Canadian National Railway Co. v. Norsk Pacific Steamship Co.

Canadian National Railway Co. v. Norsk Pacific Steamship Co.
Collection
Supreme Court Judgments
Date
1992-04-30
Report
[1992] 1 SCR 1021
Case number
21838
Judges
La Forest, Gérard V.; L'Heureux-Dubé, Claire; Sopinka, John; Cory, Peter deCarteret; McLachlin, Beverley; Stevenson, William; Iacobucci, Frank
On appeal from
Federal Court of Appeal
Subjects
Torts
Notes
SCC Case Information: 21838
Decision Content
Canadian National Railway Co. v. Norsk Pacific Steamship Co., [1992] 1 S.C.R. 1021
Norsk Pacific Steamship Company Limited,
Norsk Pacific Marine Services Ltd.,
The Tug Jervis Crown and
Francis MacDonnell Appellants
v.
Canadian National Railway Company Respondent
Indexed as: Canadian National Railway Co. v. Norsk Pacific Steamship Co.
File No.: 21838.
1991: May 2; 1992: April 30.
Present: La Forest, L'Heureux‑Dubé, Sopinka, Cory, McLachlin, Stevenson and Iacobucci JJ.
on appeal from the federal court of appeal
Torts ‑‑ Negligence ‑‑ Economic loss ‑‑ Railway bridge owned by Crown damaged by barge ‑‑ Bridge used by railways under contract ‑‑ Bridge owner recovering damages from defendants ‑‑ Railways unable to recover economic losses from bridge owner ‑‑ Whether or not defendants liable to railways using bridge for economic loss.
A barge being towed down the Fraser River by a tug owned by Norsk collided in heavy fog with the New Westminster railway bridge and caused extensive damage which closed the bridge for several weeks. Appellants admitted liability for negligence as to the collision. The bridge was owned by Public Works Canada (PWC) and used by four railways, including CN.
The bridge formed part of CN's main line and connected with tracks and land owned by CN on either side of the bridge. The railways' use of the bridge was governed by contract which explicitly reserved full ownership of the bridge to PWC and explicitly rejected any possibility of a leasehold estate or interest in CN. The bridge operated on the principle of full recovery of all operating and maintenance costs but not for profit. CN, in addition, agreed to provide PWC, on a contractual basis, with repair, maintenance, consulting and inspection services as PWC might request. PWC was to authorize all such services and to pay for them as needed. CN also provided some services voluntarily.
PWC paid for the repair to the bridge and recovered all damages resulting from the collision at trial. The licence contracts between PWC and the railways, however, provided for no indemnification in the case of disruption of bridge service. Unable to claim under the contract, CN brought this action in tort against Norsk and the other defendants claiming for the actual costs incurred because of the bridge closure.
Before trial, it was agreed that the entitlement of two of the railways to recover for pure economic loss would stand or fall on the result of the action by CN. The trial judge allowed CN's claim against Norsk and dismissed it as against the other defendants. Norsk's appeal to the Court of Appeal was dismissed.
At issue here is whether or not economic loss, and "contractual relational economic loss" in particular, is recoverable in tort.
Held (La Forest, Sopinka and Iacobucci JJ. dissenting): The appeal should be dismissed.
Per L'Heureux‑Dubé, Cory and McLachlin JJ.: Pure economic loss is prima facie recoverable where, in addition to negligence and foreseeable loss, there is sufficient proximity between the negligent act and the loss. Proximity is the controlling concept, avoiding the spectre of unlimited liability. Proximity may be established by a variety of factors depending on the nature of the case. The categories are not closed and further definition as to what factors give rise to liability for pure economic loss will occur as more cases are decided. In determining whether liability should be extended to a new situation, the courts should consider the factors traditionally relevant to proximity such as the relationship between the parties, physical propinquity, assumed or imposed obligations and close causal connection. Sufficient special factors must exist to avoid the imposition of indeterminate and unreasonable liability. The result would be a principled, yet flexible, approach to tort liability for pure economic loss. Recovery would be allowed where justified, while excluding indeterminate and inappropriate liability, and it will permit the coherent development of the law.
