The Supreme Court of Canada this week released two judgments of interest to Canadian businesses and professions, the first dealing with the scope of the ”unlawful means” required to ground the tort of interference with economic relations and the second addressing the permissable use of a pension surplus.
In A.I. Enterprises Ltd. v. Bram Enterprises Ltd., 2014 SCC 12, the Supreme Court brought some clarity to the so-called “unlawful means” tort, affirming a narrow definition of “unlawful means”. There has been an ongoing debate in Canada as to whether “unlawful means” encompassed any act without legal justification or only independently actionable wrongs.
In this case, a syndication of family members elected to sell an apartment building. The proposed sale triggered a right of first refusal at an appraised value for a dissenting family member. The dissenting family member declined, but then took steps to prevent the sale of the building to a third party. The dissenting family member ultimately purchased the building, but the delay in sale meant the appraised value was substantially less than could be obtained from a third party. The family argued the dissenting member breached his obligations and acted unlawfully, and committed an economic interference that caused losses.
The trial judge found the economic tort of interfering with contractual relations by unlawful means had been established and awarded damages. The Court of Appeal dismissed the appeal and adopted the narrow definition of the “unlawful means” element. The Supreme Court dismissed the further appeal.
The main issue before the Supreme Court was what the “unlawful” component of the tort meant, a phrase which has caused confusion in Canadian law. In Ontario, for example, 2010 saw the Court of Appeal issue two contradictory decisions: in Valcom, the Court adopted the narrow definition of “unlawful means,” restricting it to actionable wrongs; in Molson, however, the Court of Appeal adopted the broad definition (adopted in the earlier case of Reach M.D. Inc. v. Pharmaceutical Manufacturers Assn. of Canada) where the “unlawful means” requirement was held to encompass any act that “the defendant is not at liberty to commit – in other words, an act without legal justification.” For a further discussion of the Court of Appeal decisions, see the post from my colleagues here.)
The Supreme Court adopted a narrow view of “unlawful means”, holding that the test required an independent actionable wrong. In so doing, the Court cautioned that to hold otherwise would risk “tortifying” the criminal and regulatory law by imposing civil liability where there would not otherwise be any.
The Supreme Court also dealt with the question of pension surplus in Telecommunication Employees Association of Manitoba Inc. – International Federation of Professional and Technical Engineers Local 161 et al. v. Manitoba Telecom Services Inc. et al., 2012 CanLII 64737 (SCC), holding that a legislative requirement that any new plan was to provide equivalent “value” captured not just the benefits paid to the plan members, but the funding mechanism used to produce those benefits.
In this case, members of a Manitoba provincial pension plan had assets and pension rights transferred to new pension plan as a result of the privatization of the employer. The original pension fund had an actuarial surplus of 43 million dollars, the sole result of employee contributions to old plan (a situation not typical of most defined benefit plans). The employer sought to use the surplus to take a contribution holiday.
At issue was whether the two plans were ”equivalent in value” because the surplus, which had been accessible to the plan members under the old plan to fund enhancements, was not accessible to them under the new plan. The Court of Appeal concluded that the legislation only required equivalency of the basic superannuation allowance received by plan members under the two plans.
The Supreme Court allowed the appeal, concluding that the inclusion of the word “value” in “equivalent in value” in the governing legislation suggested that the phrase should be interpreted as capturing both the benefits paid to the plan members and the funding mechanism used to produce those benefits.
The governing legislation and the unique features of the old plan distinguish this case from previous decisions of this Court involving entitlement to the actuarial surplus in a defined benefit pension plan.