Judgments

Decision Information

Gypsum Carrier Inc. v. The Queen

Collection Judgments
Date 1977-05-09
Report citation [1978] 1 F.C. 147
File numbers T-3747-71
Subjects Crown

Decision Content

T-3747-71
Gypsum Carrier Inc. (Plaintiff)
v.
The Queen (Defendant)
and
Canadian National Railway Company, The Queen on the information of the Attorney-General of Canada, British Columbia Hydro & Power Au thority and Great Northern Railway Company
(Plaintiffs)
v.
The Ship Harry Lundeberg (Defendant)
Trial Division, Collier J.—Vancouver, December 21 and 22, 1976; Toronto, May 9, 1977.
Crown — Torts — Negligence — Economic loss — Ship found negligent in collision with Crown-owned bridge — Rail ways unable to use bridge as per contract with Crown — Whether railway agreements amount to easement over the bridge — Whether the railways can recover economic loss from owners of negligent ship.
The Harry Lundeberg collided with a federally owned bridge and was found to be solely at fault. The three railway compa nies either owned lands and trackage, or track rights to the approaches of the bridge. Because of the collision, the bridge was closed and alternative crossings had to be arranged. The railways are bringing an action against the owners of the Harry Lundeberg in negligence and claim damages for the cost of re-routing their trains. The Court considers these claims in a resumption of the consolidated action.
Held, the action is dismissed. Although documents appear to contain the so-called essentials of an easement, when read as a whole, there was no intention to create easements. The purpose was to create certain contractual rights whereby the railways, in return for stipulated fees, were permitted to run their trains over the bridge and approaches. There was no intention to create any rights annexed to land, or any interests in land. At best the railway companies had some kind of licence in respect of land. With respect to the negligence issue, the foreseeable and direct consequence tests ought to be applied. The railway companies were not persons so closely and directly affected that those having charge of the vessel ought reasonably to have had the railways in contemplation when the vessel was proceeding toward the bridges. The owners of the bridge, however, were within the scope of a duty of care on the part of those responsible for the vessel. The railways are denied recovery and the vessel is absolved from liability to compensate. The rail-
ways' economic loss was not a direct and reasonably foreseeable result of the striking of the bridge by the vessel. Even if persuaded that the railways had an easement, the result would have been the same.
ACTION.
COUNSEL:
J. R. Cunningham and G. R. Heinmiller for plaintiff Gypsum Carrier Inc. and defendant The Ship Harry Lundeberg.
E. Chiasson for plaintiff Canadian National Railway Co.
J. M. McEwen for plaintiff B.C. Hydro & Power Authority.
R. Wismer for defendant (plaintiff) the Queen.
D. Martin for plaintiff Great Northern Rail way Co.
SOLICITORS:
Macrae, Montgomery, Spring & Cunning- ham, Vancouver, for plaintiff Gypsum Carri er Inc. and defendant The Ship Harry Lundeberg.
Ladner, Downs, Vancouver, for plaintiff Canadian National Railway Co.
Legal Department, B.C. Hydro & Power Au thority, Vancouver, for plaintiff B.C. Hydro & Power Authority.
Deputy Attorney General of Canada for defendant (plaintiff) the Queen.
Douglas, Symes & Brissenden, Vancouver,
for plaintiff Great Northern Railway Co.
The following are the reasons for judgment rendered in English by
COLLIER J.: At this point in this litigation there is for determination an issue as to whether the damages claimed by certain of the plaintiffs are recoverable. The question came about in this way.
The Federal Crown is the owner of a bridge spanning, in a north-south direction, the Fraser River near the City of New Westminster, B.C. At the material time the only users of the bridge were
the plaintiffs Canadian National Railway Com pany, British Columbia Hydro & Power Author ity, and Great Northern Railway Company (now Burlington Northern Inc.). I will refer to those plaintiffs as "the railway companies", "the rail ways" or sometimes "the plaintiffs". Each of the three railways had agreements with the Federal Crown permitting them, for prescribed tolls per car, to use the bridge facilities. It will be neces sary, later, to deal in more detail with the nature and effect of those agreements.
The bridge was originally constructed in the early part of this century by the Province of Brit- ish Columbia. It was erected "... for the purpose of railway, vehicular and passenger traffic ...." In the late 1930's the Pattullo Bridge, slightly upstream, was completed. The bridge in question was then transferred to the Federal Crown. It has since become known as the New Westminster Railway Bridge (hereafter the "railway bridge", or the "bridge"). Vehicular and pedestrian traffic use the Pattullo Bridge'.
The railway bridge has a swing span. When that span is open, marine traffic, which could not other wise pass under, can proceed up or down stream.
The vessel Harry Lundeberg is an ocean going freighter. She is owned by the plaintiff Gypsum Carrier Inc. She was used to carry gypsum from Mexico to New Westminster. Her master, at the relevant times, was Captain Louis Sarin. The vessel in 1966 and 1967 made nine to eleven voyages to New Westminster. Those voyages required passage under the bridge through the draw when the span was open. Captain Sarin knew the railway bridge carried rail traffic only. He had seen trains on the bridge.
On July 2, 1968 the Harry Lundeberg, with a pilot on board, came into collision with the bridge. The bridge was heavily damaged. All bridge rail way traffic was suspended for 8 days.
The owners of the vessel brought action against the Federal Crown. The railway companies and
' See reasons for judgment of Sheppard D.J., p. 2.
the Federal Crown each brought action against the vessel. The various actions were consolidated. They came on for trial, before Sheppard D.J., in the fall of 1970. The parties agreed (reasons, pages 1-2):
... that the issue be tried as to whether the Bridge or the vessel was at fault, and any reference to the damages would follow upon that finding.
The hearing took 8 days. The judge found the vessel solely at fault. He said (reasons, page 15):
In conclusion, the fault of the "Harry Lundeberg" caused the accident and that fault consisted of negligence. There will be a reference to the Registrar to determine the amounts of the damages, and there will be a judgment for the plaintiffs:
Her Majesty the Queen
The Canadian National Railway Company
The British Columbia Hydro & Power Authority
and
The Great Northern Railway (now Burlington Northern Inc.) for such amounts with interest at 5 per cent per annum from 2nd July, 1968, and costs.
The trial of this consolidated action was then resumed in December 1976. The purpose was to determine an issue as set out in the opening sen tence of these reasons. An initial point was raised by the parties. It was whether the trial, on the damages issue, must continue before the same judge who heard and determined the fault issue, or whether another member of the Court (myself), could sit. I ruled that it was not necessary the same judge should hear and determine the present matter. The parties had no objection to me, as the particular judge assigned, continuing the trial. They, in fact, gave their consent.
I turn now to the specific contentions.
The Federal Crown is claiming $239,403.07 for the costs of repairs and loss of profits. No question is raised by the vessel as to the Crown's right to recover the damages alleged. The dollar amount is not agreed.
The monetary claims by the three railway com panies are for their expenses incurred in re-routing their trains during the bridge closure. No claim is advanced for any loss of profits. The amounts are:
Canadian National Railway
Company i; $125,483.10
B.C. Hydro & Power Authority 12,169.67
Great Northern Railway I 22,969.19
1 5,743.7171 2
In the amended defence, the vessel 3 asserts in respect of the railway companies:
8A. In the further alternative and in further answer to the allegations in the Statements of Claim of the Plaintiffs other than Her Majesty The Queen in the Right of Canada, the Defendant says that if these Plaintiffs have suffered loss or damage, which is not admitted but is specifically denied, then such loss or damage as is alleged is not recoverable in law against the Defendant by the said Plaintiffs.
In the statement of admitted facts (Ex. 39) the problem is put as follows:
2. The issue to be determined on the continuance of the trial is whether the claims of the three Plaintiff railway companies in the above actions numbered T-4226-71, T-3858-71 and T-3860-71 for damages are too remote, assuming, as was held by the Learned Trial Judge, the damage to the New Westmin- ster Railway Bridge was caused by the negligence of those in charge of the Defendant ship "HARRY LUNDEBERG".
The defendant says that no damage or injury was caused to any property owned by the railway companies, or to any property in which they had a proprietary interest; their economic loss, (the addi tional costs incurred) is therefore not recoverable.
The railway companies contend they had a right of way over the bridge and its approaches; the bridge was realty; their right of way was an ease- ment; they had a proprietary, or property, interest or right which was injured or interfered with by the negligence of the defendant; their economic loss flowed from that physical damage to their proprietary right; the loss is traditionally recover able; it is not too remote.
The first question then is whether the railways had an easement or some other proprietary right. The defendant says the right of the railway was, at most, a mere licence.