In effect, the absolute exclusionary rule could be seen as an indicator of proximity in accordance with the approach initiated in England by Hedley Byrne & Co. v. Heller & Partners Ltd., and followed in Canada in Rivtow Marine Ltd. v. Washington Iron Works, Kamloops (City of) v. Nielsen and B.D.C. Ltd. v. Hofstrand Farms Ltd. Where there is physical injury or damage, one posits proximity on the ground that if one is close enough to someone or something to do physical damage to it, one is close enough to be held legally responsible for the consequences. It is, however, not the only indicator of proximity. The necessary proximity to found legal liability fairly in tort may arise in circumstances where there is no physical damage.
A more comprehensive and objective consideration of proximity requires that the court review all of the factors connecting the negligent act with the loss; this includes not only the relationship between the parties but all forms of proximity -‑ physical, circumstantial, causal or assumed indicators of closeness. While it is impossible to define comprehensively what will satisfy the requirements of proximity or directness, precision may be found as types of relationships or situations are defined in which the necessary closeness between negligence and loss exists.
Proximity, while critical to establishing the right to recover pure economic loss in tort, does not always indicate liability. The approach adopted in Kamloops (paralleled by the second branch of Anns v. Merton London Borough Council) requires that the court consider the purposes served by permitting recovery as well as any residual policy considerations which call for a limitation on liability. Liability for pure economic loss can therefore be rejected where indicated by policy reasons not taken into account in the proximity analysis.
The approach enunciated in Kamloops does not threaten to open the floodgates of indeterminate liability, lead to undue uncertainty, or cause unfair or inefficient economic allocation of resources. Rather, it is sensitive to these concerns. The legislature, moreover, can impose limits if the courts extend liability too far following this approach. In light of the review of the issues of insurance, loss spreading and contractual allocation of risk raised against liability in this appeal, there is no practical reason for the courts to retreat to the inflexible rule, for example, one that never countenances recovery of economic loss except where the plaintiff has suffered physical damage or injury or has relied on a negligent misrepresentation.
CN suffered economic loss as a result of being deprived of its contractual right to use the bridge damaged by the defendants' negligence. Its right to recover depended on: (1) whether it could establish sufficient proximity or "closeness" and (2) whether extension of recovery to this type of loss was desirable from a practical point of view.
The issue of proximity had to be considered anew here. The case did not fall within any of the categories where proximity and liability had previously been found to exist.
In addition to focusing upon the relationship between Norsk and CN -- a significant indicator of proximity in and of itself -- the trial judge based his conclusion that there was sufficient proximity on a number of factors related to CN's connection with the property damaged, the bridge, including the fact that CN's property was in close proximity to the bridge, that CN'S property could not be enjoyed without the link of the bridge which was an integral part of its railway system, and that CN supplied materials, inspection and consulting services for the bridge, was its preponderant user, and was recognized in the periodic negotiations surrounding the closing of the bridge.
Recovery for purely economic loss has been recognized for a "joint" or "common venture" category. To deny recovery in such circumstances would be to deny it to a person who for practical purposes is in the same position as if he or she owned the property physically damaged. Here, CN's operations were so closely allied to the operations of PWC's damaged bridge that the necessary proximity is established.
From a practical point of view, extension of recovery to this type of loss is desirable. Recovery permits a plaintiff, whose position for practical purposes vis‑à‑vis the tortfeasor is indistinguishable from that of the owner of the damaged property, to recover what the actual owner could have recovered. This is fair and avoids an anomalous result. Recovery of economic loss in this case does not open the floodgates to unlimited liability; the category is a limited one and allows potential tortfeasors to gauge in advance the scope of their liability.
Per Stevenson J.: While in Canada there is no general exclusionary rule precluding recovery of pure economic loss in a negligence action, there are acceptable policy reasons which preclude recovery of certain types of economic losses. For policy reasons and for reasons of fairness to defendants, the law must deny recovery of economic losses which give rise to the possibility of indeterminate liability. Relational losses usually create the possibility of indeterminate liability and their recovery is therefore exceptional. Aside from the danger of indeterminate liability, however, there is no reason in principle that bars recovery of such losses. Relational losses should thus be recoverable wherever the policy concern about indeterminate liability does not apply. There is no danger of indeterminate liability when the defendant actually knows or ought to know of a specific individual or individuals, as opposed to a general or unascertained class of the public, who is or are likely to suffer a foreseeable kind of loss as a result of negligence by that defendant. With a "known plaintiff", the scope of liability cannot become indeterminate. While the "known plaintiff" approach may not be an adequate final limit on recovery of relational economic loss, it provides an appropriate basis for excluding the relational loss exclusionary rule. There may be other exceptions. The concept of proximity is incapable of providing a principled basis for drawing the line on the issue of liability.
