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Simon Shields, LLB

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Torts - Intentional Interference with Economic Relations

Damages - Intentional Torts - 'Damages at Large'

Damages - Punitive

Equity - Equitable Set-off - Elements

Equity - Equitable Set-off - Where Limitation Period Inapplicable

Grand Financial Management Inc. v. Solemio Transportation Inc. (Ont CA, 2016)

In this wide-ranging case the Court of Appeal canvassed the elements of the tort of intentional interference with economic relations as follows:
[62] The trial judge properly identified the three essential elements of the tort as traditionally understood: first, the defendant must have intended to injure the plaintiff’s economic interests; secondly, the interference must have been by illegal or unlawful means; and thirdly, the plaintiff must have suffered economic harm or loss as a result: see Alleslev-Krofchak v. Valcom Ltd., 2010 ONCA 557 (CanLII), 322 D.L.R. (4th) 193, and cases cited therein, leave to appeal refused, [2010] S.C.C.A. No. 403.

Intentional Injury

[63] The trial judge found that the actions of Grand Financial were directly intended both to harm Solemio in its business interests and to enrich itself. This finding is amply supported by the record. Mr. Rakhnayev threatened Mr. Ullah that he would take steps to shut him down if he did not make certain payments and give Grand Financial business from other clients. He told Arnold Bros. in an angry message that someone was going to pay the money owed to Grand Financial, and he “didn’t care who” – supporting the trial judge’s finding that Mr. Rakhnayev would take any steps within his power, whether lawful or unlawful, to get the money he thought he was owed. Mr. Rakhnayev also threatened to pursue Arnold Bros.’ customers, causing Arnold Bros. to sever its business relationship with Solemio. Finally, the trial judge found, at para. 52, that Mr. Rakhnayev was “well aware of and intended the natural consequences which he knew would flow from his deliberate actions in executing on security pursuant to an agreement which he knew was terminated.”

Unlawful Means

[64] Grand Financial’s main argument on the cross-appeal is that the trial judge erred in his application of the “unlawful means” criterion for the establishment of the tort. It points out that the trial judge did not have the benefit of the recent decision of the Supreme Court of Canada in A.I. Enterprises Ltd. v. Bram Enterprises Ltd., 2014 SCC 12 (CanLII), [2014] 1 S.C.R. 177 – which was still under reserve at the time of trial – and suggests that the analysis of the tort in that case leads to the conclusion that the trial judge erred in holding Grand Financial liable.

[65] I disagree. That A.I. Enterprises did not change the essential elements of the tort is apparent from the following succinct description of its parameters by Cromwell J. at para. 23:
The unlawful means tort 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. While the elements of the tort have been described in a number of ways, its core captures the intentional infliction of economic injury on C (the plaintiff) by A (the defendant)’s use of unlawful means against B (the third party). [Emphasis added.]
[66] The primary issue resolved by A.I. Enterprises, had to do with “the scope of liability for [the] tort and, in particular, what the unlawfulness requirement means”: at para. 4. Although there has been no dispute that the unlawful conduct forming the basis for the tort must be intentional and must cause the plaintiff injury, there has been considerable debate in Canadian and international jurisprudence about the scope of the type of conduct that will constitute “unlawful means”. Should the courts take a broad approach or a narrow approach to this question? I need not review that jurisprudence here. After doing so at length, the Supreme Court of Canada settled firmly on the narrow approach in A.I. Enterprises.

[67] Writing for the Court, Cromwell J. made it clear, at para. 5, that “the tort should be kept within narrow bounds” and, at para. 35, that it should be viewed “as one of narrow scope.” In particular, he confirmed, at para. 5, that for conduct to constitute “unlawful means” in this context, it must be conduct that “would be actionable by the third party or would have been actionable if the third party had suffered loss as a result of it.” In this respect, A.I. Enterprises is consistent with this Court’s analysis in Alleslev-Krofchak and Correia v. Canac Kitchens (2008), 2008 ONCA 506 (CanLII), 91 O.R. (3d) 353.
The court also made the following useful comments on the assessment of 'damages at large' in the context of intentional torts:
[82] Damages at large may be awarded in cases of intentional torts, and to corporations in such circumstances where there has been injury to the corporation’s reputation and associated economic loss: see Uni-Jet Industrial Pipe Ltd. v. Canada (A.G.) (2001), 2001 MBCA 40 (CanLII), 198 D.L.R. (4th) 577 (Man. C.A.), at paras. 66-72; Foschia v. Conseil des Écoles Catholique de Langue Française du Centre-Est, 2009 ONCA 499 (CanLII), 266 O.A.C. 17, at para. 37; PSC Industrial Canada Inc. v. Ontario (Ministry of the Environment) (2005), 2004 CanLII 15482 (ON SC), 48 B.L.R. (3d) 58 (Ont. S.C.), at paras. 60-62, rev’d in part on other grounds (2005), 2005 CanLII 27657 (ON CA), 258 D.L.R. (4th) 320 (Ont. C.A.); and Alleslev-Krofchak v. Valcom Ltd., 2009 CanLII 30446 (ON SC), at para. 361, aff’d 2010 ONCA 557 (CanLII), 322 D.L.R. (4th) 193.

