Torts Hutchinson F08

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                                                                                           TORTS – SUMMARY
                                                     INDEX

                        STANDARD OF CARE                                 2
                        DUTY OF CARE                                     3
                        REMOTENESS                                       4

                        CAUSATION                                        5
                             Alternative/Joint/Indivisible Harm          6

                        LOSS OF CHANCE                                   6

                        DEFENCES                                         7
                             Contributory Negligence                     7
                             Voluntary Assumption of Risk                7
                             Illegality                                  8

                        CONTRIBUTION                                     8

                        STATUTORY TORTS                                  9

                        NEGLIGENT STATEMENTS                             10
                             Table of Cases                              11
                             Contract v. Tort                            11-12

                        ECONOMIC LOSS                                    12

                        PSYCHIATRIC HARM                                 13

                        WRONGFUL LIFE & WRONGFUL BIRTH                   14

                        NONFEASANCE                                      15

                        DAMAGES                                          16
                            Types                                        16
                            Lump Sum v. Periodic Payments                17
                            Infants                                      18
                            FLA                                          18
                            Collateral Benefits                          19

                        IS TORT LAW FAIR                                 19

To get recovery, the plaintiff must prove that:
    1.       the defendant breached the standard of care
    2.       the defendant owed the pl. a duty of care and breached it
    3.       the damages are not too remote
    4.       there was no intervening act breaking the chain of events linking the defendant’s negligent act and
             the plaintiff’s injury
    5.       the defendant caused the injury
    6.       the pl. did not negligently contribute to the occurrence of the injury
    7.       the pl. did not voluntarily assume the risk
    8.       in case of recovery, the pl. does not recover for illegal acts
    9.       Special cases: negligent misstatements, psychiatric harm, wrongful life/birth, economic loss
Once it is determined that the plaintiff is eligible for recovery, damages are assessed.
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STANDARD OF CARE
Breach of standard of care proves creation of unreasonable risk = negligence (Vaughan v. Menlove).

The standard of care is objective – would an ordinary man of prudence have anticipated/foreseen the risk in the
circumstances (Vaughan v. Menlove).

Arguably, the objective standard is not as objective as it seems because:
       - ordinary man of prudence is above average in prudence and intelligence
       - the qualifier “in the circumstances” is highly subjective
       - standard may be said to be unfair because it is uniform

Exceptions to objective standard:

    1. Insanity or loss of consciousness due to inability to understand duty imposed (Buckley v. Smith
       Transport).
           a. not applicable where insanity/loss of consciousness would have been foreseen by ordinary man of
               prudence (Roberts v. Ramsbotton).
           b. not applicable where the person was unaware of disabling condition (Mansfield v. Weetabix).
    2. infants – objective test relative to foresight/prudence of children of the same age (McHale v. Watson)
           a. policy – this means that parents are not responsible for kids’ actions
           b. not applicable where infants are engaged in adult activities (driving motorized vehicles, Queen v.
               Hill SCC)
    3. physicians – objective standard of average practitioner (Fleming, Law of Torts)
    4. experts – objective standard of a reasonable expert in the field
           a. everyone will undergo this standard if activity warrants expert action, especially in tasks that
               impinge immanently on public safety
           b. not applicable – beginners
    5. disabled – objective standard of a reasonable person with that disability (ibid)
           a. not applicable – unusual mental/emotional characteristics

Factors that help determine standard of care:
   1. foreseeability of risk – via objective standard
   2. probability of risk (P) – risk must be extremely small to justify disregarding risk (Bolton v. Stone)
   3. seriousness of injury (L) – low seriousness limits liability (Bolton v. Stone)
   4. burden of precaution (B) – high cost/importance of activity justify disregarding risk (Latimer v. AEC -
       sawdust)
           a. burden can be non-monetary (Watt v. Hertfordshire County Counsel – delay in saving a life as a
               firefighter too great a burden to take precaution)
           b. but imposing liability would create a greater incentive to prevent accidents so burden in Latimer
               would not have to be undertaken
   5. social utility – limits liability (Bolton v. Stone)
   6. custom – can determine standard of care in a specific profession at the time of the injury; determination
       of custom must be reasonable – materials (Timaraco v. Klein – bath glass door) and knowledge (ter
       Neuzen v. Korn) must be available
           a. exception: if custom itself is undreasonable = liability (The T.J. Hooper)
           b. exception: custom cannot be found unreasonable if it involves difficult scientific/technical
               matters unless it fails to adopt obvious reasonable precautions (ter Neusen v. Korn)
   7. economics (cost-effectiveness) – Learned Hand’s formula in United States v. Carroll Towing Co.
       (elaborated upon by Posner):
           a. B – burden of taking precautions (prevention cost-def. pays)
           b. P – probability of accident occurring (risk)L – actual loss (incurred cost-pl. pays)
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            c. Formulas: if B<PL and if defendant did not take precautions (in this case, reasonable), then the
               defendant is negligent; if B>PL, then defendant is not negligent because the prevention cost is
               unreasonable, has no economic sense.


DUTY OF CARE
The onus is on the plaintiff to establish that the defendant owed him a duty of care and that there is a link between
injury and defendant’s activity. If there is no duty of care, the plaintiff cannot recover.

