A.I. Enterprises Ltd. v. Bram Enterprises Ltd.: Clarifying the Tort of Intentional
Interference with Economic Relations
David S. Steinberg, Pape Barristers
Introduction
Intentional interference with economic relations is frequently pleaded in commercial litigation.
Yet few understand the tort. In part, this stems from long-standing confusion within the law. Even
its name is unsettled1.
In A.I. Enterprises Ltd. v. Bram Enterprises Ltd., 2014 SCC 12, the Supreme Court of Canada has
now clarified what this tort is – and what it is not – and limited its scope according to certain
principles.
Whether the policy rationales underlying A.I. Enterprises are sound is for others to debate. The
purpose of this paper is to summarize the Court’s decision, and explain what use we as lawyers
should (and should not) make of the intentional interference tort in developing litigation strategy.
The Case
A.I. Enterprises arose from a dispute between family members about whether to sell an apartment
building they co-owned. Title to the property was held by Joyce Avenue Apartments Ltd.
(“Joyce”), a corporation owned by Lillian Schelew and her four sons (Jeffrey, Michael, Bernard
and Alan) through three holding companies: Bram Enterprises Ltd. (“Bram”), Jamb Enterprises
Ltd. (“Jamb”), and A. I. Enterprises Ltd. (“A.I.”). Shares of Bram and Jamb were equally held
among the four sons, and Lillian held voting preference shares in Bram. Alan was the sole owner
and director of A.I.
A syndication agreement (“the agreement”) between Joyce, Bram, Jamb and A.I. provided that a
majority of them could cause the building to be sold, subject to a right of first refusal to any
dissenting investor to buy it based on a professionally appraised value. The agreement further
provided that in the event such an appraisal was obtained, an irrevocable offer to sell would be
deemed to have been made to the dissenting investor, such offer to remain open for fifteen days.
In 2000, all of the family members except Alan wanted to sell the building. The majority caused
Bram and Jamb to give notice to A.I. as provided under the agreement, and the building was then
appraised, at $2.2 million. When A.I. did not accept the deemed offer within the prescribed fifteen
days, the building was listed for sale. Several potential third party purchasers expressed interest,
The tort is variously referred to as “intentional interference with economic relations”, “unlawful
interference with economic relations”, “interference with a trade or business by unlawful means”, and
“causing loss by unlawful means”: A.I. Enterprises Ltd. V. Bram Enterprises Ltd. 2014 SCC 12, at paras.
2, 28 (“A. I. Enterprises”).
1
and over the next two years Joyce entered into agreements of purchase and sale with two of them.
Neither of those agreements was completed, however.
The trial judge found that Alan (and through him, A.I.) thwarted the majority’s legitimate efforts
to sell the property to a third party. In particular, he found that Alan and A.I. (a) misused arbitration
provisions under the agreement in an effort to stall such a sale; (b) registered a baseless “Notice of
first right of refusal” and a similarly unfounded certificate of pending litigation against title to the
property; and (c) denied prospective buyers access to the building.
The trial judge further found that these acts were not legally justified and were intended to and in
fact had the effect of “complicating, delaying, impeding and ultimately for all intents and purposes
completely obstructing and preventing” a successful third party sale 2. The trial judge thus found
Alan and A.I. liable for intentional interference by unlawful means.
Ultimately, A.I. bought the building in 2002 for $2.2 million – based on the appraised value from
two years earlier, when the majority had first decided to sell. The trial judge found that but for
Alan and A.I.’s wrongful conduct the property would have been sold to a third party purchaser in
2001 for $2.58 million, an additional $380,000. Accounting for real estate commissions and prejudgment interest, he awarded damages to Bram and Jamb, each in the amount of $183,061.
The trial judge also found that Alan and A.I.’s wrongful conduct amounted to a breach of Alan’s
fiduciary duty as a director of Bram and Jamb, and a breach of the agreement by A.I.
On appeal, the New Brunswick Court of Appeal took a different analytical approach to the
intentional interference tort, but concluded that the trial judge’s result was nevertheless correct in
the circumstances, and dismissed the appeal. Citing a 2007 decision of the House of Lords, OBG
Ltd. v. Allan3, the Court of Appeal held that the tort of intentional interference required unlawful
conduct by the defendant actionable by the third party against whom it had been directed. In other
words, Alan and A.I.’s conduct must have been actionable by the prospective third party
purchasers.
