Dear Colleagues:
Those of you interested in the economic torts will be interested in a recent decision of the NBCA which discusses the ambit of the unlawful means tort in Canadian law: see A.I. Enterprises Ltd. v. Bram Enterprises Ltd. 2012 NBCA 33.
The decision makes three main points:
1. That the test from the HL in OBG v Allan is generally the law of Canada.
2. But that there should be principled exceptions to Lord Hoffmann’s “independent actionability” requirement. (As the court noted: “It seems to me that the Supreme Court of Canada typically eschews the formulation of rules or frameworks which do not admit exceptions”).
3. That there is a defence of justification to the unlawful means tort.
The facts of the case were roughly as follows: The plaintiffs and defendant purchased a commercial property through an agent (in which title to the land was vested). The relationship between the agent and the investors was regulated by a syndication agreement. The agreement included a clause that permitted the defendant to purchase the building at appraised value in the event that the plaintiffs sought to sell, failing which the property would be marketed to the public. The plaintiffs sought to sell the building but the defendant declined to purchase the building at its appraised value. In order to block any sale of the building, the defendant filed a notice of the right of first refusal on the title, initiated arbitration proceedings, registered liens against title, and refused entry to the plaintiffs for inspection by prospective purchasers. This continued on for some 20 months during which time two highly lucrative sales failed to close. In the end, the defendant purchased the building at the appraised value. The plaintiffs then sued for the difference they would have received had the purchase completed on the basis of the earlier offers.
The NBCA awarded damages based on the unlawful means tort. As the Court reasoned:
[79] If we do adopt Lord Hoffmann's definition, there can be no doubt that a requirement of the impugned conduct being independently actionable by the third party (the potential purchasers in this case) would be fatal to the trial judge's finding of tort liability for unlawful interference. There would be no reasonable cause of action open to [the potential purchasers in this case]. For example, the potential purchasers could not have sued [defendant] for inducing a breach of contract, as the executory contracts of purchase and sale were not breached. They simply expired or the parties withdrew without objection of the other party. …
[80] I am now left to consider whether this Court should embrace the narrow definition of "unlawful means" as outlined in OBG. As a starting point, no one questions the merit of the narrow definition of "unlawful means" when compared to earlier formulations. … In my opinion, [the earlier] definitions fail for vagueness. However, the critical issue is whether the independent actionability requirement should be flexible and allow for exceptions, or exceptional categories, consistent with the tort's objectives, without undermining the goal of certainty in the law. In my view, the question deserves a positive response. …
[82] Having concluded the accepted definition of "unlawful means" must allow for exceptions, I agree that any exception must not stifle or unduly impede the ability of others to engage in fair competition in the marketplace. In short, the law should only encourage principled exceptions to the narrow definition. In my view, the facts of the present case warrant exceptional treatment. As stated at the outset, the intentional erection of 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. While this is not a case where the plaintiffs could have alleged the tort of abuse of legal process, the facts are akin to an abuse of statutory process, for which there is no civil remedy.
Personally, I do not find any of this particularly persuasive since I do not understand what makes this exception “principled” or why it demands treatment under the unlawful means tort rather than some sort of expansion of the tort of abuse of process or slander of title or how in the end it is different than the "not at liberty to commit" test that is criticized. As always, I would be interested in other list members’ views.
Sincerely,
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Jason Neyers
Associate Professor of Law
Faculty of Law
Western University
N6A 3K7
(519) 661-2111 x. 88435