Duty extends by:
   1. foreseeability of harm (part I (a) of Cooper v. Hobart test)
              i.     Depends on how detailed is the question asked to determine forseeability:
                     a.      Detailed – not foreseeable – no recovery (Cardozo in Paslgraf);
                     b.      Broad – usually foreseeable – recovery.
              ii.    applies more to standard of care rather than to duty (see Atkin in D)
              iii. not necessary as long as there is harm caused by an unreasonable act (Andrews in Palsgraf)
   2. proximity – proximate cause determined by:
              i.     natural and continuous sequence between the act and injury (Palsgraf per Andrews,
                     dissenting)
              ii.    “neighbour” – persons “closely and diredly affected” by the act that are “in reasonable
                     contemplation of being so affected” (per Lord Atkin in Donoghue)
              iii. categories (see below)
              iv. general description of parties (e.g. mother and child, Dobson v. Dobson)
              v.     other factors like expectations, representations, reliance, property other interests
                     (Kamloops/Anns test in Cooper)
   3. policy reasons – notwithstanding proximity – generally limit duty
              i.     are there any public policy considerations that should negate or limit
                     a.      the scope of duty
                     b.      class of persons to whom duty is owed
                     c.      or damages (Kamloops test in Dobson)
         ii. part I (b) Cooper test – policy reasons that would limit proximity
         iii. Part II – general policy reasons limiting duty

House of Lords did away with Anns test and limited duty to categories, with possibility of creating new categories
(Caparo Industries v. Dickman, 1990)

Categories:
Duty extends from:
   1.       Manufacturer to ultimate consumer, whether consumer paid for product or not (Donoghue v.
            Stevenson – per Atkin)
   2.       Distributors to consumer (Watson v. Buckley – hairdye)
   3.       Employers to workers (Clay v. A.J. Crump – const. wall)
   4.       Party creating risk to rescuers – conscious intervention (Haynes v. Harwood – running horse)
            a. “Danger invites rescue” – rescue is usually foreseeable – recovery (Wagner v. International
                Railway Co. per Cardozo)
            b. Duty to rescuer is separate from duty to injured party (Horsley v. McLaren)
            c. Compare Watt v. Herfortshire (firefighter – no duty to him)
            d. Family member volunteering organ to save life is rescue (Urbanski v. Patel)
5. Non-mother negligent party to born child injured as a fetus (Duval v. Senguin)
6. Dorsal officers to persons who have property situate in geographical proximity (Home Office v. Dorset per
   Lord Diplock)
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Duty does not extend from:
1.     A party to a contract to third parties to the contract
           a. If 1 step, why not 50? (Winterbottom v. Wright per Alderson)
           b. Overruled by Donoghue
2.     Master to servant’s property (Deyong v. Shenburn)
3.     Negligent mother to a born child injured as a fetus (Dobson v. Dobson)
           a. There should be duty because the fetus belongs in a class of people to whom the mother already
                owes a duty as a motorist, there are no public policy reasons to negate duty (no extra duty) (per
                Major, dissenting)
4. Anyone to corporations/entities not in existence at the time of tort (Wellbridge Holdings v. Greater Winnipeg)
5. Registrar of Mortgage Brokers to investors (Cooper v. Hobart)
           a. Due to lack of proximity outlined in statue that regulates the registrar, to proximity policy reasons
                – statue says duty to public, not investors


REMOTENESS OF DAMAGES
     Damages (consequences of negligent act) are limited by:

I.   direct/indirect consequence of act, irrespective of foreseeability: if direct, then recovery; if indirect, too
     remote, so no recovery (Polemis, 1921 – vapour petrol explosion; Jeffrey v. Copeland – tied buildings)
        i.   this was said to be too pro-plaintiff, although Polemis damages could be said to have been indirectly
             caused by vapour petrol

II. reasonable foreseeability – if damage is foreseeable, recovery (The Wagon Mound No. 2, 1961); if damage
    is not foreseeable, too remote, so no recovery (The Wagon Mound No. 1). This overruled Polemis.

III. type/extent – only type needs to be foreseeable; extent depends on susceptibility of victim – thin skull
     principle, defendant takes his victim as he finds him (Smith v. Leech Brain – iron sheet protector; Cotic v.
     Gray – mva suicide; Stephenson v. Waite – wire rope).
     a. Test for type – would a person of ordinary fortitude suffer any injury of this type at all (Mustapha v.
         Culligan).
     b. Type is not limited by foreseeability of circumstances – when type is the same, circumstances do not
         need to be foreseeable (Lord Advocate per Lord Reid – red lamp explosion; contra Doughy v. Turner
         Manufacturing – asbestos sheet explosion in metal).
     c. Once type is proved, a link must be established between the act and injury by cause and effect – isn’t this
         Polemis? (Stephenson)
     d. Extent can include a reaction to a new virus, not only past susceptibility of victim (Stephenson v. Waite)
     e. Differentiating between type/extent is difficult because type will depend on degree of precision and can
         be made so general that any injury will fall under type (Jolley v. Sutton HL – it was foreseeable that
         “children would meddle with the boat”)

IV. natural and probable consequence of the negligent act – is the injury within the risk that defined the
    negligent act – this depends on detail of injury (Hill v. Winsor, US – tug boat bumping).

V. intervening act
              a. must be foreseeable for pl. to recover (Bradford v. Kanellos)
              b. must be “very likely” to happen (Home Office v. Dorset per Lord Reid – dorsal boys)
              c. must be “inevitable” (Lamb v. London per Oliver LJ – squatters)

IV. policy reasons can made damages remote (Lamb v. London per Lord Denning – council was not asked to
    remove squatters); based on instinctive feeling (ibid, per Watkins)
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CAUSATION
Cause in fact connects an act to an injury by indicating that one produced the other.

General principles re causation (Canada):

1.      A defendant is liable for all injuries that, on the balance of probabilities, were caused or contributed by
        his/her negligence. A contributing factor is material if it falls outside the de minimis range. (Athey v.
        Leonati SCC 1996)

2.      The basic test is the “but for” test: excluding all natural elements (like cars on the road), but for an act,
        would the chain of events have broken? (Barnett v. Chelsea & Kensington Hospital – arsenic tea). There
        must also be a substantial connection between the injury and the defendant’s conduct (per Sopinka in
        Farrell v. Snell). The onus of proving this is on the plaintiff (Athey v. Leonati; Blackstock v. Foster – hit
        chest, malignant growth), but this is problematic because the defendant has better resources.

