Shine a Light: New Perspectives on Intentional Interference with Economic Relations  

publication 

Fall 2010 - (Commercial Litigation Brief)

Commercial Litigation Brief

The Rolling Stones came to Toronto in 2003 to play a concert which some referred to as "SARSFest". The sale of water at that benefit concert spawned litigation which recently reached the Ontario Court of Appeal in Barber v. Molson Sport & Entertainment Inc.1 At around the same time as SARSFest, a conspiracy claim involving defence contracts also spawned litigation, and that too reached the Ontario Court of Appeal, in Alleslev-Krofchak v. Valcom Limited.2 Both decisions provide some fresh commentary with respect to the relatively undeveloped tort of intentional interference with economic relations ("IIER").

The Facts

a) Barber v. Molson Sport & Entertainment


Jonathan Vrozos obtained exclusive rights to sell water for the concert from Molson. Mr. Vrozos sold those rights to Stephen Barber, who then assigned them to Wahta Natural Spring Water. Ultimately, parties other than Wahta were permitted by Molson to sell water at the concert. In addition, Molson had to meet certain requirements by Toronto Public Health and Emergency Medical Services to have free water available for patrons and hence Wahta did not receive the $2.50 or $3.00 market price for these bottles. At trial, one of the judge's findings was that Molson had committed the tort of IIER against Wahta.

b) Alleslev-Krofchak v. Valcom Limited

Valcom Limited wanted to retain Ms. Alleslev-Krofchak to provide consulting services. The arrangement providing Alleslev-Krofchak's services was ultimately structured such that Valcom contracted with ARINC (a large American company) who in turn sub-contracted with Temagami Outfitting Company, a company in which Alleslev-Krofchak was a shareholder. Valcom later became dissatisfied with Alleslev-Krofchak, and one of Valcom's employees (Poulin) requested that she be removed from the project and subsequently locked her out of the project. At trial, Valcom and two of its employees (Lewis and Poulin) were held to have interfered with Alleslev-Krofchak's economic relations. Poulin and Valcom were also held to have intentionally interfered with Temagami's economic relations.

What is "Intentional Interference with Economic Relations"?

Generally speaking, IIER is a tort which allows recovery to a plaintiff who does not have a direct cause of action against the defendant but is harmed economically by that defendant's unlawful actions. In Barber, the Court articulated the three criteria required to establish IIER as follows: (1) the defendant intended to injure the plaintiff; (2) the defendant interfered with the plaintiff 's economic interests by illegal or unlawful means; and (3) as a result of that interference, the plaintiff suffered economic loss.3

(1) "Intention to Injure"

With respect to the first criterion, both decisions were consistent on what constitutes an "intention to injure"; namely, an intention to injure can be determined by inference from the facts, and does not require that it be expressly demonstrated in evidence.

In Barber, Molson committed two wrongs which constituted an "intention to injure" Wahta. The first wrong was that Molson had breached its contract with Vrozos with complete disregard for any impact that the breach would have on Wahta's economic interests. This conclusion was based on Molson's sale of water rights to Great Moments in Catering, knowing that it would reduce Wahta's profits.4

The second wrong which constituted an intent to injure Wahta was when Molson "foisted its obligation" to supply free water onto Wahta. The Court held that even if Molson's intent was to ensure the concert took place, Molson was "willing to impose hardship on Wahta" by requiring them to provide the complimentary water.5

What is key is that Wahta did not need to prove that Molson's predominant purpose was to injure Wahta. It was suffi cient to establish that Molson's unlawful act was "in some measure" directed against Wahta.6

Similarly, one issue in Alleslev- Krofchak was whether Poulin and Valcom had intention to injure Temagami. The Court held that Poulin and Valcom deliberately took steps to bring about Alleslev-Krofchak's termination from the project in question.7 It was open to the trial judge to conclude that those parties also intended to cause loss to Temagami, given its contract with ARINC for her services; Poulin and Valcom intended the "natural consequences that they knew would arise from their deliberate actions"8 and could therefore be liable to Temagami.

(2) "Illegal or Unlawful Means"

The two decisions consider the second criterion in very different ways. Barber promoted a broader approach, whereas Alleslev-Krofchak placed specific requirements on what may constitute illegal or unlawful means.

In Barber, the Court held that in order to find "illegal or unlawful means", all that is required is that a party do something that it is "not at liberty to do", which is to be interpreted broadly.9 In this case, the Court held that Molson breached its original contract with Vrozos by selling the water rights to another party and failing to negotiate the purchase of the "free" water with Wahta. These were acts that Molson was "not at liberty to commit".

