The Marex tort is a tortious cause of action predicated on the defendant's alleged intentional violation of the claimant's rights in a judgment debt. The existence (and birth) of the tort was firstly considered by Knowles J in Marex Financial Limited v Carlos Sevilleja Garcia EWHC 918 (Comm) and recently in Lakatamia Shipping Co Ltd v Su EWHC 1907 (Comm), in which Bryan J reaffirmed and set out its parameters for the first time.
The establishment of the Marex tort, at least in first-instance courts, is welcomed as it provides an important basis for obtaining redress from persons who act to undermine interests in judgments.
2. Marex Financial Limited v Carlos Sevilleja Garcia
Marex had entered into a contract with two BVI companies. Following the breach of contract by the companies, Marex commenced proceedings against them. After the adjudication of the case, a draft judgment was sent to the parties, upholding Marex's claim. Between the date of circulation of the draft judgment and the date that the judgment was finally handed down, the owner of the two defendant companies, Mr Sevilleja, siphoned-off all the assets of the companies.
As soon as this was realised by Marex, Marex commenced proceedings against Mr Sevilleja, alleging inter alia, that Mr Sevilleja's actions constitute the tort of "knowingly inducing and procuring the companies to act in wrongful violation of Marex's rights under the judgment".
Knowles J held, in the context of an interlocutory application for challenging the jurisdiction, that Marex had the better argument (test of good arguable case) that English law recognised a tort of inducing or procuring a violation of rights under a judgment.
He did so on the premises that, inducing a breach of contractual rights is actionable, and in turn it would be counterintuitive if it were not also tortious to procure a violation of rights in a judgment debt that was founded upon a contract since non-payment of a judgment debt is itself an actionable wrong – the theoretical basis for the enforcement of foreign judgments at common law.
The creation of the new tort was further bolstered by Asplin LJ's refusal to grant permission to appeal against this part of Knowles J's decision; permission was granted only in respect of the issue concerning reflective loss.
3. Lakatamia Shipping Co Ltd v Su
In Lakatamia, Bryan J issued a judgment in favour of the claimant relying on the Marex tort, inter alia, and thereby giving life to it, with a powerful judgment.
Lakatamia succeeded in a claim for damages against Mr Su and companies linked to him - who were found by the court to have induced/procured the disposal of his assets to frustrate the execution of the judgment and awarded damages equal to the value of the disposed of assets.
Bryan J, considering the rationale of Knowles J in Marex and stated verbatim:
"120. The Marex tort finds a close, and I consider compelling, analogy with the tort of inducing a breach of contract. There would seem to be no compelling reason why, in circumstances where the law protects against intentional interference by third parties with contractual rights it should not equally protect against intentional interference with rights established by judgments."
He concluded a fortiori that the position was the same in relation to judgments vindicating contractual rights.
As was the case in the Lakatamia case - the initial judgment issued by Cooke J was based on a breach of contract of forward freight agreements (FFAs) by Mr Su. Bryan J reasoned that once a judgment is issued on a breach of contract, the contractual rights are merged/novated in judgment – the claimant now has a legal right to the money from the defendant, based on the judgment itself rather than the contract. In view of that, he concluded that there is:
"..no reason why the law should protect against third-party interference with contractual rights but not against such interference with contractual rights that have been novated by judgment. Absent such protection, the law would perversely diminish the protection that it affords to a victim of a breach of contract where the victim has had those rights vindicated by the courts."
4. Elements of the Marex Tort
Having established the legal existence of the Marex tort, Bryan J proceeded to examine its elements. In doing so, he applied the elements of inducing a breach of contract mutatis mutandis and considered them to be:
- The entry of a judgment in the claimant's favour;
- Breach of the rights existing under that judgment;
- The procurement or inducement of that breach by the defendant;
- Knowledge of the judgment on the part of the defendant; and
- Realisation on the part of the defendant that the conduct being induced or procured would breach the rights owed under the judgment.