It is necessary to refer to some agreed facts.
2 The exhibit setting out Burlington's claim is unclear as to whether the second amount is additional to the first. For the present issue, it is immaterial.
3 I shall, at times, refer to the vessel as the "defendant".
The Canadian National Railway Company (CN) main line, from east to west, is divided by the river. The bridge is the connecting link. The western terminus of the CN is in Vancouver, on land and tracks owned by it. To the south of the river (the Surrey side) the CN owns land and trackage contiguous to the bridge approaches. It owns, as well, a strip of land (on which there is trackage) about 100' wide. This strip is below the bridge approaches. The approaches are owned by the Federal Crown. Some of the pilings supporting these approaches are bedded in this strip of land. The land to the north and south of the strip is owned by the Federal Crown. The CN does not own any land or trackage immediately to the north side of the river (the New Westminster side). There is trackage, contiguous to the bridge ap proaches, on land owned by someone else. The CN has continuous running rights on that trackage. By that means it connects, at various points, with its own trackage and lands to service the city of New Westminster, the main terminus at Vancouver, and North Vancouver.
British Columbia Hydro & Power Authority owns and operates railway trackage on both the north and south sides of the Fraser River.
There was no agreed statement of facts in respect of the land and trackage owned by Bur- lington Northern Inc., or as to location of its property in relation to the bridge and its ap proaches. I assume that was oversight. At the hearing before me it appeared to be common ground that Burlington Northern Inc. owned land and trackage, north and south of the river, contig uous to the bridge and its approaches.
All three railway companies had written agree ments (Ex. 42), going back some years, with the Federal Crown. For the purpose of this issue, it is my view the agreements are substantially the same in meaning and effect. It is on those documents the railway companies base their assertion of ease- ments.
The railways were given the right to construct and maintain connections between their own tracks and the tracks on the bridge and its ap proaches. They were further given the right,
during the term of the agreements, to run their trains over the bridge and the approaches. The Federal Crown stipulated that it should have and maintain
... full control over the maintenance and betterment of the property covered by this agreement ....
and undertook to repair the bridge and approaches at its own expense. The Crown further agreed to substitute, at its expense, heavier rails if they became necessary. The Crown was not, however, required to rebuild or replace the "... bridge structure proper". If there were complete or par tial destruction of the steel structure, or any sub stantial part of the bridge, the railways had the option to terminate the agreement.
The railway companies agreed to pay
... for and in full consideration of all the uses, rights and privileges by this agreement granted ....
fifty-three cents per car passing over the bridge. If there were default in the payment provisions, then the Federal Crown had the option to terminate the agreement.
Until 1960, the life of the agreements had been for a fixed number of years. They initially pro vided the agreements could be terminated (other than as set out above) by mutual consent, or by either party giving a three year notice of termination. 4 Effective December 1, 1959 the agreements were renewed for terms of one year (to November 30, 1960) and
... thenceforth from year to year thereafter until terminated by mutual consent....
An easement has been defined as 5
... a right annexed to land to utilise other land of different ownership in a particular manner (not involving the taking of any part of the natural produce of that land or of any part of its soil) or to prevent the owner of the other land from utilising his land in a particular manner.
The railway companies contend that all the essen tial characteristics of an easement are here
4 The B.C. Hydro initial agreement did not have that provision.
5 Halsbury's Laws of England, (4th ed.) vol. 14, para. 1, p. 4.
present. 6 There is, it is said, a dominant tenement (the railway lands and trackage) and a servient tenement (the bridge and its approaches); the easement accommodates (is connected with the beneficial enjoyment of) the railway lands and trackage; the owners of the two tenements are different persons; the easement alleged is capable of forming the subject matter of a grant (by deed).
In my opinion, the agreements between the Crown and the railway companies did not create easements in favour of the railway companies. The documents, superficially, appear to contain the so-called essentials of an easement. But I think one must ascertain the intention of the parties. To my mind, when the agreements are read as a whole, there was no intention to create easements. The purpose was to create certain contractual rights whereby the railways, in return for stipulated fees, were permitted to run their trains over the bridge and approaches. There was no intention to create any rights annexed to land, or any interest in land.'
Leaving aside intention, and merely construing the agreements, I conclude, as well, there were no easements created. I have kept in mind the admo nition that the "list of easements is not closed".
The railway companies say, alternatively, that if there was not, in fact and law, an easement, they nevertheless had some "lesser proprietary inter est"; the vessel is liable for interfering with it. Certain authorities 8 were relied upon. They are, in my opinion, readily distinguishable. They were concerned with compensation for injurious affec tion, or with public nuisance. I do not understand what, in this case, is meant by "some lesser pro prietary interest". At best, the railway companies
6 Halsbury's Laws of England, (4th ed.), paras. 2-18, pp. 4-9. See also paras. 19-167, pp. 9-82, as to easements and rights of way generally; Megarry and Wade, The Law of Real Property, (3rd ed.) 1966, pp. 802-807; In re Ellenborough Park [ 1956] I Ch. 131.
' I contrast the situation discussed in In re Ellenborough Park [1956] I Ch. 131, per Evershed M.R. at pp. 167-168.
B The Queen v. The Great Northern Railway Co. (1849) 117 E.R. 10; Ricket v. The Metropolitan Railway Co. (1865) 122 E.R. 790 and Campbell v. Metropolitan Borough of Padding- ton [19111 I K.B. 869.
may have had some kind of licence in respect of land (the bridge and approaches). The characteri zation of a right as giving a proprietary interest does not necessarily, to my mind, permit recovery against an alleged tortfeasor, or someone who carelessly disrupts that right.
I now turn to the second area of dispute. This engenders a foray into the vexed and developing field of liability for negligent acts and pure eco nomic loss.
For the railway companies it is said their addi tional outlays, even though there was no physical damage to any property owned by them, are recov erable from the vessel. For the vessel it is said there is no recovery for economic loss (without physical damage) except in special relationship situations such as Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. 9 and Rivtow Marine Ltd. v. Washington Iron Works 10 ; there was no such special relationship here; the damages claimed are too remote.
A large volume of cases and other authoritative materials were cited. I admit to having considered, as well, other cases and materials. For the conve nience of the parties, I set them all out in an appendix to these reasons.
As I see it, the problem is probably two-fold and, at that, intermingled. The basic question may well be, not so much remoteness of damage, but whether there was, in the circumstances, any duty to these particular railway companies. Lord Den- ning M.R., in Spartan Steel & Alloys Ltd. v. Martin & Co. (Contractors) Ltd., described the problem, and his approach, as follows":
Mr. Bathurst submitted in the alternative that the views expressed by Winn L.J. and me in S.C.M. (United Kingdom) Ltd. v. W.J. Whittall & Son Ltd. [1971] 1 Q.B. 337 were wrong. He said that if there was any limitation on the recovery of economic loss, it was to be found by restricting the sphere of
9 [1964] A.C.465.
10 [ 1974] S.C.R. 1189.
" [1973] 1 Q.B. 27 at pp. 36-37.
duty, and not by limiting the type of damages recoverable. In this present case, he said, the defendants admittedly were under a duty to the plaintiffs and had broken it. The damages by way of economic loss were foreseeable, and, therefore, they should be recoverable. He cited several statements from the books in support of his submissions, including some by myself.
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. Thus where a person is injured in a road accident by the negligence of another, the negligent driver owes a duty to the injured man himself, but he owes no duty to the servant of the injured man—see Best v. Samuel Fox & Co. Ltd. [1952] A.C. 716, 731: nor to the master of the injured man—Inland Revenue Commissioners v. Hambrook [1956] 2 Q.B. 641, 660: nor to anyone else who suffers loss because he had a contract with the injured man—see Simpson & Co. v. Thomson (1877) 3 App.Cas. 279, 289: nor indeed to anyone who only suffers economic loss on account of the accident: see Kirkham v. Boughey [1958] 2 Q.B. 338, 341. Likewise when property is damaged by the negligence of another, the negligent tortfeasor owes a duty to the owner or possessor of the chattel, but not to one who suffers loss only because he had a contract entitling him to use the chattel or giving him a right to receive it at some later date: see Elliott Steam Tug Co. Ltd. v. Shipping Con troller [1922] 1 K.B. 127, 139 and Margarine Union G.m.b.H. v. Cambay Prince Steamship Co. Ltd. [1969] 1 Q.B. 219, 251-252.
