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EXTRA-CONTRACTUAL OBLIGATIONS/TORTS 2002-2003 Prof. LARA KHOURY - page 48 / 64

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

Issues

1. Could ECN be counted as “another” under (a.1053,CCLC)?

2. Was the economic injury to ECN caused by the accident?

Holding

1. Yes; 2. No.

Ratio

1. Owen JA held that the “clear meaning” of (a.1053,CCLC) was that it included anyone—it could not be limited to certain classes of persons.

2. However, Owen JA also found that it was not clear that Elliott’s accident had caused the extra cost of hiring additional foremen. It is true that Giannotti’s inability to work for 10 months was caused by the accident, but ECN probably would have had to hire extra staff anyway. During the four months following the accident, ECN’s business took off, expanding from 2 to 50 contracts and from 10 to 50 employees. The two foremen who were hired to replace Giannotti were kept on when Giannotti returned to work.  

Comments

J.E. Construction Inc. c. General Motors du Canada Ltée., [1985] C.A. 275. (CB2p127)

Jurisdiction

Quebec

Facts

J.E. was digging when it accidentally broke a water main. As a result, no water was supplied to the GM plant and GM had to halt production for several hours. During this time, GM nonetheless had to pay its employees, because of a stipulation in their collective agreement. GM sued for the cost of its employees’ salaries during the downtime.

Issues

Did J.E.’s fault cause GM’s economic loss?

Holding

Yes.

Ratio

Finding no problem with including GM as “autrui” under (a.1053,CCLC), Mayrand J went on to ask whether the loss was an “immediate and direct” result of the accident. Doctrine did not seem to provide a clear answer, so Mayrand J tried “jurisprudential empiricism” (i.e., it all depends on the facts of the case). Much of the decision seems to have been based on Joly c. Ferme Ré-Mi [1974], where a driver who had crashed into a hydro pole was held to have caused the asphyxiation of chickens.

Comments

Common law has traditionally refused to compensate for pure economic loss. Its “bright line rule” holds that there is no duty of care.

Weller v. Foot and Mouth Disease Research Institute, [1966] 1 Q.B. 569. (CB2p109)

Jurisdiction

England

Facts

Weller owned a cattle auctioning business in a rural area. Due to the FMDRI’s fault, a virus escaped from its labs and infected cattle at neighbouring farms, which had to be destroyed. As a result, Weller’s business suffered.

Issues

Did the FMDRI have a duty of care to Weller?

Holding

No.

Ratio

There is no duty of care toward someone who might suffer pure economic loss. If there were, the FMDRI’s liability could extend indefinitely throughout the economy. The court applied a bright line rule, saying that damages can only be awarded when someone’s person or property was directly injured. In this case, the FMDRI would have to compensate farmers whose cattle died, but no one else.

Comments

This is the classic common law position on pure economic loss.

The floodgates concern was stated by Cardozo J in Ultramares Corp. v Touche: “There is a fear of liability in an intedeterminate amount, for an intedeterminate time, to an intedeterminate class.”

The Wrongs of Tort calls this a “mantra.”

In many cases, insurance also obviates the need to recover for pure economic loss.

The bright line rule also results from the separation between contract law and tort law.

Common law has also had a traditional belief that financial interests are not as important as physical or proprietary interests.

However, there have been exceptions to the bright line rule:

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