Court File and Parties
Court File No.: CV-22-00690087-0000 Date: 2024-04-16 Ontario Superior Court of Justice
Between: BURNAC PRODUCE LIMITED CORPORATION, PROVINCIAL FRUIT CO. LIMITED, RITE-PAK PRODUCE CO. LIMITED and PRO PAK PACKAGING LIMITED, Plaintiffs – and – HUGH BOWMAN and GLOBAL CITRUS GROUP INC., Defendants
Counsel: Peter-Paul E. Du Vernet, for the Plaintiffs Ted Laan, for the Defendants
Heard: March 27, 2024
Before: Papageorgiou J.
Overview
[1] This motion to strike pursuant to r. 21.01(b) and 25.11 addresses the scope of the tort of unlawful interference with contractual relations, and whether the tort of inducing breach of contract can constitute the unlawful means required for said tort.
Decision
[2] For the reasons that follow, the pleadings related to unlawful interference with contractual relations are struck with leave to amend.
[3] The pleading of inducing breach of contract is not struck, nor is the pleading related to breach of confidence or conversion. There was no argument before me that there were insufficient facts pleaded to make out these torts. There was only the argument that the Supreme Court’s case in A.I. Enterprises v Bram Enterprises, [2014] 1 R.S.C. 177, 2014 SCC 12 effectively eliminates the tort of inducing breach of contract which I reject.
Issues:
- Issue 1: Does the Claim set out a cause of action for unlawful interference with economic relations?
- Issue 2: Does the Supreme Court’s decision in A.I. Enterprises implicitly eliminate the tort of inducing breach of contract?
Analysis
[4] Before addressing the issues, I set out the legal framework.
[5] Under Rule 21.01(1)(b) of the Rules of Civil Procedure, a party may move to strike out a pleading on the ground that it does not disclose a cause of action. On such a motion, the following principles apply:
a. All allegations of fact, unless plainly ridiculous or incapable of proof, must be accepted as proven.
b. The defendant, in order to succeed, must show that it is plain and obvious and beyond doubt that the plaintiff could not succeed in the claim.
c. The novelty of the action will not militate against the plaintiff.
d. The Statement of Claim must be read as generously as possible with a view to accommodating any inadequacies in the allegations due to drafting deficiencies. Jacobson v. Skurka, 2015 ONSC 1699, 125 O.R. (3d) 279, at para. 73; Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959, at pp. 972-973; Dawson v. Rexcraft Storage and Warehouse Inc. (1998), 164 D.L.R. (4th) 257 (Ont. C.A.), at para. 9.
e. A claim will be found legally insufficient when its allegations “do not give rise to a recognized cause of action or it fails to plead the necessary elements of an otherwise recognized cause of action…[A] plaintiff must, at minimum, plead the basic elements of a recognized cause of action pursuant to which an entitlement to damages is claimed. Vague allegations that make it impossible for [the defendant] to reply should be struck”: Aristocrat Restaurants Ltd. v. Ontario, 2003 CarswellOnt 5574, at paras. 18-19.
[6] Leave to amend will only be denied in the clearest of cases when it is plain and obvious that no tenable cause of action is possible on the facts as alleged and there is no reason to suppose that the party could improve his or her case by any amendment: Mitchell v. Lewis, 2016 ONCA 903, 134 O.R. (3d) 524, at para. 21; Conway v. Law Society of Upper Canada, 2016 ONCA 72, 395 D.L.R. (4th) 100, at para. 16; Adelaide Capital Corp. v. The Toronto-Dominion Bank, 2007 ONCA 456, at para. 6.
[7] The defendant’s argument pursuant to r. 25 is the same as it is for r. 21.01(b). It argues that the pleading demonstrates a complete absence of material facts and is thus frivolous and vexatious within the meaning of r. 25.11.
Issue 1: Does the Claim set out a cause of action for unlawful interference with economic relations?
[8] I conclude that no tenable cause of action for unlawful interference with economic relations is pleaded but there are sufficient facts pleaded to support the cause of action inducing breach of contract.