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. Take the illustration given by Blackburn J. in Cattle v. Stockton Waterworks Co. (1875) L.R. 10 Q.B. 453, 457, when water escapes from a reservoir and floods a coal mine where many men are working. Those who had their tools or clothes destroyed could recover: but those who only lost their wages could not. Similarly, when the defendants' ship negligently sank a ship which was being towed by a tug, the owner of the tug lost his remuneration, but he could not recover it from the negligent ship: though the same duty (of navigation with reasonable care) was owed to both tug and tow: see Société Anonyme de Remorquage à Hélice v. Bennetts [1911] 1 K.B. 243, 248. In such cases if the plaintiff or his property had been physically injured, he would have recovered: but, as he only suffered economic loss, he is held not entitled to recover. This is, I should think, because the loss is regarded by the law as too remote: see King v. Phillips [1953] 1 Q.B. 429, 439-440.
On the other hand, in the cases where economic loss by itself has been held to be recoverable, it is plain that there was a duty to the plaintiff and the loss was not too remote. Such as when one ship negligently runs down another ship, and damages it, with the result that the cargo has to be discharged and reload ed. The negligent ship was already under a duty to the cargo owners: and they can recover the cost of discharging and reloading it, as it is not too remote: see Morrison Steamship Co. Ltd. v. Greystoke Castle (Cargo Owners) [1947] A.C. 265. Likewise, when a banker negligently gives a reference to one who acts on it, the duty is plain and the damage is not too remote: see Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465.
The more I think about these cases, the more difficult I find it to put each into its proper pigeon-hole. Sometimes I say: "There was no duty." In others I say: "The damage was too remote." So much so that I think the time has come to discard those tests which have proved so elusive. It seems to me better to consider the particular relationship in hand, and see whether or not, as a matter of policy, economic loss should be recover able, or not. Thus in Weller & Co. v. Foot and Mouth Disease Research Institute [1966] 1 Q.B. 569 it was plain that the loss suffered by the auctioneers was not recoverable, no matter whether it is put on the ground that there was no duty or that the damage was too remote. Again in Electrochrome Ltd. v. Welsh Plastics Ltd. [1968] 2 All E.R. 205, it is plain that the economic loss suffered by the plaintiffs' factory (due to the damage to the fire hydrant) was not recoverable, whether because there was no duty or that it was too remote.
The statement of Lawton L.J. in the same case sets out, in my view, the current position in England 12 :
This appeal raises neatly a question which has been asked from time to time since Blackburn J. delivered his well known judgment in Cattle v. Stockton Waterworks Co. (1875) L.R. 10 Q.B. 453 and more frequently since the decision in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465, namely, whether a plaintiff can recover from a defendant, proved or admitted to have been negligent, foreseeable financial damage which is not consequential upon foreseeable physical injury or damage to property. Any doubts there may have been about the recovery of such consequential financial damage were settled by this court in S.C.M. (United Kingdom) Ltd. v. W.J. Whittall & Son Ltd. [1971] 1 Q.B. 337. In my judgment the answer to this question is that such financial damage cannot be recovered save when it is the immediate consequence of a breach of duty to safeguard the plaintiff from that kind of loss.
That is not, as I see it, since the Rivtow case, the position in Canada. It is possible, by detailed analysis, to restrict the Rivtow decision to its
12 [1973] 1 Q.B. 27 at pp. 46-47. See: Salmond on Torts (16th ed.) 1973, pp. 205-207; Winfield & Jolowicz on Tort (10th ed.) 1975, pp. 51-53; Street, The Law of Torts (6th ed.) 1976, pp. 112-114 and Millner, Negligence in Modern Law, (1967), pp. 60-63.
particular fact situation and to the particular rela tionship which existed between the plaintiff and the two defendants. But members of the Supreme Court of Canada, in subsequent decisions, have themselves asserted that Rivtow is authority for the wider proposition: there need not be physical injury to person or property in order successfully to recover for pure economic loss. In Haig v. Bamford 13 Dickson J. said:
Recovery for economic loss caused by negligence has been allowed in Rivtow ... .
Pigeon J. in Agnew-Surpass Shoe Stores Limited v. Cummer-Yonge Investments Ltd. said: 14
It is now settled by the judgment of this Court in Rivtow .. . that recovery for economic loss caused by negligence is allow able without any recovery for property damage.
I am satisfied that, in this case, the absence of physical damage to any property of the railway companies does not, by itself, preclude recovery for the additional expense the railway companies incurred (the economic loss).
The very difficult question is whether the vessel is legally liable to the railways for that loss.
Lord Denning M.R. in the Spartan Steel case expressed his personal view that the question of recovery is one of policy; the court draws the boundaries
... so as to limit the liability of the defendant .... If ... [the negligent act] causes economic loss ... [to a number of per sons] should it as a matter of policy be recoverable? And against whom? 15
This approach has found favour with some com mentators; others hold the view that policy con siderations, in cases of this kind, are really what brings a judge, whether he says so or not, to a
13 [1977] 1 S.C.R. 466 at p. 483, Laskin C.J.C., Ritchie, Spence, Pigeon and Beetz JJ. concurred.
14 [1976] 2 S.C.R. 221 at p. 252. Ritchie, Dickson, and Beetz JJ. concurred.
15 [1973] 1 Q.B. 27 at 36, 37. Lord Denning went on to set out, in that particular case, five policy considerations.
particular result. 16 Ritchie J. in the Rivtow case, speaking for himself and six others had this to say on the point of "policy" decisions 17 :
I am conscious of the fact that I have not referred to all relevant authorities relating to recovery for economic loss under such circumstances, but I am satisfied that in the present case there was a proximity of relationship giving rise to a duty to warn and that the damages awarded by the learned trial judge were recoverable as compensation for the direct and demonstra bly foreseeable result of the breach of that duty. This being the case, I do not find it necessary to follow the sometimes winding paths leading to the formulation of a "policy decision".
Edmund Davies L.J., in the Spartan Steel case, dissented. To my mind, his conclusions in respect of recovery for economic loss are in line with the Canadian legal position as laid down in the Rivtow decision. I adopt his views as to the application of policy considerations ' 8 :
I ... find myself unable to accept as factors determinant of legal principle those considerations of policy canvassed in the concluding passages of the judgment just delivered by Lord Denning, M.R.
As I see it, policy decisions, in suits between litigants, should be eschewed. It makes for uncer tainty. Litigants, would-be litigants, and persons endeavouring to organize their commercial affairs in respect of potential risks should be given some guidelines (even if they are somewhat vague and difficult to define) on the likelihood or not of recovery or liability.
My difficulty is: what are the tests or principles to be applied in this case? It seems to me there are
16 Bruce M. Haines (1961) 19 University of Toronto Faculty of Law Review 191 at 204-205, commenting on Seaway Hotels Ltd. v. Gragg (1960) 21 D.L.R. (2d) 264; Winfield & Jolowicz, pp. 51-53; Street, p. 112; Millner, pp. 62-63; Professor P. S. Atiyah Negligence and Economic Loss (1967) 83 L.Q.R. 248; A. H. Brown The Recovery of Economic Loss In Tort (1972- 75) 2 Auckland Univ. Law Rev. 50, particularly at pp. 77-84; Christopher Harvey Economic Losses and Negligence (1972) 50 Can. B. Rev. 580; Mary V. Newbury (1972) 7 U.B.C. Law Rev. 303 at 310-311, commenting on the B.C. Court of Appeal decision in the Rivtow case and P. P. Craig, Negligent Mis statements, Negligent Acts and Economic Loss (1976) 92 L.Q.R. 213 at 235-241.
17 [1974] S.C.R. 1189 at p. 1215.
18 [1973] 1 Q.B. 27 at p. 40.
at least three approaches, not necessarily distinct from each other.
The first is what I might term the assumption of responsibility test. It is generally accepted it had its most recent origin in the speeches of Lords Reid, Devlin and Pearce in the Hedley Byrne case 19 . The Supreme Court of Canada has never, as I read the decisions, expressly adopted this test. Mention has been made of it. In Welbridge Hold ings Ltd. v. The Metropolitan Corporation of Greater Winnipeg Laskin J. [as he then was], in discussing the liability of the City for passing an invalid by-law which allegedly resulted in some economic loss to the plaintiff, said 20 :
Under the considerations on which Hedley Byrne's enuncia tion of principle rests, it cannot be said in the present case either that a special relationship arose between the plaintiff and the defendant or that the defendant assumed any responsibility to the plaintiff with respect to procedural regularity.