3.      The test is changed to “material contribution” when the but for test is inconclusive or unusable, i.e.
        when:
        a.      it is impossible for the plaintiff to prove causation using the but for test due to factors that are
                outside the plaintiff’s control (i.e. Cooke v. Lewis); or

        b.      it is clear that the defendant breached a duty of care owed to the plaintiff, thereby exposing the
                plaintiff to an unreasonable risk of injury and the plaintiff suffered an injury within that risk
                (unless the defendant shows some other cause per Wilberforce in McGhee v. National Coal
                Board – dermatitis, shower). (Tests: Resurfice v. Hanke SCC 2007)

        c.      where it is impossible to prove whether the person would have caused the injury even if the
                defendant had not been negligent (breaks the chain of connection – Walker Estate v. York Finch
                Hospital HIV Blood donation)

        Material contribution can be as low as 25%, but unknown if the court will go below this. Recovery is
        full damages (Athey v. Leonati SCC 1996 – thin skull – disc herniation was put into action by negligent
        act).

Supervening tortious act: 1st tortfeasor (if there is one) is responsible for all damage caused by him. The 2nd
tortfeasor finds his victim already injured so is only responsible for any additional damage. [per McLachlin in
Sunrise, pl. may recover from 2nd tortfeasor ½ of damages if 1st act was not due to any negligence].

Supervening illness: a tortfeasor is responsible for damage caused, offset substantially by illness (Jobling v.
Associate Diary 1982 HL – back injury followed by spinal disease).

Causation is determined by policy discussion: under what circumstances are we prepared to shift the cost from
the plaintiff to the defendant?

There are 3 types of multiple causations. In each, at least one party also caused the injury:
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ALTERNATIVE: there are multiple parties not involved in a joint enterprise, one of whom causes the injury.
If both parties are negligent:
-        each is liable for full damages, unless they prove that they did not cause it (Cooke v. Lewis per Rand J) or
-        each is liable for its market share (Sindell v. Abbott Laboratories Calif. CA 1980 – drug manufacturers,
         substantial connection – cancer only caused by the drug).
If not all are negligent, the “but for” test is used:

McGhee v.           1 tortfeasor     50% increase           Reid: materially increased risk = material
National Coal       1 cause          (1/2 chance of         contribution
Board HL 1972       liability        cause – no             Wilberforce: if breach of duty created risk and
                                     showers)               injury is w/in that risk = causation = liability
Wilsher v. Essex    1 tortfeasor     25% increase           Where there are causes other than defendant’s
Area Health         5 causes         (1/5 chance – one      negligence, McGhee principle does not apply.
Authority 1988      no liability     cause is negligent
HL                                   for blindness)
Fairchild v.        2 tortfeasors    50% increase           Bingham: the injustice of imposing liability of a
Glengaven           2 causes         ½ chance               duty-breading employer are heavily outweighed
Funeral Service     liability        (inhalation of         by the injustice of denying redress to the victim
HL 2002                              asbestos at 2          (duty+breach+creation of risk+injury w/in that
                                     places)                risk = liability)

JOINT: parties were involved in a joint enterprise (hard to prove). All are liable, even if one of the parties was
not negligent.

INDIVISIBLE HARM: multiple tortfeasors acting separately cause harm. It is impossible to determine the
harm caused by each:
-      where multiple tortious acts amount to an aggregate that is an actionable wrong, each is liable (Lambton
       v. Mellish – organ music) for the entire damage (Kingston v. Chicago & NW Ry - fires).

-       where only one act is tortious, the wrongdoer will be held liable for the entire damage, even if his
        contribution was small, unless he proves that the innocent act was caused by natural events or was of
        much greater proportions (Kingston v. Chicago & NW Ry - fires) overruled:

-       where only one act is tortious, damages will be apportioned as follows:
        tortious (27 days’ repairs)                innocent (14 days’ repairs)
        L’Heureux-Dubé (maj) liability for 27 days
        McLachlin                liability for 20 days = (solely tortious cause: 13 + half of concurrently cause: 14/
                                 ½ =7) (Sunise v. Ship Lake Winnipeg)

Liability will be based on the relative degree of contribution to chance of injury (ris), not all-or-nothing
(Hoffman in Baker v. Corus 2006 HL).

McGhee principle does not apply in Canada.

Causation and fairness – it is better to shift the loss to the negligent defendant from the non negligent plaintiff
(Summers v. Tice). The defendants are better able to carry the cost of the injury (Sindell v. Abbott Laboratories).
Not much of that in SCC.

LOSS OF CHANCE: is not an actionable damage (per Lord Hale in Gregg v. Scott HL 2005 – chance of
recovery was reduced by 40%), upheld in SCC Lapier v. Lawson. Per lord Nicholls: should be actionable,
liability should be based on % terms of likelihood of recovery diminished by negligence).
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DEFENCES
Defences are circumstances that reduce/exclude the plaintiff’s recovery.

3 types:
  1.   contributory negligence damages are limited proportional to fault)
  2.   voluntary assumption of risk – volenti non fit injuria (involves consent)
  3.   illegality – ex turpi cause non oritur action


CONTRIBUTORY NEGLIGENCE is established in Butterfield v. Foster, 1809 – obstruction of road,
rode hard, fell – full defence.

Now defence limits damages proportionally to degree of fault (s. 3 Negligence Act). If fault cannot be allocated, it
is equally distributed (s. 4 Negligence Act).

Applies also where the plaintiff was no negligent, but failed to take precaution that a man of ordinary prudence
would (Froom v. Butcher per Denning – fail to wear seatbelt; deduction for damages that would have been
entirely prevented by wearing seatbelt – 25%; less severe damages w/out seatbelt – 15%.)

Does not apply where the defendant had “the last clear chance” to avoid causing injury and failed to take it
(liability for negligently running over a donkey negligently left on a road because def. was riding too fast –
Davies v. Mann 1842).

The case against contributory negligence:

1.      It reduces deterrence and compensation – someone who was not contributorily negligent could also have
        been injured (Posner).

2.      Tort law is not punitive – there should be separate sanctions for negligent plaintiffs.

3.      It does not help to deter plaintiff’s negligence because plaintiffs initially don’t want to be injured (Hutch).

4.      It falls more heavily on the plaintiff than defendant because defendant can usually spread the loss
        (Atiyah).