On the facts of this case, there is no policy rationale for excluding liability. The appellants do not deny that the respondent's loss was foreseeable or that the other usual elements necessary to found a liability in negligence were present. One navigating near a bridge would ordinarily realize that damage to the bridge structure will cause damage to the users of the bridge. The loss and the victim were identifiable, and the damage almost inevitable. The appellants ought to have known ‑‑ and in fact knew ‑‑ that the respondent would suffer economic loss as a result of their negligence. Liability would in no way be out of proportion with the neglect. There is no danger of indeterminate liability.
Per La Forest, Sopinka and Iacobucci JJ. (dissenting): There are at least three types of economic loss cases in tort. The first involves consequential economic loss. In those cases, the plaintiff claims for economic loss which occurs as a consequence of the plaintiff's being personally injured or incurring property damage. In the second type, which can be termed non-relational economic loss, the plaintiff claims for pure economic loss which is unrelated to any personal injury or property damage suffered by either the plaintiff or any third party. It is doubtful that this group can be analyzed in terms of a single rule. The third type, present here, involves a claim for relational economic loss by the plaintiff as a result of damage caused to someone else's property.
Thus the issue in this case is not whether economic losses are recoverable in tort; they are indeed recoverable in certain cases. The issue, rather, is whether a person (A) who contracts for the use of property belonging to another (B) can sue a person who damages that property for losses resulting from A's inability to use the property during the period of repair. This type of loss can be referred to as contractual relational economic loss.
A distinct approach to contractual relational economic loss cases is justified both on policy grounds and on precedent. In policy terms, contractual economic loss cases have a number of specific characteristics that differentiate them from other pure economic loss cases. First, the property owner's right of action already puts pressure on the defendants to act with care. Imposing further liability cannot reasonably be justified on the grounds of deterrence. Second, a firm exclusionary rule does not necessarily exclude compensation to the plaintiff for his or her loss. Rather, it simply channels to the property owner both potential liability to the plaintiff and the right of recovery against the tortfeasor. Third, perfect compensation in these cases is almost always impossible because of the ripple effects which are of the very essence of contractual relational economic loss. These effects are often absent in other economic loss cases. It is in this sense that the solution to cases of this type is necessarily pragmatic: the whole exercise in this kind of situation involves drawing a line amongst those who are undeniably injured by the tortfeasor who was undeniably at fault. Fourth, contractual relational economic loss cases, typically, involve accidents, an aspect of fundamental importance with respect to tests of liability founded on the foreseeability of an individual plaintiff or an ascertained class of plaintiffs.
As for precedent, the debate over recovery of pure economic loss in tort has been obscured by the existence of two different versions of an exclusionary rule barring recovery for pure economic loss. In its narrow formulation, the rule excludes claims for negligent interference with contractual relations where a third party's property has been damaged and where the damage to the plaintiff's contractual relations is caused as a result of that property damage. The rule was originally developed in these terms in Cattle v. Stockton Waterworks Co., and other early cases as noted in the recent case of Candlewood Navigation Corp. v. Mitsui O.S.K. Lines Ltd. (The Mineral Transporter). Subsequently, the exclusionary rule was broadened and purported to exclude all claims in negligence for pure economic loss. This broad rule was rejected in Hedley Byrne & Co. v. Heller & Partners Ltd., opening up a third phase in the development of law on economic loss. Many recent cases in the area of economic loss have approached the problem at a very high level of generality. They have addressed the question of whether we should abandon the broad rule altogether. The result of this broad approach is that cases on relational economic loss are unhelpfully bound up with other types of economic loss cases that raise different policy concerns. Precedent and policy support a distinct approach to the issue of contractual relational economic loss.
