2012 NBCA 33, 2012 NBCA 33

COURT OF APPEAL OF NEW BRUNSWICK 108-10-CA A.I. ENTERPRISES LTD. and ALAN SCHELEW APPELLANTS A.I. ENTERPRISES LTD. et ALAN SCHELEW APPELANTS - and - - et - BRAM ENTERPRISES LTD. and JAMB ENTERPRISES LTD. RESPONDENTS BRAM ENTERPRISES LTD. et JAMB ENTERPRISES LTD. INTIMÉES A.I. Enterprises and Schelew v. Bram Enterprises and Jamb Enterprises, 2012 NBCA 33 A.I. Enterprises et Schelew c.

Bram Enterprises et Jamb Enterprises, 2012 NBCA 33 CORAM: The Honourable Justice Robertson The Honourable Justice Bell The Honourable Justice Green CORAM : L’honorable juge Robertson L’honorable juge Bell L’honorable juge Green Appeal from a decision of the Court of Queen’s Bench: July 22, 2010 Appel d’une décision de la Cour du Banc de la Reine : Le 22 juillet 2010 History of Case: Historique de la cause : Decision under appeal: 2010 NBQB 245 Décision frappée d’appel : 2010 NBBR 245 Preliminary or incidental proceedings: N/A Procédures préliminaires ou accessoires : s.o.

Appeal heard: November 23, 2011 Appel entendu : Le 23 novembre 2011 Judgment rendered: April 12, 2012 Jugement rendu : Le ​12 avril 2012

Reasons for judgment by: The Honourable Justice Robertson Motifs de jugement : L’honorable juge Robertson Concurred in by: The Honourable Justice Bell The Honourable Justice Green Souscrivent aux motifs : L’honorable juge Bell L’honorable juge Green Counsel at hearing: For the appellants: Richard J. Scott, Q.C. and Jennifer D. Snow For the respondents: Charles A. LeBlond, Q.C. Avocats à l’audience : Pour les appelants : Richard J. Scott, c.r., et Jennifer D. Snow Pour les intimées : Charles A. LeBlond, c.r. THE COURT The appeal is dismissed with costs. LA COUR Rejette l’appel avec dépens.

The judgment of the Court was delivered by ROBERTSON J.A. I. Overview [ 1 ] Three intentional economic torts have attracted significant judicial treatment over the last 10 years: (1) conspiracy; (2) inducing breach of contract; and (3) interference with contractual relations by unlawful means. Ultimately, this appeal focuses on the unlawful means tort, which has its own conditions for liability. Above all, that tort must be isolated from the inducement tort.

As one commentator, writing in The Lawyers Weekly, cautioned: “The shoals of motion practice are littered with the wrecks of claims struck out for failure to comply with the technical rules that govern this area” (Peter Wardle, October 14, 2011). [ 2 ] The tort of inducing breach of contract became firmly cemented in the common law with Lumley v. Gye (1853), 118 E.R. 749 (Q.B.) (A induces B to breach its contract with C). The unlawful means tort can be traced to an equally seminal English decision: Allen v. Flood , [1898] A.C. 1 (H.L.) (A induces B not to contract with C).

While the two torts differ in several respects, one is palpable. The inducement tort must involve a breach of contract. Not so with respect to the unlawful means tort. The interference may simply prevent the formation of a contract or its due performance without resulting in a breach. The second difference is that the inducement tort is not concerned with the means chosen to induce the breach of contract. In short, it matters not whether the means chosen are lawful or unlawful. Obviously, not so with respect to the unlawful means tort, where the task is to properly define “unlawful means”.

Another difference between the two torts lies in the requirement of establishing “intent”. Under the inducement tort, the claimant must establish the defendant’s intent to induce the breach. Under the unlawful means tort, the claimant must establish the

defendant’s intent to cause the claimant harm. All of this leads to the observation: the two torts are distinct and not to be placed under a single legal umbrella, as might be expected if one were to adopt a unified theory of liability. This remains true even though both torts are intended to place boundaries surrounding the right of parties to engage in “fair competition”. Each of those propositions is derived from the relatively recent decision of the House of Lords in OBG v.

Allan, [2007] UKHL 21 (“ OBG ”) . [ 3 ] This appeal examines the unlawful means tort and, in particular, whether this Court should adopt the narrow definition of “unlawful means” articulated in the majority opinion of Lord Hoffmann in OBG. Therein, “unlawful means” are defined in terms of the defendant’s impugned acts being independently actionable by the third party, or would have been had the third party suffered a loss. In short, unlawful interference embraces an actionable civil wrong committed against a third party. (A uses physical threats to induce B not to contract with C.

As B has an independent cause of action against A for intimidation, C may sue A for unlawful interference. Not so if A resorts only to logical persuasion, which is not independently actionable). [ 4 ] Prior to OBG , and as a general proposition, Canadian courts had adopted broad but, admittedly, vague

definitions of “unlawful means”, and some courts were still struggling with the question of whether the tort existed. Often, the approach was a reflection of the English trend of conflating the inducement and unlawful means torts under what would be labeled the “unified theory”. OBG has clarified, if not effectively recast, the English model with respect to the intentional economic torts.

What we are left with is a set of cogent principles that bring immense certainty to the English law, while bringing into focus the need to reevaluate the Canadian authorities to the extent they relied on the earlier English jurisprudence. Be that as it may, if we adopt the narrow definition of unlawful means offered in OBG , we must allow the appeal and set aside the trial judge’s finding of tortious liability. This is because the independent actionability requirement cannot be met.

This is true unless: (1) we recognize the definition is not an absolute and allows for principled exceptions; and (2) we conclude the case falls within an exceptional category. [ 5 ] As a starting point, no one questions the merit of the narrow definition of “unlawful means” when compared to earlier formulations. The critical issue is whether the independent actionability requirement should be flexible and allow for exceptions, or exceptional categories, which are principled in nature and do not attract the criticism of ad hoc decision making. In my view, the question should be answered in the affirmative.

This view is consistent with the jurisprudence of the Ontario Court of Appeal, so far as that Court has expressly declined the invitation to “fully define” the scope of the expression “unlawful means”: Alleslev- Krofchak v. Valcom Limited , 2010 ONCA 557 , [2010] O.J. No. 3548 at para. 63 (QL), citing Correia v. Canac Kitchens , 2008 ONCA 506 , [2008] O.J. No. 2497 at para. 107 (QL). This approach suggests that the categories of unlawful means may not be closed in Ontario. And it is worth noting that ten months after the House of Lords rendered its decision in OBG , their Lordships adopted a broader

interpretation of unlawful conduct in regard to the intentional tort of conspiracy (to include criminal wrongs not actionable at common law): Total Network SL v. Her Majesty’s Revenue and Customs Commissioners , [2008] UKHL 19, see paras. 96-104 , revisiting OBG, and see also Agribrands Purina Canada Inc. v. Kasamekas , 2011 ONCA 460 , [2011] O.J.

No. 2786 (QL), which also broadens the definition of “unlawful means” in cases involving the tort of conspiracy. [ 6 ] Accepting the narrow definition presented in OBG should allow for exceptions, we must decide whether the facts of the present case warrant exceptional treatment. The following represents an adumbration of the circumstances which propelled this case into the Court of Queen’s Bench. In 1985, three corporations (Bram Enterprises, Jamb Enterprises and A.I. Enterprises) acquired an apartment building located at 99 Joyce Avenue in Moncton as an investment.

Title to the property was vested in a company (Joyce Avenue Apartments Limited), which acted as “agent” for the three corporate investors. In turn, the relationship between the agent and the corporate investors and between the investors themselves was regulated by a “syndication agreement”. The syndication agreement provided that if the majority decided to sell, the minority would have the right to purchase the building at its appraised value, failing which the property could be marketed to the public. In April of 2000, resolutions were passed calling for the sale of the building. A.I.

Enterprises, the minority investor, objected, but declined the opportunity to purchase the building at its appraised value of $2.2 million. Nonetheless, Alan Schelew, who is the President and sole shareholder of A.I. Enterprises, continued to resist any sale of the property on the ostensible ground of the majority’s non-compliance with the syndication agreement. Over a period of 20 months, Mr. Schelew instituted arbitration proceedings, registered documents encumbering the property’s title and denied third parties access to the building for inspection purposes.

