Supreme Court Clarifies “Unlawful Means” Requirement in Tort of Unlawful Interference with Economic Relations

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On January 31, 2014, the Supreme Court of Canada released its unanimous decision in A.I. Enterprises Ltd. v. Bram Enterprises Ltd., clarifying and narrowing the common law tort of unlawful interference with economic relations (referred to by the Court as “the ‘unlawful means’ tort”).

Facts

The Supreme Court summarized the facts of the case as follows: 

A group of family members, through their companies, owned an apartment building. The majority of them wanted to sell it, but one of them did not. He took a series of actions to thwart the sale. The result was that the ultimate sale price was nearly $400,000 less than it otherwise might have been. When the majority sued to recover this loss, the main question was whether the dissenting family member and his company were liable for what the trial judge referred to as the tort of unlawful interference with economic relations.  

Lower Court Decisions

The trial judge found that the unlawful means tort had been made out, focusing on four of the appellants’ actions. The appellants had

  • misused arbitration provisions to stall the sale of the property;
  • advanced legally groundless defences for a “Notice of its first right of refusal,” which they had filed against the property;
  • filed an equally baseless certificate of pending litigation against the property; and
  • denied prospective buyers entry to the property.

The trial judge found these acts had the effect of “complicating, delaying, impeding and ultimately and for all intents and purposes completely obstructing and preventing” the property from being sold to the prospective third-party purchasers. For the purposes of the unlawful means criterion, the trial judge found such conduct to be unlawful because “it lacked any legal basis or justification.”

The New Brunswick Court of Appeal dismissed the appeal, but took a different view of the unlawful means tort. The Court reviewed in detail the House of Lords decision in OBG Ltd. v. Allen,1 which itself extensively reviewed the proper scope of economic torts in general, and of the unlawful means tort in particular. In OBG, Lord Hoffman, in the majority on this point, adopted a narrow definition of “unlawful means” whereby the unlawful conduct would need to be actionable by the party toward whom it was directed (who, in this case, would be the prospective third-party purchasers) to give rise to liability under the tort.

The New Brunswick Court of Appeal preferred Lord Hoffman’s narrow definition of unlawful means. While the Court acknowledged that the conduct of the appellants (as reviewed above) was not actionable by the prospective third-party purchasers, to mitigate the effects of the rigid rule the Court of Appeal allowed for “principled exceptions” to actionability. Given its finding of a principled exception to the requirement for actionability, the Court of Appeal held that the appellants were indeed liable under the unlawful means tort.

Supreme Court Decision

Like the Court of Appeal and Lord Hoffman in OBG, the Supreme Court adopted a narrow approach to the unlawful means component. The Court found that the focus of the unlawful means tort is unlawful conduct that intentionally harms the plaintiff’s economic interests.

Providing clarity regarding what conduct constitutes unlawful means, the Supreme Court confirmed that for conduct to be considered unlawful it must give rise to a civil cause of action by the third party if the third party had suffered loss (criminal offences and breaches of statute would not be per se actionable). However, the Supreme Court refused to recognize the principled exception identified by the Court of Appeal and, as a result, found that the unlawful means tort had not been made out by the respondents.

The Supreme Court identified many factors militating in favour of a narrow scope for the unlawful means tort:

  1. “Tort law has traditionally accorded less protection to purely economic interests than to physical integrity and property rights.”
  2. “The common law has traditionally been reluctant to develop rules about fair competition.”
  3. “The common law in the Anglo-Canadian tradition has generally promoted legal certainty for commercial affairs.”
  4. “The risk inherent in the economic torts generally that they will undermine legislated schemes favouring collective action in, for example, labour relations and interfere with fundamental rights of association and expression.”

The Supreme Court concluded its review regarding the unlawfulness requirement stating:

The limitation of unlawful means to actionable civil wrongs provides certainty and predictability in this area of the law, since it does not expand the types of conduct for which a defendant may be held liable but merely adds another plaintiff who may recover if intentionally harmed as a result of that conduct. While details relating to the scope of what is “actionable” may need to be worked out in the future, the basic contours of liability would be clear.

The Court also clarified that the unlawful means tort is not a last resort. The appellants had argued, as was the view of the Court of Appeal, that the unlawful means tort “should only be available where the defendant’s conduct does not provide the plaintiff with any other cause of action against the defendant” (a view also adopted by the Court of Appeal for Ontario and followed by other Canadian courts). The Supreme Court rejected that requirement, stating that such a limitation is wrong in principle: “The gist of the tort is the targeting of the plaintiff by the defendant through the instrumentality of unlawful acts against a third party.” The Court found that such conduct gives rise to liability “quite apart from conduct that may otherwise be actionable by the plaintiff,” and further stated that “general principles of tort liability accept concurrent liability and overlapping causes of action for distinct wrongs suffered by the plaintiff in respect of the same incident.”


1 [2007] UKHL 21.

 

Topics:  Canada, SCC, Tortious Interference

Published In: Business Torts Updates, Civil Procedure Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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