The decisions of this Court relied upon by the respondent are not contractual relational economic loss cases; they involve other types of economic loss claims which raise different policy concerns. Undoubtedly, the decisions of this Court in Rivtow Marine Ltd. v. Washington Iron Works and Kamloops (City of) v. Nielsen, refute the existence of a broad exclusionary rule in Canada and Murphy v. Brentwood District Council does not represent the law in Canada. However, nothing in Rivtow or Kamloops indicates that the Court considered the narrow exclusionary rule to be ill-advised.
While the respondent recognized the existence of the narrow rule in Cattle, it sought first to avoid the application of the rule by contending that its interest was more than a mere contractual interest. Second, they sought to qualify the application of the rule in Cattle by contending that even if CN has only a contractual interest, the existence of other factors is sufficient to constitute a special relationship with the tortfeasor and to ground recovery for its contractual claims. These arguments were dealt with in turn.
CN's arguments that the narrow rule should not apply in this case because it had more than a contractual interest were unpersuasive. First, CN did not suffer a "transferred loss of use" any different in kind from that suffered by the typical contractual claimant. The argument that granting judgment to CN in this case would not extend the liability of the defendants over and above what they would normally incur to the owner of commercial property (since the owner could have collected damages for loss of use) was unconvincing. A similar argument was rejected in Candlewood on stronger facts for the plaintiff. Adoption of a "transferred loss of use" theory in cases of this type would lead to great uncertainties in measuring, tracing and apportioning damages. Second, CN did not come under the common adventure or joint venture exception to the narrow exclusionary rule. CN's preponderant usage of the bridge and its contractual arrangement to supply repair services to PWC where requested and paid for by PWC were not sufficient to constitute a common adventure. Common adventure cases involve a situation where B is bound to contribute to A's loss under general average rules and seeks to recover that amount from the wrongdoer C. They also involve discretionary decisions made in the common interest which impose cost disproportionately amongst those who benefit from the decision. There was no common imminent peril in this case and CN was not required to contribute to PWC's loss. CN's voluntary contributions to bridge maintenance were also insufficient to constitute a common adventure.
Turning to the second branch of CN's argument, it was necessary, before examining the various proposals that have been made to relax the bright line rule which excludes recovery for contractual relational economic loss, to set forth the criteria that a rule in this area should meet. The guideposts set forth by McLachlin J. for establishing a rule in this area were generally agreed with: liability must be limited; the limits must be clearly defined; considerations of policy and fairness must be taken into account. A number of additional aspects are also relevant to the choice of a rule in this area. It is often suggested that indeterminacy is the only problem the rule must confront. This was perhaps natural in light of the importance of potential indeterminate liability in negligent misrepresentation cases and the fact that the breakthrough in allowing recovery for economic loss came in Hedley Byrne. However, the resulting confusion between the indeterminate liability problem and economic loss cases in general tends to obscure the variety of issues raised in different kinds of economic loss cases. Although a rule in the area of contractual relational economic loss certainly must confront the problem of indeterminacy, the rule should serve to do more than just exclude indeterminate liability. A test for recovery in cases of contractual relational economic loss should also reflect the characteristics of this type of litigation. The rule should encourage both parties to act in ways that will minimize overall losses.
The rule must, of course, also confront the problem of indeterminacy. What then does it mean for a particular liability to be determinate? First, in this area, the requisite certainty should exist before the accident occurs. Second, the concern is not simply the risk of a large number of claims since an accident may injure a large number of people or cause extensive property damage. Rather, the concern is that the volume of claims is indeterminate and therefore difficult and expensive to insure against. In physical damage cases, the number of potential first-victim claims is usually foreseeable even when large. Even more importantly, it is rare for multiple physical damage claims to ripple down a chain. In contrast, such ripple effects are the very essence of contractual relational economic loss. A third important consideration is the indeterminacy of each claim. Allowing recovery for contractual expectancies would require analysis of who bore the loss. The problem with this case, from the perspective of indeterminacy, is that it involves a type of accident that will very likely lead to a great number of claims.