In J. Nunes Diamonds Ltd. v. Dominion Electric Protection Company, Pigeon J. said 21 :
D.E.P. did not act in any fiduciary or advisory capacity towards Nunes. Its situation was that of a party contracting to supply specified services. The insurance brokers were those who were giving advice to Nunes. By giving them information, D.E.P. did not cease to be a contractor and become an advisor to the appellant on the matter of burglary protection. If it did make an honest, but inaccurate, statement as to the perform ance of its system it did not thereby assume responsibility for all damage which might thereafter be sustained by the appel lant if its system, on his premises, was circumvented.
In Haig v. Bamford, Dickson J. made this comment":
This reference to "assumption of responsibility" is crucial in cases involving economic loss, according to C. Harvey, "Eco- nomic Losses & Negligence" (1972), 50 Can. Bar Rev. 580. Harvey devises a test for imposing a duty of care in cases of economic loss which he phrases as follows (p. 600):
19 [1964] A.C. 465 at pp. 486-487, 529-530, and 540.
20 [1971] S.C.R. 957 at p. 967. See also a passage at p. 971.
21 [1972] S.C.R. 769 at 777.
22 [1977] 1 S.C.R. 466 at pp. 479-480. Mr. Christopher Harvey in a later comment on the Rivtow case seems to favour, as a liability-control device, foreseeability of injury and direct ness of the economic loss, rather than assumption of responsi bility. See (1974) 37 Modern Law Rev. 320 at p. 324.
a person should be bound by a legal duty of care to avoid causing economic loss to another in circumstances where a reasonable man in the position of the defendant would foresee that kind of loss and would assume responsibility for it.
This "assumption of responsibility" test is an interesting one, although it is no more objective than a foreseeability test. It would allow the Court to narrow the scope of liability from that resulting from a foreseeability test, but it would still require a policy determination as to what should be the scope of liability.
In Minister of Housing v. Sharp 23 all three members of the Court of Appeal were critical of that test or doctrine. Lord Denning M.R., at pages 268-269, commented:
I have no doubt that the clerk is liable. He was under a duty at common law to use due care. That was a duty which he owed to any person—incumbrancer or purchaser—whom he knew, or ought to have known, might be injured if he made a mistake. The case comes four square within the principles which are stated in Candler v. Crane, Christmas & Co. [1951] 2 K.B. 164, 179-185, and which were approved by the House of Lords in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465.
Mr. Hunter submitted to us, however, that the correct princi ple did not go to that length. He said that a duty to use due care (where there was no contract) only arose when there was a voluntary assumption of responsibility. I do not agree. He relied particularly on the words of Lord Reid in Hedley Byrne's case [1964] A.C. 465, 487, and of Lord Devlin at p. 529. I think they used those words because of the special circumstances of that case (where the bank disclaimed responsibility). But they did not in any way mean to limit the general principle.
In my opinion the duty to use due care in a statement arises, not from any voluntary assumption of responsibility, but from the fact that the person making it knows, or ought to know, that others, being his neighbours in this regard, would act on the faith of the statement being accurate. That is enough to bring the duty into being. It is owed, of course, to the person to whom the certificate is issued and whom he knows is going to act on it, see the judgment of Cardozo J. in Glanzer v. Shepard (1922) 233 N.Y. 236. But it also is owed to any person whom he knows, or ought to know, will be injuriously affected by a mistake, such as the incumbrancer here.
At page 279, Salmon L.J. said:
It has been argued, in the present case, that since the council did not voluntarily make the search or prepare the certificate for their clerk's signature they did not voluntarily assume responsibility for the accuracy of the certificate and according ly owed no duty of care to the Minister. I do not accept that, in all cases, the obligation to take reasonable care necessarily depends upon a voluntary assumption of responsibility.
23 [1970] 2 Q.B. 223.
Cross L.J., at pages 290-291, made these remarks:
The question is whether there was sufficient "proximity" between the Ministry and the searcher—whether he was suf ficiently their "neighbour"—to render him liable to be sued under the modern developments of the law of tort which were initiated by Donoghue v. Stevenson [1932] A.C. 562 and extended to negligent statements in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465. Some points can readily be got out of the way. The problem posed by the case of the hydrographer who draws an inaccurate chart and is sued by an unknown purchaser of it does not arise here because the searcher will have been given a request to register, or a request for a search, as the case may be, on behalf of an identified person with whom he will have been brought, in a sense, into diçect contact.
Further, although the searcher's work does not involve any "special skill" he may fairly be assumed to have realised that not to register a document submitted for registration, or to omit to disclose a registered charge in a certificate of search, might cause serious damage to the party requesting the registration or the search. Again I do not think that the fact that the searcher did not undertake the function of making the statement in question "voluntarily"—except in the sense that he could have refused to accept employment in so potentially hazardous an occupation—is relevant to the problem in hand.
It is true that the phrase "voluntary assumption of risk" occurs frequently in the speeches in the Hedley Byrne case, but I agree with the judge that that case did not purport to lay down any metes and bounds within which legal liability in tort for false statements, on which the parties to whom they are made rely, has to be confined: see in particular per Lord Devlin, at pp. 530-531. I see no sufficient reason why in an appropriate case the liability should not extend to cases in which the defendant is obliged to make the statement which proves to be false.
The assumption of responsibility test may be apt in cases of negligent misstatements or negligent advice. But as I see it, it is fraught with difficulties when one tries to apply it to careless acts or omissions. I discard it as a solution in this case.
The second approach is that of foreseeability alone, or foreseeability plus a special relationship. That method has found favour with some courts.
The starting point is, of course, the classic state ments of Lord Atkin in Donoghue v. Stevenson 24:
24 [1932] A.C. 562 at pp. 580-581.
At present I content myself with pointing out that in English law there must be, and is, some general conception of relations giving rise to a duty of care, of which the particular cases found in the books are but instances. The liability for negligence, whether you style it such or treat it as in other systems as a species of "culpa," is no doubt based upon a general public sentiment of moral wrongdoing for which the offender must pay. But acts or omissions which any moral code would censure cannot in a practical world be treated so as to give a right to every person injured by them to demand relief. In this way rules of law arise which limit.the range of complainants and the extent of their remedy. The rule that you are to love your neighbour becomes in law, you must not injure your neighbour; and the lawyer's question, Who is my neighbour? receives a restricted reply. You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law is my neighbour? The answer seems to be—persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question. This appears to me to be the doctrine of Heaven v. Pender, as laid down by Lord Esher (then Brett M.R.) when it is limited by the motion of proximity introduced by Lord Esher himself and A. L. Smith L.J. in Le Lievre v. Gould. Lord Esher says: "That case established that, under certain circumstances, one man may owe a duty to another, even though there is no contract between them. If one man is near to another, or is near to the property of another, a duty lies upon him not to do that which may cause a personal injury to that other, or may injure his property." So A. L. Smith L.J.: "The decision of Heaven v. Pender was founded upon the principle, that a duty to take due care did arise when the person or property of one was in such proximity to the person or property of another that, if due care was not taken, damage might be done by the one to the other." I think that this sufficiently states the truth if proximity be not confined to mere physical proximity, but be used, as I think it was intended, to extend to such close and direct relations that the act complained of directly affects a person whom the person alleged to be bound to take care would know would be directly affected by his careless act. [My underlining.]
In Weiner v. Zoratti the defendant car driver negligently struck a fire hydrant. Water from it forced its way into the plaintiffs basement, damaging the plaintiffs stock in trade. Matas J. fastened liability on the defendant 25 :
In summary, counsel for the defendant submitted that the plaintiffs loss was damnum sine injuria as the water damage to the goods could not have been reasonably foreseen by the defendant. But it is not necessary to engage in speculation about the specific foreseeability of each specific event from the moment of impact to the damage to the plaintiffs property; nor is it necessary to embark on an exercise in metaphysical
25 (1970) 72 W.W.R. 299 at p. 304.
subtleties. The plaintiff's loss was a direct, probable and fore seeable result of the negligent breaking of the hydrant just as much as if a piece of the broken hydrant had been propelled by the impact through the window of the plaintiff's shop or had struck a passing pedestrian causing physical injury.
In School Division of Assiniboine South v. Greater Winnipeg Gas Company Limited a snow mobile struck and damaged a gas-riser pipe on a school building. Gas entered the building and exploded. The snowmobile had been operated by a 14 year old boy. It was owned by his father. On the facts of the case both the boy and his father were held partly at fault. Dickson J.A. gave the judgment of the Manitoba Court of Appeal. I set out certain excerpts 26:
We come then to the preliminary question of whether a duty of care was owed by the Hoffers to the plaintiff. The answer to this question must be in the affirmative. They had a machine of substantial size and weight, capable of high speed. They knew, or should have known, that if the machine were released to careen riderless around the countryside, damage to the person or property of others would result. The case falls squarely within the "neighbour" principle enunciated by Lord Atkin in Donoghue (M'Alister) v. Stevenson, [1932] A.C. 562 at 580....