During this time frame, the majority did in fact receive and accept two offers from distinct purchasers. One offer was for $2.58 million. The other was for $2.5 million. However, neither transaction closed without either vendor or purchaser being in breach of the underlying agreement of purchase and sale. In 2002, the majority sold the building to the minority investor for its most recent appraised value of $2.2 million. [ 7 ] A year after the sale of the building, the majority of investors (Bram Enterprises and Jamb Enterprises) sued Alan Schelew and A.I.

Enterprises for damages equal to the difference between what the majority would have received, had the property sold to one of the two prospective purchasers in 2000, and the price which the minority paid. The claim was allowed. The trial judge concluded that but for the “numerous illegitimate and unlawful obstructive tactics” adopted by the defendants, the property would have sold to a third party for a price higher than what the minority investor eventually paid.

The trial judge also found the requisite intent to cause harm and, therefore, the intentional tort of “unlawful interference with economic relations” had been established. Bram and Jamb were each awarded damages of $183,061, together with costs of $14,478. [ 8 ] For reasons addressed below, the decision in OBG and its Canadian progeny were not brought to the trial judge’s attention. Applying the definition of “unlawful means” articulated in that case, the appellants quite properly argue the appeal

must be allowed. No one has been able to identify a sustainable cause of action upon which the potential purchasers could have sued either Alan Schelew or A.I. Enterprises.

Thus, it remains to be determined whether this case should fall within the exceptional category. [ 9 ] In my view, the intentional erection of self-help legal barriers, some of which are enforceable through statutory processes not subject to prior judicial authorization, in circumstances where those barriers rest on rights fabricated with arguments of sand, warrants redress under the tort of unlawful means (akin to the tort of abuse of legal process). Mr. Schelew’s manipulation of A.I.

Enterprises and his unwarranted reliance on the syndication agreement provided him with a convenient pretext for opposing any sale. In truth, there was never a genuine issue of contractual

interpretation dividing the corporate investors to the syndication agreement, just a family feud over the soundness of a business decision to liquidate a valuable asset. I would decide the unlawful means issue in favour of the respondent investors and the same holds true in regard to other contentious issues: “proximate cause” and “intent to cause harm”. [ 10 ] On a preliminary note, experience dictates it is prudent for appellate judges to state up front what a case is not about.

As will be explained, the analytical framework being applied in Ontario, with respect to the unlawful means tort, provides for a criterion not expressly referred to in either the Canadian or English jurisprudence. The Ontario Court of Appeal has recognized the tort should be unavailable if the impugned conduct giving rise to the action is directly actionable by the claimant. The purpose of the intentional torts is to fill a gap where no action could otherwise be brought for intentional conduct that caused harm through the instrumentality of a third party: Correia v.

Canac Kitchens , at para. 107 and Alleslev-Krofchak v. Valcom Limited , at para. 58 . In the present case, no one pled or argued that the impugned conduct of A.I. Enterprises qualified as a breach of its contractual obligations under the syndication agreement and, therefore, its liability to the plaintiffs Jamb and Bram should have been framed in contract as well as tort ( e.g., breach of the implied contractual duty of good faith performance).

Similarly, no one pled the impugned conduct of Alan Schelew resulted in a breach of his fiduciary obligations as a director of Jamb and Bram and, therefore, this defendant was directly liable to the corporate claimants. I shall touch upon these points, lest this case be the subject of further scrutiny. Indeed, it was Lord Walker in OBG who, after commenting on the differences in opinion expressed by his colleagues, Lord Hoffmann and Lord Nicholls with respect to the issue of unlawful means, observed their case was not “likely to be the last word on this difficult and important area of the law” (para. 269). II.

Underlying Facts [ 11 ] Curiously, the 339 paragraph decision under appeal has yet to be reported. But it does bear a neutral citation: 2010 NBQB 245 .

The basic facts and structure of this dispute have been set out above at paragraph 6, however the particular details require further analysis. [ 12 ] Since the 1970s, the Schelew family (brothers Alan, Jeffrey, Michael and Bernard Schelew, and their mother Lillian Schelew) have been involved in residential real estate leasing through two corporations: Jamb Enterprises Ltd. (“Jamb”), which is owned by the four brothers equally, and Bram Enterprises Ltd. (“Bram”), which is also owned by the four brothers equally, with Lillian Schelew holding a separate class of preferred shares. The properties were managed by A.I.

Enterprises Ltd. (“A.I.”), a corporation of which Alan Schelew is sole shareholder and director. As noted above, Bram, Jamb and A.I. became the shareholders of Joyce Avenue Apartments Ltd. The shareholders of Bram, Jamb and A.I. are also the directors. Indeed, it would appear every shareholder of every company is also a director of the corresponding company. In addition to being a director and minority shareholder of Bram and Jamb, Alan Schelew was the sole shareholder of A.I. Enterprises. A.I. Enterprises was also the property manager of the Joyce Avenue apartment building.

The fact the three closely-held companies entered into a syndication agreement governing their respective rights and obligations with respect to the building is of paramount significance. Under that agreement, Joyce Avenue Apartments Limited is designated as the agent for the three investors (Bram, Jamb and A.I. Enterprises). Of particular note is Clause 9 of the agreement. Clause 9.01 states that if an offer to purchase the building is received, and the majority decides to sell the property, the minority has a right of first refusal.

Clause 9.02 provides that if the majority decides to sell the building, the minority has the right to purchase the building at the property’s appraised value. If the minority fails to accept the “irrevocable offer” within 15 days of the offer being made, the majority has the right to seek out and effect a sale to a third party. The agreement provides a mechanism for determining the appraised value and requires that all matters in dispute be submitted for arbitration. [ 13 ] At a directors’ meeting of Joyce Avenue Apartments Ltd., held on April 27, 2000, all investors, except A.I.

Enterprises (Alan), agreed the apartment building should be sold. At this point no potential purchasers had been identified and no offers to purchase were under consideration. On May 3, 2000, Alan wrote a letter to his brother Bernard, outlining various objections to the sale based on irregularities in the holding of meetings (e.g. less than 48 hours notice), non-compliance with the syndication agreement and the failure to pursue arbitration. In response, Bernard informed Alan, on May 4, 2000, that another meeting would be held to redo what had been done at the April 27, 2000 meeting.

The “redo” meeting was scheduled for May 12, 2000. Alan was aware of the proposed meeting but he did not attend, nor did he pick up the registered notice of meeting from the post office until May 19, 2000, a week after the holding of the scheduled meeting. While reserving his right to allege the April 27 and May 12 meetings were improperly convened, Alan did provide the majority with the names of three appraisers, one of whom ended up being the co-author of the appraisal report ultimately submitted.

However, only one of the appraisers identified by Alan was duly qualified as the others lacked the required “AACI” designation. Alan’s refusal or failure to co-operate in the selection of an appraiser forced the majority to make the selection. In response, Alan issued a Notice of Arbitration on May 29, 2000. However, that Notice failed to set out the issues to be arbitrated. After an

exchange of emails, Alan finally provided a nonsensical response: the arbitrator would decide what issues would be arbitrated. It was not until after Alan’s lawyers intervened that the majority was provided with a list of issues to be arbitrated. That list was provided on September 7, 2000, three months after the Notice of Arbitration issued. [ 14 ] On May 25, 2000, four days prior to issuing the Notice of Arbitration, Alan caused his company, A.I. Enterprises, to file a “Notice of Right of First Refusal” in the local Land Titles office.

This encumbrance on title remained in place until August 24, 2001, the day on which an adjudicator, acting under the Land Titles Act, S.N.B. 1981, c. L-1.1, declared the Notice to be of no effect. The subsequent judicial review application of the adjudicator’s decision was dismissed by the Court of Queen’s Bench: see A.I. Enterprises Ltd. v. Joyce Avenue Apartments Ltd. , 2002 NBQB 13 , 246 N.B.R. (2d) 92.

Following the adjudicator’s decision in August of 2001, and at the request of Michael Schelew, the Registrar General of Land Titles issued a “Stop Order” against the disputed property, preventing the filing of further encumbrances. This order was set to expire on November 15, 2001. Two days prior to that date, Alan filed a Notice of Application in the Court of Queen’s Bench seeking the appointment of an arbitrator.