5.      Plaintiff’s damges are often reduced having regard not only to the degree of his fault but relative to fault
        of the defendant (Atiyah).

The remaining defences are rare and must be strictly proven because they deny recovery.


VOLUNTARY ASSUMPTION OF RISK

Usually involves some form of consent. Also, there is a distinction between consenting to physical risk (injury)
and legal risk (no compensation for negligence).

The general rule is that defence applies where the plaintiff (1) appreciated the risk involved and (2) willingly took
it (ex. Birch v. Thomas – sticker: no insurance).

a.      Special knowledge of the plaintiff will not be used against the plaintiff to show knowledge or risk –
        cautions on dangerous goods must be specific; test is reasonable person (Cambert v. Lastoplex 1971
        SCC).
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b.      In cases of drunk drivers, it must be show that the plaintiff, knowing of the virtually certain risk of harm,
        bargained away his right to sue for injuries resulting from negligence and that both parties understood that
        the defendant assumed no responsibility to take due care and the plaintiff did not expect him to (Dube v.
        Labar 1986 SCC drunk drivers).

c.      Acceptance of risk (2) may be express or implied through conduct (Yarmouth v. France).

d.      If joint venture is proven, consent is usually there and defence applies (Priestley v. Gilbert).

e.      Being drunk does not limit the plaintiff’s ability to assume the risk (2) (Miller v. Decker).

The case against voluntary assumption or risk: in cases of drunk drivers, the drunk driver escapes liability
when defence applies – no deterrence.

ILLEGALITY
When the plaintiff does something illegal, he is prevented form recovering from the act, except for compensation
resulting from negligence (Hall v. Hebert 1993 SCC).

The defence should only be used where a damages award to the plaintiff would not:

a.      allow the plaintiff to profit from illegal act, which does not include compensation, but would deny
        recovery for exemplary damages and damages for future income based on illegal profits.

b.      permit an evasion/rebate of penalty prescribed by criminal law


CONTRIBUTION
The plaintiff can sue any defendant for injury and get 100% of damages (County of Parkland No. 31 v. Stetar
1974 SCC – sign fell).

The defendants found liable are (1) jointly liable (for 100% of damages) and (2) severally liable (s. 1 Negligence
Act). Defendants are to make contribution proportionally to their degree of fault (s. 1). Contribution can also be
sought for reasonable settlement amount against any tortfeasor who is, or would be if sued have been found, liable
(s. 2).

In case of non-suit (not being able to sue), no liability = no contribution (Stetar).

Contribution is to be determined at the very end, following contributory negligence, damages deductions
(Fitzgerald v. Lane 1988 HL).

The case against contribution:

1.      Some tortfeasors get away (no deterrence).

2.      Makes settlement more difficult – tortfeasors try to find other tortfeasors to contribute, won’t settle before
        find others bcs. don’t know if others will contribute.

3.      Favours wealthy defendants who can shift losses.
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4.      Tort law should be about distributing losses over society. This way, we can get a good rule through bad
        reasons, rather than bad rule using good [consistent] reasons (fault). (James)

5.      US take on contribution: Def. 1 10% liable; Def. 2 90 % liable, but can’t pay. Def. 1 pays 10% + ½ of
        90%; plaintiff carries 45% of loss. But pl. is not at all negligent.


STATUTORY TORTS
3 schools of thought:
1.      Public interest theory – legislation is made to correct market failures and is a genuine attempt at optimal
        safety, so should be given great weight in determining cause of action.

2.      Interest group theory – legislation benefits certain groups, and to give a cause of action on it would tip the
        balance toward those groups.

3.      Public theory (Hutch) – breach of statute is a wrong – all wrongs must be actionable (and for which
        people are liable – Posner). Prudent men do not break the law (Fleming).

4.      Also, courts derive their power from legislation, legislation corrects weaknesses of court decisions, so
        breach should give rise to cause of action (Landis).

Statutes can give a right of action or prohibit same expressly.

Generally, statutes say nothing about private action for breach of statute. The courts will decide on whether there
is a right of action in tort. When statute says nothing about a specific type of injury, this does not mean it
prohibits it (Jordan House v. Menow 1973 SCC hotel, intoxication, damage to self).

Statutes will only be relevant when they apply (Chipchase v. British Titan Products ladder).

International positions re statutory torts:

English: proof of breach of statute and consequent damages gives rise to liability where (1) duty is to an
individual; and (2) the purpose of the statute is to protect a specific class of individuals (R. v. Saskatchewan
Wheat Pool).

US: breach of statutory duty is proof of breach of standard of care (negligence). Further elements of liability need
to be proven to recover (Wheat Board).

Canadian: breach of statutory duty is only evidence of negligence (reluctance to impose strict liability).

No tort of discrimination was recognized in Seneca v. Bhadauria (many applications to Seneca for job, less
qualified people got it; enforcement of HRCT makes this tort unnecessary 1981 SCC).

However, tort principles should reflect Charter values. Result may be different now.
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NEGLIGENT STATEMENTS
Generally, there is no liability for negligent statements because there is no tort duty (Derry v. Peek). Donoghue
principle does not apply to negligent statements – courts treat this as a special case and limit scope of liability.
The main concern the court has is liability in an indeterminate amount for an indeterminate time to an
indeterminate class (Cardozo in Ultramares v. Touche, 1931 NYCA)

However, the courts have come up with exceptions to no liability rule.

In case of third parties, there is duty where:

1.       The bond between a party to a contract and a third party is so close as to approach privity (Glanzer v.
         Shepard per Cordozo – weighers – certificates were produce on behalf of a company for the third party).

