Date: 20080522
Docket: T-745-04
Citation: 2008
FC 653
BETWEEN:
PEMBINA COUNTY WATER RESOURCE
DISTRICT,
CITY OF PEMBINA, NORTH DAKOTA,
TOWNSHIP OF PEMBINA, NORTH DAKOTA,
TOWNSHIP OF WALHALLA, NORTH DAKOTA,
CITY OF NECHE, NORTH DAKOTA,
TOWNSHIP OF NECHE, NORTH DAKOTA, AND
TOWNSHIP OF FELSON, NORTH
DAKOTA
Plaintiffs
and
GOVERNMENT OF MANITOBA,
RURAL MUNICIPALITY OF RHINELAND,
RURAL MUNICIPALITY OF MONTCALM,
RURAL MUNICIPALITY OF STANLEY, and
TOWN OF EMERSON, MANITOBA
Defendants
REASONS FOR
ORDER AND ORDER
LAFRENIÈRE P.
[1]
The
Plaintiffs move for leave to amend their Statement of Claim to plead the tort
of interference with economic relations and to claim economic damages stemming
from the loss of revenue from their tax base due to the decrease in value of
lands owned by third parties that were flooded as a result of the Defendants’
alleged negligence.
[2]
The
Plaintiffs submit that the proposed amendments arise from substantially the
same factual situation as previously plead in their Statement of Claim and, in
the absence of any prejudice to the Defendants, should be allowed. The
Defendants counter that it is plain and obvious that the claim of interference
with economic relations cannot succeed. They contend that the additional
damages being sought amount to a claim for pure economic loss, which is recoverable
only in exceptional circumstances and should not to be recognized in this case.
Background
[3]
Various
towns and cities in North Dakota joined together and commenced an action against
the Defendants on April 8, 2004. The Plaintiffs allege in their Statement of
Claim that the Government of Manitoba and four municipalities are liable for
flooding damage caused by the construction, maintenance, and operation of a
dike near the international border running along the 49th parallel between
North
Dakota
and Manitoba. The dike is
immediately inside the Canadian side of the border and extends for
approximately 30 miles west from a point just west of where the Red River
crosses the border. Historical records indicate that the construction of part
of the present day dike took place in the early 1940s and, since that time, the dike has been improved and
lengthened to its present state.
[4]
The
Plaintiffs allege that the dike blocks water flowing in natural watercourses in
the State of North Dakota from flowing into the Province of Manitoba, in
violation of the International Boundary Waters Treaty Act, R.S., 1985,
c. I-17 (the IBWA Act). They further allege that flooding and consequential
damage is caused by the operation of the dike, resulting in damage to works and
undertakings they operate or control. In their prayer for relief, the
Plaintiffs request the removal of the dike, re-establishment of the land upon
which the dike has been constructed to prairie grade, as well as damages. The
Defendants filed statements of defence in March 2005 denying both liability and
damages.
[5]
Before
embarking on examinations for discovery, the Plaintiffs seek leave to amend the
Statement of Claim by adding the underlined wording in
the following paragraphs:
1. The plaintiffs claim:
…
e) damages
in the excess of $50,000 caused to the plaintiffs, or any of them, related to
the loss of tax revenue from the damage to property, works or undertakings
caused directly or indirectly from the intentional and/or negligent acts and/or
nuisance of the defendants as hereinafter pleaded;
8. Each of the
plaintiffs owns or controls property, works or undertakings and/or is
dependent for its revenues upon the taxes levied upon those persons that own or
control property, works or undertakings in the United States that are
located close to the International Boundary in the Townships of Pembina,
Neche, Felson, St. Joseph, Walhalla, Joliette, Lincoln and Drayton in Pembina
County in the State of North Dakota. The Townships of Pembina, Neche, Felson, St. Joseph and Walhalla have a northern
boundary that extends to the International Boundary.
19. The plaintiffs,
either directly or indirectly, have for years informed the Province of Manitoba
that the said dike was the cause of, and continues to be the cause of,
extensive flooding within the Townships of Pembina, Neche, Felson, St. Joseph,
Walhalla, Joliette, Lincoln and Drayton, and within the cities of Pembina,
Neche, Walhalla and Drayton, in the State of North Dakota, with resulting
property damage, loss of income, loss of opportunities, loss of enjoyment of
land and property, endangerment of health of persons and livestock and
reduction in the quality of the land.