On November 15, 2001, the date the Stop Order expired, Alan filed a Certificate of Pending Litigation in the same Land Titles office based on the pending application. [ 15 ] Alan declined to purchase the property at its appraised value of $2.2 million by allowing the “irrevocable offer to sell” to expire, which it did on July 27, 2000, in accordance with the terms of the syndication agreement. Thereafter, the majority actively marketed the property through the services of a local real estate agent. Only two potential purchasers were prepared to enter into a binding agreement of purchase and sale.

The first executory contract was with Bloomfield Holdings Ltd. for $2.58 million. It was entered into on April 3, 2001, with a closing date of June 22, 2001. However, on May 30, 2001, Bloomfield withdrew from the transaction, citing its inability to “confirm the balance of our financing” due to “uncertainty of this sale”. The second contract of sale was with Greenarm Development Ltd. for $2.5 million. The agreement became binding on July 24, 2001, and provided for a closing date of October 22, 2001.

That date passed, yet Greenarm continued to express an interest in the property and sought permission to inspect the building along with officials from the Canada Mortgage and Housing Corporation (“CMHC”), which was to provide financing for the transaction. Sometime in early November of 2001, officers from Greenarm and CMHC were denied physical access to the building by two uniformed security guards, who were employees of A.I. Enterprises.

An officer of Greenarm testified that he had hoped the dispute between the investors could be resolved and that Greenarm was prepared to extend the closing date, until it became apparent that the transaction was not going to close because of Alan’s interventions. This is when Greenarm decided to withdraw from the transaction. [ 16 ] After the Greenarm sale failed to close, the real estate listing expired. In the spring of 2002, the majority restarted the procedure for disposing of the building in accordance with the syndication agreement.

This time Alan accepted the offer to purchase the building for its most recent appraised value of $2.2 million. The agreement of purchase and sale was dated November 28, 2002. [ 17 ] On September 5, 2003, the majority of investors in Joyce Avenue Apartments Ltd. initiated an action against Alan and his company. With respect to the cause of action, the Statement of Claim is conspicuously silent. The plaintiffs simply allege the actions of the defendants resulted in the plaintiffs’ inability to sell the apartment building to a third party.

This is followed by a claim for damages equal to the difference between what Alan paid and what the majority would have received from a third party. The Statement of Defence includes, inter alia , a claim the plaintiffs’ had failed to disclose a reasonable cause of action and submits the action should be dismissed under Rule 23.01(1)(

b) of the Rules of Court . However, no motion was brought for that purpose. Instead, the parties went to trial relying on the understanding the pre-trial and post-trial briefs could effectively serve as valid substitutes for proper pleadings. Thankfully, it is those submissions which lay the foundation for the arguments resting on the intentional tort of “unlawful interference with economic relations”. III. The Failure to Address OBG at Trial [ 18 ] This case has an element of awkwardness for counsel on appeal, as they were not counsel at trial.

The law governing the unlawful means tort has been in a state of flux in Canada prior to and after the trial of the present action. Regrettably, at the time of trial, counsel and the trial judge were unaware of the relatively recent decision in OBG. In part, this can be explained by the fact the underlying action was commenced in 2003, long before the House of Lords rendered its 2007 decision in OBG.

However, the trial in this action commenced in May of 2008 and would be spread over the following 12 months, followed by the submission of post- trial briefs in June and August of 2009, well after the House of Lords released its decision in OBG . The trial decision was released on July 22, 2010. Three months prior to that date, this Court released a decision involving the inducement tort and the application of OBG : SAR Petroleum et al. v. Peace Hills Trust Company , 2010 NBCA 22 , 357 N.B.R. (2d) 202. Between 2008 and 2010, the Ontario Court of Appeal released three influential decisions.

While the evolving nature of the intentional tort under consideration may conjure some sympathy for counsel at trial, the responsibility to constantly monitor developments in the law rests squarely on their shoulders. Regardless of what legal principles were or were not pursued at trial, it remains the responsibility of this Court to render a decision based on the legal principles as they presently stand or should stand. All of that said, we must first look to what the trial judge decided based on the arguments advanced before him. IV. The Trial Decision

[19] The pre-trial and post-trial briefs raised seven questions for the trial judge’s consideration. Although most werenot pled, the trial judge answered each question. Of particular significance to this appeal is his finding the plaintiffs were not in breach ofany of the provisions of the syndication agreement. The one issue which remains central to this appeal is whether the actions of thedefendants unlawfully interfered with the plaintiffs’ efforts to sell the property to a third party. With respect to this broad issue, the trialjudge made a number of relevant findings to support his positive response.

Those findings are as follows. [20] The decision to encumber the title with the Right of First Refusal was held to be without legal justification (“nolawful reason”) (para. 246). Filing of the document was undertaken for the purpose of preventing third parties from proceeding with asale. The trial judge also found this conduct to be a breach of Alan’s fiduciary duty as director of Jamb and Bram (para. 248). As to thedefendants’ decision to exercise the right to pursue arbitration proceedings, the trial judge concluded “neither Alan, nor A.I. Enterpriseshad any genuine wish to arbitrate” (para. 232).

The issues which the defendants ultimately identified for arbitration were held to be“attempts by the defendants at creating issues” to further Alan’s dispute (para. 230). Correlatively, the registration of the Certificate ofPending Litigation, tied to the court application seeking the appointment of an arbitrator, was found to be an unjustified step taken withthe object of preventing a sale to a third party.

Having regard to the plaintiffs’ decision to authorize a potential purchaser to inspect theproperty and the defendants’ refusal to allow physical access to the property, the trial judge held this conduct to be “wrongful andunlawful” (para. 269).

The trial judge found that the denial of access was an abuse of the office of building manager and also a violationof the syndication agreement, which required the cooperation of minority shareholders when it came to the sale of the building (paras.265-268). [21] Armed with the above findings of fact, the trial judge went on to determine whether the tort of “unlawfulinterference with economic relations” had been established.

The trial judge referred to the only decision of this Court touching on thisparticular intentional economic tort and other relevant Canadian authorities which were decided prior to the House of Lords’ decision inOBG. The decision of this Court in Carnahan v. McGregor and Whalen (1994), (NB CA), 149 N.B.R. (2d) 342,[1994] N.B.J. No. 249 (C.A.) (QL), makes reference to a five prong analytical framework set out in Dufferin Real Estate Limited v.Giralico, [1989] O.J. No. 1525 (H.C.J.) (QL).

Therein, the essential elements of the unlawful means tort are identified as follows: (1) theexistence of a valid business relationship or expectancy; (2) knowledge by the defendant of the relationship or expectancy; (3) intentionalinterference inducing or causing a termination of the relationship or expectancy by unfair or unlawful means; (4) proximate cause; and (5) resultant damages. This analytical framework is taken from the well-known American treatise Prosser and Keeton on Torts, 5th ed.(St. Paul, MN: West Publishing Co., 1984) at 1005. I pause here to note that Carnahan v.

McGregor and Whalen was decided on thebasis of another intentional tort: inducing breach of contract. [22] For obvious reasons, the trial judge did not dwell on elements one and two identified above. As to elementthree, the trial judge concluded the defendants’ conduct was the proximate cause of the plaintiffs’ loss. At paragraph 283 of his decision,the trial judge concluded: “but for these numerous illegitimate and unlawful obstructive tactics, used by or in the names of thedefendants, the majority investors would have been successful in selling that building to a third party”.

As to whether the defendantspossessed an actual intent to cause the plaintiffs economic harm, the trial judge held this was not a case in which the harm was anincidental result of the defendants pursuing their own legitimate self-interest. The trial judge recognized that the defendants werepursuing their self-interests but they did so using a “series of illegitimate and wrongful actions” (para. 289). As to the meaning of thephrase “wrongful conduct”, the trial judge effectively embraces the approach adopted in Reid v. British Columbia (Egg MarketingBoard), 2007 BCSC 155, [2007] B.C.J. No. 197 (QL).

The trial judge in the case at bar determined that unlawful conduct is definedbroadly to mean conduct that the defendant was “not at liberty to commit”, to behaviour “not authorized by law” or to an “act withoutlawful justification” (para. 291). Against this backdrop, the trial judge concluded the tort of “unlawful interference with economicrelations” had been established. V. The Underlying Legal Framework & OBG [23] As a starting point, it is necessary to provide an overview of the intentional economic torts dealing with theinterference of contractual relations as viewed from the analysis offered in OBG.