Since there was no finding that Alan and A.I.’s conduct amounted to a legal wrong actionable by
these parties, the Court of Appeal reasoned that the strict requirements of the tort had not been
made out. Significantly, the Court observed that the failure to complete the two agreements of
purchase and sale which it had entered into with third parties did not result in any breach of contract
by Joyce4.
Yet the Court of Appeal concluded that the interests of justice warranted principled exceptions to
avoid overly harsh results, and concluded this was such a case. The Court of Appeal thus upheld
the imposition of liability on the basis that Alan and A.I.’s conduct “warrants redress under the
tort of unlawful means”5.
A.I. Enterprises, supra, at para. 13, citing trial judge’s reasons, 2010 NBQB 245, at para. 282.
[2007] UKHL 21, [2008] 1 A.C. 1.
4
See reasons for decision of Court of Appeal, 2012 NBCA 33 (“NBCA Reasons”), at para. 6.
5
NBCA, at para. 9.
2
3
2
The Supreme Court’s Decision
On further appeal to the Supreme Court of Canada, Cromwell J. writing for a unanimous Court
rejected both the Court of Appeal’s and the trial judge’s analytical approaches to the intentional
interference tort.
Cromwell J. articulated the proper scope of the tort, as follows:
In light of the history and rationale of the tort and taking into account where it fits
in the broader scheme of modern tort liability, the tort should be kept within narrow
bounds. It will be available in three-party situations in which the defendant commits
an unlawful act as against a third party and that act intentionally causes economic
harm to the plaintiff. (Other torts remain relevant in two-party situations, such as
for example, the tort of intimidation.)
(1)
tort?
What sorts of conduct are considered “unlawful” for the purposes of this
Conduct is unlawful if it would be actionable by the third party or would have been
actionable if the third party had suffered loss as a result of it. The alleged
misconduct of the defendants in this case was not unlawful in this sense and
therefore they cannot be held liable on the basis of the unlawful means tort.
(2)
Is the tort available only if there is no other cause of action available to the
plaintiff against the defendant in relation to the alleged misconduct?
In my view the answer to this question is no.
(3)
Should the “unlawfulness” requirement be subject to principled exceptions?
The answer to this question is also no in my view6.
Having regard to these principles, Cromwell J. concluded that Alan and A.I. could not be held
liable for intentional interference with economic relations. Despite the trial judge’s finding that
their conduct was lacking in any legal justification, it did not rise to the level of a legal wrong
actionable by a third party (i.e., any of the third party purchasers). Therefore, the unlawful means
tort had no application.
However, based on the trial judge’s findings that Alan’s conduct amounted to a breach of his
fiduciary duties as a director of Bram and Jamb, it was held that the judgment should be upheld on
that basis, and the appeal was thus dismissed.
6
A.I. Enterprises, supra, at para. 5
3
Intentional Interference Is Not About “Commercial Morality”
The narrow scope of the unlawful means tort adopted by the Supreme Court in A.I. Enterprises
reflects a deliberate policy of limiting judicial policing of competitive economic activity. This is
important not only for understanding why the Court adopted the narrow test that it did, but also to
anticipate the sorts of cases which can be successfully litigated on the basis of this tort.
Too often, counsel plead intentional interference as if it were a basket claim, evoking vague notions
of commercial morality and appealing to unfocused conceptions of fairness. The Supreme Court
has now made it clear that this is not the correct approach.
As Cromwell J. explained:
[30] Potential liability for the unlawful means tort often arises when there are
contingent economic interests at stake, such as legitimate business expectations.
Such interests, however, are at the margins of the traditional concerns of tort law.
The first point, therefore, is that tort law has traditionally accorded less protection
to purely economic interests than to physical integrity and property rights. As this
Court stated in R.W.D.S.U., Local 558 v. Pepsi-Cola Canada Beverages (West)
Ltd., 2002 SCC 8, [2002] 1 S.C.R. 156, “[t]he law has never recognized a sweeping
right to protection from economic harm”: para. 72. The unlawful means tort should
not be viewed as providing that sort of “sweeping protection”: [citations omitted].
