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Transcript of COURT OF APPEAL FORONTARIO - Derek Nicholson - .COURT OF APPEAL FORONTARIO Goudge, MacFarland and

  • CITATION: Alleslev-Krofchak v. Valcom Limited, 2010 ONCA 557DATE: 20100824

    DOCKET: C50673

    COURT OF APPEAL FOR ONTARIO

    Goudge, MacFarland and LaFonne JJ.A.

    BETWEEN

    Leona Alleslev-Krofchak and Temagami Outfitting Company Canada Inc.

    Plaintiffs (Respondents)

    and

    Valcom Limited, Brian Lewis and Greg Poulin

    Defendants (Appellants)

    Peter K. Doody, Craig M. Bater and Jonathan M. Richardson, for the appellants

    Ronald G. Slaght and Yashoda Ranganathan, for the respondents

    Heard: March 29-30, 2010

    On appeal from the judgment of Justice Catherine D. Aitken of the Superior Court ofJustice, dated May 25, 2009, with reasons reported at 2009 CanLII 30446 (ON S.C.)

    Goudge J.A.:

  • Page: 2

    INTRODUCTION

    [1] After a four week trial, the appellants, Valcom Limited (Valcom), Brian Lewis

    (Lewis) and Gregory Poulin (Poulin), were found liable to both respondents and ordered

    to pay significant damages. The trial judge concluded that all three appellants were

    jointly and severally liable for defamation of the respondent Ms. Alleslev-Krofchak

    (AK), and for intentionally interfering with her economic relations. The appellants

    Poulin and Valcom were held jointly and severally liable to the respondent Temagami

    Outfitting Company Canada Inc. (Temagami) for intentionally interfering with its

    economic relations and for inducing breach of contract.

    [2] On appeal, the appellants raise six issues, focusing mainly on the trial judge's

    treatment of the torts of intentional interference with economic relations and inducing

    breach of contract. Although I agree with the ultimate conclusions of the trial judge, my

    reasons differ somewhat from hers. I would dismiss the appeal.

    THE FACTS

    [3] The trial judge's findings of fact occupy some sixty-seven pages. The following is

    a brief summary, sufficient to set the broad context for her disposition of the issues.

    [4] In the late 1990s, the federal Department of National Defence (DND) decided to

    change the basis upon which it contracted out the maintenance of its air fleet from

    contracts for time and materials to performance-based contracts which would specify

  • Page: 3

    what DND required, and the overall price, and leave it to the contractor to deliver as it

    saw fit.

    [5] AK left the Canadian Forces in 1996 and, for the next seven years, worked

    predominantly as a consultant to DND. She was recognized as a leader in managing

    change to performance-based contracting.

    [6] Temagami was started when AK retired from the military. She and her husband

    were equal shareholders. All the services she provided that are relevant to this litigation

    were contracted through Temagami.

    [7] The appellant Valcom was a consulting company whose business was to contract

    with the federal government to provide it with the services of engineers and other

    consultants.

    [8] The appellant Poulin was a manager at Valcom responsible for its aerospace

    contracts, including the one at issue in this litigation. That contract, which Valcom was

    awarded in May 2002, was for the provision of professional services to assist DND to

    move to its new method of contracting for the servicing of its air fleet.

    [9] The contract resulted from a Request for Proposals (RFP) issued on behalf of

    DND in January 2002. The RFP required that the successful bidder have experience with

    the new method of contracting. Because of AK's expertise, Valcom retained her services

    to assist with the preparation of its bid in response to the RFP.

  • Page: 4

    [10] Valcom had no experience with performance-based contracting in the aerospace

    industry. However, AK facilitated an arrangement between Valcom and ARINC, a much

    larger American company that had been involved for years with US military contracts of

    this kind. Valcom and ARINC entered into an agreement pursuant to which Valcom

    would be the prime contractor with DND and ARINC would be Valcom's subcontractor.

    [11] As part of its bid, Valcom submitted AK's name as the project manager of the

    contract (the SPM#I). At AK's insistence, her services were to be provided to the project

    by ARINC pursuant to its subcontract with Valcom, not directly as a Valcom resource.

    This reflected the fact that ARINC had advised her that it would like to have a corporate

    office in Canada, and that there would be an opportunity for her in the future to help it

    develop its capability in the Canadian aerospace sector. Thus, when the Valcom bid

    succeeded, ARINC entered into a subcontract with Temagami for the services of AK.

