When creditors bring claims against corporate debtors, they sometimes face the prospect that the debtor will have insufficient assets to satisfy any resulting judgment. For this reason, creditors will sometimes cast the net of potential defendants as wide as reasonably possible. In some situations, creditors may be able to name a broader group of parties as defendants using the tort of conspiracy.
Two Ways In Which to Establish the Tort of Conspiracy
The leading case on this tort remains Cement LaFarge v. B.C. Lightweight Aggregate from 1983. In that case, the Supreme Court of Canada considered an appeal of a judgment awarded against various companies for conspiracy to injure the respondent’s business. At issue was whether evidence of an actual intent to injure the respondent was necessary to impose liability for the tort of conspiracy. The Supreme Court reviewed the history of the tort and ultimately concluded that it had two different branches. The first type is “predominant purpose” conspiracy, while the second is “unlawful means” conspiracy.
The Test for Predominant Purpose Conspiracy
In Cement LaFarge, the Supreme Court of Canada explained that this first type of conspiracy arises where “whether the means used by the defendants are lawful or unlawful, the predominant purpose of the defendant’s conduct is to cause injury to the plaintiff.”
The Ontario Superior Court of Justice recently canvassed the law around the tort of predominant purpose conspiracy in Lilleyman v. Bumblebee Foods LLC. The Court specifically pointed out that liability for the tort requires proof of (a) an agreement to injure the plaintiff among two or more defendants, (b) the use by the defendants of some means for the predominant purpose of injuring the plaintiff (the means being lawful or unlawful); (c) the defendants acting “in furtherance of their agreement to injure”; and (d) the plaintiff suffering damage as a result.
Predominant Purpose Conspiracy Requires Proof of Actual Intent to Harm a Plaintiff
The requirement of an intention to injure will not be met if the harm suffered by the plaintiff is an indirect result of acts taken by the defendants out of their self-interest. As the Court in Lilleyman explained, “The focus is on the actual intent of the defendants and not on the consequences that the defendants either realized or should have realized would follow.” For this reason, conduct that amounts to nothing more than ordinary business competition does not generally satisfy the requirement of an intent to injure. Parties are free to act predominantly in their self-interests, and doing so will not give rise to liability for the tort absent something more, even if the plaintiff suffers harm.
Each Conspirator Will Be Liable for Predominant Purpose Conspiracy
The liability of conspirators for the tort of conspiracy is joint and several, whereby each conspirator is liable for the conduct of the other conspirators. As the Court noted in Lilleyman, a conspirator’s liability arises when they participate in and contribute to the conspiracy. Each such conspirator is jointly liable for resulting damages, “regardless of the degree of their participation or the date on which they joined the conspiracy.”
The Test for Unlawful Means Conspiracy
The Ontario Superior Court of Justice recently discussed the tort of unlawful means conspiracy in 6071376 Canada Inc. v. Mahmood Khedmatgozar et al.. There, the Court described the tort’s requirements as follows: (a) the defendants must have acted in combination (“in concert, by agreement or with a common design”); (b) their conduct must have been unlawful; (c) that conduct must have been directed towards the plaintiff; (d) the defendants should have known that injury would have been likely to result; and (e) the plaintiff must have suffered damage as a result.
What Generally Constitutes “Unlawful Means”?
Disputes involving the tort of unlawful means conspiracy sometimes concern whether the defendant’s conduct was “unlawful.” This was one of the issues the Ontario Court of Appeal considered in Agribrands Purina Canada Inc. v. Kasamekas. Criminal and quasi-criminal conduct will usually suffice. Likewise, tortious conduct generally constitutes “unlawful” means, such as nuisance, fraud and defamation. As the Court explained in Kasamekas, what is required to meet this test element is that “the defendants engage, in concert, in acts that are wrong in law, whether actionable at private law or not.” However, as with the tort of predominant purpose conspiracy, this particular tort is not intended to capture otherwise lawful “highly competitive activity” in the business world.
A Breach of Statute Will Also Generally Constitute “Unlawful Means” for the Purpose of Establishing the Tort of Conspiracy
Also noteworthy is the distinction between the unlawful acts that ground a claim for the tort of conspiracy and those that ground claims for other economic torts, such as intentional interference with economic relations. Intentional interference with economic relations requires proof that a defendant used unlawful means to interfere with a plaintiff’s economic interests. As the Supreme Court of Canada clarified in A.I. Enterprises Ltd. v. Bram Enterprises Ltd., means will be considered unlawful for that tort only if they would support a civil action by a third party or would do so if the third party has suffered damage as a result. The same does not appear to be true for the tort of conspiracy. Criminal offences and other breaches of the statute will generally support a claim for unlawful means of conspiracy.
Allegations of Conspiracy Must Be Carefully Pleaded
Creditors should also beware that any lawsuit based on the tort of conspiracy must be detailed and thoroughly set out in the Statement of Claim. As the Ontario Superior Court of Justice explained in Robins v. 2758729 Ontario Inc. et al., an allegation of conspiracy “is a serious matter.” It is an intentional tort, so it is important to set out the material facts in the Statement of Claim or face the risk of having it struck. Bald, unfounded allegations of conspiracy are unlikely to pass scrutiny.
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