Problems in Canadian
Business Law
Pol/Soc Sci 3165 6.0A
Tuesdays, 2:30-5:30
pm
Simon Archer
sarcher@torys.com
Administrative items
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Papers
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Marking on both writing ability and
content
Advice: choose a topic covered in
the term
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For e.g., business associations,
securities, corporate rights, intellectual
property, etc. questions leave to next
term
Last class
Tort law introduction
 Law of negligence or unintentional
harms to others
 Duty of care, standard of care,
causation, injury, defences
 Remedies …
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Economic loss
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Hedley Byrne v. Heller (p. 76 Willes’)
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Negligent misstatement and pure economic
loss (no “injury”, purely lost profits not
directly causally related to action of D)
Bank makes wrong call on customer,
advertising agency loses $$
Professional negligence grows from this case
Cf. fiduciary duties (later in term)
• Key difference is limiting doctrines – defences and
remedies
• No remoteness doctrine in equity, or fiduciary duties
Remedies for negligence
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Theory: to restore the injured party to
the original state as far as possible
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Vs. contract – forward looking – as if contract
had been fulfilled
Vs. criminal – penal – punish and deter
Practice: money
Damages (money compensation for loss)
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Special – relating to a loss but not direct
General – the measure of the loss
Nominal – where no loss (trespassing)
Punitive – unusual, contra theory
Remedies cont’d
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General damages
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Injury – physical
• The meat chart (since 600/700 AD)
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Injury – non-physical, emotional, etc.
• What is the measure?
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The damages trilogy in 1978: cost of care,
cost of lost earnings, special costs, and nonpecuniary loss
• Caps general damages at $100k indexed (now 300?)
Remedies cont’d
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P also has the burden of proving the
quantum of damages
P is under an obligation to act reasonably
in all circumstances of the case to
mitigate his losses. D has the burden of
proving that P failed to do so.
D is allowed to set off against P's damage
claim any parallel expenditures that P
would have incurred had the tort not
been committed
Remedies cont’d
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At common law, damages are awarded in a lump sum to
compensate P for all the losses he has suffered and will
likely suffer in the future.
However, this lump sum cannot always anticipate future
needs or high inflation rates. If a loss turns out to be far
greater or smaller than that calculated at trial, there is no
means of reassessment.
Although lump sum awards are non-taxable, the interest it
generates when invested is taxable.
As a result, periodic payments are a central feature of the
increasing number of structured settlements being reached
by parties. In most cases, D's insurer purchases an
annuity designed to generate periodic payments for P's
life.
Remedies cont’d
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In a jury trial it is the jury's responsibility to assess
damages (questions of fact). Council cannot mention to
the jury the amount of general damages s/he feels is
appropriate. Expert witnesses, while allowed to comment
on the extent of P's injuries, cannot suggest a monetary
value for these losses. A judge may not express his
opinion on the quantum of damages. Nor may previous
awards in similar cases be mentioned. All these rules lead
to a problem of consistency in damage awards.
However, the Courts of Justice Act, S.O. 1984, c.11, s.130,
as amended by S.O. 1989, c.67, s.4, allows the parties
and the judge to inform the jury on general damages
awards. No other jurisdiction has taken this step.
Hot issue: auto insurance
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The system: no fault insurance
Regardless of fault, your insurer pays
 Must have insurance
 Limitations on ability to sue
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Rarely a “pure” no fault system, but
hybrids
 Two completely no-fault jurisdictions in
Canada - Manitoba and Quebec
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Auto insurance cont’d
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Details contained in an Insurance Act -determines the fault given default rules
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Faster, no lawyers, mandatory insurance
Focus on rehabilitation (14 days to payout)
In hybrid systems usually property not covered
Policy (read: profit) in tort?
Allows insurers to raise premiums to recoup costs
Election issue across Canada: cost of auto
insurance premiums/public auto insurer: single
provider to cap costs (would be a non-profit
insurer)
Public insurers in B.C., Sask, Man.
Specific applications
Occupier’s liability (last class)
 Professional liability (last class)
 Manufacturer’s liability (last class)
 Strict liability
 Vicarious liability
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Strict liability
Liability for injury or loss based on
factual cause alone
 Can apply to inherently, obviously
very risky activities
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products liability (res ipsa loquitur?)
 keeping of wild or ferocious animals
 abnormally dangerous activities (e.g.,
storing, transporting, or using
explosives in a populated area)
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Vicarious liability
In some circumstances, one person
is liable for the tortious in/actions of
another
 Usually seen in employment context
 Must be committed in course of
employer’s business
 Cf. partnership (next spring)
 By statute: drivers of your car
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Professional liability
Special duties and standards of care
(discussed above)
 Concurrent liability in equity
(fiduciary relationships)
 Special torts: negligent
misstatements & misrepresentation
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Hedley Byrne v. Heller – pure economic
loss
Manufacturer’s liability
Since Donoghue case
 Effectively a strict liability standard,
subject to available defences
 Must show some negligent aspect of
the manufacture
 Often a battle over warnings – were
they sufficient to warn of risks
associated with use of product?
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Risk shifting in theory … an
example
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Important because much law-and-economics
based on this kind of analytics
In U.S. v. Carroll Towing Co., (1947) Judge
Learned Hand considered a case in which a
tugboat had broken away from a barge, the
barge later sank:
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... the owner's duty, as in other similar situations, to
provide against resulting injuries is a function of three
variables: (1) The probability that she will break away;
(2) the gravity of the resulting injury, if she does; (3)
the burden of adequate precautions. Possibly it serves
to bring this notion into relief to state it in algebraic
terms: if the probability be called P; the injury, L; and
the burden, B; liability depends upon whether B is less
than L multiplied by P: i.e., whether B < P × L
Risk shifting in theory … an
example
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This is one of the few reported judicial decisions in the
USA that contains an equation.