[9] The plaintiffs plead that they are in the business of supplying produce to retailers. They say they have developed unique and exclusive supplier and supply arrangements which are the result of many years of exploring and sourcing produce from all over the world. They say that these arrangements are proprietary to them.
[10] The defendants are competitors.
[11] The plaintiffs say that the defendants became privy to the business model developed by them, as well as their exclusive suppliers and their unique and special products. They say that the defendants have sought to “interpose [themselves] into the [plaintiffs] purchase and sale relationships, and appropriate and replicate specific aspects of the [plaintiffs’] business model.”
[12] The plaintiffs say that the defendants did this by approaching various of the plaintiffs’ producers to establish direct buying relationships with them, for resale to retailers, in place of the plaintiffs. On one occasion, the defendants tried to intercept one of the plaintiffs’ suppliers on their way to a meeting with the plaintiffs to change the receipt of the products from the plaintiffs to the defendants. The plaintiffs also say that the defendants attended meetings with the plaintiffs’ suppliers to try to convert and appropriate supply arrangements and sales. They say that the defendants knew of the plaintiffs’ “proprietary and exclusive relationships and intended to disrupt, and appropriate, and convert them to [their] own use and benefit.” They plead that their relationships have been appropriated or impaired as a result of this unlawful interference, that the defendants thus converted their business relationships and that such conduct was intended to induce breach of contract with their suppliers and customers.
[13] In the decision A.I. Enterprises Ltd. v. Bram Enterprises, 2014 SCC 12, [2014] 1 S.C.R. 177, the Supreme Court concluded that the tort of unlawful interference with economic relations should be narrowly applied because tort law has traditionally given less protection to purely economic interests and not given “a sweeping right to protection from economic harm”: para 30. Businesses should be allowed to compete with “some elbow room”: para 31. There should not be liability for mere competition, which is not only permitted but encouraged: para 31.
[14] The Court explained the tort of interference with economic relations as one which “creates a type of ‘parasitic’ liability in a three-party situation: it allows a plaintiff to sue a defendant for economic loss resulting from the defendant’s unlawful act against a third party. Liability to the plaintiff is based on (or parasitic upon) the defendant’s unlawful act against the third party,” something that the third party could sue directly upon: para 23.
[15] The reason why the tort of unlawful interference with contractual relations is permitted is because it is a type of “liability stretching,” where the basis of liability is not enlarged. Rather, there is already a basis for liability at the suit of the third party; the law of unlawful interference means simply allows those “intentionally targeted by already actionable wrongs to sue for resulting harm”: para 37.
[16] There are two principal elements: i) unlawful means which is conduct that would give rise to a civil cause of action by the third party; and ii) the defendant’s intention to harm the plaintiff.
[17] The difficulty in this case as pleaded, is that there is no pleading that anything that the defendants have done was unlawful as against the third parties, who are the plaintiffs’ suppliers and customers.
[18] While inducing breach of contract is pleaded in paragraph 23 together with the facts in the response to the demand for particulars that cause of action is still a cause of action that the plaintiffs have against the defendants; it is agreed by the plaintiffs that inducing breach of contract is not a cause of action that the third party has or would have against the defendants. As explained in Drouillard v. Cogeco Cable Inc., 86 O.R. (3d) 431, 2007 ONCA 322 at para 26, the tort of inducing breach of contract involves the following elements: 1) the plaintiff has an enforceable contract with a third party; 2) the defendant was aware of the existence of this contract; 3) the defendant intended to and did procure the breach of contract; and 4) As a result, the plaintiff suffered damages. Nowhere, does it say that the third party has a cause of action for inducing breach of contract against the party who procured the breach committed by the third party. I requested that the parties provide submissions on this issue, and they did not find any law supporting the third party being able to bring an action for inducing breach of contract against the defendant.
[19] Thus, pursuant to the law in A.I. Enterprises Ltd, inducing breach of contract cannot constitute the unlawful means for the purpose of the tort of unlawful interference with economic relations.