2.       There must be a “special relationship” that is “equivalent to a contract” (Lord Devlin in Hedley Byrne)

3.       Voluntary assumption of responsibility (Queen) or an undertaking to assume responsibility (Hedley
         Byrne)

4.       Consideration/benefit from making statement (Hedley Byrne)

5.       Formal setting, not informal conversation (Hedley Byrne)

6.       No requirement to be in business of providing statements (Queen – job, unavailable).


In Canada, “special relationship” (duty) is determined by the modified Anns test (Hercules Management v. Ernst
Young, 1999 SCC):

1.       Proximity (see also Queen; Henderson v. Merrett Syndicates)

         a.      Reasonable foreseeability of plaintiff’s use of statements by third party (see also Haig v.
                 Bamford, 1976 SCC Dickson; Queen v. Cognos, SCC 1993)

         b.      Reliance is reasonable (Haig). If reliance is unreasonable, the plaintiff is deemed to have
                 negligently contributed, so damages are reduced, but liability is not negated (Grand Restaurants
                 v. City of Toronto Ont. HC 1981)

2.       Policy reasons

     a. Defendant’s knowledge of third party plaintiff or limited class of plaintiffs (knowledge of specific third
        party is not necessary when class is known – Hedley Byrne (Haig)

     b. Dhether the statements were used for the particular purpose for which they were provided (Haig – actual
        knowledge of the purpose for which the statements will be used)

In case of contractual relationships, tort duty is owed where:

1.       Misrepresentation was intended to form a warranty between two contracting parties (i.e. no disclaimer)
         (Hedley Byrne)

2.       Misrepresentation is between parties in a fiduciary relationship (contract) (Hedley Byrne v. Heller, HL
         1964)
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English courts did away with Anns test in Caparo Industries v. Dickman, 1990 HL and decided that duty would
only be owed in specific categories of relationships.

In case of negligent misrepresentation to third parties, accountants, in preparing financial statements (auditing),
owe a duty of care to shareholders collectively so that they would be able to exercise their ownership power based
upon good intelligence. They do not owe a duty of care to individual shareholders wishing to purchase stocks
based upon the financial statements or to individual investors. Exception: unless the statement is made for a
specific potential investor (Caparo).

Case                        Person/Class     Purpose known         Rel’p              Decision
                            known
Candler v. Crane            Yes – person     Yes – investment      Third party        No liability
1951 CA Denning                                                                       Denning – liability
Glanzer v. Shepard          Yes – person     Yes – buy goods       Third party, but   Liability
1921 NYCA Cardozo                                                  close to privity
Ultramares v. Touche        No: everyone     Yes, but not # of     Third party        No liability
1931 NYCA Cardozo           – too broad      tranact.
Queen v. Cognos SCC         Yes – person     Yes – he quit his     “Special           Liability
1993                                         job                   relationship”
Haig v. Bamford 1976        Yes – class –    Yes – funding         Third party        Liability
SCC                         investors
Caparo v. Dickman 1990      No – only        Yes – investment      Third party        No liability
HL                          shareholders
Hercules v. Ernst 1997      Some – only      Only to help          Third party        Liability for
SCC                         shareholders     manage                                   management, not for
                                                                                      investments of
                                                                                      shareholders or
                                                                                      investors
Hedley Byrne 1964 HL        Yes – ad         Yes – to secure ad    Third party -      Liability if not for
                            company          contract              bank               disclaimer

[Denning in Candler v. Crane dissent: a duty may exist outside of a contract, irrespective of nature of damage
(injury or economic loss) when:
    1. 1 Duty is owed by persons such as accountants, and other people whose profession and occupation is to
         examine books, and to make reports on which other people, other then their clients, rely in the ordinary
         course of business.
    2. Duty is owed to those who are closely and directly affected by their work, apart from any obligation
         under contract or undertaking.
             a. Clients/ employers
             b. Third parson to whom they themselves show the account
             c. To whom they know their employer is going to show the account so as to induce him to invest
                 money or take some other action
             d. Not to strangers of whom they have heard nothing and to whom their employer without their
                 knowledge may choose to show their accounts
    3. Duty is owed relative to the following transactions:
Those transactions for which the accountants knew their accounts were required. ]


CONTRACT V. TORT
Principles established in Donoghue, Hedley Byrne, Anns apply to both contractual and non-contractual
relationships (Canada Trust v. Rafuse 1986 SCC).
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Contract will limit tort duty where:

1.      Contract explicitly and clearly states this (Rafuse, Checo v. Hydro);

2.      In case of co-extensive duty where context is commercial and parties of equal bargaining power (Checo v.
        Hydro 1993 SCC, Rafuse);

3.      Tort duty circumvents contractual limitations (Nunes Diamond 1992 SCC, Rafuse).

Tort duty will prevail over contract limitations where:

1.      Tort duty is considered as an “independent tort” not limited by contract (Nunes Diamond);

2.      In case of co-extensive duty, where the context is non-commercial or where it is commercial, where
        parties do not have equal bargaining power.


ECONOMIC LOSS
3 streams of tort law:

1. Negligent act causing personal/property damage: Donoghue 1932; no K required
2. Negligent statement causing pure economic loss: Hedley Byrne 1964; “special relationship” required; now also
proximity required (Hercules 2008)
        Negligent acts causing pure economic loss (not recoverable)
3. Disclaimers limiting liability: can have liability both in tort and contract, but K can limit liability as long as it
does so expressly.

The general rule is that economic loss resulting from a negligent act is not recoverable (Weler v. Foot and Mouth
Disease Research Institute 1966 QB; and in Spartan Steel v. Martin 1942 CA; cf. Davies – recoverable).

