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

plans. As a sophisticated company, it could also “self-insure” in its budget, take out real insurance, or negotiate some kind of protection in a contract with the bridge owner.


McLachlin retreated from her position on proximity in Bow Valley Husky v. St. John Shipbuilding. While she claimed to be following her decision in CNR v. Norsk, she ended up taking a position closer to La Forest J’s dissent. She upheld a general exclusion of duty of care for contractual relational pure economic loss. She said that the list of situations where the courts would find duty of care was not closed, but that the court would not deliberately seek to expand the list.

Conaghan and Mansell, The Wrongs of Tort, pp.21-34. (pure economic loss)

The traditional reasons for denying recovery for pure economic loss (floodgates, insurance) could equally apply to many other situations.

The Hedley Byrne case (1964) allowed recovery for pure economic losses from a negligent misstatement arising out of a “special relationship” between the parties. This seemed to create a special exception to the bright line rule.

There are borderline cases where it’s not clear whether the loss is purely economic, e.g., latent structural defects in buildings. This was the issue in Murphy v. Brentwood DC (1990).

In the Henderson case (1994), it seems that the Hedley Byrne principle was extended to investors who had relied on someone else’s undertaking. Lord Goff would have liked to strike down all barriers to recovery for pure economic loss.

Hedley Byrne plays a strange role, filling a gap between contract and tort law.


The Scope of Risk

There are two ways of looking at causation:

factual causation: This is what we studied last term. It means telling the story of the injury: What actually happened?

legal causation: This means distinguishing conditions from causes and attributing liability among the causes (once the facts are known).

Common law also calls this “remoteness.”

This is mainly a common law distinction, but civil law sometimes uses it too, especially in Quebec.

Hart & Honoré, Causation in the Law, 2nd ed. (1985) pp.9-13. (CB2p130)

Philosophical theories of causation have been immensely useful in science, but not so in law or history. This is because scientists try to construct generalizations, whereas lawyers and historians are concerned with causation in particular cases.

Common-sense notions of causation distinguish between causes and mere conditions. This is important in legal or historical causation as well.

Common law recognizes that policy plays a role in determining causation. (Civil law does not.)

The two main standards for evaluating causation are:

1. directness

2. foreseeability

Both systems have used each of these.

These standards can often lead to different results.

For example, in the case of Falkenham v. Zwicker, a driver swerved to avoid hitting a cat and crashed into a fence. Staples from the fence fell onto the field. A few cows ate the staples, and some died.

The directness approach would find causation.

One wouldn’t think the foreseeability approach would find causation, but it did.

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