[20] The Court’s decision in Drouillard, also supports this conclusion. In that case, the trial judge had made findings of inducing breach of contract as well as unlawful interference with economic relations. The Court of Appeal overturned the finding of unlawful interference on the basis that the plaintiff had not proven an unlawful act but upheld the finding of inducing breach of contract. If inducing breach of contract could constitute the unlawful means for the tort of unlawful interference, then the finding of unlawful interference would not have been overturned.
[21] The plaintiff has also pleaded facts relating to the defendant appropriating or converting its proprietary relationships and contracts which appears to be some kind of pleading relating to breach of confidence. It appears to me that what is pleaded is not sufficient. The plaintiff must plead that the documents or material has a quality of confidence, that they were imparted in circumstances importing an obligation of confidence and used in an unauthorized manner: Cantol v. State Chemical, 2019 PMSC 531 citing RBC Dominion Securities at para 55. Boehmer at para 62 citing Stenada Marketing Ltd. v Nazareno, [1990] B.C.J. No. 2118; Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574 at para 152.
[22] However, since there was no argument before me that this pleading should be struck out, I am not doing so; the plaintiffs did not have an opportunity to argue the matter.
[23] There appear to be enough facts to support a pleading that the defendant somehow became privy to its business model and then used it without authority. This could support a claim for conversion but again, this was not argued and so there is no basis to strike out any of these pleadings.
[24] Nevertheless, even these torts (breach of confidence and conversion) could not constitute the unlawful means for the tort of unlawful interference with economic relations within the framework of the facts as I understand them. Again, these are not torts that the third party could bring against the defendant and so do not satisfy the parasitic nature of the tort of unlawful interference with economic relations.
[25] As a critical element of the tort of unlawful interference with contractual relations is missing, (the unlawful means) there is no reasonable cause of action pleaded in respect of unlawful interference with economic relations, and pleadings related to this cause of action are struck out.
[26] However, I am giving the plaintiffs leave to amend to plead the required unlawful means, if they can. As noted, the unlawful means must be a tort that the defendants committed against the third party and that would give rise to a cause of action by the third party against the defendants.
[27] I add that there is no basis to strike out the entire Statement of Claim because the tort of inducing breach of contract was adequately pleaded and there was no argument before me that it was not.
Issue 2: Does the Supreme Court’s decision in A.I. Enterprises implicitly eliminate the tort of inducing breach of contract?
[28] The defendants also argued that the tort of inducing breach of contract has implicitly been or should be eliminated based on the reasoning in A.I. Enterprises.
[29] I reject this argument.
[30] In A.I. Enterprises, the Court made specific reference to the tort of inducing breach of contract when it discussed concurrent liability of interference with economic relations and inducing breach of contract. Far from eliminating the tort of inducing breach of contract, the Court determined that there could be liability for both depending upon the facts in issue: para 80.
Conclusion
[31] The aspects of the pleading that claim damages for unlawful interference with economic relations are struck out with leave to amend. In that regard, only the specific references to this tort are struck out in paragraph 1(a), (e), 18, 19, 23, 24. Any factual assertions in these paragraphs are not struck out because they are proper pleadings in support of the inducing breach of contract claim and/or the claim for conversion and/or breach of confidence.
[32] The plaintiffs are given twenty days to amend the Statement of Claim and I give them leave to amend also with respect to their claim in respect of breach of confidence or conversion if they wish. As noted, whether these causes of action were adequately pleaded was not argued and the plaintiffs may wish to revisit this issue since pleadings are not yet closed.
[33] If a further motion to strike is brought, I am seized of it if I am available.
[34] I strongly encourage the parties to settle costs. If they cannot, they make submissions no longer than 5 pages, with the defendant’s due within 5 days and the plaintiffs’ within 5 days thereafter.
Papageorgiou J. Released: April 16, 2024
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN: BURNAC PRODUCE LIMITED CORPORATION, PROVINCIAL FRUIT CO. LIMITED, RITE-PAK PRODUCE CO. LIMITED and PRO PAK PACKAGING LIMITED, Plaintiffs – and – HUGH BOWMAN and GLOBAL CITRUS GROUP INC., Defendants
REASONS FOR JUDGMENT Papageorgiou J. Released: April 16, 2024