Supreme court | Fiduciaries
REMEDIES
President could not take groundless steps to obstruct sale in order to further personal interests
Three corporations acquired apartment building. Title was vested in company which acted as “agent” for corporate investors. Syndication agreement provided that if majority decided to sell, minority had right of first refusal. Resolutions for sale were passed by majority. Minority investor, objected but initially declined to purchase. President of minority investor continued to resist sale and filed certificate of pending litigation based on own application seeking appointment of arbitrator. During period of president’s resistance, two transactions failed to close due to interventions of president and minority investor. Majority investors sued president and minority investor for difference between what majority would have received from prospective purchasers and price minority ultimately paid. Trial judge allowed claim, finding that tort of unlawful interference with economic relations made out. New Brunswick Court of Appeal dismissed appeal by president and minority investor. Further appeal by president and minority investor dismissed. Narrow scope for liability consistent with history and rationale of unlawful means tort. Scope should be understood in context of broad outlines of tort law’s approach to regulating economic and competitive activity. Rationale is “liability stretching”; tort does not seek to create new actionable wrongs, but simply expands range of persons who may sue for harm intentionally caused by existing actionable wrongs to third party. Trend of authority also towards narrow definition of “unlawful means”. Narrow approach provides certainty and predictability, not expanding scope of conduct for which defendant may be held liable but merely adding another plaintiff who may recover if intentionally harmed as result of that conduct. Core of unlawful means tort captures intentional infliction of economic injury on plaintiff by defendant’s use of unlawful means against third party. Conduct must be actionable civil wrong or conduct that would be actionable if it had caused loss to person at whom it was directed. Liability not limited to situations in which defendant’s conduct not otherwise actionable by plaintiff. General principles of tort liability accept concurrent liability and overlapping causes of action. Exceptions to scope of liability for unlawful means tort would be antithetical to principled approach and would undercut efforts to give certain and narrow ambit to tort. No actionable wrong by prospective purchasers against president and minority investor; president and minority investor not liable on basis of unlawful means tort. However, record was clear that president breached fiduciary duty to majority to act in good faith. As building manager, through minority investor, he could not take groundless legal steps to obstruct sale in order to further his personal interests.
Bram Enterprises Ltd. v. A.I. Enterprises Ltd. (Jan. 31, 2014, S.C.C., McLachlin C.J.C., LeBel J., Fish J., Rothstein J., Cromwell J., Karakatsanis J., and Wagner J., File No. 34863) Decision at 215 A.C.W.S. (3d) 252 was affirmed. 237 A.C.W.S. (3d) 551.
President could not take groundless steps to obstruct sale in order to further personal interests
Three corporations acquired apartment building. Title was vested in company which acted as “agent” for corporate investors. Syndication agreement provided that if majority decided to sell, minority had right of first refusal. Resolutions for sale were passed by majority. Minority investor, objected but initially declined to purchase. President of minority investor continued to resist sale and filed certificate of pending litigation based on own application seeking appointment of arbitrator. During period of president’s resistance, two transactions failed to close due to interventions of president and minority investor. Majority investors sued president and minority investor for difference between what majority would have received from prospective purchasers and price minority ultimately paid. Trial judge allowed claim, finding that tort of unlawful interference with economic relations made out. New Brunswick Court of Appeal dismissed appeal by president and minority investor. Further appeal by president and minority investor dismissed. Narrow scope for liability consistent with history and rationale of unlawful means tort. Scope should be understood in context of broad outlines of tort law’s approach to regulating economic and competitive activity. Rationale is “liability stretching”; tort does not seek to create new actionable wrongs, but simply expands range of persons who may sue for harm intentionally caused by existing actionable wrongs to third party. Trend of authority also towards narrow definition of “unlawful means”. Narrow approach provides certainty and predictability, not expanding scope of conduct for which defendant may be held liable but merely adding another plaintiff who may recover if intentionally harmed as result of that conduct. Core of unlawful means tort captures intentional infliction of economic injury on plaintiff by defendant’s use of unlawful means against third party. Conduct must be actionable civil wrong or conduct that would be actionable if it had caused loss to person at whom it was directed. Liability not limited to situations in which defendant’s conduct not otherwise actionable by plaintiff. General principles of tort liability accept concurrent liability and overlapping causes of action. Exceptions to scope of liability for unlawful means tort would be antithetical to principled approach and would undercut efforts to give certain and narrow ambit to tort. No actionable wrong by prospective purchasers against president and minority investor; president and minority investor not liable on basis of unlawful means tort. However, record was clear that president breached fiduciary duty to majority to act in good faith. As building manager, through minority investor, he could not take groundless legal steps to obstruct sale in order to further his personal interests.
Bram Enterprises Ltd. v. A.I. Enterprises Ltd. (Jan. 31, 2014, S.C.C., McLachlin C.J.C., LeBel J., Fish J., Rothstein J., Cromwell J., Karakatsanis J., and Wagner J., File No. 34863) Decision at 215 A.C.W.S. (3d) 252 was affirmed. 237 A.C.W.S. (3d) 551.
