The floodgates principle, or the floodgates argument, is a legal principle which is sometimes applied by judges to restrict or limit the right to make claims for damages because of a concern that permitting a claimant to recover in such situations might open the metaphorical "floodgates" to large numbers of claims and lawsuits.[1] The principle is most frequently cited in common law jurisdictions, and in English tort law in particular.
Most of the situations in which the courts have employed the floodgates argument have revolved around liability in tort, and in particular in relation to the liability for nervous shock or for pure economic loss. The rationale in which the floodgates principle has been applied may vary. In some cases it is expressed to be a constraint upon when a defendant will owe a duty of care, in others it is expressed to be a limitation upon the remoteness of damage for which a defendant should be held responsible for.[2] In other cases it is simply stated as a principle of public policy.
The floodgates principle is arguably the antithesis of the legal maxim: fiat justitia ruat caelum ("let justice be done though the heavens fall").
[I]f claims for economic loss were permitted for this particular hazard, there would be no end of claims. Some might be genuine, but many might be inflated, or even false. A machine might not have been in use anyway, but it would be easy to put it down to the cut in supply. It would be well-nigh impossible to check the claims. If there was economic loss on one day, did the claimant do his best to mitigate it by working harder next day? and so forth. Rather than expose claimants to such temptation and defendants to such hard labour - on comparatively small claims - it is better to disallow economic loss altogether, at any rate when it stands alone, independent of any physical damage.
If a party by their negligence causes physical injury to one other person, then the pool of claimants for that physical injury is just that person. However, if each person who suffers resultant economic loss as a result of the injury to the person is also able to make a claim, then potentially the negligent party (and the courts) could be opened up to a vast array of claims. Similarly, where a party publishes a negligent in a document, if that document is published widely, if every person who read that statement was entitled to rely upon it and claim for any loss caused by relying upon it, there would similarly be an extremely wide-ranging liability for negligent misstatement. The last, and probably most difficult area where the floodgates principle has been evoked relates to psychiatric injury, or "nervous shock". How far should a person be liable if they injure someone negligently, and then other persons see the accident and suffer psychiatric injury (but no physical harm) just from witnessing the accident? In trying to answer these questions the courts have sometimes fallen back on the floodgates principle to try and limit the potential range of claims.
Nervous shock cases
In English law the first recorded reference to the floodgates principle was in 1888[4] in Victorian Railway Commissioners v Coultas[5] That case involved a pregnant woman (the claimant) whose husband had driven onto train tracks at a level crossing, and due to the negligence of the gate keeper, were nearly struck by a high speed train. The plaintiff, Mrs Coultas, suffered from serious shock, leading to impaired memory and eyesight, and the loss of her unborn child. Nonetheless, the Privy Council held that she had no sustainable claim for damages, holding that:
Damages arising from mere sudden terror unaccompanied by any actual physical injury, but occasioning a nervous or mental shock, cannot under such circumstances, their Lordships think, be considered a consequence which, in the ordinary course of things, would flow from the negligence of the gate-keeper. ... damages must be the natural and reasonable result of the defendant's act; such a consequence as in the ordinary course of things would flow from that act.
The leading authority on nervous shock cases under English law is now Alcock v Chief Constable of South Yorkshire Police,[6] a case which draws heavily upon the floodgates principle. In limiting the right to recover to those who saw the accident or its immediate aftermath Lord Oliver held:
It would be inaccurate and hurtful to suggest that grief is made any the less real or deprivation more tolerable by a more gradual realisation, but to extend liability to cover injury in such cases would be to extend the law in a direction for which there is no pressing policy need and in which there is no logical stopping point.
"Worried well" cases
As an adjunct to the nervous shock cases, the courts have also had to consider claims by persons who are loosely classified as the "worried well", i.e. persons who are not actually ill, but have suffered an exposure and therefore are greatly concerned they may become gravely ill. These claims often relate to asbestos exposure, as mesothelioma can take 20 to 50 years, or longer, to manifest after an exposure. To date, the courts have appeared unwilling to consider claims from the "worried well".[7]
Judicial concern has also been expressed about potential liability for negligent misstatements. Unlike physical acts, a negligent statement may be relied upon by a great many people leading to a wide class of potential claims. Accordingly, in Hedley Byrne & Co Ltd v Heller & Partners Ltd[9] the House of Lords imposed the requirement that there would need to be a "special relationship" in order to justify a duty of care under which a person making a negligent statement could be held liable to a person who relied upon it.
Other cases
In Hill v Chief Constable of West Yorkshire[10] the House of Lords had to consider a claim by Jacqueline Hill, the last victim of Peter Sutcliffe (a serial killer known as the "Yorkshire Ripper"), against the police. The case argued that police had been sloppy and careless in their investigation, and if they had not been so the killer would have caught long before he murdered his last few victims. The claim was struck out on a number of grounds, one of which was the risk that every victim of crime might have an action against the police arguing that they should have caught the perpetrators at an earlier stage of their criminal careers.
The decision was upheld in Kent v Griffiths[11] and rationalised on a different basis, viz., that the emergency services to do not owe general duties to the public on grounds of public policy.
However, by contrast in Dorset Yacht Co Ltd v Home Office[12] the House of Lords were fully prepared to hold the Home Office responsible for the acts of young offenders whom it failed to supervise, and who subsequently caused damage to the property of various members of the general public.
Examples of opening the floodgates
The floodgates principle is by no means a principle of universal application.
The courts have, on occasion, been prepared to uphold claims notwithstanding that they recognise that the effect of a decision will most likely result in a large amount of subsequent litigation. In the case of Hazell v Hammersmith and Fulham LBC[13] the House of Lords upheld a claim that interest rate swaps entered into with local authorities in the United Kingdom were void although they knew that large numbers of such contracts had been entered into, and that unwinding the swaps would result in a large amount of litigation. In the event, over 200 separate sets of legal proceedings were launched,[14] several of which were litigated to the Court of Appeal and three of which reached the House of Lords.
