Shoulda Woulda? Alberta Court of Appeal Considers the Mental Element of the Tort of Civil Conspiracy

Introduction

The Alberta Court of Appeal has provided its latest contribution to the analysis of the tort of civil conspiracy. The case’s importance lies in its consideration of the mental element of the tort. The case is also interesting for the absence of any reference to the recent Ontario Court of Appeal jurisprudence on the matter, perhaps signifying the development of distinct Western-Canadian jurisprudence on the subjection of economic torts. Mraiche also highlights the inherently contradictory nature of the Canadian formulation of the tort of civil conspiracy, which is a tort that involves both subjective and objective mental elements.

Decisions Below

Mraiche was an appeal from a motion for summary judgment. The case arose out of an apparently fraudulent conveyance executed by the client of the law firm McLennan Ross LLP. One of the creditors sued the firm, arguing that one of the firm’s lawyers ought to have been aware of the illegality of his client’s actions.

It is well-established that the tort of civil conspiracy requires: (1) an agreement between two or more persons; (2) concerted action taken pursuant to the agreement; (3) actual damage suffered by the plaintiff, and (4) intent on behalf of the defendant to cause damage to the plaintiff. If the conspirators used "unlawful means" to injure the plaintiff, such intent can be constructive rather than actual, and need not be the predominant purpose of the agreement.  The foundational case in this area remains Canada Cement Lafarge v. BC Lightweight Aggregate, which, in relevant part, states:

“[W]here 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. … [I]t is not necessary that he predominant purpose of the defendants’ conduct be to cause injury to the plaintiff but, in the prevailing circumstances, it must be a constructive intent derived form the fact that the defendants should have known that injury to the plaintiff would ensue.” (at 471-472)

In the court below, the summary judgment motion by the defendant was granted. The Court found no evidence that the lawyer entered into an agreement with the client to defraud the client’s creditors. The Plaintiff appealed.

On appeal, in reliance on the “constructive intent” doctrine, the Plaintiff argued that the lawyer in question ought to have known that the predominant purpose of his client’s instructions was to defraud his creditors, even if he had no information to indicate so directly, and even if he did not know of any specific creditors who would be defrauded by the action. The Appellant, further, adduced no evidence of any agreement between the lawyer and the client.

The Court of Appeal disagreed. Observing that “the appellant’s case rests entirely on suspicions of the appellant contrived from the basic facts indicated by the documents, transactional history, and evidence,” the Court observed that to hold that the lawyer liable in tort, in the absence of any evidence of an agreement, would be improper. According to the Court:

"It is not enough that there is some evidence of some parts of the tort if there is no evidence of any one or more essential ingredients. What is important in the present context is the existence of an actual agreement. The artificial imposition of a deemed agreement arising from a purely constructively determined ‘ought to know’ state of mind would make this tort so elastic as to make it mere negligence without proximity, privity, or fiduciary duty. "(para. 43)

The Court also proceeded to reaffirm earlier case law which held that  "[i]n order to be found to be a party to a conspiracy one must know that facts of the alleged agreement or combination and intend to be a party to the 'combining'."

Potential Significance

The decision in Mraiche did not alter the definition of the civil conspiracy tort, but merely reinforced the requirement of positive evidence in support of the element of agreement. Nonetheless, the decision is significant in highlighting the inherently problematic nature of the Canadian formulation of the tort of unlawful means conspiracy.  Despite civil conspiracy being an intentional tort, the Supreme Court’s decision in Lafarge, contrary to English precedent, permitted intent to be inferred on an objective basis where the means employed to achieve the conspiracy are “unlawful.” However, Lafarge did not convert the tort from an intentional tort into a negligence-based tort, since the subjective element was retained in the requirement that anintentional agreement exist among the tortfeasors before liability can be imposed. The inherent conflict between the objective and subjective elements of intent in the tort of unlawful means conspiracy causes evidentiary difficulties and continues to present a jurisprudential challenge.

It would seem preferable for Canadian courts to abandon the objective test for intent in this tort, and return civil conspiracy to its subjective roots. The English Court of Appeal recently did just that in Baldwin v. Berryland Book, where it said:

"The leading authority on intention and knowledge in this context is OBG Ltd v Allan [2007] UKHL 21, [2008] 1 AC 1. … The House of Lords was not concerned specifically with tortious liability for conspiracy, but the views which were expressed by the House of Lords on the mental requirements of the tort of causing loss by unlawful means are applicable to the tort of conspiracy: Meretz Investments NV v ACP [2007] EWCA Civ 1303, [2008] Ch 244 at [146] (Arden LJ). OGB is authority that, in this context, what is required is actual intention or reckless indifference. Mere foreseeability of a consequence does not satisfy the requirement of intention: [43] (Lord Hoffmann). A defendant's foresight that his or her unlawful conduct may or will probably damage the claimant is not enough: [164] (Lord Hoffmann)." (para. 48)

Case Information

Mraiche Investment Corporation v. McLennan Ross LLP, 2012 ABCA 95

Docket No: 1103-0115-AC

Date of Decision: March 20, 2012

Alberta Court of Appeal fraudulent conveyance mental element summary judgment motion tort of civil conspiracy

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