    However, because AK's involvement as an ARINC resource would have resulted in

    ARINC providing more resources to the project than were contemplated by its own

    subcontract with Valcom, it agreed that AK would initially assume the SPM# 1 position

    as a Valcom resource, but only until her second in command (the SPM#2) was hired. In

    the main, therefore, AK's work on the project was to be as an ARINC resource, not a

    Valcom resource.

    [12] This way of supplying AK's services to the project left Valcom and Poulin

    frustrated and angry, but they needed both ARINC and AK to win the bid.

  • Page: 5

    [13] The appellant Lewis was recruited by Valcom to serve as the SPM#2 and began

    work on July 21,2003 as an employee ofValcom.

    [14] The events central to this litigation began to come to a head on August 11, 2003,

    when Poulin directed ARINC to remove AK from the project. He asserted that there was

    serious concern about potential departures of project staff because of dissatisfaction with

    her management approach - a claim that the trial judge ultimately concluded was without

    foundation.

    [15] When ARINC refused to remove her, given the absence of any evidence of her

    deficiencies, on August 13 Poulin purported to suspend the Valcom/ARINC subcontract

    and locked AK out of the project. On August 25, Lewis took over as the acting SPM#I.

    [16] ARINC considered a number of Valcom's actions to be rash and unprofessional,

    including e-mails about AK circulated by Poulin and Lewis that the trial judge

    determined to be defamatory, and Valcom's peremptory actions on August 13. ARINC

    was concerned that its efforts to develop a relationship with DND could be negatively

    impacted as a consequence. It immediately began to consider how to extricate itself from

    its relationship with Valcom and, in due course, terminated its subcontract with Valcom.

    [17] Following her termination as SPM#I, AK never again obtained military or

    aerospace consulting work.

  • Page: 6

    THE TRIAL JUDGE'S DISPOSITION OF THE ISSUES

    [18] After dealing with the facts, the trial judge addressed the claims advanced by the

    respondents, specfically the torts of defamation, intentional interference with economic

    relations and inducing breach of contract.

    a) Defamation

    [19] In the statement of claim, three e-mails were particularized as defaming AK. The

    first was sent by Lewis to Poulin on July 27,2003, and subsequently forwarded by Poulin

    to ARINC and others at Valcom. The second and third were sent by Poulin to ARINC on

    August 11 and 12, 2003. These e-mails asserted that AK had lied to Lewis, lacked

    integrity, was not trustworthy and was so lacking in management skills that some

    members of the project team would leave ifshe was not removed from the project.

    [20] The trial judge found that all three e-mails were defamatory and could not be

    justified as being truthful. If qualified privilege applied, it was negated by malice on the

    part of Lewis and Poulin. The trial judge held that, since both were acting as employees

    of Valcom, all three appellants were liable for the defamation, and were jointly and

    severally responsible for the resulting damage to AK's reputation, which the trial judge

    assessed at $100,000. She did not award damages for economic loss for this tort, finding

    that the loss of income AK suffered from being peremptorily terminated from the SPM# 1

    position was planned by Valcom before the e-mails were sent and, in that sense, was not

    caused by the defamation.

  • Page: 7

    [21] In this court, the appellants do not contest the defamation findings. They challenge

    only the quantum of general damages assessed for lost reputation due to the defamation.

    b) Intentional interference with economic relations

    [22] The trial judge then turned to the claim for intentional interference with economic

    relations. She found that all three appellants intended their actions to result in AK being

    removed from the project as SPM#I, thereby causing her injury. The trial judge

    concluded that, since Poulin and Valcom knew AK contracted her services to ARINC

    through Temagami, they also intended their actions to cause Temagami economic loss.

    [23] However, the trial judge found no evidence that Lewis knew Temagami existed,

    and thus there was no evidence to support the conclusion that he intended to cause it

    economic loss. The trial judge therefore dismissed Temagami's claim against Lewis for

    intentional interference with economic relations.

    [24] The trial judge then addressed the requirement that the interference be by unlawful

    means. She identified three that were applicable on the facts: defamation, conspiracy, and

    breach of contract.

    [25] The defamation identified by the trial judge as unlawful mea