The second question is whether the damage done by them was reasonably foreseeable and therefore recoverable ....
The test of foreseeability of damage becomes a question of what is possible rather than what is probable.
Since The Wagon Mound (No. 1) the "scholastic theories of causation and their ugly and barely intelligent jargon", have taken a back place to foreseeability. It is now settled that foresight is the test both for duty and for remoteness.
Union Oil Company v. Oppen 27 is an interesting, and perhaps perplexing decision. I neither rely on it nor reject it. American authorities, in this field, must be considered with caution. The suit was a class action brought by commercial fishermen against a number of oil companies. It arose out of the Santa Barbara oil spill of 1969. There was a claim for "ecological damage". The defendants, by motion, sought to eliminate from the plaintiffs' claims for relief "... any element of damages consisting of profits lost as a result of the reduc-
26 [1971] 4 W.W.R. 746 at pp. 750, 751, 753.
27 501 F. 2d 558 (1974) (U.S. Court of Appeals, Ninth Circuit). This decision has been commented on. See 88 Har- vard Law Rev. 444 (1974-1975).
tion in the commercial fishing potential ...." The defendants argued that such claims were not com- pensable under the law. The Court dealt with the problem of recovery for pure economic loss as follows at pages 563-564:
Recovery for Pure Economic Loss in Negligence: The General Rule.
Defendants support their motion for partial summary judg ment by pointing to the widely recognized principle that no cause of action lies against a defendant whose negligence prevents the plaintiff from obtaining a prospective pecuniary advantage. See, e.g., Prosser, Law of Torts 952 (4th ed. 1971) (hereinafter Prosser); Harvey, Economic Losses and Negli gence, 50 Can. Bar Rev. 580 (1972); Note, 49 Can. Bar Rev. 619 (1971); Note, Negligence and Economic Loss, 117 The Solicitors' Jour. 255 (1971); Note, Negligent Interference with Economic Expectancy: The Case for Recovery, 16 Stan. L. Rev. 664 (1964). See also Restatement (Second) of Torts, Tent. Draft No. 14, § 766B. As the defendants see it, any diminution of the sea life in the Santa Barbara Channel caused by the occurence, which, it must be remembered, is attributable to the defendants' negligence by reason of the parties' Stipula tion, consists of no more than the loss of an economic advan tage which is not a "legally cognizable injury" and thus not "legally compensable."
Their argument has strength. It rests upon the proposition that a contrary rule, which would allow compensation for all losses of economic advantages caused by defendant's negli gence, would subject the defendant to claims based upon remote and speculative injuries which he could not foresee in any practical sense of the term. Accordingly, in some cases it has been stated as the general rule that the negligent defendant owes no duty to plaintiffs seeking compensation for such inju ries. In other of the cases, the courts have invoked the doctrine of proximate cause to reach the same result; and in yet a third class of cases the "remoteness" of the economic loss is relied upon directly to deny recovery. The consequence of these cases is that a defendant is normally relieved of the burden to defend against such claims, and the courts of a class of cases the resolution of which is particularly difficult.
The general rule has been applied in a wide variety of situations. Thus, the negligent destruction of a bridge connect ing the mainland with an island, which caused a loss of business to the plaintiff who was a merchant on the island, has been held not to be actionable. Rickards v. Sun Oil Company, 41 A.2d 267, 23 N.J.Misc. 89 (1945). A plaintiff engaged in commer cial printing has been held unable to recover against a negligent contractor who, while engaged in excavation pursuant to a contract with a third party, cut the power line upon which the plaintiffs presses depended. Byrd v. English, 117 Ga. 191, 43 S.E. 419 (1903); contra, J.W. Moore (North Shields) Ltd. v. Sharp, 108 Sol.J. 453 (1964). But see S.C.M. (U.K.) v. W.J. Whittall & Sons, Ld., [1970] 3 All E.R. 245; Seaway Hotels Ltd. v. Gragg, [1959] Ont. 177, 17 D.L.R.2d 292 (High Ct.),
affd [1959] Ont. 581, 21 D.L.R.2d 264 (Ct.App.1960). A defendant who negligently injures a third person entitled to life-care medical services by the plaintiff is liable to the third person but not to the plaintiff. Fifield Manor v. Finston, 54 Cal.2d 632, 7 Cal.Rptr 377, 354 P.2d 1073 (1960) (subroga- tion also denied because third party's claim not assignable). The operators of a dry dock are not liable in admiralty to charterers of a ship, placed by its owners in the dry dock, for negligent injury to the ship's propeller where the injury deprived the charterer of the use of the ship. Robins Dry Dock & Repair Company v. Flint, 275 U.S. 303, 48 S.Ct. 134, 72 L.Ed. 290 (1927). Mr. Justice Holmes, in writing this opinion, observed that "... a tort to the person or property of one man does not make the tort-feasor liable to another merely because the injured person was under a contract with that other, unknown to the doer of the wrong." 275 U.S. at 309, 48 S.Ct. at 135.
The Court went on to cite exceptions or qualifi cations to the general rule of no recovery. Mr. Harvey's article and the Hedley Byrne case were among the many materials cited. The fishermen were held to be in a special class, akin to riparian owners.
Page 568:
Moreover, the plaintiffs' status as riparians does not make improper the classification of these cases as exceptions to, or qualifications of, the general rule which is relied upon by the defendants in the present action. The injury for which damages were sought in each case was the loss of anticipated profits—a pure economic loss as that term is normally understood. To permit riparianship to transmute this loss into an ordinary property loss for the purpose of allowing recovery does no harm. However, harm would be done if the fact that the plaintiffs in this case are not riparian owners was held to deprive them of the comfort these authorities provide.
IV.
The Instant Action.
It is thus apparent that we are not forclosed by precedent from examining on its merits the issue presented by the defend ants' motion for partial summary judgment. As we see it, the issue is whether the defendants owed a duty to the plaintiffs, commercial fishermen, to refrain from negligent conduct in their drilling operations, which conduct reasonably and foresee- ably could have been anticipated to cause a diminution of the aquatic life in the Santa Barbara Channel area and thus cause injury to the plaintiffs' business.
Page 569:
... the question must be asked whether the defendants could reasonably have foreseen that negligently conducted drilling operations might diminish aquatic life and thus injure the business of commercial fishermen. We believe the answer is yes.
Page 570:
Finally, it must be understood that our holding in this case.
does not open the door to claims that may be asserted by those, other than commercial fishermen, whose economic or personal affairs were discommoded by the oil spill of January 28, 1969. The general rule urged upon us by defendants has a legitimate sphere within which to operate. Nothing said in this opinion is intended to suggest, for example, that every decline in the general commercial activity of every business in the Santa Barbara area following the occurrences of 1969 constitutes a legally cognizable injury for which the defendants may be responsible. The plaintiffs in the present action lawfully and directly make use of a resource of the sea, viz. its fish, in the ordinary course of their business. This type of use is entitled to protection from negligent conduct by the defendants in their drilling operations.
In the three cases I have referred to above, foreseeability imposed liability. I now turn to two Canadian decisions where the foreseeability test excluded liability.
The first is Star Village Tavern v. Nield 28 . The facts are set out in the reasons [at page 81]:
Plaintiff owns a tavern 1 1 / 2 miles east of a bridge and across the Red River from Selkirk, Manitoba. On 6th August 1974 the defendant Nield, while operating his co-defendant's vehicle, negligently collided with and damaged the bridge, causing it to be closed for repairs for approximately one month. During the time the bridge was closed, the travelling distance between Selkirk and the tavern became 15 miles. Plaintiff seeks dam ages from defendants for its economic loss caused by many of its Selkirk patrons suspending their patronage.
The whole of the reasons of Hamilton J. are, to my mind, instructive and compelling. I shall con fine myself to citing a portion at pages 82-83:
To do what Harvey suggests, as I understand him, the judge should say to himself: "If I were this defendant, being a reasonable man, freed from the prejudice of self-interest, would I in these circumstances feel a financial obligation to this plaintiff as a result of my negligence?" In answering that question in this case I would have to say that while I regretted any inconvenience that might have been caused, I could hardly assume the loss. To do so I would equally have to assume loss to all other users of the bridge who had been put to some expense.
