SAR Petroleum et al. v. Peace Hills Trust Company,

• Jurisdiction: New Brunswick
• Judge: Turnbull, Robertson and Green, JJ.A.
• Neutral Citation: 2010 NBCA 22
• Date: 18 November 2009
• Court: Court of Appeal (New Brunswick)

SAR Petroleum v. Peace Hills Trust (2010), 357 N.B.R.(2d) 202 (CA);

    357 R.N.-B.(2e) 202; 923 A.P.R. 202

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Sommaire et texte intégral

[French language version follows English language version]

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

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Temp. Cite: [2010] N.B.R.(2d) TBEd. AP.008

Renvoi temp.: [2010] N.B.R.(2d) TBEd. AP.008

SAR Petroleum Inc., Paul Blades, John Salsbury and Lisa Lowry (appellants) v. Peace Hills Trust Company (respondent)

(101-09-CA; 2010 NBCA 22)

Indexed As: SAR Petroleum Inc. et al. v. Peace Hills Trust Co.

Répertorié: SAR Petroleum Inc. et al. v. Peace Hills Trust Co.

New Brunswick Court of Appeal

Turnbull, Robertson and Green, JJ.A.

April 8, 2010.

Summary:

Résumé:

SAR Petroleum Inc., two of its directors and an employee (the plaintiffs), entered into a construction contract with Eel River Bar First Nation (the owner) to construct a gas bar and convenience store. The owner required $3 million in financing. The lender paid out all but $250,000 of the financing advances, firstly under the mistaken belief that the Mechanics' Lien Act applied and then secondly, under the terms of the financing agreement between the owner and the lender. The plaintiffs sued the lender and the lender's lawyer, alleging that their intentional failure to make timely progress payments and wrongful withholding of the final advance induced the owner to breach the terms of the contract. The lender moved for summary judgment.

The New Brunswick Court of Queen's Bench, Trial Division, in a decision cited as 2009 NBQB 19, concluded that there was no merit to the action against the lender and granted the motion. The plaintiffs appealed.

The New Brunswick Court of Appeal dismissed the appeal. The motion judge committed no reversible error. The plaintiffs were unable to sustain a triable issue when it came to establishing an intention to induce a breach of contract. A finding of intention required more than a finding that the lender knew of the contract and acted with knowledge that its conduct would induce a breach.

Practice - Topic 5702

Judgments and orders - Summary judgments - Jurisdiction or when available or when appropriate - The New Brunswick Court of Appeal stated that "[t]he test for summary judgment is stringent and only met if the moving party establishes, by way of admissible evidence, the dismissal of the action at trial is a foregone conclusion. Once the relevant principles are established, the court is in a position to determine 'whether there is a genuine issue of material fact requiring trial'" - See paragraph 27.

Practice - Topic 5703

Judgments and orders - Summary judgments - Conditions precedent - A defendant in a tort action moved for summary judgment - The plaintiffs maintained that summary judgment could not be granted when there had been no exchange of affidavits of documents - The motion judge ruled that the basic facts were not disputed and held that the failure to exchange affidavits of documents was not fatal to the motion, as "[t]here are no answers to controversial questions within documents held exclusively by one party. Everything is known and undisputed" - The New Brunswick Court of Appeal concluded that the motion judge was correct - Any documents that existed and had not been disclosed would not and could not reasonably impact on the pivotal issue - However, there were a number of triable issues surrounding the issue of damages and an exchange of affidavits would have been required had it been necessary to address that issue - See paragraphs 66 to 69.

Practice - Topic 5719

Judgments and orders - Summary judgments - To dismiss action - The plaintiffs entered into a construction contract with a First Nation (the owner) - The owner required $3 million in financing - The lender paid out all but $250,000 of the financing advances, firstly under the mistaken belief that the Mechanics' Lien Act applied to first nation's lands, and then secondly, under the terms of the financing agreement between the owner and the lender - The plaintiffs sued the lender and the lender's lawyer in tort for inducing the owner to breach the terms of the contract - The lender moved for summary judgment - The motion judge granted summary judgment after concluding there was no merit to the action against the lender - The New Brunswick Court of Appeal dismissed the plaintiffs' appeal - The test of intention had not been satisfied - Specifically, the plaintiffs were unable to establish that breach of the contract was a desired end in the sense the breach was an end in itself or a means to an end - The lender did not act for an improper purpose but only a proper one, namely, to protect its legitimate commercial interests by acting on the instruction and advice of its lawyer - Moreover, there was no triable issue of fact surrounding the element of intention - See paragraph 65.