It is an understatement to acknowledge the decision hasbeen treated as persuasive authority in this country. But the complexity of the decision and its ambit should not be overlooked. There arefour sets of concurring/dissenting opinions embracing three separate appeals and five different torts, all of which are canvassed in a 330paragraph decision released following a 10 day appeal hearing. Most courts and academics focus on their Lordships’ general analysis oflegal principles surrounding the tenets of the intentional torts as measured against the old jurisprudence.

However, the application ofthose tenets to the specific cases under appeal is equally as instructive. Often, it is not what one says that is important but rather what onedoes. Some of the following discourse borrows freely from the pithy and incisive analysis of Janet O’Sullivan in her commentary on theOBG decision: see Janet O’Sullivan, “Intentional Economic Torts in the House of Lords” [2007] C.L.J. 503.

Some of the comments areobviously personal observations. [24] Professor O’Sullivan explains that prior to the decision in OBG, the boundaries and principles of the variouseconomic torts in England had become “muddled”. So far as the inducement tort was concerned, the law was firmly settled since Lumleyv. Gye. In that case, the opera impresario Gye had enticed diva Johanna Wagner to break her existing contract with his rival Lumley andto sing for him instead. Lumley recovered for intentionally inducing the breach. What made the inducement tortious was the intention of

procuring Wagner’s breach of her contract with Lumley. The case was of significance because the prior jurisprudence limited the application of the tort to the master/servant relationship and not cases involving an independent contractor. Subsequently, the case would be applied to all contractual relations. Of course, Lumley v. Gye did not address the situation in which the defendant interfered in circumstances where the claimant did not have an existing contract with the third party, or if a contract did exist, the interference did not result in a breach.

These scenarios fell within the tort of “intentionally interfering with business by unlawful means”, as confirmed in Allen v. Flood. In that case, the defendant was found not liable for threatening a lawful strike unless the employer agreed not to hire certain workers, which the employer was free to do, as the workers were only retained on a daily basis. However, liability would attach if the union were to intimidate the potential customers of an employer not to deal with the employer with a view to unionizing its workers.

The “unlawful means” in that instance would be the tort of intimidation committed against the potential customers. Otherwise, promises or threats to do what one is entitled to do are not actionable. [ 25 ] Professor O’Sullivan explains that English law fell into confusion during the second half of the 20 th century, when it tried to unify the two separate torts by treating the Lumley v. Gye tort as merely an example of the unlawful means tort. D.C. Thomson & Co. Ltd. v.

Deakin and Others , [1952] 1 Ch. 646 (C.A.) is cited as the source of the unified theory and the notion of there being a substantive difference between direct and indirect interference, so far as the inducement tort was concerned. In regard to indirect inducement of a breach of contract, the Court of Appeal held that unlawful means were required, but not so for direct inducement ( Lumley v . Gye ).

Eventually there was a perception that the law was threatening to expand liability to encompass situations not falling properly within either tort, such as lawful conduct that interfered with performance of a contract, but which did not induce a breach. As Professor O’Sullivan goes on to explain, the unified theory was also thought to cause confusion when the courts tried to determine what level of intention was necessary for liability. She explains: Should the test be targeting the claimant wanting to cause him harm or intending to cause a breach of contract without necessarily intending the resulting harm?

Should recklessness as to whether harm was caused suffice? What of mere foreseeability of harm? [p. 504] [ 26 ] The three appeals heard in OBG provided the House of Lords with the opportunity to address the muddling of the two intentional torts. Lord Hoffmann authored the majority reasons, and his statements of the relevant principles were largely agreed with by the remaining four justices (the application of those principles to specific cases caused some disagreement). I will explain shortly the differences of opinion between Lord Hoffmann and Lord Nicholls.

For the moment, the decision of Lord Hoffmann is central to how their Lordships unraveled the two intentional economic torts. [ 27 ] With respect to the distinction between the tort of inducing breach of contract and the tort of unlawful interference, Lord Hoffmann identified four key differences. First, the unlawful means tort involves primary wrongdoing, whereas the Lumley v. Gye inducement tort is one of secondary liability. The plaintiff sues the person who breached the contract for the breach of contract (primary liability). The person who induced the breach is sued in tort (accessory liability).

If the plaintiff does not recover from one defendant, the plaintiff may recover from the other. Second, it is a pre-requisite for the unlawful means tort that the defendant has used independently unlawful means, but not so for the Lumley v. Gye tort, which may involve, and often does involve, conduct lawful in itself (gentle persuasion). Third, the Lumley v. Gye tort depends on there being a breach of contract, while the unlawful means tort does not. It may well be that the interference prevents the formation of a contract or its due performance, in which case there has been no breach per se .

Fourth, the question of intent to interfere is dealt with differently under each of the torts. The Lumley v. Gye tort focuses on the intent to induce a breach of the contract and not on whether there was an intention to cause damage to the claimant, as is true in regard to the unlawful means tort. As Professor O’Sullivan succinctly explains: “This means that a defendant is liable under Lumley v.

Gye even if his only motive was to make a profit for himself, rather than wanting to cause loss to the claimant, much as one would imagine was impresario Gye’s state of mind when he lured the diva to his theatre” (p. 505). On the other hand, the unlawful means tort focuses on the intent to cause harm to the claimant. [ 28 ] There are two aspects of the OBG decision that are critical to this appeal. The first pertains to the definition of unlawful means. The second deals with the meaning of “intent” under both intentional torts. I will deal with both aspects in the order stated.

As it was Lord Hoffmann who wrote on behalf of the majority with respect to the definition of unlawful means, I begin with his articulation of the definition: In my opinion, and subject to one qualification, acts against a third party count as unlawful 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. [para. 49] [ 29 ] The qualification to the definition was justified on the basis that in cases involving the defendant’s intimidation of potential customers of the plaintiff, the threats will not usually give rise to a cause of action by the customers, because they will have

suffered no loss. Above all, Lord Hoffmann’s definition does not make room for statutory breaches and, in particular, breaches of a criminal statute. Lord Hoffmann reasoned that it was “not for the courts to create a cause of action out of a regulatory or criminal statute which Parliament did not intend to be actionable in private law” (para. 57). In support of his position, Lord Hoffmann offered two justifications. First, he observed that the common law has traditionally been reluctant to become involved in devising rules of “fair competition” and has left the formulation of such rules to Parliament.

Second, “courts should be similarly cautious in extending a tort which was designed only to enforce basic standards of civilised behaviour in economic competition, between traders or between employers and labour” (para. 56). Lord Hoffmann concluded with the premonition that “there is a danger that [the tort] will provide a cause of action based on acts which are wrongful only in the irrelevant sense that a third party has a right to complain if he chooses to do so” (para. 56). [ 30 ] So too did Lord Nicholls address the meaning to be attributed to the criterion of “unlawful means”.

His minority analysis began by acknowledging there are two views with respect to the scope of the expression. One view is that “unlawful” comprises all acts which a person is not permitted to do. The distinction is between what one has a right to do, and what one has no right to do. This perspective covers “common law torts, statutory torts, crimes, breaches of contract, breaches of trust and equitable obligations, breaches of confidence and so on” (para. 150) and is tied to Lord Reid’s decision in Rookes v. Barnard , [1964] A.C. 1129 (H.L.) .

Lord Nicholls then turned to the other view, that “unlawful” only embraces civil wrongs. A variant of this view is that “unlawful means” are limited to torts and breaches of contract. Lord Nicholls went on to explain the different views are founded on different perceptions of the rationale underlying the unlawful interference tort. Applying the wider perspective, the tort “seeks to curb clearly excessive conduct” (para. 153). “Excessive conduct” is said to be unacceptable conduct. But Lord Nicholls did not end his analysis of this point here.

Here is his ultimate ruling: For these reasons I accept the approach of Lord Reid and Lord Devlin and prefer the wider

interpretation of “unlawful means”.

In this context the expression “unlawful means” embraces all acts a defendant is not permitted to do, whether by the civil law or the criminal law. [para. 162] [ 31 ] Based on the above passage, the only difference in opinion between Lord Hoffmann and Lord Nicholls with respect to the meaning of “unlawful means” is whether the concept should embrace breaches of the criminal law which are not generally actionable. (I assume Lord Nicholls also intended breaches of a statute to constitute unlawful means, but the above passage suggests otherwise.) As should be obvious, their differences of opinion do not impact on the outcome of this case, because we are not dealing with impugned conduct against a third party that involves a breach of a statute, criminal or otherwise. [ 32 ] As noted at the outset, ten months later, the House of Lords adopted the position that, for purposes of the tort of conspiracy, the impugned acts (criminal conduct) did not have to be actionable by the third party: Total Network SL v.

