Continuing confusion on how to plead third party interference
Updated: Nov 27, 2021
OHB Construction Co. v. Potash Corp. of Saskatchewan Inc., 2015 NBQB 80, illustrates the continuing confusion regarding the torts of inducing breach of contract and causing loss by unlawful means.
Comstock Canada Ltd., the predecessor to the plaintiff, entered into a contract with the defendant, Potash Corporation of Saskatchewan Inc. ("PCS"), to provide services in the construction of a potash compaction plant at PCS's potash mine in Penobsquis, New Brunswick. The defendant, AMEC Americas Limited ("AMEC"), was named in the contract as the engineer and construction manager on the project. After PCS terminated the contract with Comstock, Comstock brought an action against both PCS and AMEC. AMEC brought an application to strike the pleadings as against it.
INDUCING BREACH OF CONTRACT
There is no definitive case in Canada setting out the elements of the tort of inducing breach of contract. In New Brunswick, the leading case on the tort of inducing breach of contract is Sar Petroleum v. Peace Hills Trust Company, 2010 NBCA 22, where Robertson J.A. determined that there are eight elements to the tort of inducing breach of contract:
(1) there must have been a valid and subsisting contract between the plaintiff and a third party;
(2) the third party must have breached its contract with the plaintiff;
(3) the defendant's acts must have caused that breach;
(4) the defendant must have been aware of the contract;
(5) the defendant must have known it was inducing a breach of contract;
(6) the defendant must have intended to induce a breach of contract in the sense that the breach was a desired end in itself or a means to an end;
(7) the plaintiff must establish it suffered damage as a result of the breach; and
(8) if these elements are satisfied, the defendant is entitled to raise the defence of "justification".
This articulation of the elements seems overly complicated, since intention to induce the breach (6) would necessarily indicate knowledge (5). Further, it is self-evident that the eighth "element" is not an element of the tort.
AMEC submitted that the claim for inducing breach of contract should be struck because there was no allegation that the breach of contract was either an end in itself or a means to an end. The judge concluded that the plaintiff pleaded intention on the part of AMEC because it alleged wrongful and deliberate conduct by AMEC and "...that AMEC induced the breach for the improper purpose of justifying and/or excusing its unlawful conduct, i.e. that was the end and the alleged inducement was the means."
AMEC also submitted that the claim for inducing breach of contract should be struck because there was no allegation of malice on its part. As noted by the judge, Sar Petroleum, supra, rejected malice as a necessary element of the tort (at para. 32).
AMEC further submitted that the tort of inducement of breach of contract is not available if identical damages are sought from the primary wrongdoer, and the plaintiff has not plead that any contractual remedy against the primary wrongdoer is inadequate. While the judge properly rejected that failure to plead it is fatal to the claim, he stated that it "may be better pleading" to allege that the contractual remedy would be inadequate. It is unclear why that "may be better pleading" where, as noted by the judge, damages in a tort action are "at large" and may ground a claim for punitive/aggravated/exemplary damages.
UNLAWFUL MEANS TORT
As set out in A.I. Enterprises Ltd. v. Bram Enterprises Ltd., 2014 SCC 12, at paras. 23, 76 and 95, the elements of the tort of causing loss by unlawful means are:
Intention to cause economic harm to the plaintiff, either as an end in itself or a means to an end;
Interference with the plaintiff's economic relations by the use of unlawful means against a third party that is actionable by that third party, or would be actionable if the third party had suffered loss as a result; and
Resulting economic loss to the plaintiff.
AMEC submitted, unsuccessfully, that there was no such allegation in the pleadings that the unlawful act be directed at PCS.
It further submitted that it was necessary for the pleadings to allege that AMEC targeted Comstock out of malice or spite or allege that a benefit accrued to AMEC as a result of the breakdown of the economic relationship between PCS and Comstock.
The judge found that the pleadings were sufficient to allege both. However, he should have clarified that neither malice nor economic advantage are required. As set out in paras. 95-97 of Bram, all that is required is an intention to cause economic harm either as an end in itself or as a means to an end. The defendant must target the plaintiff in some way.
When pleading the intention element of the economic torts, it is important to identify the leading authority and plead as closely as possible to the requirements set out therein.