671122 Ontario Ltd. v. Sagaz Industries Canada Inc. et al., 2001 SCC 59

• Judge: McLachlin, C.J.C., Iacobucci, Major, Bastarache, Binnie, Arbour and LeBel, JJ.
• Court: Supreme Court of Canada
• Case Date: Friday September 28, 2001
• Jurisdiction: Canada (Federal)
• Citations: 2001 SCC 59;(2001), 274 N.R. 366 (SCC);EYB 2001-25875;17 BLR (3d) 1;8 CCLT (3d) 60;274 NR 366;[2001] 4 CTC 139;150 OAC 12;[2001] 2 SCR 983;[2001] SCJ No 61 (QL);55 OR (3d) 782;108 ACWS (3d) 300;12 CPC (5th) 1;[2001] CarswellOnt 3357;204 DLR (4th) 542;JE 2001-1832;11 CCEL (3d) 1;AZ-50100985;[2001] ACS no 61

671122 Ont. Ltd. v. Sagaz Ind. Can. (2001), 274 N.R. 366 (SCC)

test 12345

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[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2001] N.R. TBEd. SE.024

Sagaz Industries Canada Inc., Sagaz Industries Inc. and Joseph Kavana (appellants) v. 671122 Ontario Limited, formerly Design Dynamics Limited (respondent)

(27820; 2001 SCC 59)

Indexed As: 671122 Ontario Ltd. v. Sagaz Industries Canada Inc. et al.

Supreme Court of Canada

McLachlin, C.J.C., Iacobucci, Major, Bastarache, Binnie, Arbour and LeBel, JJ.

September 28, 2001.

Summary:

The plaintiff company supplied seat covers to Canadian Tire for 30 years, accounting for over 50% of the plaintiff's business. The defendant Sagaz manufactured similar seat covers and retained the defend­ant AIM (marketing company) to obtain the Canadian Tire con­tract. AIM would receive a commis­sion on all sales to Canadian Tire. Summers headed Canadian Tire's automotive division. Kavana was Sagaz's principal officer. AIM bribed Summers (2% kick­back) to termin­ate Cana­dian Tire's relationship with the plain­tiff and substitute Sagaz as supplier. When the bribery surfaced, Summers was dismissed and later criminally convicted. The plaintiff sued Sagaz, Kavana and AIM for damages for conspiracy to injure and unlawful inter­fer­ence with economic rela­tions.

The Ontario Court (General Division), in a judgment reported 67 O.T.C. 22, found that the bribe was the proximate and operative cause of the termination of the plaintiff's relationship with Canadian Tire. AIM and its owner were liable in damages for conspiracy to injure and unlawful inter­ference with economic relations. The court awarded the plaintiff damages of $2,307,500 (net loss in the fair market value of the business) plus $50,000 punitive damages. The court dis­missed the action against Sagaz (no vi­cari­ous liability where AIM an independent con­tractor). The court also dismissed the action against Kavana, where neither Sagaz nor Kavana had know­ledge that its con­tract with Canadian Tire had been secured by a bribe. After the trial judge released reasons, but before formal judgment, AIM's owner (who had not testified at trial) gave an affi­davit admitting the conspiracy to bribe and impli­cating Kavana. The trial judge refused the plaintiff's motion to re-open the trial to hear the owner's evidence on the ground that the evidence was available at trial and the plain­tiff made a tactical decision not to call the owner. The plaintiff appealed on the grounds that, inter alia, the trial judge erred in dis­missing the claim against Sagaz on the basis of vicarious liability and erred in refusing to reopen the trial. Sagaz and Kav­ana cross-appealed respecting costs.

The Ontario Court of Appeal, in a judg­ment reported 128 O.A.C. 46, allowed the appeal and cross-appeal. Sagaz was vicari­ously liable for the tortious conduct of AIM and its owner (except for punitive damages). Further, the trial judge erred in refusing to reopen the trial to hear the owner's evidence. The court directed a new trial on the issue of Kavana's liability. Sagaz and Kavana appealed.

The Supreme Court of Canada allowed the appeal and restored the trial judge's decision.

Master and Servant - Topic 308

Nature of relationship - Contract of ser­vice and contract for services distinguished - [See first Torts - Topic 2560].

