Humpty Dumpty’s Views

In Through the Looking Glass, Humpty Dumpty was of the view that the meaning of a word was what he said it meant. "When I use a word," Humpty Dumpty said in rather a scornful tone, "it means just what I choose it to mean — neither more nor less." "The question is," said Alice, "whether you can make words mean so many different things." "The question is," said Humpty Dumpty, "which is to be master — that’s all."

In Agribrands Purina Canada Inc. v. Kasamekas, 2011 ONCA 460, the Court of Appeal dealt with the tort of unlawful conduct conspiracy. You may recall, from the previous issue of Farley’s Reflections, that this court has difficulty determining the element of "unlawful means" in the tort of unlawful interference with economic relations (see "Does the Left Hand Know what the Right Hand is Doing?"). In Agribrands Purina, Goudge J.A. for the court observed in determining that the trial judge had confused the concept of "unlawful conduct" in regard to unlawful conduct conspiracy with that in unlawful interference with economic relations.

[34] Moreover, reliance on the tort of intentional interference [with economic relations] does not recognize that these two torts have evolved separately, and thus each has developed their own concept of unlawful conduct.

He went on to state:

[37] It is clear from that jurisprudence that quasi-criminal conduct, when undertaken in concert, is sufficient to constitute unlawful conduct for the purposes of the conspiracy tort, even though that conduct is not actionable in a private law sense by a third party. The seminal case of Canada Cement Lafarge [[1983] 1 S.C.R. 452] is an example. So too, is conduct that is in breach of the Criminal Code. These examples of "unlawful conduct" are not actionable in themselves, but they have been held to constitute conduct that is wrongful in law, and therefore sufficient to be considered "unlawful conduct" within the meaning of civil conspiracy. There are also many examples of conduct found to be unlawful for the purposes of this tort simply because the conduct is actionable as a matter of private law. In Peter T. Burns and Joost Blom, Economic Interests in Canadian Tort Law (Markham: LexisNexis, 2009), the authors say this at p. 167-168:

There are two distinct categories of conduct that can be described as comprising "unlawful means": conduct amounting to an independent tort or other actionable wrong, and conduct not actionable in itself.

Examples of conspiracies involving tortious conduct include breach of contract, wrongful interference with contractual rights, nuisance, intimidation and defamation. Of course, a breach of contract itself will support an action in civil conspiracy and, as one Australian court has held, the categories of "unlawful means" are not closed.

The second category of unlawful means is conduct comprising unlawful means not actionable in itself.

The first class of unlawful means not actionable in themselves, but which nevertheless supports a conspiracy action, is breach of a statute which does not grant a private right of action; the very instance rejected in Lonrho (1981) by the House of Lords. A common case is a breach of labour relations legislation, and another is the breach of a criminal statute, such as the Canadian Criminal Code.

[38] What is required, therefore, to meet the "unlawful conduct" element of the conspiracy tort, is that the defendants engage in concert, in acts that are wrong in law, whether actionable at private law or not. In the commercial world, even highly competitive activity, provided it is otherwise lawful, does not qualify as "unlawful conduct" for the purposes of this tort.

It was not disputed that Purina had breached its franchise contract with Raywalt. However, Goudge J.A. did not see that Ren’s or McGrath did anything sufficient to qualify as "unlawful conduct". Interestingly, it was also not disputed that Purina had terminated Ren’s as a dealer when it discovered Ren’s was also selling a competitor’s feed in breach of its dealership agreement with Purina. Raywalt was appointed as the replacement dealer pursuant to an agreement whereby Purina:

[6] ...agreed not to appoint any other dealer in Raywalt’s territory, previously Ren’s territory.

[7] Raywalt opened for business in mid-March 1991. However, despite giving Raywalt territorial exclusivity, Purina continued to supply feed to Ren’s until the end of April 1991. This enabled Ren’s to sell to its former customers in what was now Raywalt’s territory. When Purina finally ended this practice, Ren’s got McGrath (who was a friend), and the Purina dealer in a neighbouring territory, to supply Ren’s with Purina feed at dealer prices. This allowed Ren’s to continue to sell Purina feed in Raywalt’s territory. Purina knew of, condoned, and indeed approved of this arrangement. Purina provided McGrath with feed for resale to Ren’s. As a result, Raywalt’s business was not nearly as profitable as projected and, its cash flow problems caused it to cease business at the end of January, 1992.