If I was to ask the question as if it were asked prior to the accident, a more realistic answer might be given: "If I run into this bridge and cause it to be closed for a month, to whom will I owe compensation?" My answer might be that I would be responsible to the bridge authority, but I would not think of anyone else to whom I owed compensation. I might feel I owed a duty to the public at large not to damage a public thorough fare, but if through some unintentional though negligent act, I did cause the thoroughfare to be closed, I could hardly feel that I should pay any user of the highway who suffered some loss by
28 [1976] 6 W.W.R. 80 (Hamilton J., Man. Q.B.).
having to detour. If I caused a bridge to be closed, I could imagine that everyone who used the bridge might suffer eco nomic loss by having to drive a further distance to their normal destination. It is possible that merchants in the Town of Selkirk lost business usually coming from the east side of the river. While I accept the "neighbour" principle with respect to liabili ty in tort, there are also normal risks of living and doing business which one assumes. Every loss or inconvenience in life cannot give rise to a cause of action.
This test of placing oneself in the shoes of the negligent person before the occurrence of the negligence would seem to fit many of the economic loss situations referred to in the cases. Will I owe a duty to a merchant and should I compensate him if I Cut his power line—disrupt his telecommunications; destroy a hydrant and cause water to enter his place of business; give an inaccurate financial statement on which he may rely? One could reasonably answer those questions in the affirmative, but so have the reported cases from which the questions arise.
To answer the question in the affirmative, it appears that there must be some link between the wrongdoer and the person suffering loss. While Harvey would have us abandon former terminology, it appears that the test of foreseeability remains. That test confines the limits of liability within reason. To abandon it places compensation at' large and within the limit less discretion of the judiciary. In my opinion, there must be rules for determining the limits of liability so that there will be consistency in the application of the law so that the public, whether as potential litigants, or merely concerned with pro tecting themselves by caution or by insurance, will have some way of predetermining their liability or freedom therefrom.
In the case at bar, liability of the defendant to this plaintiff is, in my mind, beyond the contemplation of the reasonable wrongdoer.
and at page 84:
Applying the foreseeability test to the case before me, I conclude the plaintiff does not fall within the category of "neighbour" to the defendants. It would not reasonably have been within the contemplation of defendants that they would assume responsibility for any damage caused to the plaintiff. Plaintiff was not sufficiently close to the defendants, or their acts of negligence, to be within their reasonable contemplation, either as a neighbour to whom a duty was owed, or as one who ought reasonably to be compensated. To apply the test accepted by the Supreme Court—damage to this plaintiff ought not reasonably to have been in the contemplation of defendants. It was not reasonably foreseeable.
Counsel for the railways did not assert the Star Village Tavern case was incorrectly decided. They contended it was distinguishable. In the case before me, it is said, the bridge is used by a limited class of persons, akin to the limited class referred to in the Haig case; the vessel's master knew the bridge was used by railways only. I fail to see the force of this so-called distinction. Should there be
a difference in result if the vessel had struck the Pattullo Bridge, used by vehicles and pedestrians, and rendered it unusable? Nor should there be a difference in result merely because the number in a limited class is small. The vessel owners here had no knowledge whether three or three hundred rail ways used the bridge.
The second Canadian decision is Hunt v. T. W. Johnstone Co. Ltd. 29 There were three plaintiffs. The individual plaintiff owned a building. It was occupied by the corporate plaintiffs. The individu al plaintiff was, for practical purposes, the owner of the two companies. One company manufactured building products on the premises. The other com pany was the vehicle through which the products were sold. The defendants negligently caused the building to catch fire. The building was damaged. Some of the equipment and stock-in-trade of the manufacturing company was damaged or destroyed. Both companies alleged loss of profits. Hughes J., in respect of the manufacturing com pany, awarded compensation for the loss of and damage to equipment, and for certain other mat ters. He concluded it had not established any loss of profits. He assessed the loss of profits of the selling company at $120,000. But he denied it recovery from the defendants.
He reviewed a number of the cases (including, of course, the Rivtow decision) which were relied on by the parties in this litigation. At pages 666- 667 he said:
I therefore conclude that unless there can be discerned an independent tort against the sufferer of economic loss which is not consequent upon physical injury, the principle of SCM (U.K.) Ltd. v. W.J. Whittall & Son Ltd. must still be followed even though it may be necessary, to use the words of Ritchie, J., "to follow the sometimes winding paths leading to the formulation of a `policy decision' ".
A useful discussion of the problem may be found in McGre- gor on Damages, 13th ed. (1972), p. 52, para. 74ff., in which the learned author, in discussing SCM (U.K.) Ltd. v. Whittall & Son Ltd., criticizes Lord Denning, M.R.'s insistence that "the absence of liability in these cases is based upon remote ness" and says that this is difficult to support because the economic loss is clearly foreseeable (p. 53, fn. I1). He con cludes that "absence of liability in such circumstances would
29 (1977) 69 D.L.R. (3d) 639 (Hughes J., Ont. H.C.). The reasons in this case are dated February 16, 1976. The reasons in the Star Tavern case are dated July 19, 1976.
seem to stem from the absence of a duty of care". Here the question must be asked: Did the defendants owe a duty of care to the Millwork company? Assuredly they did; but did they also owe a duty of care to the Hunt company? This is a more difficult question to answer, because the test of proximity cannot simply be applied to the physical presence of a corpora tion under the same roof as the one which has been directly damaged by loss of its property. The neighbourly duty referred to in M'Alister (or Donoghue) v. Stevenson, [1932] A.C. 562, is one extended to the last recipient and consumer of a defective product, and if the Hunt company had been compelled to suffer the consequences of accepting the Millwork company's product, rendered defective as a result of the fire, the defendants would probably be liable. But the Hunt company, for reasons which I have referred to, must stand in the same position as any other buyer of the Millwork company's product, and can conceivably go out into the market and buy it elsewhere. This, I think, justifies Lord Denning, M.R.'s insistence on the tests of prox imity and remoteness, and his view as to the undesirability of having the one contractor bear the burden of liability to all those affected who are at one remove from the sufferer of direct damage. In reaching this conclusion I am not unmindful of the strong argument developed by Ruttan, J., in his judgment at the trial of the Rivtow case, but I am inclined to agree that a plaintiff in the situation of the Hunt company must show, as Widgery, J. (as he then was), said in Weller & Co. et al. v. Foot & Mouth Disease Research Institute, [1965] 3 All E.R. 560 at p. 570, "that he was within the scope of the defendant's duty to take care". After much reflection, and with some uneasiness in view of the steadily widening scope of liability in modern tort law, I conclude that the Hunt company, as a mere seller and distributor of the manufacturer's product was not, and cannot recover.
In my opinion, the test of foreseeability (includ- ing "proximity" as described by Lord Atkin) is a relevant test to apply in the case before me. But it must be combined with, or followed by, what is, I think, a third approach.
To my mind, economic loss, even though fore seeable, ought snot to be recoverable unless it results directly from the careless act. This third approach has sometimes been maligned by commentators. 30 But when combined or intermin gled with the foreseeability approach, it, in my view, provides some guide as to whether or not recovery may be had.
One must go back again to Lord Atkin and his view of "proximity" of the actors in the drama as extending:
30 See, for example, Professor Atiyah Negligence and Eco nomic Loss (1967) 83 L.Q.R. 248 at pp. 262-264.
... to such close and direct relations that the act complained of directly affects a person whom the person alleged to be bound to take care would know would be directly affected by his careless act. 31
In discussing Blacker v. Lake & Elliott Ltd. 106 L.T. 533, he commented at pages 594-595:
With all respect, I think that the judgments in the case err by seeking to confine the law to rigid and exclusive categories, and by not giving sufficient attention to the general principle which governs the whole law of negligence in the duty owed to those who will be immediately injured by lack of care. [My underlining.]
I refer once again to the Rivtow case. The plaintiff was the charterer of a self-loading log barge. Washington was the designer and manufac turer of a crane installed on the barge. Walkem was the distributor and sole representative, in Brit- ish Columbia, of Washington. Washington had designed and built similar cranes for other barge owners. Walkem had been the distributor. There was a defect in the pintles of the crane. This was known to both Washington and Walkem. A crane on another barge collapsed. The plaintiff then withdrew its crane from service to effect repairs in order to avoid a similar occurrence. The plaintiff sued for the cost of repairing and for loss of earnings while the barge and crane were being repaired. Washington was held to be negligent in its design. Both defendants were found to be negli gent in failing to warn the plaintiff of the danger. The Trial Judge found the plaintiff could not recover the amount expended for repairs. He assessed loss of earnings for the down period at $90,000 and held the plaintiff was entitled to recover. But he deducted from that an amount of $30,000
... earnings which would have been lost in any event for the 30-day period required by the plaintiff to make repairs had it
been properly warned by the defendants. 32
In the Supreme Court of Canada, the trial judgment was affirmed by Ritchie J. speaking for himself and six other members of the Court. Laskin J. [as he then was] and Hall J. dissented.