[83] Unlike pecuniary damages, such damages are not capable of being precisely measured and are more a matter of impression: Uni-Jet, at para. 72; and Foschia, at para. 37. As Kroft J.A. explained in Uni-Jet, at para. 72:
[D]amages at large are a matter of impression; they must include the consideration of a host of circumstances involving both the particular plaintiff and the particular defendant, and they are likely to be unique in each case.
[84] In Howard v. Madill, 2010 BCSC 525 (CanLII), at para. 89, Bruce J. summarized the principles relating to the assessment of damages at large, as canvassed in Uni-Jet:
An accurate summary of the law with respect to the assessment of damages at large, and the circumstances in which such an award may be made, is contained in Uni-Jet at paras. 66 to 73. I summarize these principles as follows:
1. Damages other than for pecuniary loss are "damages at large" and generally include compensation for loss of reputation, injured feelings, bad or good conduct by either party, or punishment.

2. Damages at large are compensatory for loss that can be foreseen but cannot be readily quantified.

3. Damages at large are a matter of discretion for the trial judge and are more a "matter of impression and not addition."

4. Where damages at large are imposed for intentional torts, the assessment of damages provides an opportunity to condemn flagrant abuses of the legal process.
[85] I too would adopt this summary.

[86] Damages at large for intentional torts include damages for loss of reputation, but are not limited to that type of loss. As the authorities above demonstrate, they include as well damages reflecting the court’s condemnation of flagrant abuses of the legal process. Generally speaking, they are compensatory for loss that can be foreseen, but not readily quantified. The trial judge applied these factors.
Next, the court considered the elements of the doctrine of equitable set-off, and when it is subject to limitation periods (see paras 92-94):
[97] Equitable set-off is a defence that is particularly rooted in the circumstances of the individual case. It requires, amongst other things, that the set-off claim go directly to impeach the plaintiff’s demands, the “plaintiff” in this case being Solemio and the “claim” being an award of damages to compensate it for harm suffered as a result of an intentional wrongdoing – the tort of interference with economic relations. To put it another way, the defence requires that the set-off claim be so closely connected to the plaintiff’s demands that it would be “manifestly unjust” to allow the plaintiff (Solemio) to enforce payment without taking into account the set-off claim: see Holt v. Telford, 1987 CanLII 18 (SCC), [1987] 2 S.C.R. 193, at p. 212; Canaccord Genuity Corp. v. Pilot, 2015 ONCA 716 (CanLII), 340 O.A.C. 359, at paras. 55-59; Ang v. Premium Staffing Ltd., 2015 ONCA 821 (CanLII).

[98] In addition, the application of equitable set-off is subject to the equitable doctrine of “clean hands”. The courts will not allow a party to set-off “where there [is] an equity to prevent [the party from] doing so; that is to say, where the rights, although legally mutual, [are] not equitably mutual”: In re Whitehouse & Co. (1878), 9 Ch. D. 595, at p. 597; see also Stewart v. Bardsley, 2014 NSCA 106 (CanLII), at paras. 54-61; Saskatchewan Wheat Pool v. Feduk, 2003 SKCA 46 (CanLII), at para. 63; and Kelly R. Palmer, The Law of Set-Off in Canada (Aurora, Ontario: Canada Law Book Inc., 1993), at p. 66. Here, Grand Financial seeks to set off against its contractual claim under the Wild Lions Agreement Solemio’s judgment for damages caused by Grand Financial’s own intentional wrongdoing, albeit a wrongdoing that may have some connection with, or arise from, the issues regarding the Wild Lions Agreement. Whether equitable set-off would be available as a defence in such circumstances is something that would require viva voce evidence and credibility findings made during an assessment focused on that particular issue.
And lastly, on punitive damages:
[102] The trial judge properly summarized the law relating to punitive damages at para. 88 of his reasons:
Punitive damages are only awarded in extraordinary situations. In general, punitive damages are considered in situations where the defendant’s misconduct is so malicious, oppressive, and high-handed that it would offend the court’s sense of decency. Punitive damages do not bear any relation to what the plaintiff should receive by way of compensation. Their aim is not to compensate a party, but rather to punish someone. It is the means by which a court expresses its outrage at what it considers egregious conduct of a party. As noted by the Supreme Court of Canada in Whiten v. Pilot Insurance Co., 2002 SCC 18 (CanLII), [2002] 1 S.C.R. 595, punitive damages are very much the exception rather than the rule. [Citations omitted.]
[103] His application of the law on punitive damages to the circumstances of this case was a matter of fact and mixed fact and law, and is therefore entitled to deference.

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