Background
A barge being towed in heavy fog by tug Jervis Crown, owned and operated by the Norsk Pacific Steamship Co. and Norsk Pacific Marine Services Ltd., collided with the New Westminster Railway Bridge, which spans the Fraser River between Surrey and New Westminster. Canadian National Railway (CN) was the primary user (86% of total use) of the bridge owned by Public Works Canada (PWC). The bridge is the sole direct link for several railway companies between the north and south shores of the Fraser in Metro Vancouver.
The tug owners were familiar with the area and were at all times aware that the bridge was mainly used by CN and was essential to their operations.
After the accident, it took several weeks to repair the bridge, during which time CN and other railways were forced to re-route traffic. This increased the cost of operations and reduced the freight capacity during that time.
The railways sued the tug owners and operators for the additional cost incurred as a result of the closure of the bridge. The tug owners claimed that there was no right to recover, as CN was not the owner of the bridge and suffered no direct physical or property damage. Their losses were purely economic (based on lost profits and increased operational costs), which were not generally recoverable in tort law.
Opinion of the court
McLachlin J. (as she then was), joined by L'Heureux-Dubé and Cory JJ., found in favour for the plaintiff CN. Using the Anns test as adopted by the Supreme Court of Canada in Kamloops (City) v. Nielsen , she found that Norsk owed a duty of care to CN, making the loss recoverable.
Under the first branch of the Anns test, she held that there must be sufficient proximity between the parties in addition to the damage being foreseeable. In the context of contractual relational economic loss, there must be a close examination of the facts to determine if there is sufficient closeness, including "physical propinquity, assumed or imposed obligations and close causal connection."
Under the second branch of the Anns test, she rejected three broad policy arguments advanced by the defendant: (1) the insurance argument was questionable because it assumes that victims are better suited to insure themselves than tortfeasors, (2) the loss-spreading justification is inadequate because it does not justify cases where there is only one victim, and (3) the contractual allocation of risk argument was rejected because it assumes that all businesses efficiently allocate risk and have equal bargaining power, and overlooks the concept of fault in determining liability.
Applying the law to the case, McLachlin found that CN was sufficiently close to Norsk as well as the property in question. She noted that the relationship between CN and PWC was such that the bridge could be considered a "joint" or "common venture" under which recovery for economic loss had been allowed in the United Kingdom.
Dissent
LaForest J. held that no duty of care arises unless the case falls within narrow exceptional categories, which does not include the case at hand. He would have upheld the traditional bright line rule excluding recovery for economic loss caused by damage to third party property.
He questioned the applicability of tort compensation in such cases and wrote that "it is legitimate to consider which party is the better loss bearer in this type of case." He found that "a denial of recovery in this case is justified in light of C.N.'s overwhelmingly superior risk bearing capacity on the facts of this case."
In addition, LaForest J. argued that McLachlin's approach would create uncertainty in the law, as the plaintiffs could be an indeterminately large class and there is no way for the defendant to know who might be affected by damage caused by their tugboats. Under McLachlin's approach, both parties would require insurance at a high cost and thus is not economically efficient.
Aftermath
The state of the law on economic loss was unclear immediately following the decision in Norsk, as neither McLachlin nor LaForest's judgments were the clear majority.
In Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd. , [1997] 3 SCR 1210, McLachlin clarified the result, affirming that recovery for contractual relational economic loss is the exception rather than the norm. There is a presumption against contractual relational economic loss, subject to recognized exceptional categories:
- 1. Where the claimant has a possessory or proprietary interest in the damaged property;
- 2. General average contribution cases; and
- 3. Where the relationship between the claimant and the property owner constitutes a joint venture.
In Martel Building v. Canada , [2000] 2 SCR 860, the court summed up the state of the law, partially endorsing LaForest's judgment with regards to the categories of cases that can potentially give rise to compensable economic loss. These five categories were:
- The Independent Liability of Statutory Public Authorities;
- Negligent Misrepresentation;
- Negligent Performance of a Service;
- Negligent Supply of Shoddy Goods or Structures;
- Relational Economic Loss.
These categories are not closed but will be approached on a case-by-case basis based on the rationale from Norsk and Bow Valley.
