“Intentional interference with economic relations” now called “unlawful means tort” – Supreme Court of Canada clarifies test for tort
February 1st, 2014
The tort of unlawful interference with economic relations has also been referred to as “interference with a trade or business by unlawful means”, “intentional interference with economic relations”, “causing loss by unlawful means” or as the Supreme Court of Canada decided in the case of A.I. Enterprises Ltd. v. Bram Enterprises Ltd., simply as the “unlawful means” tort.
The 1793 case of Tarleton v. M’Gawley (1793) serves as an example of the tort: the defendant, the master of a trading ship, fired its cannons at a canoe that was attempting to trade with its competitor, the plaintiffs’ trading ship, in order to prevent it from doing so. The plaintiffs were able to recover damages for the economic injury resulting from the defendant’s wrongful conduct toward third parties (the occupants of the canoe) which had been committed with the intention of inflicting economic injury on the plaintiffs.
The unlawful means tort allows a plaintiff to sue a defendant for economic loss resulting from the defendant’s unlawful act against a third party. In order to found liability to the plaintiff, the defendant must use unlawful means and the defendant must intend to harm the plaintiff through the use of the unlawful means. Important from the A.I. Enterprises Ltd. v. Bram Enterprises Ltd. case is that the conduct complained-of must give rise to a civil cause of action by the third party (or would do so if the third party had suffered loss as a result of that conduct) before a plaintiff can recover under the unlawful means tort. If the third party does not suffer a loss, the plaintiff cannot recover from the defendant on the basis of the unlawful means tort.
The case in question involved a group of family members who, 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.
The “intentional” aspect of the tort remains despite the name change. The defendant must intend to cause economic harm to the plaintiff as an end in itself or the intention to cause economic harm to the plaintiff because it is a necessary means of achieving an end that serves some ulterior motive. It is the intentional targeting of the plaintiff by the defendant that justifies stretching the defendant’s liability so as to afford the plaintiff a cause of action. This would be a factual finding made by a trial judge.
The main issue before the Supreme Court was what the “unlawful” component of the tort meant. It held that to be unlawful, the conduct of the defendant would have to be actionable by the third party if it suffered a loss as a result of the conduct. If there was no loss, then the conduct would not be unlawful. The Supreme Court held that there could be no principled exceptions to this rule on the basis that to allow exceptions would add unnecessary uncertainty to the tort and to commercial relations in Canada. To that end, the Supreme Court was informed by past jurisprudence that held that the law had never recognized a sweeping right to protection from economic harm and that the common law had traditionally been reluctant to develop rules about fair competition.
The Supreme Court referred to the fact that the common law in the Anglo-Canadian tradition had generally promoted legal certainty for commercial affairs. To found a tort on “commercial morality” or to impose liability for malicious conduct alone would not promote legal certainty.
The Supreme Court supported a narrow definition of “unlawful means”. The tort does not seek to create new actionable wrongs but simply to expand the range of persons who may sue for harm intentionally caused by existing actionable wrongs to a third party. The Supreme Court thus, essentially adopted a previous UK House of Lords decision on the unlawful means requirement (see: http://www.thelitigator.ca/2007/10/hello-case-says-goodbye-to-confusion-in-economic-torts/).
Noteworthy was the court’s discussion of the fundamentally different approach that Quebec’s civil law takes to the problem. Quebec has an “abuse of rights” doctrine that is rooted in the Civil Code of Québec, which provides in art. 6 that “[e]very person is bound to exercise his civil rights in good faith” and in art. 7 that “[n]o right may be exercised with the intent of injuring another”.
The civil law of Quebec goes farther than the Anglo-Canadian unlawful means tort: under the civil law, liability may be imposed on the defendant for conduct that is otherwise lawful but which is done with the intent to injure the plaintiff or in a manner inconsistent with the social ends of that right.
In the case at hand, however, there was no harm to the third party, which barred recovery by the plaintiff for its damages.
