#Said vs. Butt:

At common law, it is well settled that a director who authorises a company's breach of contract does not thereby incur tortious liability for the breach unless he has conducted himself otherwise than as the company's agent. This was established in Said v. Butt, a case in which the plaintiff alleged that the defendant, the chairman and managing director of a company, had unlawfully procured or induced the breach of a contract between the plaintiff and the company. The plaintiff had twice applied in his own name for a ticket to watch a new play at the theatre owned by the company. The company, however, had refused to sell the ticket to him as he had previously made serious and unfounded charges against the defendant and other officials of the company. As a result, the plaintiff resorted to asking a friend, one P, to buy a ticket on his behalf and P succeeded in doing so. When the plaintiff turned up at the theatre, he was ejected by the theatre's attendants acting under the defendant's instructions. On these facts, the court rejected the plaintiff's claim for wrongful inducement of breach. The ticket sale to P did not constitute a binding contract between the plaintiff and the company because the company was entitled to decide, and did make it plain, that it would not contract with the plaintiff. Nevertheless, McCardie J then went on to consider whether the plaintiff's claim could be sustained on the assumption that the contract had subsisted. The learned judge held that it could not. The governing principle stated by McCardie J was 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 thereby become liable to an action of tort at the suit of the person whose contract has thereby been broken.

Although, Said v. Butt was concerned with a director's liability for inducing the company's breach of contract, the same principle has been applied to protect agents or directors from liability for conspiring with the company to breach its contracts. Two reasons underpin the rule in Said v. Butt. The first may be understood as an application of the “identification doctrine”. Under this doctrine, the acts of a person or persons who hold a high level of authority in the company are attributed to the company with the result that the law regards such persons as having acted as the company. That being the case, it is not the director but the company that has procured its own breach. A more explicit endorsement of this line of reasoning is seen in O'Brien v. Dawson, where the High Court of Australia held, following Said v. Butt, that a director who authorised a company's breach of contract is not, without more, liable as a co-conspirator for the breach. In an oft-cited passage, Starke J observed:

A company ‘cannot act in its own person as it is not a real person. So it must of necessity act by directors, managers and other agents. The company, if it were guilty of a breach of its contract in this case, acted through its director the respondent Doyle, but it is neither ‘law or sense’ to say that Doyle in the exercise of his functions as a director of the company combined with it to do any unlawful act or become a joint tortfeasor. Again, it is equally fallacious to assert that Doyle knowingly procured the company to break its contract. The acts of Doyle were the acts of the company and not his personal acts which involved him in any liability to the plaintiff.

Conclusion:

It has since gained acceptance because it assures that persons who deal with a limited company and accept the imposition of limited liability will not have available to them both a claim for breach of contract against a company and a claim for tortious conduct against the director with damages assessed on a different basis. It also assures that officers and directors, in the process of carrying on business, are capable of directing that a contract of employment be terminated or that a business contract not be performed on the assumed basis that the company's best interest is to pay the damages for failure to perform.