As we have seen in cases that we’ve previously blogged about, conspiracy is sometimes a ground of misconduct alleged by shareholders during business disputes. What is conspiracy, and how does this tort play out in the context of a business dispute?

Civil Conspiracy

Civil conspiracy is a tort claim (i.e. a civil wrong) that can arise from business transactions and other relationships that result in an economic loss.

As established by the Supreme Court, in Canada, civil conspiracy is comprised of two separate but related categories:

  • “Lawful means” or “simple motive” conspiracy; and
  • “Unlawful means” or “unlawful conduct” conspiracy.
Simple Motive Conspiracy

Where the plaintiff (i.e. the victim) alleges that the defendants (i.e. the individuals being sued) have engaged in simple motive conspiracy, the plaintiff must establish that the defendants:

  • Engaged in a course of conduct with the predominant purpose of causing injury to the plaintiff (even if the conduct might otherwise be legal); and
  • That the plaintiff suffered some damage as a result.
Unlawful Means Conspiracy

Where a plaintiff alleges that the defendants have engaged in unlawful conduct conspiracy, the plaintiff must establish that:

  • Two or more people acted in concern, by agreement, or with a common design or intention;
  • Those people engaged in conduct that was unlawful (this can include violation of a contract, breach of a law/statute, or an underlying tort such as fraud or misrepresentation);
  • The conduct was directed towards the plaintiff;
  • The defendants should have known that injury or harm would be a likely result; and
  • Injury or harm did occur.

Where intentional misconduct is alleged, full particulars are required in the pleadings.

A Case Study

The Court of Appeal case which we previously analyzed in the context of oppression remedies is also an excellent case study through which to review conspiracy.

In that case, in addition to claiming that certain transactions were adverse to their interests, the minority shareholder plaintiffs alleged a conspiracy between several of the defendants that allowed their family-owned company to default on a mortgage so that a company owned by the Director could take assignment of the power of sale under the mortgage and sell the property to another defendant involved in the alleged scheme. The plaintiff’s claimed that the Director and the other defendant had “met, planned, and conspired” to injure them in their capacities as minority shareholders and mortgagees of the property.

The original trial judge had found that there had been no conspiracy, on the grounds that, among other things, the plaintiffs had failed to plead whether the alleged conspiracy was a result of unlawful or lawful conduct, that the alleged conduct of one of the defendant’s “was not in any way contrived or of a conspirational nature”, and that no unlawful conspiracy had been made out in the evidence.

The plaintiffs appealed, alleging that the trial judge had erred in finding that:

  • The mortgagees had fulfilled their obligation to obtain the full market value of the property in question; and
  • The plaintiffs had suffered no damages.

The appeal judge determined that the trial judge’s findings regarding the lack of proof of a conspiracy had been open for her to make. The trial judge had concluded that no unlawful conspiracy had been made out on the evidence and had rejected the conspiracy claim on the basis of credibility. She had found no evidence that the sale of the property was intended to cause harm to the plaintiffs.

If you believe that a civil conspiracy has been committed against you or your business which resulted in damages to your business, contact Eli Karp aFinancial Litigation. Eli is an experienced commercial litigator who focuses on the financial elements of legal disputes. He consistently strives to minimize the impact of commercial disputes on his client’s financial security, and works to resolve litigation as quickly as possible, so that business owners can focus on getting back to their business. Schedule your consultation online, or by calling us at 416-769-4107 x1.