19.1 The plaintiffs say
that the defendants committed the tort of intentional interference with
economic interests. The defendants’ conduct as herein plead, was directed
towards the plaintiffs with knowledge of its consequences. The defendants’
illegal and/or unlawful conduct has caused ongoing and continuing damage to
property, works or undertakings within the tax base of the plaintiffs so that
the property has devalued thereby decreasing the tax base and taxes levied by
the plaintiffs with the result that the defendants have caused economic loss to
the plaintiffs in amounts to be proven at the trial of this action.
19.2 Furthermore, the
plaintiffs say that the defendants, by their intentional and/or negligent
actions and/or nuisance in constructing and maintaining the dike as aforesaid,
have caused foreseeable, ongoing and continuing damage to property, works, or
undertakings within the tax base of the plaintiffs with the result that the
property has devalued, thereby decreasing the tax base and taxes levied by the
plaintiffs in amounts to be proven at the trial of this action.
Issues to be determined
[6]
The
issue to be decided on this motion is whether the tort of intentional
interference with economic relations has any chance of success, in other words,
whether it is "plain and obvious" that the action is doomed to fail.
The first matter to be considered is whether the facts
pleaded in the proposed amendments meet the requirements of the tort. The
second matter is whether there are policy considerations that justify negating
liability on the particular facts of this case.
Legal
Principles: Amendments to Pleadings
[7]
The
parties agree on the principles to be applied on this motion for leave to amend
a pleading. In determining whether an amendment to a pleading should be
permitted, the Court is required to take the facts as stated in the proposed
pleading as proven: Hunt v. Carey [1990] 2 S.C.R. 959. The
Court should take a generous approach to a request for an amendment: Fox Lake
Indian Band v. Reid Crowther & Partners Ltd, 2002 FCT 630 at paras. 9-13;
Canada v. J.D. Irving, Ltd. [1999] 2 F.C. 346; Canderel Ltd. v. Canada, [1994] 1 F.C.
3 at 10 (C.A.). Provided
the cause of action is not plainly and obviously destined to fail and there is
no significant prejudice to the other party which could not be compensated by
costs, an amendment ought to be permitted: Fox Lake Indian Band,
above
at para. 13; Almecon Industries Ltd. v. Anchortek Ltd. (1999), 85 C.P.R (3d) 216
(F.C.T.D.).
[8]
The
Court must also consider whether the proposed amendment would be capable of
being struck out under Rule 221 of the Federal Courts Rules: 1340232
Ontario Inc. v. St. Lawrence Seaway Management Corp., 2004 FC 209 at para. 12.
Rule 221(1)(a) provides that the Court may, on motion, order that a pleading,
or anything contained therein, be struck out, with or without leave to amend,
on the grounds that it discloses no reasonable cause of action.
[9]
The
test to strike pleadings is a stringent one; the pleading must be found to be
certain to fail as it contains a "radical defect". The moving
party must meet a very high threshold, demonstrating that it is plain and
obvious that the claim does not disclose a cause of action. Neither the length and complexity of the issues, the novelty of the
cause of action, nor the potential for the defendant to present a strong
defence should prevent the plaintiff from proceeding with its claim: Hunt v.
Carey, above. However, in circumstances where no cause of action is
disclosed, proposed amendments to pleadings will be refused: VISX Inc. v. Nidek Co. (1996), 72 C.P.R. (3d) 19 at 24 (F.C.A.); Chrysler Canada Ltd. v.
The Queen, [1978] 1 F.C. 137 at 138 (T.D.); Johnson & Johnson Inc.
v. Boston
Scientific Ltd. (2001), 14 C.P.R. (4th) 512 at 516
(F.C.T.D.).
Whether the
proposed amendments meet the requirements of the tort
[10]
The
concept of an action for interference with economic relationships outside the
scope of contracts finds its early roots in 18th century British
law. Over the past two decades economic interference torts have
increasingly appeared on the Canadian legal landscape, as courts recognize that
liability may exist even in instances where no breach of contract has occurred.