Torts - Topic 5208

Interference with economic relations - Contracts - Inducing or procuring breach of contract - [See Practice - Topics 5719 ].

Torts - Topic 5208

Interference with economic relations - Contracts - Inducing or procuring breach of contract - The New Brunswick Court of Appeal stated that the tort of inducing breach of contract "was never intended to provide a convenient legal tool for circumventing the doctrine of 'privity' in cases involving a web of interlocking commercial relationships. Hence, in cases where both the plaintiff and the defendant are contractually tied to a third party, under distinct and separate contracts, and the defendant, acting in furtherance of its contractual rights, adopts a course of conduct which forces the third party to breach its contract with the plaintiff, the defendant is not liable simply because it knew a breach would follow. This remains true even if the defendant misconstrued its contractual rights. So long as the defendant acted in good faith, liability will not attach" - See paragraph 5.

Torts - Topic 5208

Interference with economic relations - Contracts - Inducing or procuring breach of contract - The New Brunswick Court of Appeal stated that "Negligent conduct is not actionable in cases involving an intentional tort. Above all, mere knowledge that a breach would follow is insufficient to meet the threshold test of intention. In addition, the breach must have been a 'desired end'. This means that the breach must be an end in itself or a means to an end. Malice or ill-will towards the plaintiff qualifies as an end in itself. The pursuit of a benefit or economic advantage over and above the preservation of existing contractual rights qualifies as a means to an end. Such a goal reeks of 'opportunism' ... Otherwise, and as a general rule, the defendant cannot be accused of opportunistic behaviour if its actions were intended to protect its competing contractual or property rights" - See paragraph 5.

Torts - Topic 5208

Interference with economic relations - Contracts - Inducing or procuring breach of contract - The New Brunswick Court of Appeal stated that "it is wrong to proceed on the assumption that the test for intention is satisfied simply because a breach of the plaintiff's contract with the third party was a natural and foreseeable consequence of the defendant's acts and, therefore, the defendant knew or ought to have known that a breach would follow" - See paragraph 30.

Torts - Topic 5208

Interference with economic relations - Contracts - Inducing or procuring breach of contract - The New Brunswick Court of Appeal revisited the jurisprudence with a view to isolating the essential elements of the tort of inducing breach of contract - The court settled on the following eight elements: "(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 procure 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'" - See paragraphs 31 to 40.

Torts - Topic 5208

Interference with economic relations - Contracts - Inducing or procuring breach of contract - The New Brunswick Court of Appeal discussed the apparent overlap when it came to the defence of justification and the test of intention to induce or procure breach of contract - "[O]nce the intention test is framed in terms of the defendant not acting for an improper purpose (means to an end), it is only logical that the defendant would want to show that it acted for a proper purpose: the pursuit and preservation of existing contractual rights with the third party. This is why the test of intention overlaps with the defence of justification as it was applied pre OBG Limited v. Allan [2007 H.L.]" - It seemed to the court that the defence of justification, as applied in Edwin Hill v. First National Finance Corp. (1988), had been incorporated into the test of intention as articulated in OBG Limited - See paragraphs 42, 70 to 73.

Torts - Topic 5208

Interference with economic relations - Contracts - Inducing or procuring breach of contract - The plaintiffs entered into a construction contract with Eel River First Nation - Eel River required financing - The plaintiffs sued the lender and the lender's lawyer, alleging they should be held liable in tort for inducing Eel River to breach its contract with the plaintiffs - The lender moved for summary judgment - Much of the argument focused on whether the lender's actions were justified under the terms of the loan agreement - On appeal, the plaintiffs argued that the lender could not shelter itself from liability because the motion judge erred in concluding that the lender had a contractual right to do what it did under the terms of the loan agreement - The New Brunswick Court of Appeal stated that the lender was justified in doing what it did (acted for a proper purpose) - "Above all else, liability does not attach simply because [the lender] or its lawyer may have misinterpreted the former's legal rights under its loan agreement with Eel River. Negligent interpretation of a contractual right does not lead to liability for the tort of inducing breach of contract" - See paragraphs 74 to 78.