[31] Second, the common law has traditionally been reluctant to develop rules about
fair competition: OBG, at para. 56, per Lord Hoffman. The common law in general,
and tort law in particular, have been astute to assure “some elbow-room [many
would say much elbow room] for the aggressive pursuit of self-interest: …
Fleming’s The Law of Torts (10th ed. 2011), at para. 30.120. As Bowen L.J. put it
in Mogul Steamship Company v. McGregor, Gow, & Co. (1889), 23 Q.B.D. 598
(C.A.), at p. 614, aff’d [1892] A.C. 25 (H.L.), there can be no liability for a person
who has “done nothing more against the plaintiffs than pursue to the bitter end a
war of competition waged in the interest of their own trade”. The same sentiment
comes through in Lord Davey’s speech in Allen v. Flood, [1898] A.C. 1, at p. 173:
“The right which a man has to pursue his trade or calling is qualified by the equal
right of others to do the same and compete with him, though to his damage.” More
recently, Lord Nicholls acknowledged the common law’s respect for competition
in OBG where he wrote:
Competition between businesses regularly involves each business taking
steps to promote itself at the expense of the other…Far from prohibiting
such conduct, the common law seeks to encourage and protect it. The
common law recognizes the economic advantages of competition. [para.
142]
[32] This reluctance is directly relevant in this case. The trial judge found that the
appellants intended to do “whatever they could to pursue the interest of A.I.
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Enterprises and…were well aware that their actions would cause harm to Jam[b] &
Bram”: trial reasons, at para. 287. Although he went on to find that the harm caused
was not incidental to the pursuit by the defendants of their legitimate self-interest,
this same conclusion could apply to a great deal of legitimate competitive activity
in the marketplace. That, it seems to me, suggests the need for a limited role for the
unlawful means tort.
[33] A third point also favours a limited role for this tort. The common law in the
Anglo-Canadian tradition has generally promoted legal certainty for commercial
affairs. That certainty is easily put in jeopardy by adopting vague legal standards
based on “commercial morality” or by imposing liability for malicious conduct
alone: [citations omitted]…Regulating commercial activity should not, it has been
said, depend on the “idiosyncrasies of individual judges”: Mogul Steamship (H.L.),
at p. 51, per Lord Morris.7
[emphasis added]
The Principle: “Liability Stretching”
In addition to identifying the policy rationale for narrowing its scope, Cromwell J. also articulated
the underlying principle on which the tort is founded:
[37] There are several possible rationales for the tort but they are mostly variations
on two themes: [citations omitted]. The first – what I will call the “intentional harm”
rationale – focuses on the fact that harm has been intentionally inflicted. This
rationale supports the creation of new tort liabilities in order to reach clearly
excessive and unacceptable intentional conduct: [citation omitted]. The second, and
in my view the preferred rationale, focuses on extending an existing right to sue
from the immediate victim of the unlawful act to another party whom the defendant
intended to target with the unlawful conduct. I will call this the “liability stretching”
rationale. The focus of the tort on this understanding is not on enlarging the basis
of civil liability, but on allowing those intentionally targeted by already actionable
wrongs to sue for the resulting harm. On either rationale, the tort is, at its core, a
tort of intention. The main difference is that on the “intentional harm” rationale, the
intention requirement is seen as the main limitation on the potential scope of
liability, whereas in the “liability stretching” rationale, the potential scope of
liability is limited by both the intention requirement and the more restrictive
definition of the conduct which will support liability.8
[emphasis added]
The purpose of the tort is to extend protection to those injured as a result of actionable wrongs
committed against third parties, where such injury was intended. The tort is thus designed to close
7
8
A.I. Enterprises, supra, at paras. 30-33.
A.I. Enterprises, supra, at para. 37.
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a “perceived liability gap where the wrongdoer’s acts in relation to a third party, which are in
breach of established legal obligations to that third party, intentionally target the injured plaintiff”9.
As Cromwell J. explains:
[45] This rationale of the tort supports a narrow definition of “unlawful means”:
the tort does not seek to create new actionable wrongs but simply to expand the
range of persons who may sue for harm intentionally caused by existing actionable
wrongs to a third party.