Practice - Topic 5006

Conduct of trial - General principles - Reopening of trial to hear additional sub­missions or evidence - The plaintiff sup­plied Canadian Tire (CT) - Sagaz manu­factured similar product and retained AIM to obtain the CT con­tract - Kavana was Sagaz's principal officer - AIM bribed a CT employee (2% kick­back) to termin­ate CT's relationship with the plaintiff and substitute Sagaz as supp­lier - The plain­tiff sued Sagaz, Kavana and AIM for damages for conspiracy to injure and unlawful inter­fer­ence with economic rela­tions - The trial judge found AIM and its owner were liable, but dis­missed the action against Kavana on the ground that he had no know­ledge that the CT con­tract was secured by a bribe - After the trial judge released rea­sons, but before formal judg­ment, AIM's owner (who was not called at trial) gave an affi­davit admit­ting the con­spiracy to bribe and impli­cat­ing Kava­na - The trial judge refused to re-open the trial to hear the owner's evidence on the ground that the evidence was avail­able at trial and the plain­tiff made a tacti­cal decision not to call the owner - The Court of Appeal ordered a new trial, finding that the trial judge should have reopened the trial where the evidence might probably have affected the outcome and the evidence could not have been discovered sooner with due diligence - The Supreme Court of Canada held that the trial judge did not err in exercising his discretion not to reopen - Accordingly, the Court of Appeal should not have substituted its decision for that of the trial judge - See paragraphs 59 to 65.

Practice - Topic 8804

Appeals - General principles - Duty of appellate court regarding discretionary orders - The Supreme Court of Canada restated that "absent an error of law, an appellate court should not interfere with the exercise by a trial judge of his or her discretion in the conduct of a trial" - See paragraph 60.

Torts - Topic 2560

Vicarious liability - For independent con­tractors - What constitutes an independent contractor - The Supreme Court of Canada discussed the various tests developed to distinguish an employer-employee rela­tion­ship from an employer-independent con­tractor relationship - The court stated that "there is no one conclusive test which can be universally applied to determine whether a person is an employee or an independent contractor. ... The central question is whether the person who has been engaged to perform the services is performing them as a person in business on his own account. In making this deter­mination, the level of control the employer has over the worker's activities will always be a factor. However, other factors to consider include whether the worker pro­vides his or her own equipment, whether the worker hires his or her own helpers, the degree of financial risk taken by the worker, the degree of responsibility for investment and management held by the worker, and the worker's opportunity for profit in the performance of his or her tasks. It bears repeating that the above factors constitute a non-exhaustive list, and there is no set formula as to their applica­tion. The relative weight of each will depend on the particular facts and circum­stances of the case." - See para­graphs 46 to 48.

Torts - Topic 2560

Vicarious liability - For independent con­tractors - What constitutes an independent contractor - [See Torts - Topic 5086].

Torts - Topic 5086

Interference with economic relations - Conspiracy - Conspiracy to injure - The plaintiff supplied seat covers to Canadian Tire for 30 years - The defendant Sagaz manufactured similar seat covers and retained the defend­ant AIM (marketing company) to obtain the Cana­dian Tire con­tract - Summers headed Canadian Tire's automo­tive divi­sion - Kavana was Sagaz's principal officer - AIM bribed Summers (2% kick­back) to termin­ate Cana­dian Tire's rela­tionship with the plaintiff and substitute Sagaz as supp­lier - The plain­tiff sued Sagaz, Kavana and AIM for damages for conspiracy to injure and unlawful inter­fer­ence with economic rela­tions - The trial judge found AIM and its owner liable in dam­ages for conspiracy to injure and un­lawful inter­ference with economic rela­tions, but dis­missed the action against Sagaz, finding no vi­cari­ous liability where AIM was an independent contractor - Further, neither Sagaz nor Kavana had know­ledge that its con­tract with Canadian Tire had been secured by a bribe - The Court of Appeal held that Sagaz was vicar­iously liable for AIM's and Kav­ana's tortious conduct - The evi­dence disclosed that AIM was not acting inde­pendently, but as part of the Sagaz organ­ization - Apply­ing the "organization test", Sagaz was vicariously liable for AIM's tortious con­duct notwithstanding the parties chose to label AIM an independent contractor - The Supreme Court of Canada restored the trial judge's decision that, based on all of rel­evant factors, AIM was an independent contractor and Sagaz was accordingly not vicariously liable - See paragraphs 25 to 58.

