The Second Opinion: The SCC Narrows the Scope of the Tort of Unlawful Interference With Economic Relations
A Commentary on Recent Legal Developments by the Opinions Group of McCarthy Tétrault LLP
The contours of the tort of unlawful interference with economic relations have, heretofore, been “unsettled”, “confusing” and “inconsistent”. The tort essentially provides redress when party “A” intentionally inflicts economic injury on party “B” by use of unlawful means against party “C”. What is the nature of the “unlawful” activity that can ground the tort? What degree of intentionality is required to give rise to the tort? Is the tort available concurrently with other causes of action? These are the central questions that the Supreme Court of Canada grappled with in its recent decision in A.I. Enterprises Ltd. v. Bram Enterprises Ltd., 2014 SCC 12, in an effort to bring clarity and coherence to this tort.
The salient facts of the decision in A.I. Enterprises were as follows. The majority owners of an apartment building attempted to sell the property. The dissenting minority owners thwarted the sale of the property to third parties by filing encumbrances against the property and denying prospective buyers entry to the property. The property was ultimately sold to the dissenting minority owners for less than fair market value.
The majority owners commenced an action against the minority owners, alleging that the latter’s conduct amounted to interference by unlawful means. The majority owners prevailed at first instance. The trial judge’s ruling was affirmed on appeal. Although the appeal court found that the minority owners’ conduct did not meet the requirements of the tort, it nevertheless imposed liability on the basis of a “principled exception.”
On further appeal, the Supreme Court of Canada took the occasion to delineate the proper bounds of the tort, acknowledging the “unfortunate state” of the existing jurisprudence. The Supreme Court of Canada, after reviewing the relevant jurisprudence from Canada, England, Australia, New Zealand and the United States, adopted a “narrow understanding” of the tort. More specifically, it ruled that:
- the “unlawful means” aspect of the tort will only be satisfied if it would give rise to an actionable civil wrong from the perspective of the person at whom it was directed (thus, ”criminal offences and breaches of statute would not be per se actionable under the unlawful means tort”);
- this narrow definition of “unlawful means” should not be subject to “principled exceptions” (which the Court noted essentially depend on the idiosyncrasies of individual judges, introduce unwanted uncertainty and compromise predictability); and
- a plaintiff must specifically intend to harm the defendant – incidental, foreseeable, harm is not sufficient – in order to establish the tort.
The Supreme Court applied a restricted approach to the concept of “unlawful means” despite recognizing the broader approach to that concept in the context of other economic torts. However, the Supreme Court declined to further confine the application of the tort by ruling that it can be asserted concurrently with other available causes of action.
The Court ultimately ruled that the unlawful means element of the tort was not satisfied in the context of this case (but went on to find the liability based on a different cause of action).
The decision in A.I. Enterprises represents a significant narrowing of the bounds of the tort of unlawful interference with economic relations. The circumscription of the tort evinces a judicial desire to permit robust competition in the marketplace – “some elbow-room…for the aggressive pursuit of self-interest” – free from “vague” judicial standards of “commercial morality”.
The McCarthy Tétrault Opinions Group consists of members of the firm’s litigation department whose practices focus on written advocacy and the provision of strategic advice and opinions in the context of complex business disputes and transactions. The members of the Opinions Group are Anthony Alexander, Martin Boodman, Brandon Kain, Hovsep Afarian and Kirsten Thompson.
A.I. Enterprises Ltd. v. Bram Enterprises Ltd. 2014 SCC 12 concurrent economic tort intentional interference with economic relations principled exception SCC Supreme Court of Canada tort unlawful interference with economic relations unlawful means