31 Donoghue v. Stevenson [1932] A.C. 562 at p. 581.
32 Rivtow Marine Ltd. v. Washington Iron Works (1970) 74 W.W.R. 110 at 131.
As I interpret the case, the dissent does not indi cate a real difference in view as to approaches to be used in cases of this kind. The fundamental dispute between the parties was whether the plain tiff could legally recover anything from the defendants. All members of the Court agreed that the plaintiff was entitled to recover. Laskin and Hall JJ. went a step further. They held the plain tiff was entitled, as well, to the cost of repairing the crane—the expense incurred in making it safe. There was no discussion, in either judgment, of the $30,000 deduction in respect of loss of profits.
The reasons of Ritchie J. did not really touch upon the question of loss directly caused, except in this sentence 33 :
Page 1210:
Finding as I do that there was in this case a breach of a duty to warn which constituted negligence on the part of both respondents, and that the economic loss solely attributable to the interruption of the appellant's business during "coastal operations" was the immediate consequence of that breach, I come to consider the question of whether such damage is recoverable in an action for negligence. [My underlining.]
The reasons of Laskin J. did: Page 1216:
This is the first occasion upon which this Court has been called upon to determine whether recovery may be had in a negligence action for economic loss which stands alone and is not consequent upon physical injury. The trial judge awarded damages for loss of earnings suffered by the appellant for a certain down period required for repairs to the pintle crane, but he denied recovery for the cost of repairs to make the faultily- designed and manufactured crane fit for service. In this view he is sustained in the reasons of my brother Ritchie which I have had an opportunity to read. I agree with the award of damages so far as it goes, but I would enlarge it to include as well the cost of repairs.
Page 1217:
Two new points are involved in this question. The first is whether Washington's liability for negligence should embrace economic loss when there has been no physical harm in fact, and the second is whether the appellant is a proper plaintiff to recover for economic loss and as well the cost of repairing the defective crane.
Pages 1218-1219:
Support for such recovery in the present case will not lead to 33 [1974] S.C.R. 1189.
"liability in an indeterminate amount for an indeterminate time to an indeterminate class", to borrow an often-quoted state ment of the late Judge Cardozo in Ultrarnares Corp. v. Touche [(1931), 255 N.Y. 170], at p. 179. The pragmatic consider ations which underlay Cattle v. Stockton Waterworks Co. [(1875), 10 Q.B. 453] will not be eroded by the imposition of liability upon Washington as a negligent designer and manu facturer: cf. Fleming James, "Limitations on Liability for Economic Loss Caused by Negligence: A Pragmatic Apprais al", (1972), 12 Jo. S.P.T.L. 105. Liability here will not mean that it must also be imposed in the case of any negligent conduct where there is foreseeable economic loss; a typical instance would be claims by employees for lost wages where their employer's factory has been damaged and is shut down by reason of another's negligence. The present case is concerned with direct economic loss by a person whose use of the defend ant Washington's product was a contemplated one, and not with indirect economic loss by third parties, for example, persons whose logs could not be loaded on the appellant's barge because of the withdrawal of the defective crane from service to undergo repairs. It is concerned (and here I repeat myself) with economic loss resulting directly from avoidance of threatened physical harm to property of the appellant if not also personal injury to persons in its employ. [My underlining.]
It seems to me the railway companies claim here is akin to that of the persons whose logs could not be loaded: the railways' cars could not run across the bridge because of the withdrawal of the bridge for service to undergo repairs.
I earlier indicated my conclusion that the dis senting reasons of Edmund Davies L.J. in the Spartan Steel case are in accord with the Canadi- an position as set out in the Rivtow case. He used the combined approach of reasonable foreseeabili- ty and direct consequence, in that case, to permit recovery and to impose liability. He was careful to point out that it had been conceded the defendants owed a duty of care to the particular plaintiff, and had breached it. Rather than summarize (and knowing I am further lengthening these already too long reasons) it is preferable to set out the precise language used 34 :
Pages 39-40:
The facts giving rise to this appeal have already been set out by Lord Denning M.R. Their very simplicity serves to highlight a problem regarding which differing judicial and academic views have been expressed and which it is high time should be finally solved. The problem may be thus stated: Where a
34 [1973] 1 Q.B. 27.
defendant who owes a duty of care to the plaintiff breaches that duty and, as both a direct and a reasonably foreseeable result of that injury, the plaintiff suffers only economic loss, is he entitled to recover damages for that loss?
In expressing in this way the question which now arises for determination, I have sought to strip away those accretions which would otherwise obscure the basic issue involved. Let me explain. We are not here concerned to inquire whether the defendants owed a duty of care to the plaintiffs or whether they breached it, for these matters are admitted. Nor need we delay to consider whether as a direct and reasonably foreseeable result of the defendants' negligence any harm was sustained by the plaintiffs, for a "melt" valued at £368 was admittedly ruined and the defendants concede their liability to make that loss good. But what is in issue is whether the defendants must make good (a) the £400 loss of profit resulting from that material being spoilt and (b) the £1,767 further loss of profit caused by the inability to put four more "melts" through the furnace before power was restored. As to (a), the defendants, while making no unqualified admission, virtually accept their liability, on the ground that the £400 loss was a direct conse quence of the physical damage caused to the material in the furnace. But they reject liability in respect of (b), not because it was any the less a direct and reasonably foreseeable conse quence of the defendants' negligence than was the £400, but on the ground that it was unrelated to any physical damage and that economic loss not anchored to and resulting from physical harm to person or property is not recoverable under our law as damages for negligence.
In my respectful judgment, however it may formerly have been regarded, the law is today otherwise. I am conscious of the boldness involved in expressing this view, particularly after studying such learned dissertations as that of Professor Atiyah on Negligence and Economic Loss (1967) 83 L.Q.R. 248, where the relevant cases are cited. I recognise that proof of the necessary linkage between negligent acts and purely economic consequences may be hard to forge. I accept, too, that if economic loss of itself confers a right of action this may spell disaster for the negligent party. But this may equally be the outcome where physical damage alone is sustained, or whether physical damage leads directly to economic loss. Nevertheless, when this occurs it was accepted in S.C.M. (United Kingdom) Ltd. v. W.J. Whittall & Son Ltd. [1971] 1 Q.B. 337 that compensation is recoverable for both types of damage. It follows that this must be regardless of whether the injury (physical or economic, or a mixture of both) is immense or puny, diffused over a wide area or narrowly localised, provided only that the requirements as to foreseeability and directness are fulfilled. I therefore find myself unable to accept as factors determinant of legal principle those considerations of policy canvassed in the concluding passages of the judgment just delivered by Lord -Denning M.R.
Page 41:
For my part, I cannot see why the £400 loss of profit here sustained should be recoverable and not the £1,767. It is common ground that both types of loss were equally foreseeable and equally direct consequences of the defendants' admitted
negligence, and the only distinction drawn is that the former figure represents the profit lost as a result of the physical damage done to the material in the furnace at the time when power was cut off. But what has that purely fortuitous fact to do with legal principle? In my judgment, nothing, and I would seek no stronger support for my answer than the following passage from the judgment of Lord Denning M.R. himself in S.C.M. (United Kingdom) Ltd. v. W.J. Whittall & Son Ltd. [1971] 1 Q.B. 337....
Page 45:
Having considered the intrinsic nature of the problem pre sented in this appeal, and having consulted the relevant authorities, my conclusion, as already indicated, is that an action lies in negligence for damages in respect of purely economic loss, provided that it was a reasonably foreseeable and direct consequence of failure in a duty of care. The application of such a rule can undoubtedly give rise to difficul ties in certain sets of circumstances, but so can the suggested rule that economic loss may be recovered provided it is directly consequential upon physical damage.
Page 46:
I should perhaps again stress that we are here dealing with economic loss which was both reasonably foreseeable and a direct consequence of the defendants' negligent act. What the position should or would be were the latter feature lacking (as in Weller & Co. v. Foot and Mouth Disease Research Institute [1966] 1 Q.B. 569) is not our present concern. By stressing this point one is not reviving the distinction between direct and indirect consequences which is generally thought to have been laid at rest by The Wagon Mound [1961] A.C. 388, for, in the words of Professor Atiyah, Negligence and Economic Loss, 83 L.Q.R. 263, that case
was solely concerned with the question whether the direct ness of the damage is a sufficient test of liability, ... In other words, The Wagon Mound merely decides that a plaintiff cannot recover for unforeseeable consequences even if they are direct; it does not decide that a plaintiff can always recover for foreseeable consequences even if they are indirect.