Negligence is a failure to exercise appropriate and/or ethical ruled care expected to be exercised amongst specified circumstances. The area of tort law known as negligence involves harm caused by failing to act as a form of carelessness possibly with extenuating circumstances. The core concept of negligence is that people should exercise reasonable care in their actions, by taking account of the potential harm that they might foreseeably cause to other people or property.
In law and insurance, a proximate cause is an event sufficiently related to an injury that the courts deem the event to be the cause of that injury. There are two types of causation in the law: cause-in-fact, and proximate cause. Cause-in-fact is determined by the "but for" test: But for the action, the result would not have happened. The action is a necessary condition, but may not be a sufficient condition, for the resulting injury. A few circumstances exist where the but-for test is ineffective. Since but-for causation is very easy to show, a second test is used to determine if an action is close enough to a harm in a "chain of events" to be legally valid. This test is called proximate cause. Proximate cause is a key principle of insurance and is concerned with how the loss or damage actually occurred. There are several competing theories of proximate cause. For an act to be deemed to cause a harm, both tests must be met; proximate cause is a legal limitation on cause-in-fact.
A tort is a civil wrong that causes a claimant to suffer loss or harm, resulting in legal liability for the person who commits the tortious act. Tort law can be contrasted with criminal law, which deals with criminal wrongs that are punishable by the state. While criminal law aims to punish individuals who commit crimes, tort law aims to compensate individuals who suffer harm as a result of the actions of others. Some wrongful acts, such as assault and battery, can result in both a civil lawsuit and a criminal prosecution in countries where the civil and criminal legal systems are separate. Tort law may also be contrasted with contract law, which provides civil remedies after breach of a duty that arises from a contract. Obligations in both tort and criminal law are more fundamental and are imposed regardless of whether the parties have a contract.
Punitive damages, or exemplary damages, are damages assessed in order to punish the defendant for outrageous conduct and/or to reform or deter the defendant and others from engaging in conduct similar to that which formed the basis of the lawsuit. Although the purpose of punitive damages is not to compensate the plaintiff, the plaintiff will receive all or some of the punitive damages in award.
The tort of negligent infliction of emotional distress (NIED) is a controversial cause of action, which is available in nearly all U.S. states but is severely constrained and limited in the majority of them. The underlying concept is that one has a legal duty to use reasonable care to avoid causing emotional distress to another individual. If one fails in this duty and unreasonably causes emotional distress to another person, that actor will be liable for monetary damages to the injured individual. The tort is to be contrasted with intentional infliction of emotional distress in that there is no need to prove intent to inflict distress. That is, an accidental infliction, if negligent, is sufficient to support a cause of action.
In tort law, a duty of care is a legal obligation that is imposed on an individual, requiring adherence to a standard of reasonable care to avoid careless acts that could foreseeably harm others, and lead to claim in negligence. It is the first element that must be established to proceed with an action in negligence. The claimant must be able to show a duty of care imposed by law that the defendant has breached. In turn, breaching a duty may subject an individual to liability. The duty of care may be imposed by operation of law between individuals who have no current direct relationship but eventually become related in some manner, as defined by common law.
Economic torts, which are also called business torts, are torts that provide the common law rules on liability which arise out of business transactions such as interference with economic or business relationships and are likely to involve pure economic loss.
Tortious interference, also known as intentional interference with contractual relations, in the common law of torts, occurs when one person intentionally damages someone else's contractual or business relationships with a third party, causing economic harm. As an example, someone could use blackmail to induce a contractor into breaking a contract; they could threaten a supplier to prevent them from supplying goods or services to another party; or they could obstruct someone's ability to honor a contract with a client by deliberately refusing to deliver necessary goods.
Cooper v Hobart, 2001 SCC 79 is a Supreme Court of Canada case that redefined the "Anns test", which was adopted in Kamloops v Nielsen to establish a duty of care in civil tort cases.
Causation is the "causal relationship between the defendant's conduct and end result". In other words, causation provides a means of connecting conduct with a resulting effect, typically an injury. In criminal law, it is defined as the actus reus from which the specific injury or other effect arose and is combined with mens rea to comprise the elements of guilt. Causation only applies where a result has been achieved and therefore is immaterial with regard to inchoate offenses.
