Canada: Does The Left Hand Know What The Right Hand Is Doing?

Last Updated: May 31 2011
Article by James Farley

Most Read Contributor in Canada, September 2018

This is the unfortunate tale of two decisions concerning the tort of unlawful interference with economic relations: Barber v. Molson Sport & Entertainment Inc., 2010 ONCA 70 (CanLII) released September 3, 2010, just 10 days after Alleslev-Krofchak v. Valcom Limited, 2010 ONCA 557 (CanLII) was released on August 24. The puzzling problem is that the two panels (which shared a common member) have left up in the air the proper meaning of "by unlawful means," a key element in the test as to this intentional tort. Both these cases were heard in March 2010.

As Sgt. Joe Friday of Dragnet fame said: "The facts, Ma'am — just give me the facts." The appellate courts are not there to retry the case under appeal, but rather to correct for errors of law and misapprehension of material facts. In Barber, the Court of Appeal made a preliminary comment in its analysis:

[43] The trial judge gave lengthy, detailed reasons in which he made a great many factual findings. Having said that, we acknowledge that the trial judge's legal analysis is thin and, in some areas, incorrect. Nevertheless, because of the care he took in making his factual findings and because he made all the requisite findings, we have been able to make the necessary determinations to decide these appeals without the necessity of a new trial.

The tort of unlawful interference with economic relations requires that the plaintiff prove that: (a) the defendant intended to injure the plaintiff; (b) the defendant interfered with the plaintiff's economic interest by illegal or unlawful means; and (c) as a result thereof, the plaintiff suffered economic loss. Judge Cumming, in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 1998 CanLII 14850 (ON SC) gave a more focused breakdown of these requirements:

[61] In my view, and I so find, there is a tort in the Canadian common law which I shall call the "tort of unlawful interference with economic relations." The elements of the tort of "unlawful interference with economic relations" are: (i) the existence of a valid business relationship or business expectancy between the plaintiff and another party; (ii) knowledge by the defendant of that business relationship or expectancy; (iii) intentional interference which induces or causes a termination of that relationship or expectancy; (iv) the interference is by way of unlawful means; (v) the interference by the defendant must be the proximate cause of the termination of the business relationship or expectancy; and (vi) there is a resulting loss to the plaintiff.

I would suggest that Judge Cumming's breakdown of the elements is helpful but needs to be refined in respect of the aspect that it is still tortious if the business relationship or expectancy is diminished, even though not completely destroyed. Given that it is an intentional tort, negligent interference with such interest does not amount to intentional interference: see Lineal Group Inc. v. Atlantis Canadian Distributors Inc., 1998 CanLII 4248 (ON C.A.).

The Alleslev-Krofchak panel decision states in paragraph 48 (the clarity referred to therein is with respect to the elements of the tort of unlawful interference with economic relations together with a detailed analysis of this tort and the tort of inducing breach of contract, these two intentional torts often being confused with each other) and in paragraphs 51 and 52 that:

[48] I think recent jurisprudence has provided much clarity. The most important case is OBG v. Allen, [2008] 1 AC, [2007] UKHL 21 ...

[51] The debate in OBG was about the scope of "unlawful means." That is also central to the appellant's argument in this case. The protagonists were Lord Hoffmann, with whom the majority of the House of Lords agreed, and Lord Nicholls.

[52] Lord Hoffmann began his discussion at paragraph 46, by adopting Lord Lindley's rationale for the tort as being, in Lord Nicholls phrase describing his position, the defendant seeking to harm the plaintiff's business "through the instrumentality of a third party":

The rationale of the tort was described by Lord Lindley in Quinn v. Leathem [1901] AC 495, 534-535:

A person's liberty or right to deal with others is nugatory, unless they are at liberty to deal with him if they choose to do so. Any interference with their liberty to deal with him affects him. If such interference is wrongful, the only person who can sue in respect of it is, as a rule, the person immediately affected by it; another who suffers by it has usually no regress; the damage to him is too remote, and it would be obviously practically impossible and highly inconvenient to give legal redress to all who suffer such wrongs. But if the interference is wrongful and is intended to damage a third person, and he is damaged in fact — in other words, if he is wrongfully and intentionally struck at through others, and is thereby damnified — the whole aspect of the case is changed: the wrong done to others reaches him, his rights are infringed through although indirectly, and damage to him is not remote or unforeseen, but is the direct consequence of what has been done. [Emphasis added in the Alleslev-Kofchak panel decision]

The key to the Alleslev-Kofchak panel view of the tort of unlawful interference with economic relations was set out at paragraphs 53 to 55:

[53] He [Lord Hoffmann] set out his view of the essence of the tort at paragraph 47:

The essence of the tort therefore appears to be (a) a wrongful interference with the actions of a third party in which the claimant has an economic interest; and (b) an intention thereby to cause loss to the claimant.

[54] Then, critically for the appellant's argument, Lord Hoffmann specified, at paragraph 49, that the tort must be actionable by the third party subject to one exception:

In my opinion, and subject to one qualification, acts against a third party count as unlawful means only if they are actionable by that third party. The qualification is that they will also be unlawful means if the only reason why they are not actionable is because the third party has suffered no loss. In the case of intimidation, for example, the threat will usually give rise to no cause of action by the third party because he will have suffered no loss. If he submits to the threat, then, as the defendant intended, the claimant will have suffered loss instead. It is nevertheless unlawful means. But the threat must be to do something which would have been actionable if the third party had suffered loss.