Torts - Topic 5208

Interference with economic relations - Contracts - Inducing or procuring breach of contract - The New Brunswick Court of Appeal discussed the essential elements of the tort of inducing breach of contract, including the element that the defendant must have been aware of the contract - "Without knowledge there can be no intent and no liability. This leads one to ask whether mere knowledge of the contract is sufficient for purposes of establishing liability. The answer is a qualified 'no'. The defendant must also know of the contract's essential terms. However, the law assists the plaintiff by holding that a defendant who has the means of acquiring knowledge of the contract's terms and deliberately fails to do so will be deemed to have acquired the requisite knowledge. This understanding of the law accords with the general principle that a conscious decision not to inquire into the existence of a fact may be treated as the equivalent to knowledge of the fact" - See paragraph 45.

Torts - Topic 5208

Interference with economic relations - Contracts - Inducing or procuring breach of contract - The New Brunswick Court of Appeal discussed "the most problematic aspect" of the tort of inducing breach of contract; namely, the requisite intention to induce a breach of contract - The problem was anchored to the test to be applied for establishing intention - The court stated that Lord Hoffman's formulation of the intention test in OBG v. Allan (that the plaintiff must show the breach was an end in itself or a means to an end), made "eminent good sense", as it accorded with one of the tort's primary objectives; namely, to protect contractual rights - "In brief, if the breach of contract were neither an end in itself nor a means to an end, one must conclude that it was unintended. Hence, if the defendant did not act out of malice or obtain an economic advantage as a result of the breach, it should follow that the requisite intention is absent and the tort action must fail" - In the case at bar, the element of intention had not been satisfied - See paragraphs 51 to 56.

Délits civils - Cote 5208

Atteintes aux relations économiques - Contrats - Incitation à la rupture de contrat - [Voir Torts - Topic 5208 ].

Procédure - Cote 5702

Jugements et ordonnances - Jugements sommaires - Compétence ou conditions d'ouverture ou opportunité - [Voir Practice - Topic 5702 ].

Procédure - Cote 5703

Jugements et ordonnances - Jugements sommaires - Conditions préalables - [Voir Practice - Topic 5703 ].

Procédure - Cote 5719

Jugements et ordonnances - Jugements sommaires - En vue du rejet de l'action - [Voir Practice - Topic 5719 ].

Cases Noticed:

Lumley v. Gye (1853), 2 E. & B. 216; 118 E.R. 749 (K.B.), consd. [paras. 1, 31].

Fabbi et al. v. Jones; Fleck et al. v. Jones, [1973] S.C.R. 42, consd. [paras. 1, 54].

Jones v. Fabbi - see Fabbi et al. v. Jones; Fleck et al. v. Jones.

Walsh v. Nicholls et al. (2004), 273 N.B.R.(2d) 203; 717 A.P.R. 203; 2004 NBCA 59, consd. [paras. 1, 31].

Mainstream Properties Ltd. v. Young - see OBG Ltd. et al. v. Allan et al.

OBG Ltd. et al. v. Allan et al., [2008] A.C. 1; 369 N.R. 66; [2007] UKHL 21, consd. [para. 2].

Caissie v. Sénéchal Estate et al. (2001), 237 N.B.R.(2d) 232; 612 A.P.R. 232; 2001 NBCA 35, refd to. [para. 10].

Whelton v. Mercier et al. (2004), 277 N.B.R.(2d) 251; 727 A.P.R. 251; 2004 NBCA 83, refd to. [para. 26].

Cannon v. Lange et al. (1998), 203 N.B.R.(2d) 121; 518 A.P.R. 121 (C.A.), refd to. [para. 27].

Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423; 247 N.R. 97; 126 O.A.C. 1, refd to. [para. 27].