Her Majesty’s Revenue and Customs Commissioners , supra , and see also Agribrands Purina Canada Inc. v. Kasamekas . This acknowledgment is not meant to suggest that the decisions of their Lordships are inconsistent or irreconcilable, as their Lordships do distinguish OBG . The question whether the grounds for the distinction are persuasive is a matter for others to consider.

However, there does not appear to be much controversy over the ultimate outcome in Total Network : see Janet O’Sullivan, “Unlawful Means Conspiracy in the House of Lords”, [2008] C.L.J. 459. [ 33 ] The other issue addressed in OBG , which is directly relevant to the present appeal, is the matter of establishing intent under both the unlawful means and inducement torts. On this issue, Lord Hoffmann and Lord Nicholls are in agreement. But it is Lord Hoffmann who dealt with the issue in greater depth.

As an aside, those called on to consider this issue typically focus on paragraph 62 of his reasons, to the exclusion of his analysis of the intent issue when disposing of one of the three appeals ( Douglas v. Hello! Ltd. ). At paragraph 62, Lord Hoffmann distinguished between the intent requirement as it applies to each of the two economic torts: Finally, there is the question of intention. In the Lumley v Gye tort, there must be an intention to procure a breach of contract. In the unlawful means tort, there must be an intention to cause loss. The ends which must have been intended are different.

South Wales Miners’ Federation v Glamorgan Coal Co Ltd [1905] AC 239 shows that one may intend to procure a breach of contract without intending to cause loss. Likewise, one may intend to cause loss without intending to procure a breach of contract. But the concept of intention is in both cases the same. In both cases it is necessary to distinguish between ends, means and consequences. One intends to cause loss even though it is the means by which one achieved the end of enriching oneself.

On the other hand, one is not liable for loss which is neither a desired end nor a means of attaining it but merely a foreseeable consequence of one’s actions. [para. 62] [ 34 ] It must be recognized that the above passage represents general remarks made in the context of both intentional economic torts. What cannot be overlooked is Lord Hoffmann’s subsequent analysis dealing with the question of intent within the context of one of the three appeals being heard in OBG ( Douglas v. Hello! Ltd .). At this juncture, Lord Hoffmann was speaking of intent within the tort of unlawful interference.

Therein, his Lordship cautioned against giving an artificially narrow meaning to the concept of intention. He went on to note there are two ways of restricting the ambit of the tort of unlawful interference: one is to define the meaning

of “unlawful conduct” narrowly; the other is to define the meaning of “intent to cause harm” narrowly. What Lord Hoffmann found dangerous was giving a broad meaning to the concept of unlawfulness and then giving an artificially narrow meaning to the concept of intention. His framework calls for a narrow definition of unlawful conduct and a broad definition of intent to cause harm.

Lord Hoffmann stated: The analysis of intention by the Court of Appeal in my opinion illustrates the danger of giving a wide meaning to the concept of unlawful means and then attempting to restrict the ambit of the tort by giving a narrow meaning to the concept of intention. The effect is to enable virtually anyone who really has used unlawful means against a third party in order to injure the plaintiff to say that he intended only to enrich himself, or protect himself from loss.

The way to keep the tort within reasonable bounds is not to extend the concept of unlawful means beyond what was contemplated in Allen v Flood , rather than to give an artificially narrow meaning to the concept of intention. [para. 135] [ 35 ] It goes without saying that a defendant may intend to harm the claimant as an end in itself or as a means to an end. The former would arise in cases where the defendant interfered with the plaintiff’s business relations out a sense of spite or malice, as reflected in a grudge. Rarely, if ever, do we see such cases working their way onto a judicial docket.

At the same time, the law is clear: a finding of malice or ill-will is not a condition precedent to establishing liability with respect to the intentional torts. South Wales Miners’ Federation v. Glamorgan Coal Company Limited , [1905] A.C. 239 (H.L.) , stands for the proposition that it is no defence to an action for inducing a breach of contract that the defendant acted in good faith or without malice.

In OBG , Lord Hoffmann noted that some writers had expressed regret that “bad motive” had not been adopted in English law as a ground for liability, as is the case in Germany and some jurisdictions in the United States, but agrees with British commentators that “we are better off without it” (para. 14). On the other hand, the intent to cause harm as a means to an end is illustrated in those cases where the defendant’s intimidation of potential customers not to do business with the plaintiff is carried out with a view to forcing the plaintiff to do something that it would not otherwise do.

The classical example is the union which intimidates an employer’s potential customers in the hope of unionizing the employer’s workers. In other instances, the defendant may have engaged in unlawful conduct solely for the purpose of reaping the benefit that would have otherwise accrued to the plaintiff. The injury in the latter case is regarded as the means for achieving a desired end and “not merely a foreseeable consequence of having done so” (Lord Hoffmann, at para. 134). [ 36 ] Lord Nicholls succinctly expressed his understanding of the intent requirement in a manner consistent with Lord Hoffmann’s.

Lord Nicholls explained that where a defendant seeks to advance his own interest by pursuing a course of conduct which he knows will necessarily be injurious to the claimant, the defendant’s gain and the plaintiff’s loss are inseparably linked.

If the defendant cannot obtain the one without bringing about the other, Lord Nicholls concluded the defendant’s state of mind will satisfy the intent requirement of the tort of unlawful interference (para 167). [ 37 ] The practical application of Lord Hoffmann’s broad approach to the question of intent is illustrated by reference to the manner in which he disposes of the appeal in Douglas v. Hello! Ltd. The essential facts of that case are as follows. Michael Douglas and Catherine Zeta-Jones provided OK!

Magazine with the exclusive right to publish photographs of their forthcoming marriage for £ 1 million, in preference to the rival magazine Hello!. Under the agreement, the Douglases agreed to retain the photographer and to use their best efforts to ensure that no one else would take photographs. Through no fault of the Douglases, a freelance photographer infiltrated the wedding and took photographs, six of which he sold to Hello! for £ 125,000. Hence, OK! could not and did not sue Hello! for inducing a breach of contract, as the Douglases were not in breach of their contract with OK!.

The unauthorized photos were then published prior to OK! publishing its authorized photos. OK! sued Hello! for breach of confidence and for causing loss by unlawful means. [ 38 ] The House of Lords allowed OK!’s action for breach of confidence while upholding the trial judge’s decision rejecting the claim for unlawful interference. However, Lord Hoffmann reasoned that both the trial judge and Court of Appeal erred in dismissing the claim on the basis that Hello! did not intend to cause loss to OK!. Both intermediate courts had based their decision on the evidence of the editor of Hello!.

He testified that he sought only to defend his publication against the damage it might suffer on account of having lost the exclusive right to publish to OK!. Lord Hoffmann rejected this argument. He held Hello! knew that any gain to be realized from the publication of the unauthorized pictures would result in a corresponding loss on OK!. This led Lord Hoffmann to conclude: “The injury to OK! was the means of attaining [the editor’s] desired end and not merely a foreseeable consequence of having done so” (para 134). [ 39 ] Having established the requisite intent to cause harm in Douglas v. Hello!

Ltd. , one is left to ask why the claim for unlawful interference failed. Curiously, Lord Hoffmann did not dismiss the appeal on the basis the impugned conduct was not independently actionable (unlawful). He dismissed the appeal because the publication of the photos did not interfere with the contractual relationship between the Douglases and OK!. Alternatively stated, neither the photographer nor Hello! did anything to interfere with the liberty of the Douglases to deal with OK! or perform their respective obligations under their contract.

According to Lord Hoffmann: “All they did was to make OK!’s contractual rights less profitable than they would otherwise have been” (para. 129). This finding requires further elaboration.

[40] Lord Hoffmann’s analysis brings to light the distinction between an impugned act which interferes withcontractual relations between the claimant and a third party, and conduct which merely affects the profitability of their contractualrelationship. Let me explain. Lord Hoffmann’s reasons point out that “unlawful means” does not include acts which may be unlawfulagainst a third party, but which do not affect his freedom to deal with the claimant (plaintiff). His Lordship cited RCA Corporation v.Pollard, [1983] Ch. 135 (C.A.), as an example.