He then proceeded and articulated the following additional principles, which he considered to be applicable to the Marex tort:
- There is no need for the defendant to intend to cause damage to the claimant - the intention to violate the claimant's rights under the judgment will suffice;
- It is inessential for the defendant to have actual knowledge of the contents of the judgment;
- In this regard, "blind-eye" knowledge will suffice - that the defendant acted knowingly or recklessly "indifferent [as to] whether it is a breach or not";
- Any active step by the defendant which procures or induces the violation of the claimant's rights under the judgment will fall within the ambit of the tort; and
- It is unnecessary to establish "spite, desire to injure, or ill will" on the part of the defendant.
5. Advantages compared to other economic torts
The Marex tort having a relationship with the inducement of a breach of contract, has some significant and strategic advantages compared to other economic torts, inter alia, deceit or conspiracy:
- One wrongdoer, other than the judgment debtor, will suffice to establish the elements of the tort;
- There is no need to allege or prove fraud or dishonesty, which are burdensome;
- Contrary to the ever-expanding tort of unlawful means conspiracy, there is no need to establish the existence of unlawfulness;
- There is no need to prove that the defendant intended to cause damage to the claimant - it will suffice that the defendant intended to violate the claimant's rights under the judgment; and
- There is no scope for the defence of "justification" in relation to the Marex tort (Lakatamia ).
Further to the above advantages, the Marex tort also retains the practical benefit of casting the net of liability beyond the immediate wrongdoers, as the rest of multi-party liability torts.
6. Does the Marex tort apply in cases where the underlying monetary judgment obtained arises out of a tortious claim?
Given that in both Marex itself and Lakatamia, the underlying cause of action was contractual, it would be interesting to see if it could apply to monetary judgments obtained on a tortious claim which are now merged in a judgment.
There are two points that one may argue why the Marex tort does apply to monetary judgment obtained arises out of a tortious claim:
- Firstly, although the two torts may have a symbiotic relationship, they have one "essential" difference - which lies in the rights that are under interference. For the Marex tort being the rights emanating from a judgment (Rubin v Eurofinance SA 1 AC 236; and for the inducement to breach a contract, the rights under a contract. A fortiori, that interference with a monetary judgment obtained on a tortious claim may give rise to the newly recognised Marex tort.
- Secondly, in the recent judgment of HHJ Paul Matthews inGee v Gee EWHC 1369 (Ch), he held that a breach of an order made following a proprietary estoppel claim, amounted to the commission of the Marex tort. This further bolsters that the Marex tort is not to be confined to judgments merged by a breach of contract.
7. Cyprus Courts
Cyprus courts have not yet examined or recognized the Marex tort. It, therefore, remains to be seen if the reasoning in Marex and Lakatamia will be followed. However, given
- the powerful and compelling analysis of Bryan J in Lakatamia;
- the applicability of common Law principles under Cyprus Law, pursuant to Section 29 of the Courts of Justice Law (14/1960); and
- the cardinal importance that the enforcement and execution of judgments have under Cyprus Law (Dimitra Georgiadou v. Alpha Bank Ltd, Civil Appeal No. 127/2011, Dated 23/3/2017);
it can be strongly contended that the Cyprus Courts will readily incorporate the newly emerged Marex tort in their armoury and cast the net of liability over the ones procuring or inducing the breach of rights under a judgment.
8. Our Services - Lytras & Associates LLC
Lytras & Associates is an independent conflict-free boutique law firm based in Cyprus that specialises in complex cross-border corporate & commercial disputes.
We approach each case by adopting an agile and innovative approach and robust strategies, to resolve the matter within the shortest possible timeframe and secure that our clients will get the desired outcome but also flourishes results that exceed our client's expectations.
In turn, we stand ready to utilise draconian interim injunctions, inter alia, worldwide freezing orders, tracing orders, disclosure orders, search orders and receivership orders, to achieve phenomenal results for our clients.
Please contact us if you are interested in the following:
- Strategic advisory in cross-border disputes;
- Cyprus Law advice in relation to complex cross-border disputes, involving,inter alia, civil & commercial fraud claims, crypto claims or corporate claims; and
- Seeking and obtaining pre-emptive remedies, worldwide freezing orders, tracing orders, disclosure orders, search orders and receivership orders.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.