The proposed tests that would allow recovery do not meet the criteria that a rule should have in this area. First, the "individual plaintiff" or "ascertained class of plaintiffs" test was rejected in Candlewood. While useful in negligent misrepresentation cases, it has no link with the defendant's degree of fault or with the merit of the plaintiff's claim in the context of an accident. Second, foresight of the specific nature of the plaintiff's loss is not sufficient; in practically all cases of this type, the defendant will be aware that the specific nature of the loss will be loss of use of the damaged property. Third, the "physical effects" test adopted by Jacobs J. in Caltex Oil (Aust.) Pty. Ltd. v. The Dredge "Willemstad", is not satisfied even if it were to be adopted. The other railways suffered identical damages despite not owning any property in physical propinquity to the accident. There is no policy significance in the fact that a particular plaintiff owns property in proximity to an accident. Fourth, the concept of proximity is incapable of providing a principled basis for drawing the line with respect to the issue of liability for the reasons expressed by Stevenson J. It expresses a result, rather than a principle. Fifth, liability in this area should not be established based on the court's perception of the extent of the defendant's moral fault. Liability is very often vicarious in cases of this type. The hallmark of vicarious liability is that it is based neither on any conduct by the defendant nor even on breach of his or her own duty. Furthermore, to the extent that the concern about fault is linked to deterrence, the deterrent effect of tort law is already present due to the tort action of the property owner. Sixth, CN's suggestion that a new bright line be erected excluding all co-contractors of CN does not appear to be a significantly better solution than the traditional rule.
The crucial problem with the various formulations of the proximity test examined so far is that they look at the problem strictly from the perspective of the defendant. Given the eminently pragmatic and policy basis of decisions about liability in this area, the situation of both the defendant and the plaintiff must be examined in cases of this kind. In particular, the plaintiff's ability to foresee and provide for the particular damage in question is a key factor in the proximity analysis.
It is legitimate to consider which party is the better loss bearer in this type of case for three reasons: policy concerns with respect to deterrence and cost internalisation are generally at least substantially met by the tortfeasor's primary liability to the property owner; the approach merely articulates another policy lying behind a well-established rule; in this field the crucial problem remains that of limiting liability and a significantly higher threshold for recovery is entirely justified.
Analysis of loss bearing ability involves asking which party is in a better position to predict the frequency and severity of CN's economic loss when bridges are damaged, and to plan accordingly. CN was undoubtedly in a better position to bear the loss in this case than was Norsk. First, in light of the significant information available regarding bridge failure and CN's long use of the bridge, CN was probably at least equally competent in terms of estimating the potential risks of bridge failure. Second, CN was clearly in a better position than Norsk to estimate the potential costs of bridge failure to CN's operations. Third, CN was better placed to protect itself from the consequences of those losses through first party commercial insurance or self-insurance, or through contract with both the bridge owner and with CN's customers. Even if recovery were allowed in this case, parties such as CN will still need to protect themselves. The critical effect of allowing recovery is that it would also require defendants in Norsk's position to insure for potential contractual relational economic loss.
To justify recovery in cases of this nature, the plaintiff would, at the very least, have to effectively respond not only to the concern about indeterminacy but also show that no adequate alternative means of protection were available. Other concerns may also need to be met. The question of whether recovery should be allowed in the residual cases in which these two barriers are overcome does not require an answer in the context of this case. The exclusionary rule is not in itself attractive. The rule only becomes defensible when it is realized that full recovery is impossible, that recovery is in fact going to be refused to the vast majority of such claims regardless of the rule we adopt, and when the exclusionary rule is compared to the alternatives. It should not be disturbed on the facts of this case.
Cases Cited
By McLachlin J.
