Summary

A counterclaim alleging breach of contract failed where the counterclaimant knew of and approved the conduct on which the counterclaim was based.

Facts

The claimant company (T) claimed unpaid commission arising from a business venture between the parties and the defendant (D) counterclaimed for damages for alleged breach of the agreements between the parties. D was a commercial investigator. T was the alter ego of its proprietor who had built up a list of trained compliance operatives and a list of potential clients for the supply of such operatives. D and T's proprietor came to an arrangement to work together to supply compliance operatives in the financial services area. T's proprietor was to supply the clients and oversee the project and D was to supply the infrastructure. T's proprietor became an employee of D and D also agreed with T that T would provide the services of its proprietor in return for 40 per cent of the net profits of the venture. The client contracts would be made with D and he would retain 60 per cent of the profits out of the proceeds. The venture secured a profitable contract with a friendly society which had been required to review its business by the regulatory authorities. The society terminated the contract after discovering that it had been overcharged in relation to the expenses of the operatives supplied by the venture. D refused to pay T the profit share due to it and T issued proceedings. D admitted the bulk of the claim but counterclaimed alleging that T and T's proprietor had breached express and implied terms of honesty and good faith in the agreements between them by causing D to lose the contract with the society and that the damages due to D could be set off against the commission due to T. T submitted that D knew and approved of the overcharging for expenses and that the contract with the society would have been terminated in any event.

Held

There had been no breach of the agreement between T and D. On the evidence, the decisions to inflate expenses charged to the society and to lie when that was discovered were taken jointly by D and the proprietor of T. There was a breach of contract with the society, but it was one committed with the knowledge and consent of D. D could not pass it off as a breach by T or its proprietor of their agreements with D. Accordingly D's counterclaim based on breach of contract by T or its proprietor failed. Even if T and its proprietor had been in breach of their agreements with D, on the facts D would have failed to satisfy the court that the contract with the society would have continued beyond the point at which it in fact terminated. Therefore D would have been entitled to recover only nominal damages for the breach.

Judgment for claimant.