Torts - Topic 5242

Interference with economic relations - Interference with business relations - What constitutes - [See Torts - Topic 5086].

Cases Noticed:

London Drugs Ltd. v. Brassart and Vanwinkle, [1992] 3 S.C.R. 299; 143 N.R. 1; 18 B.C.A.C. 1; 31 W.A.C. 1, refd to. [para. 16].

Scott v. Cook, [1970] 2 O.R. 769 (H.C.), refd to. [para. 20].

Mayer v. Lavigne (J. Conrad) Ltd. (1979), 27 O.R.(2d) 129 (C.A.), refd to. [para. 22].

Co-operators Insurance Association v. Kearney, [1965] S.C.R. 106, refd to. [para. 22].

P.A.B. v. Children's Foundation et al., [1999] 2 S.C.R. 534; 241 N.R. 266; 124 B.C.A.C. 119; 203 W.A.C. 119; 174 D.L.R.(4th) 45, refd to. [para. 27].

G.T.-J. et al. v. Griffiths et al., [1999] 2 S.C.R. 570; 241 N.R. 201; 124 B.C.A.C. 161; 203 W.A.C. 161; 174 D.L.R.(4th) 71, refd to. [para. 27].

Wiebe Door Services Ltd. v. Minister of National Revenue, [1986] 3 F.C. 553; 70 N.R. 214 (F.C.A.), refd to. [para. 37].

R. v. Walker (1858), 27 L.J.M.C. 207, refd to. [para. 37].

Laurent et al. v. Hôpital Notre-Dame de l'Espérance, [1978] 1 S.C.R. 605; 17 N.R. 593, refd to. [para. 37].

Montreal v. Montreal Locomotive Works Ltd., [1947] 1 D.L.R. 161 (P.C.), refd to. [para. 39].

Stevenson, Jordan and Harrison Ltd. v. MacDonald et al., [1952] 1 T.L.R. 101, refd to. [para. 40].

Market Investigations Ltd. v. Minister of Social Security, [1968] 3 All E.R. 732 (Q.B.), refd to. [para. 44].

Sang v. Keung et al., [1990] 2 A.C. 374; 107 N.R. 386 (P.C.), refd to. [para. 44].

Hamstra et al. v. British Columbia Rugby Union et al., [1997] 1 S.C.R. 1092; 211 N.R. 89; 89 B.C.A.C. 161; 145 W.A.C. 161, refd to. [para. 60].

Clayton v. British American Securities Ltd., [1934] 3 W.W.R. 257 (B.C.C.A.), refd to. [para. 60].

Ladd v. Marshall, [1954] 1 W.L.R. 1489 (C.A.), refd to. [para. 63].

Authors and Works Noticed:

Atiyah, P.S., Vicarious Liability in the Law of Torts (1967), pp. 6, 7 [para. 28]; 41 [para. 38]; 327 to 378 [para. 33].

Douglas, W.O., Vicarious Liability and Administration of Risk I (1928-29), 38 Yale L.J. 584, generally [para. 39].

Flannigan, R., Enterprise control: The servant-independent contractor distinc­tion (1987), 37 U.T.L.J. 25, pp. 25 [para. 36]; 29 [para. 31]; 31, 32 [para. 34].

Fleming, John G., The Law of Torts (9th Ed. 1998), pp. 410 [para. 27]; 416 [para. 41].

Fridman, G.H.L., The Law of Torts in Canada (1990), vol. 2, pp. 314, 315 [para. 28].

Kidner, R., Vicarious liability: for whom should the employer be liable? (1995), 15 Legal Studies 47, p. 60 [para. 42].

Counsel:

H. Lorne Morphy, Q.C., John B. Laskin and M. Paul Michell, for the appellants;

Martin Teplitsky, Q.C., and James M. Wortzman, for the respondent.

Solicitors of Record:

Torys, Toronto, Ontario, for the appel­lants;

Teplitsky, Colson, Toronto, Ontario, for the respondent.

This appeal was heard on June 19, 2001, before McLachlin, C.J.C., Iacobucci, Major, Bastarache, Binnie, Arbour and LeBel, JJ., of the Supreme Court of Canada.

On September 28, 2001, Major, J., delivered the following judgment in both official languages for the Supreme Court of Canada.