In that case, the plaintiff had the exclusive right to exploit records made by Elvis Presley.The defendant was selling “bootleg records” made at Elvis Presley concerts without the plaintiff’s consent. This was in contravention ofthe legislation in force which made bootlegging a criminal offence and provided performers such as Elvis Presley with a direct cause ofaction against the defendant, but said nothing of persons in the position of RCA. The English Court of Appeal held that a breach of thelegislation did not provide RCA with a cause of action.

But Lord Hoffmann went further and pointed out that the defendant was notinterfering with the contractual relationship between the estate and RCA. The defendant was merely affecting the profitability of RCA’scontract, and that fact alone was not a justification for allowing RCA to sue for unlawful interference. In brief, conduct which merelyrenders contractual rights less valuable is not actionable.

There must be interference with the performance of the contractual obligations.While Lord Hoffmann was dealing with the question of whether the “unlawful means” definition should embrace criminal or statutorywrongs, and while he concluded it was not for the courts to create a cause of action out of a regulatory or criminal statute whichParliament did not intend to be actionable in private law, the notion that the tort of “unlawful means” fails because the interferencerelates to the profitability of the contract centers prominently in the reasons. [41] Lord Nicholls rejected OK!’s claim for breach of confidence.

He also rejected the claim for unlawfulinterference, but for a reason different than the one which Lord Hoffmann proffered. Lord Nicholls reasoned that the only conduct whichcould possibly qualify as “unlawful means” was the trespass committed by the photographer who took the unauthorized photos. As hewas not the agent of Hello!, the tort claim had to fail. The remaining three judges expressed no opinion on why the appeal in Douglas v.Hello! Ltd. should be dismissed.

Their respective analyses focused more on the relatively recent tort of breach of confidence. [42] This is a convenient point to refer to the other appeal before the House of Lords that involved the tort ofunlawful interference. In OBG Ltd. v. Allan, [2005] EWCA Civ. 106, the defendants were receivers, purportedly appointed under afloating charge which was admitted to have been invalid. Acting in good faith, they took control of the claimant company’s assets andundertaking, and then terminated contracts which the claimant had with third parties.

The company (OBG) claimed this conduct was notonly a trespass to its land and a conversion of its chattels, but also actionable under the tort of unlawful interference with contractualrelations. The company claimed the defendants were liable in damages for the value of the assets and undertaking, including the value ofthe contractual claims, as at the date of their appointment. An alternative claim based on conversion was also advanced. The trial judgeaccepted the claim for unlawful interference.

By a majority, the Court of Appeal reversed this decision. [43] Lord Hoffmann summarily upheld the majority decision of the Court of Appeal on the basis the receiversneither employed unlawful means nor intended to cause the company any loss. He also questioned whether the criterion of proximatecause had been established, because OBG suffered a loss which it would not have otherwise suffered as a result of the invalidappointment of the receivers. One final observation on OBG Ltd. v. Allan. Lord Hoffmann agreed the claim in conversion was properlydismissed by all the judges who had dealt with the claim.

On this point, Lord Hoffmann concluded: “Against this background, I suggestto your Lordships that it would be an extraordinary step suddenly to extend the old tort of conversion to impose strict liability for pureeconomic loss on receivers who were appointed and acted in good faith” (para. 99). VI. The Canadian Framework [44] Strictly speaking, it is misleading to speak in terms of a Canadian framework. The Supreme Court of Canadahas yet to wade into the debate surrounding the proper tenets of the intentional torts. There are a few older cases far removed from theissues now under consideration: Roman Corp. v.

Hudson’s Bay Oil & Gas Co., (SCC), [1973] S.C.R. 820, [1973] S.C.J.No. 70 (QL) and International Brotherhood of Teamsters v. Therien, (SCC), [1960] S.C.R. 265, [1960] S.C.J. No. 6(QL). The conspiracy tort is dealt with in Cement LaFarge v. B.C. Lightweight Aggregate, (SCC), [1983] 1 S.C.R. 452,[1983] S.C.J. No. 33 (QL). See also The Queen (Can.) v. Saskatchewan Wheat Pool, (SCC), [1983] 1 S.C.R. 205,[1983] S.C.J.

No. 14 (QL), regarding the effect of a statutory breach on civil causes of action. [45] Canadian law is largely a collection of provincial decisions attempting to unravel the tenets of the English lawand to reconcile jurisprudence which, on occasion, is incapable of reconciliation. It is an understatement to acknowledge that Canadiancourts have relied heavily on the English jurisprudence, despite the occasional reference to American text writers and jurisprudencewhich also draws from English case law.

As the practitioner writing in The Lawyers Weekly observed: “Some of the law is archaic; untilrecently, little of it has been Canadian; and much of it is difficult to understand.” [Peter Wardle, October 14, 2011.] On the other hand, anumber of authors have offered their insight into this area of the law. Professor G.H.L. Fridman, in his text The Law of Torts in Canada, 3rd ed. (Toronto: Thomson Reuters, 2010), offers an historical overview of the unlawful means tort, including the decision in OBG and several of the Ontario Court of Appeal decisions.

Professor Klar offers an extensive analysis in his text Tort Law, 4th ed. (Toronto:Thomson Canada, 2008). More recently, Professors Burns and Blom have addressed the economic torts in their text Economic Interestsin Canadian Tort Law, (Markham, Ont.: LexisNexis, 2009).

[46] It is worth drawing attention to a 1980

article published in the Canadian Bar Review and authored by ProfessorPeter Burns: “Tort Injury To Economic Interests: Some Facets Of Legal Response”, (1980) 58 Can.B.Rev. 103. As of 1980, ProfessorBurns deduced that there were three essential elements to the tort of causing harm by unlawful means: (1) the defendant intended to harmthe plaintiff; (2) subsequent injury or economic loss; and (3) the presence of unlawful means in the defendant’s conduct (p. 141).Professor Burns went on, however, to question whether the law actually recognized a tort of deliberate infliction of harm by unlawfulmeans.

He also observed that Canadian judges had embraced the “unlawful means” doctrine with a “vigueur” equal to that of theirEnglish counterparts. As to the scope of the unlawful means requirement, Professor Burns observed that tortious conduct, and even abreach of statute, might qualify. But he concluded with the observation: “For the most part, however, the determination of whatconstitutes unlawful means has been made on an ad hoc basis” (p. 141). [47] It is also worth highlighting the influential decision of Lord Denning in Torquay Hotel Co., Ltd. v.

Cousins andOthers, [1969] 1 All E.R. 522 (C.A.), because his treatment of the unlawful means issue has been a mainstay of the Canadianjurisprudence. Once again, Lord Denning affirmed the distinction between direct and indirect interference and the proposition that theclaimant need only establish unlawful means in cases of indirect interference. As to what is or is not unlawful, this is what the Master ofthe Rolls had to say: I must say a word about unlawful means, because that brings in another principle.

I have always understood that if one persondeliberately interferes with the trade or business of another, and does so by unlawful means, that is, by

an act which he is not at liberty tocommit, then he is acting unlawfully, even though he does not procure or induce any actual breach of contract. If the means are unlawful,that is enough. [p. 530] [Emphasis added.] [48] The above passage, however, is not complete. Lord Denning went on to give two examples of unlawfulconduct, both of which are actionable at common law: intimidation and inducing breach of contract. Indeed, if the principles of OBGwere applied to Torquay, the result today would appear to be the same if we were to ignore the impact of any labour legislation.

InTorquay, the Transport Union instructed its members who were drivers and employees of Esso not to deliver oil to the Imperial Hotel, inbreach of their employment contracts. Because the contract between Esso and the Imperial Hotel contained a force majeure clauseregulating industrial disputes, Esso’s failure to deliver oil did not result in a breach of the underlying supply agreement.

Applying OBG,the Imperial Hotel could maintain its action against the Transport Union because the third party (Esso) had a cause of action against theTransport Union for inducing the drivers to breach their employment contracts with Esso. In short, the Transport Union used unlawfulmeans to interfere with the contractual relationship between the Imperial Hotel and Esso. Therefore, the action for unlawful means by theImperial Hotel against the Transport Union would survive under common law principles. [49] Fast forwarding to the late 1990s, we find the trial decision of Cumming J. in 671122 Ontario Ltd. v.