So, it would seem that it was clear that Purina, Ren’s and McGrath, each knew that Purina was supplying feed to Ren’s through McGrath so Ren’s could continue supplying customers in what was now Raywalt’s exclusive territory. McGrath, as a Purina dealer, would indeed know that supplying Ren’s with Purina feed at no mark-up would breach its territorial area restriction. Ren’s would know that this bootlegging by its friend violated the exclusivity arrangement on which Raywalt was relying. Was not Raywalt at least a third party beneficiary so that Purina and McGrath could not supply Ren’s in this backdoor arrangement? Were Ren’s and McGrath acting in concert not inducing Purina to breach its contract with Raywalt? Certainly each of Purina, Ren’s and McGrath were acting in concert knowing that their joint action would cause economic harm to Raywalt. If any of the three defendants were a puppet, does it matter who was the puppet of whom? Indeed, it seems that each of them was pulling each other’s strings, knowing their actions would cause injury to Raywalt.

It appears that the Court of Appeal did not have its conscience shocked as it observed at para. 41, that Purina’s knowledge and approval of the Ren’s-McGrath arrangement, "leaves little room for the conduct required by the inducing breach of contract tort". Nor did the Court of Appeal see anything the matter with the fact that Purina’s condoning the Ren’s-McGrath arrangement would be breaching the exclusivity provisions of the dealership agreement with Raywalt; but, it seems to me that Purina was participating in this arrangement by continuing to supply McGrath. One may wonder whether there was any meaning given to the "exclusivity" arrangement in that dealership agreement. It would seem that the Court of Appeal did not appreciate that exclusivity of territory in a franchise agreement is a fundamental term on which the franchisees of a franchisor mutually rely and are obligated to respect each other’s exclusivity. Failure to protect such a term would weaken the protection for franchisees as to the value of their franchise.

A rose by any other name is still a rose; but, apparently this three-way gang up on Raywalt was not sufficient to ground the tort of civil conspiracy; as set forth in Canada Cement Lafarge where Estey J. for the court at p. 471 described two categories of conspiracy recognized by Canadian law:

Although the law concerning the scope of the tort of conspiracy is far from clear, I am of the opinion that whereas the law of tort does not permit an action against an individual defendant who has caused injury to the plaintiff, the law of torts does recognize a claim against them in combination as the tort of conspiracy if:

(1) whether the means used by the defendants are lawful or unlawful, the predominant purpose of the defendants’ conduct is to cause injury to the plaintiff; or

(2) where the conduct of the defendants is unlawful, the conduct is directed towards the plaintiff (alone or together with others), and the defendants should know in the circumstances that injury to the plaintiff is likely to and does result.

In situation (2) it is not necessary that the predominant purpose of the defendants’ conduct be to cause injury to the plaintiff but, in the prevailing circumstances, it must be constructive intent derived from the fact that the defendants should have known that injury to the plaintiff would ensue.

Perhaps the Court of Appeal in Agribrands Purina was looking through the wrong end of the microscope in its search for "unlawful means" to ground the second situation set forth by Estey J. The analysis engaged in by the court would suggest that there just happened to be an unconscious coincidence that Purina wanted to breach its contract with Raywalt, and by inadvertent happenstance, McGrath and Ren’s had decided to engage in competitive but legal conduct harmful to Raywalt. When one is looking for stars, it is better to use a telescope; but one should look through the right end of this optical instrument as well and avoid putting it up to one’s blind eye as Nelson did.

It seems that Alice was alive and well in peering into the looking glass and wondering: "Who in the world am I? Ah, that’s the great puzzle." As the comic strip character Pogo said: "We have met the enemy and they is us."

Postscript: Three days after writing this piece I found myself in Oxford. I lunched that day at the Ashmolean Museum which was celebrating Alice’s Day. I was seated beside the Mad Hatter’s Tea Party; I felt right at home.