After the loss, L, has occurred, it is easy to identify the
specific measure(s) that allegedly should have been taken
to prevent the loss and focus on just one or two lossprevention measures
Before the loss, there are N possible losses, L1, L2, L3, L4,
... Lnth, each of which can be prevented by measures that
cost less than the probability of injury times the amount of
loss. But, the manufacturer or service provider might have
an uneconomical product or service if all N loss-prevention
measures were taken
Really a problem of all normative economics: descriptive
utility, prospective futility
Negligence flow chart
Is there an injury?
 Is there a duty owed?
 Was the standard discharged?
 Did the act/omission cause the
injury?
 Are there any defences?
 What are the types of damage?
What quantum?
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Questions
Do professionals have duties to third
parties?
 Why do we consider public policy
issues in nuisance, but sometimes
not in negligence?
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Professional liability
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Where a professional can reasonably
foresee third parties relying on their acts
(e.g., the issuance of financial statements
for certain purposes), there is likely a
duty of care not to make negligent errors
to that third person
Courts will be wary of extending this duty
to all third parties, and will probably
circumscribe it
Public policy in nuisance
In nuisance cases the remedy to the
individual may also have direct
impact on the community, and both
interests are weighed by a court
 Shutting down a smelly plant may
lose jobs
 Do we treat negligence differently?
Should we?
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Sample problem
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D operates a small food stand at an open air market where
farmers in close proximity to each other set up makeshift
stalls or tables to display their produce. To protect
themselves from the sun or rain, most have canvas
canopies over their stalls. D has several small propane
stoves on her stall to prepare food, which is done in oil.
While service a customer, a kid about 16 years old turns
up the flame and the oil catches fire. In an attempt to put
out the fire, she throws the pot and splashes the kid,
whose clothes catch on fire and burn his skin. The pot
lands in a farmer’s stall and sets fire to the canopy. The
farmer kicks it into another stall, where it sets fire to
paper food wrapping. By the time the fires are put out,
three stalls are destroyed, and D and the kid have been to
hospital.
What are the rights and remedies of the parties?
Sample answer
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To whom was a duty owed?
Kid?
 Farmer next door?
 Second, third farmers? By whom?
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What content of duty?
Kid? Should it be less for kids?
 Farmer next door?
 Other farmers?
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Sample answer cont’d
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Is causation an issue?
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Did D cause injury to second and third
farmer? Does she have a defence?
What injury?
Injury to kid: is there a defence?
 Loss of property
 Loss of income
 Others?
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Tort II: Nuisance
Cause of action is an “interference
with use and enjoyment of land”
 Generally includes smells or noises,
sometimes light, sightlines, views,
etc.
 Derives from property rights: right
to exclude others from your property
(e.g., tort of trespass)
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An aside on property and
law
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Aside: fundamental or core legal concepts
facilitating market economies
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Contract: freedom of, and freedom from contract
Rights of private property: not only to own, but to
exclude others from using
Expressions of a political arrangement:
ownership of the combination of labour and
capital will belong to the property-owner, not the
labourer
No inherent “legal” reason for this arrangement
See also privacy rights
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Derived in one theory from trespass
Are privacy rights human rights?
Limiting doctrines for
nuisance
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The cause gets restricted in several
ways:
acceptable community standards
 reasonable or ordinary purposes
 public policy or desirable actions
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Remedies
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Remedies include injunction or damages
Rogers, 1888 - ringing of chruch bells found to be within
community standard. No express malice or intent on part of
ringer
Shuttleworth v. Vancouver Hospital, 1927 BCSC - Anticipatory
injunction by neighbour of proposed disease hospital; not
considered cause of action because no “widespread belief or
proof in fact” that disease will spread
Miller v Jackson, 1977, HL, cricket as public good. Injunction
sought. Probability of injury cited as limiting plaintiff case, utility
of cricket, precedence of site over housing development, and
offer of damage payment ‘adequate’ for risk
Spur v. Webb 1972, Ariz. SC - Feed lot near a new subdivision
has injunction against it for loss of sales (not by residents) by
developer. Injunction reversed by SC.
Video
Tort III: Intentional torts
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Interference
with the person
 with a person’s reputation
 with property
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Often concurrent with criminal
sanction (e.g., assault)
Assault and battery
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Willes discusses, not really business law
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Consent
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Assault: intent to injure
Battery: touching without consent
Explicit and implicit (say, a fight)
False imprisonment also an intentional
tort – requires only threat of same to
establish
Libel and slander
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Defamation/tort against reputation
Libel (written)
 Slander (oral)
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Defences
Truth of statement
 Privilege
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• qualified – letters of reference – a defence
if you believed them to be true
• absolute – elected officials
Interference with property
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Trespass
entering on land without consent
 act must be intentional (lack of
voluntariness is a defence)
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Conversion
Wrongful taking of goods
 Willful damage to same
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Some intentional torts
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Slander of goods, title
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Breach of confidence
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Same as defamation where business has the
same “asset” of a good name
Esp. in negotiations where secrets traded etc.
Conspiracies in restraint of trade
Deceit
Fraudulent conversion of goods
Unfair business practices
Next class
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Law of Obligations II: contracts