Not a Tort of Last Resort
This does not mean that the tort is available only in circumstances where the plaintiff lacks a direct
cause of action. The Supreme Court has clearly rejected the view taken by the Court of Appeal for
Ontario during in cases such as Correia v. Canac Kitchens10 and Alleslev-Krofchak v. Valcom
Ltd.11, where the Court of Appeal declined to impose liability for intentional interference in
circumstances where wrongful conduct was otherwise directly actionable by the plaintiff. 12
Again, Cromwell J. clearly explains:
[78] This limitation seems to me to be wrong in principle. The gist of the tort is the
targeting of the plaintiff by the defendant through the instrumentality of unlawful
acts against a third party. It is that conduct by the defendant which gives rise to
liability quite apart from conduct that may be otherwise actionable by the plaintiff.
Moreover, general principles of tort liability accept concurrent liability and
overlapping causes of action for distinct wrongs suffered by the plaintiff in respect
of the same incident: see, e.g., Central Trust Co. v. Rafuse, [1986] 2 S.C.R. 147.
Finally, and as I explained earlier, this limitation is premised on an unduly narrow
understanding of the “gap-filling” function of the tort. A gap need not be a void.13
The tort of intentional interference operates regardless of whether relief is also available under
other causes of action.
No Exceptions
Conversely, the gap-filling function of the tort is not intended as a mechanism for imposing
liability where none exists. The Supreme Court has rejected the principled exception approach
adopted by the New Brunswick Court of Appeal.
9
A.I. Enterprises, supra, at para. 43.
2008 ONCA 506
11
2010 ONCA 557
12
A.I. Enterprises, supra, at para 77.
13
A.I. Enterprises, supra, at para 78.
10
6
As Cromwell J. explains, there are no “principled” exceptions to the principle underlying the
limited scope of the tort:
[83] The Court of Appeal, while adopting a narrow view of the unlawful means
requirement, held that it must be subject to principled exceptions. The court found
that this case falls within such an exception because the appellants’ conduct was
akin to the tort of abuse of process. As Robertson J.A. put it for the court, “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” falls within
the ambit of the unlawful means tort: para. 82. This approach was intended to
provide judges with some “wiggle room” to respond “adequately” to unanticipated
factual scenarios or changing circumstances: para. 81.
[84] I respectfully disagree with this approach and would hold that there are no
exceptions to the scope of liability which I propose for the unlawful means tort.
[85] My difficulty with the “principled exception” approach is that I cannot, with
respect, find any principle on which it is based. Providing trial judges with “wiggle
room” to deal “adequately” with cases that do not fall within the scope of the tort’s
liability simply confers an unstructured judicial discretion to do what appears to the
particular judge to be just in the particular circumstances. This to me is the
antithesis of a principled approach and, if adopted, it would largely undercut the
efforts to give a certain and narrow ambit to the tort. Allowing for exceptions
without clearly outlining the principles to guide the development of the law invites
the danger of ad hoc decisions tailored to achieve a vision of commercial morality
– precisely the danger which the unlawful means requirement is meant to avoid.14
Implications for Litigation Strategy
A.I. Enterprises should dispel much of the confusion and uncertainty that has plagued this area of
the law for the last several years. It is now clear that a pleading of intentional interference with
economic relations can only succeed where all of the following elements are present:
1. Three-parties;
2. An actionable wrong committed by the defendant against the third party; and,
3. Economic harm to the plaintiff, intentionally caused.
Therefore: do not plead this tort unless all of these elements are present.
Even then, consider whether such a pleading will enhance the theory of your case. If the case is
most effectively presented in terms of reckless disregard or negligence, then advancing it as one
of intentional interference will detract from your narrative, and ultimately undermine your chances
14
A.I. Enterprises, supra, at paras. 83-85.
7
of success. A.I. Enterprises is clear: nothing short of intentionality will suffice to establish liability
under this tort.
Of course none of this precludes pleading in the alternative, where appropriate. But, the widespread
practice of invoking the intentional interference tort as a euphemism for “commercially immoral”
or “unfair” conduct, without more, is now certain to fail.
As always, it is important to think critically. Do not get caught up with the name of the tort and all
that it evokes. The theme of your case must fit the facts, not the other way around.
When confronted with a fact situation like that in A.I. Enterprises, there is no need – and no benefit
– in couching the plaintiffs’ case as intentional interference with economic relations. Breach of
fiduciary duty and oppression are more than adequate in such circumstances to portray the
plaintiffs as victims of the defendants’ wrong-doing, and most importantly, to win.
8