↑ In Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1973] 1 QB 27 Lord Denning MR recognised this explicitly: "At bottom I think the question of recovering economic loss is one of policy. Whenever the courts draw a line to mark out the bounds of duty, they do it as matter of policy so as to limit the responsibility of the defendant. Whenever the courts set bounds to the damages recoverable - saying that they are, or are not, too remote - they do it as matter of policy so as to limit the liability of the defendant. In many of the cases where economic loss has been held not to be recoverable, it has been put on the ground that the defendant was under no duty to the plaintiff. ... In other cases, however, the defendant seems clearly to have been under a duty to the plaintiff, but the economic loss has not been recovered because it is too remote."
↑ In his judgment in Re Interest Rate Swap Litigation (unreported, 28 November 1991) Hirst J recorded that "As at 30th October, 1991 there were 203 extant swap actions, 18 had been settled after the issue of proceedings, 2 had been discontinued and 4 are in progress in the Chancery Division. Although in the vast majority of cases the banks are plaintiffs, there are 10 actions involving 8 local authorities in which a local authority is plaintiff because they are net losers under their swap transactions. The number of plaintiff banks in these actions totals in all 42 and the number of local authority defendants 62. These figures may need up-dating, but give a substantially accurate picture."
Related Research Articles
At common law, damages are a remedy in the form of a monetary award to be paid to a claimant as compensation for loss or injury. To warrant the award, the claimant must show that a breach of duty has caused foreseeable loss. To be recognized at law, the loss must involve damage to property, or mental or physical injury; pure economic loss is rarely recognized for the award of damages.
Negligence is a failure to exercise appropriate care expected to be exercised in similar circumstances.
A tort is a civil wrong, other than breach of contract, 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.
Intentional infliction of emotional distress is a common law tort that allows individuals to recover for severe emotional distress caused by another individual who intentionally or recklessly inflicted emotional distress by behaving in an "extreme and outrageous" way. Some courts and commentators have substituted mental for emotional, but the tort is the same.
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 is an English tort law case on economic loss in English tort law resulting from a negligent misstatement. Prior to the decision, the notion that a party may owe another a duty of care for statements made in reliance had been rejected, with the only remedy for such losses being in contract law. The House of Lords overruled the previous position, in recognising liability for pure economic loss not arising from a contractual relationship, applying to commercial negligence the principle of "assumption of responsibility".
English tort law concerns the compensation for harm to people's rights to health and safety, a clean environment, property, their economic interests, or their reputations. A "tort" is a wrong in civil law, rather than criminal law, that usually requires a payment of money to make up for damage that is caused. Alongside contracts and unjust enrichment, tort law is usually seen as forming one of the three main pillars of the law of obligations.
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.
Bolam v Friern Hospital Management Committee [1957] 1 WLR 582 is an English tort law case that lays down the typical rule for assessing the appropriate standard of reasonable care in negligence cases involving skilled professionals such as doctors. This rule is known as the Bolam test, and states that if a doctor reaches the standard of a responsible body of medical opinion, they are not negligent. Bolam was rejected in the 2015 Supreme Court decision of Montgomery v Lanarkshire Health Board in matters of informed consent.
Ex turpi causa non oritur actio is a legal doctrine which states that a plaintiff will be unable to pursue legal relief and damages if it arises in connection with their own tortious act. The corresponding Ex turpe causa non oritur damnum, "From a dishonourable cause, no damage arises" is a similar construction. Particularly relevant in the law of contract, tort and trusts, ex turpi causa is also known as the illegality defence, since a defendant may plead that even though, for instance, he broke a contract, conducted himself negligently or broke an equitable duty, nevertheless a claimant by reason of his own illegality cannot sue. The UK Supreme Court provided a thorough reconsideration of the doctrine in 2016 in Patel v Mirza.
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.
Causation in English law concerns the legal tests of remoteness, causation and foreseeability in the tort of negligence. It is also relevant for English criminal law and English contract law.
Breaking the chain refers in English law to the idea that causal connections are deemed to finish. Even if the defendant can be shown to have acted negligently, there will be no liability if some new intervening act breaks the chain of causation between that negligence and the loss or damage sustained by the claimant.
In the English law of negligence, the acts of the claimant may give the defendant a defence to liability, whether in whole or part, if those acts unreasonably add to the loss.
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.
In English law, a nervous shock is a psychiatric / mental illness or injury inflicted upon a person by intentional or negligent actions or omissions of another. Often it is a psychiatric disorder triggered by witnessing an accident, for example an injury caused to one's parents or spouse. Although the term "nervous shock" has been described as "inaccurate" and "misleading", it continues to be applied as a useful abbreviation for a complex concept. The possibility of recovering damages for nervous shock, particularly caused by negligence, is strongly limited in English law.
Alcock v Chief Constable of South Yorkshire Police[1991] UKHL 5, [1992] 1 AC 310 is a leading English tort law case on liability for nervous shock. The case centred upon the liability of the police for the nervous shock suffered in consequence of the events of the Hillsborough disaster.
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".
The following outline is provided as an overview of and introduction to tort law in common law jurisdictions:
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.
Attia v British Gas Plc [1988] QB 304 is an English tort law case, establishing that nervous shock from witnessing the destruction of personal property may be actionable. Prior to this case, a duty of care for an individual's mental health had not been established in situations not involving personal injury or the witnessing of such an event. The Court of Appeal ruled that British Gas were liable for the subsequent shock and depression of Mrs Attia, following the near total destruction of her home and possessions.
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