Both directness and foreseeability being here established, it follows that I regard Faulks J. as having rightly awarded the sum of £2,535. [My underlining.]
Mr. Harvey, commenting on the reasons of Laskin J. in the Rivtow case said this 35 :
Laskin J. adverted to what is really the fundamental reason for caution when courts deal with economic loss cases, namely the fear of creating a wide and indeterminate liability which would give rise to an unmanageable flood of claims. He then considered two traditional concepts which were satisfied in this case and which he appears to have accepted as being capable of limiting liability in this field. They were treated as essential prerequisites of liability for economic loss. One was foreseea-
35 (1974) 37 Modern Law Rev. 320 at pp. 323-324.
bility of injury to person or property and the other was the direct nature of the economic loss.
These two control-devices have been discussed in some recent English decisions. They are not beyond criticism but if they are used in conjunction with sound considerations of policy or rationale (which is the same thing), then they are probably sufficient for the intended task: to control liability in a way which is both just and socially beneficial in future cases of economic loss caused by dangerous products.
In my opinion, the reasonably foreseeable and direct consequence tests ought to be applied to the facts before me.
But before that final step, there is a preliminary question: did the vessel, and those having charge of her owe a duty of care to these particular plain tiffs? The Atkinian approach 36 holds that a duty of reasonable care (not to harm) is owed to "your neighbour". Neighbours are said to be those per sons who are so closely and directly affected that the author of the careless act or omission ought reasonably to have had those particular persons in contemplation at the material time.
My answer to the preliminary question, on the evidence before me, is "No". In my opinion, the railway companies were not persons so closely and directly affected that those having charge of the vessel ought reasonably to have had the railways in contemplation when the vessel was proceeding toward the bridge (or if they had, at any time, put their minds to the matter).
The owners of the bridge were however, as I see it, within the scope of a duty of care on the part of those responsible for the vessel. Sheppard D.J. has so found. The contest before him was whether the contact with the bridge was the fault of the bridge owner's servants, the fault of those navigating the vessel, or the fault of both. He did not decide, nor
36 I have not overlooked the cautionary words of Lord Reid in Dorset Yacht Co. Ltd. v. Home Office [1970] A.C. 1004 at 1027 in respect of the well known passage in Lord Atkin's speech:
It is not to be treated as if it were a statutory definition.
or the comment of Lord Morris of Borth-y-Gest at 1034:
It has been generally recognized that Lord Atkin's state ment of principle cannot be applied as though his words were contained in a positive and precise legislative exactment.
was he asked to determine, whether there was negligence, in law, vis-à-vis the railway companies.
When I now come to apply the tests or limiting devices spoken of by Laskin J. (now C.J.) and Edmund Davies L.J., I again deny recovery to the railways and absolve the vessel from liability to compensate. The railways' economic loss was not, in my opinion, a direct and reasonably foreseeable result of the striking of the bridge by the vessel.
Finally, I add this. Even if I had been persuaded the railways had an easement, my reasoning and conclusions would be the same.
The action of the railways as against the vessel is dismissed. Her owners are entitled to costs.
APPENDIX
Books
Millner, Negligence in Modern Law, 1967, pp. 60-63.
Salmond on Torts (16th ed.) 1973, pp. 203-212.
Street, The Law of Torts (6th ed.) 1976, pp. 109-114.
Winfield & Jolowicz on Tort (10th ed.) 1975, pp. 45-59.
Periodical Literature
Atiyah, Negligence and Economic Loss (1967) 83 L.Q.R. 248.
Binchy, Negligence and Economic Loss (Rivtow) (1974) 90 L.Q.R. 181.
Brown, The Recovery of Economic Loss In Tort (1972-75) 2 Auckland Univ. Law Rev. 50.
Craig, Negligent Misstatements, Negligent Acts and Economic Loss (1976) 92 L.Q.R. 213.
Haines, (Comment on Seaway Hotels Ltd. v. Gragg) (1961) 19 U. of Tor. Faculty of Law Rev. 191.
Harvey, Negligent Statements—The Wilderness Revisited (1970) Part II vol. 120 New Law Jo. 1155.
Harvey, Economic Losses and Negligence (1972) 50 Can. B. Rev. 580.
Harvey, (Comment on Rivtow) (1974) 37 Mod. Law Rev. 320.
Newbury (Comment on Rivtow) (1972) 7 U.B.C. Law Rev. 303.
Smith, J. C. "... Economic Loss, A Test Case" (1974) 9 U.B.C. Law Rev. 213.
Wallace, From Babylon to Babel ... (case com ment) (1977) 93 L.Q.R. 16.
, (Case Comment on Union Oil v. Oppen)
(1974-75) 88 Harvard Law Rev. 444.
Cases
Canadian
Seaway Hotels Ltd. v. Consumer's Gas Co. [1959] O.R. 177 (Ont. H.C.).
Seaway Hotels Ltd. v. Consumers Gas Co. [ 1959] O.R. 581 (Ont. C.A.).
Courtenay v. Knutson (1961) 26 D.L.R. (2d) 768 (B.C.S.C.).
Marine Pipeline and Dredging Ltd. v. Pryde, Flavin & Associates Ltd. (1965) 52 W.W.R. 680 (Alta. S.C.).
Weiner v. Zoratti (1970) 72 W.W.R. 299 (Man.
Q.B.).
Dominion Tape of Canada Ltd. v. L.R. McDonald and Sons Ltd. [1971] 3 O.R. 627 (Co. Ct.).
School Division of Assiniboine South, No. 3 v. Greater Winnipeg Gas Company Limited [1971] 4 W.W.R. 746 (Man. C.A.).
Welbridge Holdings Ltd. v. The Metropolitan Corporation of Greater Winnipeg [1971] S.C.R. 957.
J. Nunes Diamonds Ltd. v. Dominion Electric Protection Company [ 1972] S.C.R. 769.
Rivtow Marine Ltd. v. Washington Iron Works (1970) 74 W.W.R. 110 (B.C.S.C.).
Rivtow Marine Ltd. v. Washington Iron Works [1972] 3 W.W.R. 735 (B.C.C.A.).
Rivtow Marine Ltd. v. Washington Iron Works [1974] S.C.R. 1189.
Groves—Raffin Construction Ltd. and Fidelity Insurance Company of Canada v. Bank of Nova Scotia [1975] 2 W.W.R. 97 (B.C.S.C.).
Farish v. National Trust Company Limited [1975] 3 W.W.R. 499 (B.C.S.C.).
Agnew-Surpass Shoe Stores Ltd. v. Cummer- Yonge Investments Ltd. (1975) 55 D.L.R. (3d) 676 (S.C.C.).
Star Village Tavern v. Nield [1976] 6 W.W.R. 80 (Man. Q.B.).
Haig v. Bamford [1977] 1 S.C.R. 466.
Hunt v. T. W. Johnstone Co. Ltd. (1977) 69 D.L.R. (3d) 639 (Ont. H.C.).
English
Cattle v. The Stockton Waterworks Co. (1875) L.R. 10 Q.B. 453.
M'Alister (or Donoghue) v. Stevenson [1932] A.C. 562 (H.L.).
Morrison Steamship Company Limited v. Grey- stoke Castle [ 1947] A.C. 265 (H.L.).
Candler v. Crane, Christmas & Co. [1951] 2 K.B. 164 (C.A.).
Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465 (H.L.).
Weller & Co. v. Foot and Mouth Disease Research Institute [1965] 3 All E.R. 560 (Q.B.D.).
Electrochrome, Ltd. v. Welsh Plastics, Ltd. [1968] 2 All E.R. 205 (Q.B.D.).
British Celanese, Ltd. v. A.H. Hunt (Capacitors) Ltd. [1969] 2 All E.R. 1252 (Q.B.D.).
S.C.M. (United Kingdom) Ltd. v. W.J. Whittall & Son Ltd. [1970] 3 All E.R. 245 (C.A.).
Ministry of Housing and Local Government v. Sharp [1970] 2 Q.B. 223 (C.A.).
Home Office v. Dorset Yacht Co. Ltd. [1970] A.C. 1004 (H.L.).
Dutton v. Bognor Regis Urban District Council [1972] 1 Q.B. 373 (C.A.).
Spartan Steel & Alloys Ltd. v. Martin & Co. (Contractors) Ltd. [1973] 1 Q.B. 27 (C.A.).
American
Union Oil Company v. Oppen 501 F. 2d 558 (1974) (U.S. Ct. of Appeals, Ninth Circuit).
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