671122 Ont. Ltd. v. Sagaz Ind. Can. (2001), 150 O.A.C. 12 (SCC)
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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] O.A.C. TBEd. SE.047
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.