[11]
The
tort of interference with economic relations may arise where the defendant acts
in a manner that interferes with or disrupts the plaintiff's economic interests
without reference to a particular contract already entered into by the
plaintiff with a third party, but by doing something that affects intended
contracts, or that affects the plaintiff's economic situation generally: G.H.L.
Fridman, The Law of Torts in Canada, 2nd Ed., Carswell, 2002, at pages
808-809.
[12]
Canadian
courts have generally embraced a simple three-element test for the tort of
intentional economic interference (see Canada Steamship Lines Inc. v. Elliott,
2006 FC 609; Lineal Group Inc. v. Atlantis Canadian
Distributors (1998), 42 O.R. (3d) 157 (Ont. CA)),
namely:
1.
an intention to injure the plaintiff;
2. interference with another's method of gaining its
livelihood or business by unlawful or illegal means; and
3.
economic loss caused thereby.
[13]
The
first element of the test requires that the Court inquire into the quality of
the intention accompanying the impugned conduct. The
defendant’s motive is irrelevant to the analysis of the intent element of the
test: Daishowa Inc. v. Friends of the Lubicon (1996), 27 O.R. (3d) 215
at para. 63 (Ont.
Div. Ct.).
Nor is it necessary at this stage for the plaintiff to show that the
predominant purpose of the defendant was to cause the plaintiff damage: Therien
v. Int'l Brotherhood of Teamsters et al., [1960] S.C.R. 265.
[14]
Some
uncertainty remains with respect to other aspects of the quality of intention
necessary to make out the intentional interference tort. Canadian courts have been
closely following the development of British law, and appellate courts have
largely adopted the analytical approach espoused by the
English Court of Appeal in Millar
v. Bassey, [1994] Entertainment & Media LR
44,
a case dealing with indirect interference with contract. The majority (Ralph Gibson and Beldam L.JJ.) held that there had to
be the deliberate interference with a contract with a view to bringing about
its breach rather than interference causing a breach when that interference was
merely the incidental consequence of the defendant’s conduct.
[15]
The
“targeting the plaintiff” approach to the intent analysis dictates that mere
knowledge of an unlawful action on the part of the defendant is not enough;
intention to cause damage to the plaintiff is required. Courts taking this
approach have explicitly warned against conflating intention to cause damage
with mere foreseeability that such damage may result from unlawful conduct. In
sum, the impugned conduct must be directed at the plaintiff.
[16]
This
approach was adopted by the Nova Scotia Court of Appeal in Cheticamp
Fisheries Co-op Ltd. v. Canada 123 D.L.R. (4th) 121 at para. 42:
…What the case law requires is
an intention to cause the damage. Mere knowledge of D.F.O. officials that their
actions were unlawful or recklessness as to whether or not they were unlawful
is not, in itself, sufficient evidence of intention to do harm. I have already
referred to the fact that the purpose or intention of inflicting injury is an
essential element of the tort. The courts have stopped short of substituting
for an intention to cause damage to the plaintiff a mere foreseeability that
such damage may result from the unlawful conduct. A constructive intent to
injure or foreseeable injury may have a place in the tort of conspiracy but not
in my opinion in the tort of interference with economic relations. See
Canada Cement LaFarge v. B. C. Lightweight Aggregate Ltd. et al (1983), 145 D.L.R. (3d) 385
at 398 - 9 (S.C.C.), Fleming, The Law of Torts, 7th Edition, (1987), p. 663,
note 45, p. 665 especially note 59. I think that recklessness is more akin to
foreseeability than it is to intention. If any lesser standard of intention
were required, it still seems clear that the offending conduct must be
"directed at" the plaintiff. [Emphasis added].
[17]
The
same approach was endorsed by the Ontario Court of Appeal in Lineal Group
Inc. v. Atlantis Canadian Distributors, above, which held that even if the
defendant's actions were intentional, such action must target the plaintiff in
order for intentional interference to be made out. Similarly, in Reach M.D.
Inc. v. Pharmaceutical Manufacturers Assn. of Canada (2003), 227 D.L.R.