Exceptions:

1.      Where economic loss is accompanying physical harm (consequential econ. loss – consequential to
        plaintiff’s injury – Spartan Steel v. Martin; “parasitic damages” – Seaway Hotels v. Gragg 1959 Ont. CA)
2.      Negligent misstatements about financial matters
3.      Commercial fishermen as “favourites of admiralty” (Barber Lines v. Donau Muru 1985)
4.      Independent liability of statutory authorities (Martel Building v. Canada 2000 SCC)
5.      Negligent performance of a service or supply of shoddy goods or structures (Martel)
6.      Proximity between plaintiff and owner of damaged property pl. used; other requirements:
        i.       defendant knew that damage could cause econ. loss to those who rely on use of property (Caltex
                 Coil v. The Dredge 1976 Aust. HC recovery);
        ii.      defendant knew plaintiff was using the property (Caltex)
        i.       defendant knew or ought to have known of the specific person who may foreseeably suffer loss
                 (Norsk)
        ii.      physical injury
        iii.     relationship between parties, but plaintiff cannot sue for contractual relational economic loss =
                 econ loss suffered by a plaintiff in a contractual relationship with a third party to whom the
                 defendant is already liable for property damage unless:
                 a.       plaintiff has possessorty/proprietary interest in damaged property;
                 b.       general average cases; or
                 c.       relationship between plaintiff and property owner constitutes a joint
                                                                                                                  13
                        venture (Martel Building v. Canada 2000 SCC).
       iv.     assumed or imposed obligations
       v.      close causal connection
       vi.     policy reasons do not negate liability, see below (CN v. Norsk 1992 SCC – recovery because if
owner used bridge, same econ. loss would result)
7.     Where it was reasonably foreseeable that negligence would cause damages that pose a real and substantial
       danger to health and safety of occupants or a building, the defendant will be liable for reasonable damages
       incurred to repair defect and to prevent personal and proprietary harm threatened by negligence. The
       court uses Kamloops test; policy reasons are satisfied (Winnipeg Condominium Corp. v. Bird
       Construction 1995 SCC – recovery). However, the course of lords did not allow recovery in a similar
       case (Murphy v. Brentwood – due to approved foundation plans & subsequent cracks, ppty sold at lesser
       value). Australian courts allowed recovery even where defect is not dangerous because the builder
       assumes responsibility for product and knows of occupier’s reliance and is in a better position to take care
       (Bryan v. Maloney 1955).

Factors that may exclude liability for econ. loss for policy reasons:
1.      Insurance (pl. can self-insure).
2.      Loss spreading (1 tortfeasor, many plaintiffs).
3.      contractual allocation of risk – when making the contract, the parties allocated risk in their price or
        created contractual insurance (only in cases of equal bargaining power).
4.      Plaintiff is better able to carry the loss (La Forest).


PSYCHIATRIC HARM
Principles:

1.      A plaintiff can claim for compensation for psychiatric illness resulting from shock caused by the
        defendant’s negligence without proving personal injury to self or fear of same.

2.      Illness must be a recognizable psychiatric illness.

3.      Shock must result:
        a.     from death or injury or fear thereof to a person close to the plaintiff
        b.     from direct (no TV, radio)sight or hearing of event or its immediate aftermath
               (aftermath – recovery for mother who thought all family died; in hospital –
               McLachlin v. O’Brien).

Recovery will depend on:
1.      Class plaintiffs (relatives, friends, depends on degree of love & affection; probably not brothers).
2.      Proximity of pl. to accident (time and space – need to be at scene
3.      Means by which shock resulted (only direct)
The closer the relationship of pl. with injured person, the less strict proximity and means have are.
(Alcock v. Chief Constable 1991 HL).

Limitation: injury to person cannot be self-inflicted or self-negligent (Greatorex v. Greatorex 2000 QB)

Rescuers and helpers do not recover as a separate class, nor are they proximate enough (White v. Chief Constable 1999
HL).

Australian courts removed the “shock” requirement – psychiatric harm is treated as any physical injury. (Tame v.
Newsouth Wales 2002 Aust. CA – boy lost in desert).
                                                                                                                     14

WRONGFUL LIFE
A claim by the infant that he/she should not have been born. Problems with this claim:
1.     Doctor’s negligence did not bring about injury, only mother’s loss of chance at abortion
2.     Damages cannot be evaluated – difference between being dead and being disabled
3.     Doctor has not duty to the child (this would create a conflict of interest because mother may want to have
       the child regardless of risks – Bovingdon v. Hergott 2008 Ont. CA).

Israel approached this matter differently and awarded damages closes to situation at hand difference between
being alive and able and alive and disabled (Zaitsov v. Katz 1986 Isr. SC).


WRONGFUL BIRTH
Birth is normally brought about following a doctor’s negligence during a sterility procedure. Parents sue for:

1.      Damages consequential to birth (meds, time off work)
2.      Compensation for reasonable expectation not to be pregnant
3.      Child-rearing costs (pure economic loss)

In the case of a healthy child being born:

Canadian perspective (Kealey v. Berezowski 1996 Ont. GD per Lax – mother sues) is to award (1) and (2), but
award for (3) will depend on the reason behind sterility. (3) will only be awarded where there are financial
constraints or illnesses that deter from the parents’ ability to take care of the child. It must be kept in mind that a
healthy child is not an injury and that benefits of a healthy child offset child rearing costs.

English perspective (McFarlane v. Tayside Health Board HL 2002 – father sues) is to award (1) and (2), but not
to allow (3) because costs are otherwise not distributed (Steyn); disproportionate liability (although court had no
problem with this in case of lawyers in Hill); there is no proximity (but pregnancy was from his wife, not just any
other woman, which could create such a problem); and because benefits offset child-rearing costs (Millet).

Australian perspective (Cattarach v. Melchior 2003 Aust. HC – parents sue) is to allow recovery for all three.
Benefits of rearing a child are not legally relevant to the head of damages that compensate for child-rearing costs,
although they could negate some “enjoyment of life” claim in (2). Negligent party should internalize loss. The
harm is not the child him/herself, but the moral and legal responsibilities attached to rearing the child.

In case of a disabled child being born:

Mother can recover child-rearing costs where the child’s disability arises between conception and birth and if
there is no intervening act. The father may also recovery if there is sufficient proximity between him and the
doctor.

In case of a healthy child born to a disabled parent:

Canadian perspective – probably recoverable (see Kealey v. Berezowski).

