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EXTRA-CONTRACTUAL OBLIGATIONS/TORTS 2002-2003 Prof. LARA KHOURY - page 43 / 64

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McGill Faculty of Law: Extra-Contractual Obligations/Torts: Prof. Lara Khoury, 2002-03/Summary by Derek McKee

The role of policy was openly acknowledged; judges had to state their reasons for not finding a duty of care.  

This was criticized as too legislative, but it allowed courts to maintain the extra requirements for pure economic loss, psychiatric injury, etc.

Dorset Yacht prefigured Anns: the analysis was based on reasonable foreseeability, but policy obviously played a role.

The Anns test was formally adopted in Canada by Wilson J. in City of Kamloops v. Nielsen (1984)

In England, the courts added a third step to the Anns test in Caparo v. Dickman (1989): They separated proximity from reasonable foreseeability.

Since Anns, courts have continued to reason inductively, looking for precedent. The Anns test only becomes important when there’s no clear precedent.

Cooper v. Hobart, [2001] 3 S.C.R. 537. (CB2p45)

Jurisdiction

British Columbia

Facts

Eron, a registered mortgage broker, went broke due to irresponsible practices of its principals, using investors’ money for unauthorized purposes. Cooper, one of Eron’s investors, sued Hobart, the provincial registrar of mortgage brokers. She alleged that the registrar had breached a duty of care toward Eron’s investors to inform them of Eron’s violations of the legislation or to suspend Eron’s license.

Issues

Does a statutory regulator owe a duty of care to investors for (alleged) negligence in failing to oversee the conduct of a company?

Holding

No.

Ratio

McLachlin CJC and Major J explicated the Anns test.

They divided the first step (proximity) into two parts:

a. reasonable foreseeability

b. proximity, understood to refer to the nature of the relationship between the parties, and based on existing categories as well as policy, although there was no single unifying characteristic.

As for the second step, McLachlin CJC and Major J said that this was concerned with residual policy considerations (i.e., other than the parties’ relationship): the effects of recognizing a duty of care on other legal obligations, the legal system, or society in general.

McLachlin CJC and Major J then applied the Anns test. They interpreted the first part of the test (proximity and reasonable foreseeability) to ask whether the relationship between the parties was such that the defendant was under an obligation to be mindful of the plaintiff’s legitimate interests. They answered no: the registrar’s duties arose through a statute, and the statute only created a duty toward the public at large, not toward the investors in particular.

Given this conclusion, it was unnecessary to go on to the second stage of the test, but in obiter, McLachlin CJC and Major J did so. They said that even if there had been a prima facie duty of care, there were clear policy reasons for negating this duty, including the registrar’s freedom of discretion, conflicts between the public interest and investors’ interests, floodgates, and the costs to taxpayers of effectively creating an “insurance scheme” for investors.

Comments

Anns is still the basic test, but Cooper explicity recognizes policy considerations at the first step. Prof. Khoury says this is more honest.

This understanding of duty of care seems to resemble the English separation of reasonable foreseeability from proximity, as in Caparo v. Dickman.

Does it really make any difference to divide the policy arguments into two steps? It seems that it would make a difference from the viewpoint of the lawyer, who has to prove duty of care.  

Palsgraf v. Long Island Railroad Co., 162 N.E. 99 (N.Y.C.A. 1928). (CB2p60)

Jurisdiction

United States

Facts

A man was running to board a departing train. He was carrying a package. Railroad guards tried to push him through the door, and in the process, his package fell.

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