(4th) 458 at para. 46, the Ontario Court of Appeal discussed the first element
of the tort of economic interference as follows:
To satisfy the first element,
Reach need not prove that PMAC's predominant purpose was to injure it. This
first element of the tort will be met as long as PMAC's unlawful act was in
some measure directed against Reach. That is so even if - as PMAC claims - its
predominant purpose was to advance its own interest and those of its members. In
short, "The defendant's manoeuvre must have been targeted against the
plaintiff, although its predominant purpose might well have been to advance his
own interests thereby rather than to injure the plaintiff". See John
G. Fleming, The Law of Torts, 9th ed., (1998) at p. 769. [Emphasis added].
[18]
Some
lower courts have taken an analytical approach that puts more emphasis on
foreseeability when considering the quality of the intent. However, even in
these cases, the courts require that the perpetration of unlawful acts be directed
against the plaintiff for the tort of interference with economic interests
to be made out: (see for example Alford v. Canada (1997), 31 B.C.L.R. (3d) 228 at paras. 43-45).
[19]
In
summary, it is not sufficient that the damage suffered by the plaintiff is
merely a consequence of the defendant’s actions; negligent interference
with the plaintiff’s interests does not amount to intentional interference: Lineal
Group Inc. v. Atlantis Canadian Distributors, above. Given that unlawful
interference is an intentional tort, the conduct of the defendant must
be aimed or directed at the party who suffers damage.
[20]
In
some instances, the tort of economic interference may be justified as a means
to extending remedies to parties who have suffered damage as a result of
another party's unlawful act and have no other recourse. However, in the case
at bar, the Plaintiffs’ claim cannot succeed as the requisite intention has not
been pleaded. There is no allegation that the construction or maintenance of
the dikes by the Defendants was done with the deliberate intention of targeting
the Plaintiffs with flood damage so as to reduce their tax revenues. While the
decrease in the value of the tax base may have been a consequence of flooding
caused by dikes, the quality of intention necessary to satisfy the first
element of the test of the tort of interference with economic relations is
completely lacking.
[21]
The proposed amendments are simply not capable
of supporting an allegation of intentional economic interference, as the essential elements of the tort are not alleged. In the
circumstances, I conclude that the proposed amendments contain a radical defect
and should not be allowed.
Policy considerations
[22]
The
courts have typically been very reluctant to allow claims for pure economic
loss for a number of public policy reasons, including the view that economic
interests are less compelling of protection than bodily security or proprietary
interests, that such losses are often seen as ordinary and expected business risks,
and that allowing the recovery of economic loss encourages a multiplicity of
inappropriate lawsuits: D'Amato v. Badger, [1996] 2 S.C.R. 1071 (D’Amato)
at paras. 17-20.
[23]
The
primary reason for this cautionary approach, however, is concern over the
unbridled recognition of economic losses raising the spectre of indeterminate
liability. As the Supreme Court of Canada writes in D'Amato
at para.18:
The second, and perhaps main reason for
limiting recovery is that expressed by Cardozo J., in Ultramares Corp. v.
Touche, 174 N.E. 441 (N.Y. 1931), who feared "liability in an
indeterminate amount for an indeterminate time to an indeterminate class"
(p. 444). A negligent act or omission can have a ripple effect, causing
economic loss to a potentially wide circle of individuals. Widgery J., in
Weller, supra, disallowed pure economic loss and opined that if auctioneers
could recover for damage to farmers' cattle, so might butchers, transport
workers, and dairy workers. This view reflects the reluctance of courts to
burden business and other activity with the indeterminate expense of all
potential economic losses.
[24]
There would be broad ramifications in permitting
tax authorities to claim against any defendant who causes a decrease in the
value of a taxpayer’s asset. The effect of recognizing such a claim would be to
create indeterminate liability to a tax authority anytime the value of a third
party’s property was decreased due to the act or omission of a defendant. In my
opinion, this is precisely the type of liability of “an indeterminate amount
for an indeterminate time to an indeterminate class" that the Supreme
Court has explicitly warned against.
[25]
For all the above reasons, I conclude that the
allegations made in the proposed amendments are doomed to fail.
ORDER
THIS COURT
ORDERS that:
1. The motion to join the Township of St. Joseph as a
Plaintiff is granted.
2. The
motion to withdraw the Notices of Discontinuances of the Township of Walhalla, the City of
Neche, the Township of Neche,
and the Township
of Felson, is granted.
3. The motion is otherwise dismissed,
with costs to the Defendants.
“Roger
R. Lafrenière”
Email this Content