Pavecare Industries (1989) Ltd. et al. v. Blue Chip Investments Inc. et al. (2001), 237 N.B.R.(2d) 12; 612 A.P.R. 12 (T.D.), refd to. [para. 28].

Beaver Brokerage Inc. v. Williams et al. (1989), 103 N.B.R.(2d) 314; 259 A.P.R. 314 (T.D.), refd to. [para. 28].

Correia v. Canac Kitchens et al. (2008), 240 O.A.C. 153; 91 O.R.(3d) 353; 2008 ONCA 506, refd to. [para. 35].

Drouillard v. Cogeco Cable Inc. et al. (2007), 223 O.A.C. 350; 86 O.R.(3d) 431; 2007 ONCA 322, refd to. [para. 35].

Tireco Inc. v. YHI (Canada) Inc., 2009 CarswellOnt 6404 (Sup. Ct.), leave to appeal refused [2009] O.A.C. Uned. 511 (Div. Ct.), consd. [para. 35].

Brae Centre Ltd. v. 1044807 Alberta Ltd. et al. (2008), 446 A.R. 10; 442 W.A.C. 10; 2008 ABCA 397, consd. [para. 35].

369413 Alberta Ltd. v. Pocklington Holdings Inc. - see Gainers Inc. v. Pocklington Holdings Inc.

Gainers Inc. v. Pocklington Holdings Inc. (2000), 271 A.R. 280; 234 W.A.C. 280; 2000 ABCA 307, refd to. [para. 39].

British Industrial Plastics Ltd. v. Ferguson, [1940] 1 All E.R. 479 (H.L.), affing. [1938] 4 All E.R. 504 (C.A.), consd. [para. 49].

Millar v. Bassey, [1994] E.M.L.R. 44 (C.A.), consd. [para. 55].

Imperial Oil Ltd. v. C & G Holdings Ltd., Gardiner and Neville (1989), 78 Nfld. & P.E.I.R. 1; 244 A.P.R. 1 (Nfld. C.A.), refd to. [para. 61].

McFadden v. 481782 Ontario Ltd. et al. (1984), 47 O.R.(2d) 134 (H.C.), refd to. [para. 61].

Hill (Edwin) & Partners v. First National Finance Corp., [1989] 1 W.L.R. 225 (C.A.), consd. [para. 71].

Bank of Nova Scotia v. Gaudreau (1984), 48 O.R.(2d) 478 (H.C.), refd to. [para. 72].

Provincial Bank of Canada et al. v. Thermo King Corp. (1981), 34 O.R.(2d) 369 (C.A.), leave to appeal refused (1982), 42 N.R. 352 (S.C.C.), consd. [para. 75].

Hadley v. Baxendale (1854), 9 Exch. 341; 156 E.R. 145, refd to. [para. 77].

Authors and Works Noticed:

Burns, Peter, Tort Injury to Economic Interests (1980), 58 Can. Bar Rev. 103, generally [para. 28].

Fleming, John G., The Law of Torts (9th Ed. 1998), pp. 758 [para. 34]; 760 [para. 34].

Klar, Lewis N., Tort Law (3rd Ed. 2003), generally [para. 63].

Klar, Lewis N., Linden, Allan M., Cherniak, Earl A., Kryworuk, Peter W. and Randali, Remedies in Tort (2009) (Looseleaf Supp.), generally [para. 28].

Mitchell, Gregory, Economic tort (1), New Law Journal 157:7279 (June 29, 2007), p. 919 [para. 35].

Osborne, Philip H., The Law of Torts (2nd Ed. 2003), p. 300 [para. 71].

Richardson, W. Augustus, Making an End Run Around the Corporate Veil: The Tort of Inducing Breach of Contract (1984), 5 Adv. Q. 103, generally [para. 61].

Counsel:

Avocats:

Robert G. Vincent, Q.C., for the appellants;

Steven R. Barnett, for the respondent.

This appeal was heard on November 18, 2009, by Turnbull, Robertson and Green, JJ.A., of the New Brunswick Court of Appeal. Robertson, J.A., delivered the following judgment and reasons for judgment of the Court on April 8, 2010, in both official languages.