English perspective (Rees v. Darlington HL 2003 – blind mother) is to allow recovery for (1) and (2) - $15,000,
but no recovery for (3) because child is healthy, parent’s disability was not caused by the doctor’s negligence. (3)
is also not recoverable where the parent becomes ill as a result of unwanted pregnancy.
                                                                                                                     15

NONFEASANCE
Misfeasance – where defendant contributed to the creation of the risk in the ambit of which the plaintiff sustained
injury; commission of a wrong (Moch v. Renssealaer 1928 NYCA hydrants per Cardozo). Can be acts or
omissions. Generally, liability.

Nonfeasance – where defendant does not contribute to creation of risk, but merely fails to participate in
alleviating the risk; denial of benefit (Moch v. Renssealaer). Omissions only. Generally, no liability (ex. in case
of a drowning stranger).

Exception to “no liability” rule for nonfeasance: there may be liability where there is duty. There is duty in
the following cases:

1.      Occupier’s liability – there is a duty to render some assistance to people on one’s property, even if you
        did not cause the injury (some duty even to trespassers) (Stovin).

2.      One person undertakes to take care/act (Stovin v. Wise) (ex. begin a rescue Glanzer v. Sheppard, but the
        standard of care is low).

3.      One person induced another to rely on him/her (Stovin).

4.      Creation of a hazard, steps toward rectification, omission to go all the way (Oke v. Weide Transport 1963
        Man CA – truck, post).

5.      Where a party to a contract assumes a duty to the other party and it is foreseeable that a breach of duty
        will cause injury to some third party, the contracting a party owes a duty to all those falling w/in the
        foreseeable ambit of risk of harm (Doyle v. South Pittsburg Water water suppliers to hydrants per
        Cardozo).

6.      Social hosts have a duty to guests who they knew or ought to have known were drunk when leaving the
        host’s party, but not to people the guest injures, unless the host participates in creation or exacerbation of
        risk (Childs v. Desormeaux 2006 SCC).

7.      Duty of commercial alcohol providers to consumers and public injured by consumers (see Childs).

8.      The defendant intentionally invites parties to an inherent and obvious risk that he/she has created or
        controls (ex. captain to passengers, manufacturers to consumers – Childs).

9.      There is a supervisory relationship between def. and pl. (ex. occupier + guest; parent and child – Childs).

10.     Duty to public at large where the defendant exercises public function or engages in commercial enterprise
        (Childs).

11.     Where a person is placed in such a position with regard to another that it is obvious that, if he does not
        use due care, he will cause injury to that person, a duty arises to exercise care commensurate with the
        situation to avoid the injury (Depue v. Flatau 1907 Minn SC – skins buyer, faint, frozen).

The case for rescue duty:

1.      We should have duty where there are already other legal duties to same persons/class (i.e. students,
        children).
                                                                                                                     16
2.      Duty of rescue is different from duty of beneficience (charity).

3.      No reason to hold back in cases of easy rescue (Weinrib).

4.      Someone dying for other’s failure to act is more urgent than a small infringement on personal autonomy.

5.      Someone harmed is not an isolated event – other people will also be hurt, so the interest contrasted are
        individual v. group – Bender.

Governmental Nonfeasance:

Duty analysis is the same for government as for individuals – Kamloops test.

Canadian perspective is that although foreseeability and proximity are easily found, duty can be negated on the
basis that:
1.       Duty is not imposed by statute
2.       Decision is one of “policy”, not “operational”. The reasoning is that government should be able to decide
         on what it does without being sued (Just v. R. 1989 SCC).

Policy decisions involve resource allocations and are framed in terms of “whether” to inspect. These decisions
can, however, be challenged on the basis of not being made bona fide (Just and Anns). Once the government
decides to act, its decisions on “how” to act (standard) are “operational” and are open to tortious claims based on
negligence – standard will vary with various factors, but it is generally to act reasonably having regard to
available resources (R. v. Just – boulder fell on road; operational, duty).

Cory J in Just – general duty of public authorities, with some exceptions for policy reasons.
McLachlin in Swinamer v. AG Nova Scotia – no general duty, with exceptional exceptions.

Statutory duty of preventing crimes results in a private duty to protect or warn known victims or class of persons
known to be potential victims (Jane Doe v. Metropolitan Police 1990 Ont. DC).

English perspective is that there are discretionary decisions even at operational stages (decision to inspect and
even inspection itself. Plaintiff can go to duty analysis only following proof that decision was not discretional,
unless decision was not made bona fide (Anns v. Murton Borough 1977 HL – foundations approved).

English law removed operational/policy distinction because it created inconsistency in Cdn. Cases. It was held
that there was generally no duty, except when:

1.      It would in the circumstances have been irrational not to have exercised discretionary power; or

2.      There are exceptional grounds for holding that the policy of the statute requires compensation for persons
        who suffer loss because power was not exercised (Stoving v. Wise 1996 HL).


DAMAGES
The general principle is that damages should be awarded so as to bring the plaintiff to the position he was in
before the injury occurred, so far as money can do so. The onus is on the plaintiff to prove damages.

Generally, there are 2 types of awards (but not limted): (1) lump sum and (2) periodic payments.

Types of damages (based on Andrews v. Grand & Toy AB 1978 SCC):
                                                                                                                   17
1.      Special damages are expenses already incurred
2.      General damages include (1) pecuniary losses such as future income loss and future care and medical
        costs; and (2) non pecuniary losses that are losses beyond market value (ex. loss of enjoyment of life).

Pecuniary Loss:

1.      Future care:
        i.     Plaintiff must be reasonable in his claim, but is not required to downgrade places where he/she
               will life (home care v. institutional)
        ii.    Calculated until life expectancy, as after the accident.
        iii.   Contingencies of life: deduction - 20% for care provided elsewhere (but still has
               to pay for rent, heat, etc.)