SagazIndustries Canada Inc., (ON SC), [1998] O.J. No. 2194 (Gen. Div.) (QL), being restored by the Supreme Court ofCanada with respect to an issue not directly relevant to his rulings regarding the intentional torts (see 2001 SCC 59 , [2001] 2S.C.R. 983, [2001] S.C.J. No. 61 at paras. 12-13 (QL)). The trial decision, however, offers an incisive analysis with respect to theunlawful interference tort at that time.

Any ambiguity as to the tort’s existence was succinctly dispelled by Cumming J.: Until recent times, the general position of the common law had been that short of direct or indirect interference with anexisting contract, interference with economic relations did not constitute a tort. The underlying rationale for this position is that there is asignificant public interest in maintaining and facilitating free competition in the marketplace.

However, in 1964 the House of Lordsconfirmed the tort of intimidation, being to coerce a person by unlawful threats, into doing something or abstaining from doingsomething she had every right to do; see: Rookes v. Barnard [1964] A.C. 1129. This tort is now viewed as being illustrative of a broaderemergent tort, of uncertain ambit, what may be characterized as being the tort of unlawful interference with economic relations’. [para.52] [50] Cumming J. also set out what he regarded to be the essential elements of the unlawful means tort.

He identifiedsix: 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 economicrelations’.

The elements of the tort of unlawful interference with economic relations’ are: (1) the existence of a valid business relationshipor business expectancy between the plaintiff and another party; (2) knowledge by the defendant of that business relationship orexpectancy; (3) intentional interference which induces or causes a termination of the business relationship or expectancy; (4) theinterference is by way of unlawful means; (5) the interference by the defendant must be the proximate cause of the termination of thebusiness relationship or expectancy; and (6) there is a resultant loss to the plaintiff. [para. 56]

[51] Critical to the Sagaz case is the requirement that the interference involve unlawful means. As the defendanthad bribed the third party, the requirement of unlawful means was held to be satisfied. But if we apply OBG, the result would bedifferent today because bribery is a criminal wrong (s. 426 of the Criminal Code deals with secret commissions), which, if I understandcorrectly, is not independently actionable at common law. [52] In Saskatchewan Financial Services Commission v. Mallard, 2011 SKCA 38, [2011] S.J.

No. 208 (QL), thechambers judge (Ottenbreit J.A.) was presented with the argument that the OBG formulation of the tort was not uniformly adopted acrossCanada, citing Conway v. Zinkhofer, 2008 ABCA 392, [2008] A.J. No. 1262 (QL). In the latter case, no mention was made of OBG. TheAlberta Court of Appeal referred only to the trial judge’s decision, which had adopted a broad definition of unlawful means, the onearticulated by the Ontario Court of Appeal in Reach M.D. Inc. v. Pharmaceutical Manufacturers Assn. of Canada, (ON CA), [2003] O.J. No. 2062 (C.A.) (QL).

The chambers judge in Mallard was considering a motion for leave to appeal from thedismissal of an interlocutory application to strike a statement of claim that included a claim for unlawful interference with contract. Theleave application was allowed. [53] Ontario is the one province which has had several opportunities (seven to be exact) to deal with the intentionaltorts over the last 15 years. Three decisions predate OBG. They are Lineal Group Inc. (c.o.b. Samsonite Furniture) v. Atlantis CanadianDistributors Inc., (ON CA), [1998] O.J. No. 4499 (C.A.) (QL); Reach M.D., supra; and Drouillard v.

Cogeco CableInc., 2007 ONCA 322, [2007] O.J. No. 1664 (QL). Collectively, those decisions adopt a broad definition of unlawful means. The fourthdecision acknowledges the decision in OBG but the case does not touch on the issue under consideration: Ontario Racing Commission v.O’Dwyer, 2008 ONCA 446, [2008] O.J. No. 2219 (QL). The next decision is Correia v. Canac Kitchens, supra.

For present purposes,the case is important because the Court of Appeal was careful not to offer an exhaustive definition of “unlawful means”: “We note that itis not necessary to fully define the scope of the ‘unlawful means’ component of the tort of intentional interference with economicrelations to resolve this case” (para. 197). This leads me to what I regard the lead decision of the Ontario Court of Appeal, authored byGoudge J.A.: Alleslev-Krofchak v. Valcom Ltd., supra.

I am acutely aware of another decision of that Court released 10 days later andwhich some have viewed as being incompatible with the earlier pronouncement (Barber v. Molson Sport & Entertainment Inc., 2010ONCA 570, [2010] O.J. No. 3697 (QL)). However, and with the greatest of respect, I still regard the reasons of Goudge J.A. as reflectingthe law of Ontario. [54] The reasons of Goudge J.A. in Alleslev-Krofchak are as thorough as they are persuasive. But like the Court inCorreia, Goudge J.A. is cautious about ruling on the scope of the unlawful means definition.

He observes: Like the Court in Correia, I would say that there may be aspects of the concept of “unlawful means” yet to be fully defined.

In particular,the extent of actionability by the third party, or whether as Lord Hoffmann suggests, this requirement is subject to any qualifications,need not be fully defined in this case. [para 63] The context in which the caveat is first stated in Correia, and repeated in Alleslev-Krofchak, is important because it deals with anotheraspect of the unlawful interference tort which is not dealt with in OBG, save perhaps for a passing line in the reasons of Lord Nicholls (atpara. 166).

Let me explain. [55] In both Alleslev-Krofchak and Correia, the Court of Appeal held: “The intentional torts exist to fill a gap whereno action could otherwise be brought for intentional conduct that caused harm through the instrumentality of a third party” (para. 107 ofCorreia, cited at para. 58 of Alleslev-Krofchak). Therefore, to qualify as “unlawful means”, the defendant’s actions cannot be actionabledirectly by the plaintiff. In other words, one cannot sue for unlawful interference if the impugned conduct of the defendant is directlyactionable by the plaintiff.

A truncated and distorted version of the facts in Alleslev-Krofchak illustrates the application of thisqualification. The plaintiff, acting though her professional corporation, entered into a contract to provide consulting services to ARINCwhich, in turn, had contracted to provide the plaintiff’s consulting services to the defendant Valcom, for whom the defendants Poulin andLewis worked. The defendants Valcom/Poulin/Lewis defamed the plaintiff with a view to having ARINC terminate the plaintiff’sservice contract. Instead, ARINC terminated the consulting contract.

The plaintiff sued the defendants for unlawful interference based onthe defamatory comments made to ARINC with a view to bringing about the termination of her consulting contract. The Court of Appealheld that, as the defamatory statements were directly actionable, there was no room left for the unlawful interference tort. [56] This leads me to the point where this Court must isolate the essential tenets of the unlawful means tort.Building upon OBG and the earlier Canadian precedents, including Sagaz, I would offer the following general model which may, withthe fullness of time, need refinement.

The plaintiff/claimant must establish: (1) the existence of a valid business relationship between theclaimant and the third party; (2) the defendant knew or ought to have known of the relationship; (3) the defendant’s interferenceprevented the formation of a contract or its performance in circumstances where there is no breach of an existing contract; (4) thedefendant’s impugned conduct must qualify as unlawful means or as warranting exceptional treatment; (5) the unlawful means must notbe actionable directly by the claimant; (6) the defendant must have intended to cause the claimant harm; and (7) the defendant’s conductmust have been the proximate cause of the claimant’s loss.

From the defendant’s perspective, the analytical framework should embrace:(8) the defence of justification, which requires elaboration. [57] Some Canadian cases speak of the defence of justification as a component of the analytical framework. Indeed,

the early English jurisprudence of the House of Lords speaks of procuring a breach of contract as an actionable wrong unless the interference with a legal right can be justified: South Wales Miners’ Federation v. Glamorgan Coal Company Limited , supra. By contrast, OBG does not mention this topic, other than to hold that malice is not an essential element of the economic torts. In other words, “lack of malice” cannot be used as a shield. As mentioned earlier, in SAR Petroleum Inc. v. Peace Hills Trust Co., this Court dealt with the application of the principles articulated in OBG , as they apply to the Lumley v.

