduct”. Section 174 of the same Act imposes a duty on the directive to exercise reasonable care, skill and diligence.[119]The nature of the breach of contract is directly relevant to the determination of whether, in a particular case, a director has complied with section 172, as regards his or her duty to the company and the ultimate question whether inducing the breach is actionable against the director.[120]There is, plainly, a world of difference between, on the one hand, a director consciously and deliberately causing a company to breach its contract with a supplier, by not paying the supplier on time because, unusually, the company has encountered cash flow difficulties, and, on the other hand, a director of a restaurant company who decides the company should supply customers of the chain with burgers made of horse meat instead of beef, on the basis that horse meat is cheaper. In the second example, the resulting scandal, when the director’s actions come to light, would be, at the very least, likely to inflict severe reputational damage on the company, from which it might take years to recover, if it recovered at all.[121]In this example, the fact that supplying horse meat is likely to violate food and trading standards legislation is plainly relevant because it is society’s disapproval of acting in this manner that gives rise to the statutory duty and the breach of that duty is therefore indicative of societal disapproval of what the director has caused the company to do and the resulting reputational damage to the company.[122]Accordingly, as a general matter, the fact that the breach of contract has such a statutory element may point to there being a failure on the part of the director to comply with his or her duties to the company and, by extension, to the director’s liability to a third party for inducing the breach of contract. Whether such a breach has these effects will, however, depend on the circumstances of the particular case.[123]In the present case, D1 is one hundred per cent owned by D3. D2 is accepted by Mr Allen and Mr Greaves to have “a comparable common law fiduciary duty to act bona fide in what she considers is in the interest of the company, given that D2 is its company secretary.” That must, with respect, be right.[124]I do not consider there is any issue about whether D2 and D3 were acting within the scope of their authority, in terms of the company’s articles of association and the company’s tables (A to F Regulations). They clearly were. On the other hand, it is I find beyond doubt that D2 and D3 acted in breach of sections 172 and 174. What they did was not in the best interests of the company or its employees. On the contrary, as I shall explain, they wrecked its reputation in the eyes of the community.[125]The question for the purposes of the application of Said v Butt is, thus, whether D2 and D3 were acting bona fide, vis a vis D1. For reasons that will already be apparent, I find that they were not. In the light of the evidence, I find that neither D2 nor D3 honestly believed(i) that they were paying chicken catchers the minimum wage;(ii) that they were paying required overtime and holiday pay; and(iii) that they were entitled to withhold payments of the kinds I have described.[126]On the contrary, the inescapable conclusion is that D2 and D3 knew that they were completely unable as a matter of law to act in this way on behalf of D1. Their attempts to blame others have been exposed as a sham. Their claim not to have realised that anything significant was amiss in the light of the successful 2007 and 2010 GLA inspections is entirely false. Their efforts to rely upon the statements of individuals, who asserted all was well, has come to nothing. The credible evidence of the claimants shows how the academic team from Bristol University had the wool pulled over its eyes, so far as the true position of chicken catchers was concerned. The same is true of Mr Moorhen.[127]D2 and D3 did all these things because they were concerned to maximise the profits of D1, which they – and only they – enjoyed. But, just as in the restaurant example, the desire to maximise profits has had catastrophic consequences for D1. When the malpractices finally came to light, D1’s fortunes dramatically declined. Far from having a reputation for high standards for business conduct, D1 stands exposed as a pariah.[128]Before the exposure of D1, D2 and D3’s activities were manifestly not in interests of the company’s employees, so far as the chicken catchers were concerned. Following exposure, their activities can be seen not to have been in the interests of any of the employees, since there are no longer any supervisors or drivers.[129]That is not, in fact, quite right, if one accepts D2’s evidence that D3 drives a minibus under the auspices of D1. This exiguous activity of D1 cannot, however, rationally be said to be in any way comparable with the previous state of the company, which, before the malpractices of D2 and D3 came to light, was the biggest chicken-catching operator in the south of England.[130]In short, D2 and D3 were not acting bona fide vis-à-vis D1. It is, accordingly, necessary to turn to OBG Ltd and Another v Allan and others [2007] UKHL 21 in order of determine whether D2 and/or D3, acting in their own right, are liable for inducing breach of contract.[131]For our purposes, the following passage of the judgment of Lord Hoffman is relevant:- “39. To be liable for inducing breach of contract, you must know that you are inducing a breach of contract. It is not enough that you know that you are procuring an act which, as a matter of law or construction of the contract, is a breach. You must actually realize that it will have this effect. Nor does it matter that you ought reasonably to have done so. This proposition is most strikingly illustrated by the decision of this House in British Industrial Plastics Ltd v Ferguson [1940] 1 All ER 479, in which the plaintiff's former employee offered the defendant information about one of the plaintiff's secret processes which he, as an employee, had invented. The defendant knew that the employee had a contractual obligation not to reveal trade secrets but held the eccentric opinion that if the process was patentable, it would be the exclusive property of the employee. He took the information in the honest belief that the employee would not be in breach of contract. In the Court of Appeal McKinnon LJ observed tartly ([1938] 4 All ER 504, 513) that in accepting this evidence the judge had "vindicated [his] honesty…at the expense of his intelligence" but he and the