Applied: Rivtow Marine Ltd. v. Washington Iron Works, [1974] S.C.R. 1189; Kamloops (City of) v. Nielsen, [1984] 2 S.C.R. 2; considered: Anns v. Merton London Borough Council, [1978] A.C. 728; Caltex Oil (Aust.) Pty. Ltd. v. The Dredge "Willemstad" (1976), 11 A.L.R. 227; not followed: Murphy v. Brentwood District Council, [1991] 1 A.C. 398; referred to: Donoghue v. Stevenson, [1932] A.C. 562; Ultramares Corporation v. Touche, 174 N.E. 441 (1931); Cattle v. Stockton Waterworks Co. (1875), L.R. 10 Q.B. 453; Spartan Steel & Alloys Ltd. v. Martin & Co. (Contractors) Ltd., [1973] Q.B. 27; Leigh and Sillivan Ltd. v. Aliakmon Shipping Co., [1985] Q.B. 350; Hedley Byrne & Co. v. Heller & Partners Ltd., [1964] A.C. 465; Junior Books Ltd. v. Veitchi Co., [1983] 1 A.C. 520; Morrison Steamship Co. v. Greystoke Castle (Cargo Owners) (The Greystoke Castle), [1947] A.C. 265; Domar Ocean Transportation, Ltd. v. M/V Andrew Martin, 754 F.2d 616 (1985); Amoco Transport Co. v. S/S Mason Lykes, 768 F.2d 659 (1985); Union Oil Co. v. Oppen, 501 F.2d 558 (1974); East River Steamship Corp. v. Delaval Turbine, Inc., 752 F.2d 903 (1985), aff'd 476 U.S. 858 (1986); Cass. civ. 2e, April 28, 1965, D.S. 1965.777 (Marcailloux v. R.A.T.V.M.); Joly v. Ferme Ré‑Mi Inc., [1974] C.A. 523; Regent Taxi v. Congrégation des petits frères de Marie, dits frères maristes, [1929] S.C.R. 650; Hôpital Notre‑Dame v. Laurent, [1978] 1 S.C.R. 605; Agnew‑Surpass Shoe Stores Ltd. v. Cummer‑Yonge Investments Ltd., [1976] 2 S.C.R. 221; B.D.C. Ltd. v. Hofstrand Farms Ltd., [1986] 1 S.C.R. 228; MacMillan Bloedel Ltd. v. Foundation Company of Canada Ltd., [1977] 2 W.W.R. 717; Gypsum Carrier Inc. v. The Queen, [1978] 1 F.C. 147; Star Village Tavern v. Nield (1976), 71 D.L.R. (3d) 439; Sutherland Shire Council v. Heyman (1985), 60 A.L.R. 1.
By Stevenson J.
Approved: Caltex Oil (Aust.) Pty. Ltd. v. The Dredge "Willemstad" (1976), 11 A.L.R. 227; Ross v. Caunters, [1980] Ch. 297; not followed: Murphy v. Brentwood District Council, [1991] 1 A.C. 398; Candlewood Navigation Corp. v. Mitsui O.S.K. Lines Ltd. (The Mineral Transporter), [1986] A.C. 1; Junior Books Ltd. v. Veitchi Co., [1983] 1 A.C. 520; referred to: Agnew‑Surpass Shoe Stores Ltd. v. Cummer‑Yonge Investments Ltd., [1976] 2 S.C.R. 221; B.D.C. Ltd. v. Hofstrand Farms Ltd., [1986] 1 S.C.R. 228; Kamloops (City of) v. Nielsen, [1984] 2 S.C.R. 2; Cattle v. Stockton Waterworks Co. (1875), L.R. 10 Q.B. 453; Simpson & Co. v. Thomson (1877), 3 App. Cas. 279; Donoghue v. Stevenson, [1932] A.C. 562; Hedley Byrne & Co. v. Heller & Partners Ltd., [1964] A.C. 465; Morrison Steamship Co. v. Greystoke Castle (Cargo Owners) (The Greystoke Castle), [1947] A.C. 265; Rivtow Marine Ltd. v. Washington Iron Works, [1974] S.C.R. 1189; Anns v. Merton London Borough Council, [1978] A.C. 728; Ultramares Corporation v. Touche, 174 N.E. 441 (1931); Leigh and Sillavan Ltd. v. Aliakmon Shipping Co., [1986] A.C. 785; Société anonyme de remorquage à hélice v. Bennetts, [1911] 1 K.B. 243; Weller & Co. v. Foot & Mouth Disease Research Institute, [1966] 1 Q.B. 569; San Sebastian Pty. Ltd. v. Minister Administering the Environmental Planning and Assessment Act 1979 (1986), 162 C.L.R. 340; Candler v. Crane, Christmas & Co., [1951] 2 K.B. 164; Clarke v. Bruce Lance & Co., [1988] 1 All E.R. 364; Haig v. Bamford, [1977] 1 S.C.R. 466.
