Canadian COMPETITION LAW

A claim against two major real estate boards and their executives for breaching terms of an earlier settlement agreement, common law and Competition Act conspiracy and certain economic torts survived a motion to dismiss last week.  The reasons for judgment provide insight into the sufficiency of pleadings in cases involving allegations of anti-competitive conspiracies against businesses and their executives.

Last Friday, Mr. Justice Kenneth L. Campbell of the Ontario Superior Court of Justice dismissed a motion by the defendants in Dale v. The Toronto Real Estate Board to dismiss Realtysellers (Ontario) Limited’s (“Realtysellers”) action against The Canadian Real Estate Board (“CREA”), The Toronto Real Estate Board (“TREB”) and 47 other defendants (for a copy of the decision see: Dale v. The Toronto Real Estate Board).

This case relates to an action commenced by Realtysellers against CREA, TREB and their directors and officers in relation to alleged anti-competitive MLS® access restrictions – or, as the Court stated:

“Essentially, the plaintiffs claim that the Toronto Real Estate Board (TREB) and its officers and directors … together with the Canadian Real Estate Association (CREA) and its officers and directors … breached the terms of an earlier settlement agreement, violated [the conspiracy provisions] of the Competition Act … unlawfully conspired together to injure the plaintiffs, and wrongfully interfered with the plaintiffs’ economic and contractual relations.”

and

“As to the specific nature of the plaintiffs’ allegations, the Fresh as Amended Statement of Claim alleges that, between 2005 and 2007, the 22 individual CREA defendants, in their personal capacity as real estate brokers, and for the purpose of harming the plaintiffs and removing them and their new business as a competitive threat, ‘acted and agreed unlawfully, maliciously, without justification and outside the scope of his or her authority within CREA’ to influence CREA, TREB, the other defendants and other real estate boards ‘to drive the plaintiffs out of the resale brokerage business’ by causing CREA to implement ‘new offer negotiation rules’ that all CREA member boards across Canada would have to follow.”

In particular, Realtysellers is arguing that following an earlier settlement, TREB in consultation with CREA enacted new MLS® rules that required listing brokers to be involved in the offer negotiation process in residential real estate transactions, which prevented flat fee service offerings by Realtysellers, eliminated its access to the MLS® system and forced them to suspend their business operations.

Realtysellers is pleading a number of statutory and common law causes of action including conspiracy under section 45 of the Competition Act, common law conspiracy, breach of the earlier settlement agreement in this matter, inducing breach of contract and interference with economic relations.

In dismissing the defendants’ motion to dismiss Realtysellers’ claim, Mr. Justice Campbell found, among other things, that Realtysellers claim adequately discloses causes of action for breach of contract, both types of common law conspiracy pleaded and conspiracy under section 45 of the Competition Act.

The Court also made a number of interesting findings and observations regarding the legal test for parties seeking to strike a claim, when directors and officers may be held personally liable and, perhaps most interestingly, the evidentiary burden in conspiracy cases and role of circumstantial evidence in establishing a conspiracy:

Legal test to strike a claim:

“The combined application of these principles creates a ‘stringent’ legal test for defendants moving to strike out a statement of claim.”

When directors and officers may be held to be personally liable:

“As the Court of Appeal for Ontario confirmed in Piedra v. Copper Mesa Mining Corp. … in the absence of allegations of fraud, deceit, dishonesty, or want of authority on the part of the officers, directors, or employees of the organization, such individuals are protected from personal liability ‘unless it can be shown that their actions are themselves tortious’ or ‘exhibit a separate identity or interest from that of the company’ so as to render the impugned conduct ‘their own’ … In the present case, however, the plaintiffs have clearly alleged that the individual defendants acted unlawfully and maliciously against them, without justification, entirely outside the scope of their lawful authority as officers and/or directors of TREB and/or CREA and for the advancement of their own personal and business interests.”

Evidentiary burden in conspiracy cases and role of circumstantial evidence in establishing a conspiracy:

“Accordingly, it is not plain and obvious that the plaintiffs’ claim fails to disclose a reasonable cause of action regarding the tort of conspiracy.  Indeed, in my view the plaintiffs have alleged that the defendants engaged in a classic type of conspiracy, namely, combining together to drive a business competitor and their novel business model out of the marketplace.

While the plaintiffs candidly admit a lack of detailed knowledge as to all of the factual nuances of the conspiracy, this is hardly surprising given the nature of the allegation.  As Cumming J. aptly stated, when faced with similar circumstances in North York Branson Hospital v. Praxair Canada Inc., [1998] O.J. No. 5993 (S.C.J.), at para. 22:

‘In truth, the very nature of a claim of conspiracy is that the tort resists detailed particularization at early stages.  The relevant evidence will likely be in the hands and minds of the alleged conspirators.  Part of the character of a conspiracy is the secrecy and the withholding of information from alleged victims.  The existence of an underlying agreement bringing the conspirators together, proof of which is a requirement borne by a plaintiff, often must be proven by indirect or circumstantial evidence.  A conspiracy is more likely to be proven by evidence of overt acts and statement by the conspirators from which the prior agreement can be logically inferred.  Such details would not usually be available to a plaintiff until discoveries.  These considerations and the general theme of Hunt, instructing courts not to shy away from difficult litigation, also militate against holding pleadings in civil conspiracy cases to an extraordinary standard.’”

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