[55] Finally, he offered this helpful summary definition of the tort at paragraph 51:

Unlawful means therefore consists of acts intended to cause loss to the claimant by interfering with the freedom of a third party in a way which is unlawful as against that third party and which is intended to cause loss to the claimant. It does not in my opinion include acts which may be unlawful against a third party but which do not affect his freedom to deal with the claimant.

In contrast, the broader view of "by unlawful means" accepted by the Barber panel was set out in Lord Nicholls' reasons as encompassing any conduct by the defendant that intentionally harmed the plaintiff and was in violation of an obligation under either civil or criminal law, without any prerequisite that that conduct of the defendant be actionable by the third party. It would also seem that Lord Nicholls was not concerned about the unlawful means being directed at the third party; rather, it appears that he would have been satisfied if the unlawful means were directed at the plaintiff.

The Alleslev-Krofchak panel decision is definite as to what it takes to qualify as "by unlawful means," namely that the defendant's actions (a) cannot be actionable directly by the plaintiff; and (b) must be directed towards a third party (which then is the instrument through which the harm befalls the plaintiff).

The Alleslev-Krofchak panel decision states that the Ontario Court of Appeal had opted for the narrower definition of "by unlawful means" in both Correia v. Canac Kitchens, 2008 ONCA 506 (CanLII) and Ontario Racing Commission v. O'Dwyer, 2008 ONCA 446 (CanLII). This panel also noted that the trial judge had wondered if this jurisprudence had modified or replaced the tort's essential elements as set out in Lineal, supra, Reach M.D. Inc. v. Pharmaceutical Manufactures Association of Canada, 2003 CanLII 27828 (ON CA) and Drouillard v. Cogeco Cable Inc., 2007 ONCA 322 (CanLII), noting that Correia had suggested that Drouillard had tried to rein in the breadth of "by unlawful means." However she proceeded on the basis that OBG's acceptance in Correia had not narrowed the definition of the element of "by unlawful means." She discussed this at paragraphs 322 to 328 of 2009 CanLII 30446 (ON S.C.) and, after mentioning Correia, Droulliard and OBG, said at paragraph 328 that the pleading was insufficient as well as "... uncertainty in the law regarding the scope of the concept of 'unlawful means' has made my task particularly difficult."

Ten days later, the world (well, at least the Ontario legal community) was shaken by the Barber case, which reverted to the pre-OBG definition of "by unlawful means." The Barber panel decision stated:

[58] We begin by noting that in Reach M.D., the scope of activities that a defendant is "not at liberty to commit" is interpreted broadly: see paragraphs 48 to 52.

Only the Reach M.D. case was referred to in the Barber decision; OBG, Correira, O'Dwyer, Drouillard and Alleslev-Krofchak were ignored.

So, because of the opposing tests of these two cases, we know what the facts are, but do not know what the law is. The Ontario Court of Appeal had another case involving the tort of unlawful interference with economic relations: Heydary Hamilton Professional Corporation v. Hanuka, 2010 ONCA 881, which was released December 21st (just before I wrote this reflection). However this pleading matter was dismissed without the necessity of wading into the dispute as to the narrow verses broad definition of "by unlawful means." However, I understand that leave to appeal to the Supreme Court of Canada is being sought as to this dispute. That should prove helpful in clearing the air.

However, I think it fair to point out that the tort of intentional interference with economic relations has had a thorny and confusing history in the courts of Canada (and of the United Kingdom; see the comments of Lord Hoffmann distinguishing between the subject tort and that of inducing breach of contract in OBG, and going back to some fine historical cases starting in 1620 to do so). Likely the subject tort will continue to evolve and be refined in the golden smelter of the Common Law. See also Ultracuts Franchises Inc. v. Magicuts Inc. et al., 2010 MBCA 34 (CanLII) at paragraph 6.

I would be remiss if I did not note the work load of the Ontario Court of Appeal and its generally excellent track record. It seems that everyone has the occasional bad day. Covering a recent case, Globe & Mail columnist Christie Blatchford wrote in her December 16, 2010 column:

Now the appeal court is possibly the most cerebral, and certainly the most removed from the off-grim facts of a case, in any province.

The lawyers regularly appearing here can parse a single sentence uttered by a trial judge in 1,000 slices and split any given hair any number of ways: It's the nature of the job. They, and the judges hearing them out, can go 'round and round for hours' — by training, they all love to argue and not a few to hear themselves talk — on a single legal point or nuance. Judges so relish this cut-and-thrust that it sometimes seems they indulge the lawyers only for the sport of it.

But there was none of that this day ...

Just as Shakespeare described it, mercy dropped as the gentle rain from heaven at the Ontario Court of Appeal, blessing both giver and taker.

The quality of mercy is not strained, Shakespeare wrote. And the place where it falls like gentle rain is blessed.

So in that case the Court of Appeal came to a decision that recognized the facts and applied the correct (and common sense) law. Hopefully the Supreme Court of Canada will sort out the intentional tort of unlawful interference with economic relations so that: "All's well that ends well."

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.

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