By La Forest J. (dissenting)
Gypsum Carrier Inc. v. The Queen, [1978] 1 F.C. 147; Bethlehem Steel Corp. v. St. Lawrence Seaway Authority, [1978] 1 F.C. 464; Star Village Tavern v. Nield (1976), 71 D.L.R. (3d) 439; Weller & Co. v. Foot & Mouth Disease Research Institute, [1966] 1 Q.B. 569; S.C.M. (United Kingdom) Ltd. v. W. J. Whittall and Son Ltd., [1971] 1 Q.B. 337; Spartan Steel & Alloys Ltd. v. Martin & Co. (Contractors) Ltd., [1973] Q.B. 27; Rivtow Marine Ltd. v. Washington Iron Works (1972), 26 D.L.R. (3d) 559, rev'd [1974] S.C.R. 1189; Kamloops (City of) v. Nielsen, [1984] 2 S.C.R. 2; Hedley Byrne & Co. v. Heller & Partners Ltd., [1964] A.C. 465; Murphy v. Brentwood District Council, [1991] 1 A.C. 398; State of Louisiana v. M/V Testbank, 752 F.2d 1019 (1985); Cattle v. Stockton Waterworks Co. (1875), L.R. 10 Q.B. 453; Candlewood Navigation Corp. v. Mitsui O.S.K. Lines Ltd. (The Mineral Transporter), [1986] A.C. 1; Simpson & Co. v. Thomson (1877), 3 App. Cas. 279; Caltex Oil (Aust.) Pty. Ltd. v. The Dredge "Willemstad" (1976), 11 A.L.R. 227; Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303 (1927); Abramovic v. Canadian Pacific Ltd. (1989), 69 O.R. (2d) 487; Leigh and Sillavan Ltd. v. Aliakmon Shipping Co., [1986] A.C. 785; Société anonyme de remorquage à hélice v. Bennetts, [1911] 1 K.B. 243; Donoghue v. Stevenson, [1932] A.C. 562; Rothfield v. Manolakos, [1989] 2 S.C.R. 1259; B.D.C. Ltd. v. Hofstrand Farms Ltd., [1986] 1 S.C.R. 228; Haig v. Bamford, [1977] 1 S.C.R. 466; Elliott Steam Tug Co. v. Shipping Controller, [1922] 1 K.B. 127; MacPherson v. Buick Motor Co., 217 N.Y. 382 (1916); Overseas Tankship (U.K.) Ltd. v. Morts Dock & Engineering Co. (The Wagon Mound), [1961] A.C. 388; Cass. civ. 2e, June 25, 1975, Bull. II no. 195, eventually returned to that court, Cass. civ. 2e, February 21, 1979, Bougues‑Montès, J.C.P. 1979, IV, 145; Cour d'appel de Colmar (Ch. détachée à Metz), April 20, 1955, D.1956.723 (Football Club de Metz v. Wiroth); Cass. civ. 2e, November 14, 1958, G.P. 1959.1.31 (Demeyer v. Camerlo); Trib. gr. inst. Nanterre, October 22, 1975, G.P. 1976.1.392 (Brunet v. Rico et Caisse mutuelle d'assurance et de prévoyance); Cass. civ. 2e, April 28, 1965, D.S. 1965.777 (Marcailloux v. R.A.T.V.M.); Morin v. Blais, [1977] 1 S.C.R. 570; J. E. Construction Inc. v. General Motors du Canada Ltée, [1985] C.A. 275; Baumwoll Manufactur von Carl Scheibler v. Furness, [1893] A.C. 8; The "Father Thames", [1979] 2 Lloyd's Rep. 364; Konstantinidis v. World Tankers Corp. (The World Harmony), [1967] P. 341; Venore Transportation Co. v. M/V Struma, 583 F.2d 708 (1978); Morrison Steamship Co. v. Greystoke Castle (Cargo Owners) (The Greystoke Castle), [1947] A.C. 265; Aktieselskabet Cuzco v. The Sucarseco, 294 U.S. 394 (1935); Candler v. Crane, Christmas & Co., [1951] 2 K.B 164; Smith v. Bush, [1990] 1 A.C. 831; Lamb v. Camden London Borough Council, [1981] Q.B. 625; Photo Production Ltd. v. Securicor Transport Ltd., [1980] A.C. 827.