Canadian tort law is composed of two parallel systems: a common law framework outside Québec and a civil law framework within Québec. Outside Québec, Canadian tort law originally derives from that of England and Wales but has developed distinctly since Canadian Confederation in 1867 and has been influenced by jurisprudence in other common law jurisdictions. Meanwhile, while private law as a whole in Québec was originally derived from that which existed in France at the time of Québec's annexation into the British Empire, it was overhauled and codified first in the Civil Code of Lower Canada and later in the current Civil Code of Quebec, which codifies most elements of tort law as part of its provisions on the broader law of obligations. As most aspects of tort law in Canada are the subject of provincial jurisdiction under the Canadian Constitution, tort law varies even between the country's common law provinces and territories.
In English tort law, an individual may owe a duty of care to another, in order to ensure that they do not suffer any unreasonable harm or loss. If such a duty is found to be breached, a legal liability will be imposed upon the tortfeasor to compensate the victim for any losses they incur. The idea of individuals owing strangers a duty of care – where beforehand such duties were only found from contractual arrangements – developed at common law, throughout the 20th century. The doctrine was significantly developed in the case of Donoghue v Stevenson, where a woman succeeded in establishing a manufacturer of ginger beer owed her a duty of care, where it had been negligently produced. Following this, the duty concept has expanded into a coherent judicial test, which must be satisfied in order to claim in negligence.
Kamloops v Nielsen, [1984] 2 SCR 2 ("Kamloops") is a leading Supreme Court of Canada decision setting forth the criteria that must be met for a plaintiff to make a claim in tort for pure economic loss. In that regard, the Kamloops case is significant because the Supreme Court adopted the "proximity" test set out in the House of Lords decision, Anns v Merton LBC. Kamloops is also significant as it articulates the "discoverability principle" in which the commencement of a limitation period is delayed until the plaintiff becomes aware of the material facts on which a cause of action are discovered or ought to have been discovered by the plaintiff in the exercise of reasonable diligence. This was later adopted and refined in Central Trust Co v Rafuse. Finally, Kamloops develops the law governing circumstances where a plaintiff can sue the government in tort.
BG Checo International Ltd v British Columbia Hydro and Power Authority, [1993] 1 SCR 12 is a leading decision by the Supreme Court of Canada. The Court held that there is a prima facie presumption that a claimant is able to sue concurrently in tort and contract where sufficient grounds exist. Still, liability in tort will still be subject to an exemptions or conditions set out in a contract.
London Drugs Ltd v Kuehne & Nagel International Ltd, [1992] 3 SCR 299 is a leading decision of the Supreme Court of Canada on privity of contract.
Economic loss is a term of art which refers to financial loss and damage suffered by a person which is seen only on a balance sheet and not as physical injury to person or property. There is a fundamental distinction between pure economic loss and consequential economic loss, as pure economic loss occurs independent of any physical damage to the person or property of the victim. It has also been suggested that this tort should be called "commercial loss" as injuries to person or property can be regarded as "economic".
Recovery for pure economic loss in English law, arising from negligence, has traditionally been limited. Notably, recovery for losses that are "purely economic" arise under the Fatal Accidents Act 1976; and for negligent misstatements, as stated in Hedley Byrne v. Heller. Economic loss generally refers to financial detriment that can be seen on a balance sheet but not physically. Economic loss is then divided into "consequential economic loss" - that which arises directly from some physical damage or injury and "pure economic loss", which is everything else.
Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1973] QB 27 is a well-known English Court of Appeal case concerning the recovery of pure economic loss in negligence.
The eggshell rule is a well-established legal doctrine in common law, used in some tort law systems, with a similar doctrine applicable to criminal law. The rule states that, in a tort case, the unexpected frailty of the injured person is not a valid defense to the seriousness of any injury caused to them.
Whiten v Pilot Insurance Co, 2002 SCC 18, [2002] 1 S.C.R. 595 is a leading Supreme Court of Canada decision on the availability of punitive damages in contract. The case related to the oppressive conduct of an insurance company in dealing with the policyholders' claim following a fire. According to the majority, "[t]his was an exceptional case that justified an exceptional remedy."