In Alleslev-Krofchak, the Court of Appeal took a narrower approach and held that "illegal or unlawful means" requires acts committed by the defendant which (i) cannot be actionable directly by the plaintiff; and (ii) must be directed at a third party who then becomes the vehicle through which harm is caused to the plaintiff.10 The Court also stated that, "there may be aspects of the concept of "unlawful means" yet to be fully defined."11

Ultimately, Alleslev-Krofchak could not rely on defamation or conspiracy against her as "unlawful means" for the purposes of IIER – because both of these were directly actionable by Alleslev-Krofchak as torts in their own right. However, the Court of Appeal held that the harm resulting to ARINC as an effect of the conspiracy between Poulin, Lewis and Valcom provided ample unlawful means for Alleslev-Krofchak to claim IIER against Poulin and Lewis.

In addition, the court concluded that Valcom's breach of contract with ARINC (through the peremptory removal of Alleslev-Krofchak from the project without notice) could serve as the requisite "unlawful means" for a claim of IIER by Alleslev-Krofchak and Temagami against Valcom.12

(3) Economic Loss Suffered by the Plaintiff

At trial in Barber, the judge had awarded $232,000 for "reliance damages", and characterized it as both a "loss of profits" and a "net loss".13 The Court of Appeal stated that this was in error, as "the relevant measure for damages in tort is the restitutio in integrum principle, which requires the court to place the plaintiff, insofar as possible, in the position the plaintiff would have been had the tort not been committed."14 The Court of Appeal then stated that "the correct quantum of damages is, therefore, the revenue that Wahta would have made" which it held to be $420,000.15

Despite the trial judge's reference to "reliance damages", and the Court of Appeal's broad reference to restitution, both levels of court appear to have had similar ideas about how to measure damages for IIER, as they both comment on awarding Wahta its lost profits. Ultimately, the Court of Appeal did not award the amount that Wahta had spent in reliance, nor did it award a specifi c amount that another party profited. If the Court of Appeal's award had related to contract, the damages awarded may have been best characterized as "expectation damages".16

In Alleslev-Krofchak, another issue of damages arose, that being whether damages could be awarded for two torts, such as defamation and IIER, if a factual overlap exists. The Court referred to the trial judge's holding that damages suffered by Alleslev-Krofchak existed whether the community had learned of the defamation or not, and so it was not an error to make two general damages awards for the two different torts.17

Parties faced with a claim of IIER should also be aware that courts have granted damages "at large" with respect to IIER.18 Although not considered in Barber or Alleslev-Krofchak, this principle allows a court to make an award over and above lost profits in awarding damages for the tort.19

Conclusion

Barber and Alleslev-Krofchak illustrate that a party may be found to have committed IIER, even if it has other explanations for its conduct or can show a predominant purpose unrelated to the harmed party. IIER may provide a valuable remedy where claims for breach of contract are not available because of lack of privity. Look to IIER especially in instances of competition that have become too aggressive and harmed a company's economic relations.

In light of the diverging approaches in these two cases, there is still some uncertainty as to how broadly or narrowly the courts will defi ne the scope of "unlawful or illegal means". Then again, in law you can't always get the certainty you want, but if you try sometimes, you get the scope that you need to argue.

This article appeared in Lang Michener's Commercial Litigation Brief Fall 2010.


  1. 2010 ONCA 570 [Barber C.A.].
  2. 2010 ONCA 557 [Alleslev-Krofchak C.A.]
  3. Barber C.A. at para. 47.
  4. Barber C.A. at para. 54.
  5. Barber C.A. at para. 55.
  6. Barber C.A. at para. 52.
  7. Alleslev-Krofchak C.A. at para. 42.
  8. Alleslev-Krofchak C.A. at para 42.
  9. Barber C.A. at para. 58.
  10. Alleslev-Krofchak C.A. at para. 60.
  11. Alleslev-Krofchak C.A. at para. 63.
  12. Alleslev-Krofchak C.A. at paras. 76-85.
  13. Barber v. Vrozos, 2008 CanLII 32300 at paras. 63-64 (Ont. Sup. Ct. J.).
  14. Barber C.A. at para. 86.
  15. Ibid. at para. 87. The Court held, however, that it could not substitute this amount as Wahta and not cross-appealed the damages award.
  16. Both the trial judge and Court of Appeal mentioned expectation damages as they came to their conclusions, although the trial judge in Barber did not apply the principle.
  17. This holding would seem to be appropriate in light of the court's conclusion in Alleslev-Krofchak C.A. that IIER cannot be found based on a directly actionable tort.
  18. Polar Ice Express Inc. v. Arctic Glacier Inc., 2009 ABCA 20, [2009] A.J. No. 19 at paras. 13, 15.
  19. Polar Ice Express Inc. v. Arctic Glacier Inc., 2007 ABQB 717, [2007] A.J. No. 1349 at paras. 116-125.