Statutes and Regulations Cited
Civil Code of Lower Canada, art. 1053.
Authors Cited
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APPEAL from a judgment of the Federal Court of Appeal, [1990] 3 F.C. 114, 104 N.R. 321, 65 D.L.R. (4th) 321, 3 C.C.L.T. (2d) 229, affirming a judgment of the Federal Court, Trial Division (1989), 26 F.T.R. 81, 49 C.C.L.T. 1, allowing respondent's action in damages. Appeal dismissed, La Forest, Sopinka and Iacobucci JJ. dissenting.
P. D. Lowry and M. A. Clemens, for the appellants.
David McEwen, for the respondent.
//La Forest J.//
The reasons of La Forest, Sopinka and Iacobucci JJ. were delivered by
La Forest J. (dissenting) -- This case concerns recovery in tort for economic loss. Though some of the arguments are framed as if the case turned on the broad question whether such damages are generally recoverable, the specific issue is much narrower. It is whether a person (A) who contracts for the use of property belonging to another (B) can sue a person who damages that property for losses resulting from A's inability to use the property during the period of repair. (I call this "contractual relational economic loss", a convenient if somewhat barbarous phrase.)
The issue arises in a context where a barge collided with a bridge while being pulled by the defendants' tug, thereby preventing the plaintiff (CN) from making use of it. Ordinarily, a person whose operations are disrupted by damage to a bridge belonging to another cannot at common law pursue the person who caused the damage. But the plaintiff claims that it may do so by reason of its particular relationship with the owner of the bridge and with the tortfeasor. As in the case of three other railways, it has a contractual right to use the bridge for railway purposes, but the plaintiff relies on additional facts to establish its special relationship. It is by far the major user of the bridge, which is a central link in its operations, so much so that many of those who operated on the river, including the master of the defendants' tug, thought it belonged to the plaintiff. As well, CN's contract requires it to repair and maintain the bridge when necessary at the request of the owner; CN also owns land close to the bridge.
The courts below and my colleagues, Justices McLachlin and Stevenson, are all of the view that CN's claim should be upheld. But this unanimity is more apparent than real, for they do so for different reasons and, indeed, there is significant disagreement on the determining issues. I take the opposite view. For sound policy reasons, the courts have established a clear rule (the "bright line" rule) that persons cannot sue a tortfeasor for suffering losses to their contractual rights with the owner of property by reason of damages caused to that property by the tortfeasor. That rule, I have no doubt, may be subject to exceptions for clear and overriding policy reasons, but as I will indicate, I have been unable to determine any reason for excluding CN from the general rule in the present case.
This, in broad outline, is what this case is about. It is necessary, however, to set forth the facts in some detail.
Facts
The Accident
The New Westminster Railway Bridge, which spans the Fraser River between Surrey and New Westminster, was built in 1904. It carries a single railway track. Its sole purpose is to service railway traffic, both passenger and freight, but it incorporates a swing span to permit marine traffic to navigate the waterway.
On November 28, 1987, the barge Crown Forest No. 4, while being towed downstream by the tug Jervis Crown in heavy fog, collided with the bridge. The Jervis Crown was owned and operated by the Norsk Pacific Steamship Co. and the Norsk Pacific Marine Services Ltd., both hereafter referred to as Norsk. The accident caused extensive damage to the bridge and it was closed for several weeks while repairs were made. The appellants admitted liability for negligence as to the collision itself.
While the bridge was closed, the four railway companies that used the bridge had to reroute traffic over another bridge further upstream. Freight was either delayed or not transported at all. The use of the waterway was also interfered with, and cargo was delayed or transported by land.
This accident gave rise to a number of legal actions which were consolidated in the judgment of Addy J. The Department of Public Works ("PWC"), representing The Queen in right of Canada, claimed damages as owner of the bridge against both Norsk and the owners of the barge Crown Forest No. 4 and the tug Westminster Chinook (another tug which was helping the Jervis Crown at the ti