House of Lords agreed that he could not be held liable for inducing a breach of contract.40. The question of what counts as knowledge for the purposes of liability for inducing a breach of contract has also been the subject of a consistent line of decisions. In Emerald Construction Co Ltd v Lowthian [1966] 1 WLR 691, union officials threatened a building contractor with a strike unless he terminated a sub-contract for the supply of labour. The defendants obviously knew that there was a contract - they wanted it terminated - but the court found that they did not know its terms and, in particular, how soon it could be terminated. Lord Denning MR said (at pp; 700-701) "Even if they did not know the actual terms of the contract, but had the means of knowledge - which they deliberately disregarded - that would be enough. Like the man who turns a blind eye. So here, if the officers deliberately sought to get this contract terminated, heedless of its terms, regardless whether it was terminated by breach or not, they would do wrong. For it is unlawful for a third person to procure a breach of contract knowingly, or recklessly, indifferent whether it is a breach or not."41. This statement of the law has since been followed in many cases and, so far as I am aware, has not given rise to any difficulty. It is in accordance with the general principle of law that a conscious decision not to inquire into the existence of a fact is in many cases treated as equivalent to knowledge of that fact (see Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd[2003] 1 AC 469). It is not the same as negligence or even gross negligence: in British Industrial Plastics Ltd v Ferguson [1940] 1 All ER 479, for example, Mr Ferguson did not deliberately abstain from inquiry into whether disclosure of the secret process would be a breach of contract. He negligently made the wrong inquiry, but that is an altogether different state of mind.42. The next question is what counts as an intention to procure a breach of contract. It is necessary for this purpose to distinguish between ends, means and consequences. If someone knowingly causes a breach of contract, it does not normally matter that it is the means by which he intends to achieve some further end or even that he would rather have been able to achieve that end without causing a breach. Mr Gye would very likely have preferred to be able to obtain Miss Wagner's services without her having to break her contract. But that did not matter. Again, people seldom knowingly cause loss by unlawful means out of simple disinterested malice. It is usually to achieve the further end of securing an economic advantage to themselves. As I said earlier, the Dunlop employees who took off the tyres in GWK Ltd v Dunlop Rubber Co Ltd (1926) 42 TLR 376 intended to advance the interests of the Dunlop company.43. On the other hand, if the breach of contract is neither an end in itself nor a means to an end, but merely a foreseeable consequence, then in my opinion it cannot for this purpose be said to have been intended. That, I think, is what judges and writers mean when they say that the claimant must have been "targeted" or "aimed at". In my opinion the majority of the Court of Appeal was wrong to have allowed the action in Millar v Bassey [1994] EMLR 44 to proceed. Miss Bassey had broken her contract to perform for the recording company and it was a foreseeable consequence that the recording company would have to break its contracts with the accompanying musicians, but those breaches of contract were neither an end desired by Miss Bassey nor a means of achieving that end.44. Finally, what counts as a breach of contract? In Torquay Hotel Co Ltd v Cousins[1969] 2 Ch 106, 138 Lord Denning said that there could be liability for preventing or hindering performance of the contract on the same principle as liability for procuring a breach. This dictum was approved by Lord Diplock in Merkur Island Shipping Corporation [1983] 2 AC 570, 607-608. One could therefore have liability for interference with contractual relations even though the contracting party committed no breach. But these remarks were made in the context of the unified theory which treated procuring a breach as part of the same tort as causing loss by unlawful means. If the torts are to be separated, then I think that one cannot be liable for inducing a breach unless there has been a breach. No secondary liability without primary liability. Cases in which interference with contractual relations have been treated as coming within the Lumley v Gye tort (like Dimbleby & Sons v National Union of Journalists [1984] 1 WLR 67 and 427) are really cases of causing loss by unlawful means. "Even if they did not know the actual terms of the contract, but had the means of knowledge - which they deliberately disregarded - that would be enough. Like the man who turns a blind eye. So here, if the officers deliberately sought to get this contract terminated, heedless of its terms, regardless whether it was terminated by breach or not, they would do wrong. For it is unlawful for a third person to procure a breach of contract knowingly, or recklessly, indifferent whether it is a breach or not."[132]I have no hesitation in finding that both D2 and D3 satisfy the requirements laid out by Lord Hoffmann. I am in no doubt whatsoever, having heard the evidence, that both of them “actually realised” that what they were doing involved causing D1 to breach its contractual obligations towards the claimants. What they did was the means to an end. There is no iota of credible evidence that either D2 or D3 possessed an honest belief that what they were doing would not involve such a breach. On the contrary, the evidence is overwhelmingly to the contrary. At all material times, each knew exactly what he or she was doing. The breaches they occasioned were central to D1’s modus operandi.[133]Judgment in the preliminary issue will be entered in favour of the claimants. D2 and D3 are jointly and severally liable to the claimants for inducing the breaches of contract of D1. L. FINAL MATTERS[134]I invite counsel to prepare a draft order that reflects my decisions on summary judgment and the preliminary issue.[135]I wish to record my gratitude to Messrs Hendy QC, Lambert, Allen and Greaves, and those professionally instructing them, for the high quality of their submissions and the presentation of the materials. Neither Mr Houghton nor Ms Judge should be heard to say that they could have been more ably represented for, in truth, they could not.

Cited in 15 later judgments

and 6 more of the most senior