Gye tort. More importantly, SAR Petroleum makes room for the defence of justification when dealing with the question of intent. [ 58 ] For example, the plaintiff has a contract with a third party, which the third party breaches as a result of

an act of the defendant, in circumstances where the defendant knew of the contract between the plaintiff and the third party. As well, it is clear the defendant knew that his or her actions would lead to a breach. However, it also happens that the defendant and the third party are in a direct contractual relationship. So far as the defendant is concerned, the shortcut to

summary dismissal of the claim is to establish he or she was acting within his or her contractual rights with the third party and, therefore, while the breach between the third party and plaintiff may have been inevitable or foreseeable result of what the defendant did, that is not sufficient to ground liability. There can be no objection to one person pursuing his or her self interests where the pursuit is based on contractual rights which are self-evident or have an air of reality when measured against interpretative principles or case law.

The recent decision of the Ontario Court of Appeal in Print N’ Promotion (Canada) Ltd. v. Kovachis , 2011 ONCA 23 , [2011] O.J. No. 62 (QL) is on point. [ 59 ] In

summary, how can a defendant be found to have the requisite intent to induce a breach, when all the defendant was doing was honestly pursing his or her own interests under a contract to which the claimant was not a party? Correlatively, how can a defendant be found liable for interfering with the contractual relations of a claimant and a third party in circumstances where the defendant is honestly pursuing his or her self–interests pursuant to contractual rights? This is how I view the defence of justification. VII.

Issues [ 60 ] This case does not have to deal with whether non-actionable conduct tied to a breach of a statute (criminal or otherwise) falls within the definition of unlawful means. Nor does this case have to deal with the matter of interference with a contract that affects its profitability, as opposed to the ability of the third party to perform a contractual undertaking. Putting aside those issues, the grounds set out in the Notice of Appeal may be grouped under six headings. The appellants allege the trial judge erred: (1) in his

interpretation of the syndication agreement; (2) in concluding the appellants were the proximate cause of the respondents’ loss; (3) in failing to appreciate the appellants lacked knowledge or sufficient knowledge of the respondents’ contractual dealings with third parties (Bloomfield and Greenarm); (4) in concluding the appellants possessed the requisite intent to inflict economic harm on the respondents; (5) in failing to apply the narrow definition of “unlawful means” articulated in OBG (independently actionable); and (6) in his assessment of damages. I shall deal with the issues in the order stated. A.

Misinterpretation of Syndication Agreement [ 61 ] The appellants argue the trial judge erred in concluding they had no “lawful reason” to file the Notice of the Right of First Refusal set out in

section 9.01 of the syndication agreement. They argue the respondents led no evidence to establish that a meeting of the investors was held in accordance with

section 6.03(

d) for the purpose of approving the listing of the property for sale under

section 9.02(e). That being the case, they argue the only way the majority could dispose of the property was in accordance with

section 9.01, which provides the minority investor with a Right of First Refusal in cases where the majority is presented with an offer to purchase. This leads the appellants to conclude the filing of the Notice of the Right of First Refusal was “justified” and not “unlawful”. This argument is to be contrasted with the trial judge’s factual finding that the sale of the property was initiated in accordance with the provisions of the syndication agreement. In any event,

section 6.03(

d) states that a decision to list the property for sale requires approval by investors holding a 60% interest in the investment. The trial judge’s conclusion that the majority of investors had complied with the provisions of the syndication agreement, together with the evidentiary record brought to our attention by the respondents, is sufficient to dispose of this argument. [ 62 ] There is, however, one aspect of the Right of First Refusal that requires attention.

In the record before us, there is reference to the understanding that once the majority offered to sell the property to the minority investor, who declined the offer by allowing it to lapse, the Right of First Refusal expired. This is not so. The Right of First Refusal provided for under

section 9.01 is triggered by a different set of circumstances than those found in

section 9.02. Thus, if the pursuit of a sale under

section 9.02 is not productive and the real estate listing expires, the Right of First Refusal found in

section 9.01 would remain intact and apply, should the majority subsequently receive an unsolicited offer to purchase. That being so, it could be argued that the filing of the Right of First Refusal was in accordance with the syndication agreement and for the bona fide purpose of preserving a contractual right that could come into play at a later date. However, the argument would have to be rejected. Once the majority triggered

section 9.02, Alan Schelew and A.I. Enterprises knew that the Right of First Refusal had not been triggered, yet they went ahead and filed the Notice of Right of First Refusal. Common sense dictates that they must have known that the Notice would impose an impediment to those genuinely interested in purchasing the apartment complex, regardless of its applicability. And the same holds true with respect to the subsequent filing of the Certificate of Pending Litigation. In short, the appellants cannot seek to clothe their actions with respectability by sheltering

behind contractual rights that have no application. B. Proximate Cause [ 63 ] The appellants argue the respondents failed to establish that the impugned conduct of the appellants was the proximate cause of the decision of either Bloomfield or Greenarm to withdraw from their respective sales contracts. At this point, it makes no difference whether the impugned conduct qualifies as “unlawful”.

What is important is that the impugned conduct has three sources: (1) filing of the Right of First Refusal; (2) filing of the Certificate of Pending Litigation; and (3) refusal to provide the majority with physical access to the building in order to permit Greenarm to carry out an inspection of the building along with officials from CMHC. This leads one to ask whether either of the two prospective purchasers withdrew from their executory contract because of one or more of these three acts. [ 64 ] The appellants’ argument is carefully drafted to focus on each of the prospective purchasers.

The first question posed is whether there is sufficient evidence to support the finding that Bloomfield withdrew from its contract because of the defendants’ actions. The question is valid, as no one from Bloomfield testified at trial as to the reasons underlying its decision to withdraw from the contract three weeks prior to the contract’s expressed closing date. The only documentary evidence tendered to explain Bloomfield’s reason for its withdrawal is contained in a one-sentence letter penned by Phil Fraser, on behalf of Bloomfield.

The letter states: “Due to the uncertainty of this sale we cannot confirm the balance of our financing and regret to inform you that we will not be carrying on and request our deposit back.” Neither Mr. Fraser nor anyone else associated with Bloomfield testified. The trial judge stated that Tim Lyons, the real estate agent retained to market the property, testified the only uncertainty he was aware of was the Notice of Right of First Refusal which Alan Schelew had filed. Based on Mr. Lyons’ testimony, the trial judge effectively ruled that Bloomfield had withdrawn from the sale because of the filed notice.

The appellants claim that the trial judge erred in so holding. Their argument is as follows. [ 65 ] The defendants objected to Mr. Lyons providing testimony with respect to the meaning of the letter. The trial judge allowed the question, but noted that any answer based on what Mr. Lyons had been told by representatives of Bloomfield would not have the same weight if those representatives were not called to testify, which they did not. The appellants submit that the trial judge erred in admitting Mr. Lyons’ evidence.

His evidence is not legally relevant as to why Bloomfield withdrew and even if it were, the appellants properly submit that Mr. Lyons’ answers would constitute inadmissible hearsay: Sopinka, Lederman & Bryant, The Law of Evidence in Canada , 3 rd ed. (Markham, Ont.: LexisNexis, 2009), at 2.35. I agree. Accordingly, the plaintiffs failed to establish a proper evidentiary basis to support the argument that the actions of Alan Schelew were the proximate cause of Bloomfield’s decision to withdraw from the sale transaction.

Whether or not the trial judge could have drawn a reasonable inference from the evidentiary record to support a finding of proximate cause is not an issue on this appeal. [ 66 ] We are left to consider whether the actions of Alan Schelew (acting for A.I. Enterprises) were the proximate cause for Greenarm’s decision to end negotiations for the purchase of the apartment building. The thrust of the argument is that the trial judge erred in failing to consider the temporal connection, if any, between the unlawful actions of the appellants and Greenarm’s decision to withdraw from the contract.

Parenthetically, the same argument was also advanced in regard to the Bloomfield transaction. [ 67 ] The appellants’ argument is not complicated. The impugned conduct which could have formed the basis of Greenarm’s decision to withdraw consists of one or more of the three acts identified earlier: (1) the filing of the Right of First Refusal: (2) the filing of the Certificate of Pending Litigation; and (3) the denial of physical access to the building.

The appellants maintain that only the registration of the Right of First Refusal could have had any causal relation, as the other two matters relate to conduct which occurred after the expiration of the agreement of purchase and sale which Greenarm had sign

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