Cement Lafarge, Unlawful Means, and a Competitive Market

By Thomas Mathews and Aidan Wall

“In general, if any branch of trade, or any division of labour, be advantageous to the public, the freer and more general the competition, it will always be the more so.”

Adam Smith, The Wealth of Nations, Book II, Chapter II, p.329, para 106.

It has been more than four decades since the Supreme Court of Canada rendered arguably its most definitive statement on the tort of unlawful means conspiracy.  Cement LaFarge v. B.C. Lightweight Aggregate [1983] was a foundational case, and it both established the tort’s legal test and gave a clear sense of its purpose, namely, the regulation and restriction of anti-competitive economic behaviour. 

The Facts

The two alleged conspirators, Canada Cement LaFarge Ltd. (“CCL”) and Ocean Construction Supplies Ltd. (“OCS”) had effective control over the cement market in British Columbia, in clear violation of s. 32(1)(c) of the Combines Investigation Act.

British Columbia Lightweight Aggregate Ltd. (“BCLA”), the plaintiff, produced and sold a lightweight aggregate called “Saturnalite” and came to an agreement with OCS whereby BCLA would become the sole supplier of lightweight aggregate in British Columbia and, in exchange, agree not to compete with OCS in the production of concrete blocks. 

A short time afterwards, OCS and CCL began to use pumice instead of Saturnalite and, as a result of this, BCLA’s business shrank and eventually ceased completely.

In its judgment, the Supreme Court enunciated two scenarios involving defendants acting in concert in which the tort of conspiracy will be recognized:

whether the means used by the defendants are lawful or unlawful, the predominant purpose of the defendants' conduct is to cause injury to the plaintiff; or

the conduct of the defendants is unlawful, the conduct is directed towards the plaintiff (alone or together with others), and the defendants should know in the circumstances that injury to the plaintiff is likely to and does result.

The second of these scenarios gives rise to the “unlawful means” variety of the tort of conspiracy.

The Court concluded that (1) the respondents’ unlawful act (an effective monopoly on the concrete industry in British Columbia) was not specifically directed towards the appellant; and (2) it was not this illegal monopoly, but the respondents’ perfectly legal use of pumice that caused the injury in question. 

The History 

While the tort of unlawful means conspiracy is not very well known in Canadian law, it has an involved history.  In England, it has been estimated that conspiracy is the subject of more decisions by the House of Lords than any other tort.

The law of torts often regulates those harms that do not fall neatly into the categories of statutory, criminal, or contractual law.  The tort of unlawful means conspiracy, an evolution of criminal conspiracy, emerged in the late 19th century to compensate for the largescale deregulation of industry occurring at the time.

Even at its inception, the tort clearly served to regulate competition. More than 130 years ago, in Mogul Steamship Co Ltd v McGregor, Gow & Co [1892],  the UK Court of Appeal applied it to the actions of an association of shipowners who colluded to increase shipping rates, behaviour that would now be sanctioned under the Competition Act, 1998.

The Analysis

It is worth noting that LaFarge came only two years before the replacement of the Combines Investigation Act with the Competition Act in 1985.  It arrived in an era where such regulation was needed, and it helped clarify the role that unlawful means could play in restraining economic behaviour.

In the judgment itself, the Court consistently concerned itself with the importance of the right kind of competitive behaviour and concerns that the misuse of the tort of conspiracy might become excessively restrictive.

In LaFarge, “fair competition” operates as a limiting concept for unlawful means in two senses.  Firstly, economic actors must not be allowed to conspire to interfere with the legitimate and otherwise profitable business of others.  At the same time, the tort of conspiracy must not be allowed where to do so would interfere in the proper function of a “free and competitive market” by preventing the legitimate cooperation of economic actors in their rational pursuit of profit.  A reading of the tort that is either too broad or too narrow will result in the same harm: a less competitive market. 

This concern for protecting competition is a consistent feature of the tort.  The Court in Lilleyman v. Bumblebee Foods LLC (2023), addressing an unlawful means claim that involved a violation of s. 36 of the Competition Act, stressed more than once that:

unless an unlawful means is used, an ordinary commercial transaction or business competition designed to advance one’s economic interests, does not constitute a conspiracy to injury even though the complaining party may suffer an economic loss as a result. 

The Conclusion

Ultimately, the Court in LaFarge found that unlawful means could not apply because the appellants “discontinued their use of the respondents’ product for solid business reasons”. Prima facie, this means that defendants will avoid liability where they do not target or direct their unlawful behaviour towards any specific party.  However, on a second reading, it helps us understand the requirement that the unlawful means must target or be “directed towards” the plaintiff, and the policy interests that recognition of this tort serves.  The overriding motivation for healthy economic competition is to advantage oneself and not, primarily, to disadvantage any one other party.  Unlawful means exists as a tort to restrict the intentional and unnecessary sabotage of competitors; the kind of sabotage that diminishes the benefits generated by competition in a free market.  The premise of contractual relations is that they generate surplus value for all participants.  This is the value that the Court in LaFarge is trying to protect.