Canadian courts have long struggled with the tort of unlawful
interference with economic relations. This struggle has generated
significant ambiguity in the case law—even the tort's
name was unsettled. However, on January 31, 2014, the Supreme Court
of Canada released its decision in AI Enterprises Ltd v Bram
Enterprises Ltd, unanimously narrowing the tort's scope of
liability. This decision will bring vital certainty to a
historically vexed area of law.
In this case, a mother and her four sons owned an apartment
building, and all but one son wanted to sell it. The dissenting son
declined to exercise a right of first refusal. Nonetheless, he
thwarted all attempts to sell the property and, ultimately, bought
it for its appraised value, which was nearly $400,000 less than
another potential purchaser had offered. Acting through two
companies, the other family members sought damages for, among other
things, unlawful interference with economic relations.
It is well-established that unlawful interference with economic
relations has two key elements: intent to harm the plaintiff and
the use of unlawful means. The trial judge interpreted the second
element liberally. He found that the dissenting son had acted
without any legal basis or justification, and his actions were thus
unlawful in a broad sense. On appeal, the Court defined
unlawfulness more narrowly, restricting it to conduct amounting to
a civil wrong actionable by a third party, or which would have been
actionable had that third party suffered a loss. However, it
concluded that, although the dissenting son's conduct gave no
third party a right of action, liability to the plaintiffs could be
imposed through a "principled exception" since his
conduct had been akin to an abuse of process. Thus, it upheld the
trial judge's decision.
On further appeal, the Supreme Court of Canada examined the
tort's history and rationale in the context of the wider scheme
of modern tort liability. It found that this context militated for
a narrow interpretation of the unlawful means element. Like the
appellate court below, the Supreme Court held that in order to
constitute "unlawful means" for this tort, the conduct
complained of must be civilly actionable by a third party, or be
such that the third party could have sued had it suffered
consequential loss. Next, the Supreme Court rejected the dissenting
son's argument that, in recognition of its gap-filling
function, the tort only applies where no other causes of action are
available. It determined that this proposed requirement was
unnecessary to keep the tort within its proper bounds. Finally, the
Supreme Court rejected any so-called principled exceptions. It
found no principles on which such exceptions could be based. It
also expressed concern that recognizing exceptions would simply
confer an unstructured judicial discretion, undercutting its
efforts to give a certain and narrow ambit to the tort.
Applying its newly articulated approach, the Supreme Court found
that the dissenting son's conduct had not been unlawful in the
narrow sense. Since no principled exceptions had been recognized,
it concluded that the dissenting son was not liable for unlawful
interference with economic relations. The Supreme Court accepted,
however, that the dissenting son had breached his fiduciary duties
as a director of the plaintiff companies, and it upheld the trial
judge's award of damages on that basis. The dissenting
son's company was also held liable for knowing assistance in
breach of fiduciary duty and knowing receipt of the proceeds of the
By narrowing the scope of liability to civil wrongs actionable
by third parties, this decision rescues Canadian courts from the
morass of conflicting cases in this area of law. It also avoids, in
the Supreme Court's words, "tortifying" conduct
prohibited by statute for reasons remote from civil liability.
Thus, the decision is a welcome clarification of the tort's
boundaries. It promotes legal certainty and predictability in
commercial affairs. However, it may also simply push the
controversy back one level to the proper definition of
"actionable". In any event, the basic contours of
liability are now clear, and refinements must await further
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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