2.      Loss of earnings:
        i.      Level: graduate increase over life from position before accident.
        ii.     Length: compensation for no. of years he would have worked based on timelines
                as pre-MVA.
        iii.    Contingencies: deduction- 20% for shortcomings on earnings, illness,
                unemployment (but no +ve contingencies like bonuses).
        iv.     Duplication deductions: -53% deduction because some expenses would have come from income
                (food, sheleter) that are now included in future care costs

3.      Capitalization rate:
        i.     Present value: investment return and inflation effects on lump sum (Andrews 7%; now Townsend
               v. Kroppmanns 2004 SCC – future care 3%; future earnings 2.5%). In calculating present value,
               the calculations should provide for a self-extinguishing sum. Rules – 2.5%.
        ii.    Tax gross-up: none (Andrews: capacacity to earn, not actual income, no tax gross-up on income
               from investment; tax on future care sometimes provides for a full-time attendant that makes up
               for it, but some for fatal accidents because support of family members would have come from net
               income;
        iii.   Present tax gross-up: Now no tax gross-up for income on future income award because he would
               have paid income tax anyway (Wilson v. Martinello 1995 Ont. CA).

4.      Management fees: awarded to help the injured person manage finances to last as calculated. Assessed
        on a case-by-case basis. No additional reduction on damages will be made if this is awarded. This and
        the tax gross-up are to be calculated on the entire amount. (Townsend v. Kroppmanns 2004 SCC).

Non-pecuniary loss:

Compensation for incalculable damage (pain and suffering) to provide the injured person with reasonable solace
for misfortune, as far as money can provide this. This is limited to $100,000 in 1978 dollars. (Andrews v. Grand
& Toy AB 1978 SCC).

US calculates as follows: 1/A risk (odds) of injury with a product. Non-pecuniary award = A x max. amount that
a reasonable person would pay to eliminate risk of injury as severe as the plaintiff.

Lump sum v. periodic payments:

1.      Judges say that legislation should enforce periodic payments (Dickson in Andrews).

2.      Lump sum:

        a.        uncertainties are great and judges are not qualified to make assessments
                                                                                                                      18
        b.      inability to foresee long-term needs of victim (Dickson in Andrews)

        c.      3 principles: (1) damages are estimated, not actual expense (2) damages are not to be revisited
                (finality; and (3) plaintiff has property of award and can do with it what he wills (Townsend v.
                Kroppmanns 2004 SCC).

3.      Periodic payments (structured settlement):

        a.      allows for future interacion

        b.      more certainty

        c.      can better meet victims’ needs

        d.      eliminates gross-up for tax and management fees

        e.      eliminates investment risk (Wilson v. Martinello)

        f.      costs more to the insurer (so what?)

        g.      loss of incentive to go back to work is not true

4.      Courts of Justice Act s. 116 (following Wilson v. Martinello):

        (1)     If plaintiff requests gross-up, the court may order periodic payments,
        (2)     unless it is not in the best interests of the plaintiff (Wilson – franchise);
        (3)     If the court does not order periodic payments, it must award gross-up

Future earnings of children:

Where there is no evidence of the child’s potential earnings, the parents’ earnings should be considered. In
Arnold v. Teno 1978 SCC, the court assessed income as the average between the poverty level and the mother’s
income. Difficulty in assessing damages does not mean that they should not be assessed.

In Toneguzzo-Norvell v. Savein 1994 SCC, the court made positive contingencies for social trend of women’s
income gearing toward equality level.

In an Israeli case, the average national income was used for future earnings calculations, not the village’s future
earnings. The reasoning was that she had the opportunity to work anywhere in the country (Mugdal Ins. v. Abu
Hanna 2005 Isr. CA).

Family Law Act:

Under the FLA, specified relatives of a person who has been tortiously injured or killed are entitled to
compensation for, inter alia, loss of guidance, care, and companionship (Wilson v. Martinello).

Collateral Benefits:

Not Deductible Benefits:

1.      Private benefits are not deductible. Private benefits are those for which the plaintiff gives some
        consideration by way of payment. Disability benefits involve deduction from income, and so are
        considered private benefits (Cunningham v. Wheeler 1995 SCC). Problem: insurer may seek
        subrogation, which is why they should be deducted (Ratych v. Bloomer).
                                                                                                                    19

2.        Charitable donations (don’t want to discourage help – Cunningham v. Wheeler).

3.        Minority in Cunningham – non-indemnity benefits – those that do not award for specific loss that the
          defendant would have paid for (like loss of earnings, meds). These are usually payments on occurrence
          of an event. This way, there is no double recovery.

Deductible Benefits:

1.        Social assistance (MB v. British Columbia 2003 SCC) because it is akin to income.

2.        Minority in Cunningham – indemnity benefits – those that reduce losses under general head of damages
          because they decrease loss suffered. “McLachlin – the best that could be done is to compensate for
          payments made to receive benefits.” Some argue this discourages people from getting indemnity benefits
          – but consideration is time – those that do not have these get their award much later, and are punished as
          much as those who do not mitigate damages.

Hutch: if we really want deterrence to work, we must not let defendants insure themselves.


FAIRNESS – IS TORT LAW FAIR?
     1.       Court looks at what is fair to defendant (whether he should pay for being negligent) not what is fair to
              plaintiff (whether he should pay for not being negligent).
     2.       Economics of tort law (per market forces) allocates recovery to those people who can pay for
              protection, not to those who need it; it also treats cost efficiency as best solution (plaintiff does not
              only lose money, but life).
     3.       People are not ones who decide to what risks they are exposed – defendants decide this by virtue of
              cost efficiency (!).
     4.       It is unfair to assume, as it is assumed in tort law, that losses lie where they fall (Holmes) – why
              should non-negligent plaintiffs carry the loss
              a. Making availability of insurance funds relevant to award of damages would limit unfairness and
                   would distribute the cost
     5.       ROLFB J in Winterbottom v. Wright – hard cases are out to introduce bad law – how can following
              precedent be considered justice if the outcome is not fair?
     6.       ANDREWS dissenting in Palsgraf – in fairness, we should make good every injury flowing from a
              negligent act.
     7.       If 1 step, why not 50 – Alderson (but why not 2)

				
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