McLachlin,+'Evolution+of+the+law+of+private+obligation+The+Influence+of+Justice+La+forest'

__**Brief Summary:**__ Part A explains the difference between universalism (one broad principle) and formalism (categorizing). Canada has embraced the universalist approach by upholding //Anns// when both the UK and Australia overturned it. However, this universalist approach is greatly tempered by the formalist concern of limiting indeterminate liability and finding categories. La Forest J. is a champion of Canada's approach. McLachlin illustrates this using two examples: //Part B: Concurrence of actions// in tort, contracts and fiduciary duty and //Part C: Recovery for Pure Economic Loss//. __Note:__ The article is a good summary of cases we have already read.

__Part A: Formalism vs. universalism__ Two different approaches to precedent and legal development:

FORMALISM: - Aristotelian, recognizing the particular and categorizing it. - great emphasis on rules, precedent and categories. - old rules are applied to well-defined and circumscribed 'new' situations - no attempt to find consistency between different branches of law - little role for policy considerations - discover the correct rule and apply it - even if formalist is unhappy with result, he justifies it by saying it's what the rule requires Advantages: (a) clear and predictable (b) conservative - protects the law from judicially-imposed changes that may have unforeseen negative consequences; defers to the legislature to make the changes

UNIVERSALISM: - Platonic, search for a unifying idea. - rationalizes the different branches of law - the arbitrary lines of demarcation crumble - principle is prime; broad policy considerations are foremost Advantages: (a) rational, coherent development of the law - different branches of law are related in principle to each other (b) permits judges to adjust the law to avoid an unjust result in particular cases. (c) allows judges to set the law on a particular course of policy. This is helpful because legislature only rarely intervenes to correct anomalies in the law of private obligation. Disadvantages: (a) Having set out a general principle, it is hard to limit.

The SCC is universalist. Justice La Forest is too but his reasons reveal a wariness of straying too far from the settled rule. He uses the language of universalism but arrives at same result as a formalist would. La Forest introducted caution. The current state of Canadian law reflects this.

The law of private obligations has changed drastically in the last century due to: (1) A breaking down of the distinction between the branches of contract, tort and equity (2) An emphasis on policy and principle rather than adherence to precedent, that leads to an flexible approach embracing change

Justice La Forest has played an important role in (1) and (2) above.
 * Thesis: in both the fields of concurrency of actions (Part B) and recovery of economic losses in tort (Part C), La Forest combined broad universalist principles with pragmatic concerns, to limit them and provide a degree of certainty of law more typical of a formalist approach. His work represents a practical marriage of functionalism and universalism.**

__Part B: Concurrency of actions__ - Until 1970s, plaintiffs had to situate themselves within either contrat, tort or equity at the expense of the other fields. This was out-of-sync formalism. This is contrary to the spirit of commo law, which allows various forms of actions for the same facts. - 1970s: - England ruled that a plaintiffs could cumulate causes of action for the same facts. (Advantages: more favourable limitation periods; more appropriate remedies) - La Forest, then in New Brunswick Court of Appeal, held that the same approach should apply in Canada. - SCC confirmed this in //Central Trust v. Rafuse// Result is more nuanced: although the court accepts all causes of action, it often refuses to find a tort action on the basis of a contract. The result is the same as if the action was nevere allowed. La Forest accepted concurrent actions but avoided automatically granting relief under alternative causes of action

//London Drugs Ltd. v. Kuehne & Nagel International Ltd.// - Plaintiff signed a standard-form contract that liability for damage to things stored in their warehouse was limited to $40. - Plaintiff's transformer was damaged because employees of the warehouse dropped it. - Plaintiff sued in contract and tort. - Majority refused to consider the tort action; McLachlin rejected the tort claim because the contractual context (ie the expectations of the parties) limited the duty of care of the employees; La Forest claimed the contractual limitation of liability clause eliminated the tort duty of care.

//CN v. Norsk Pacific Steamship// - Norsk's tugboat hit bridge owned by Public Works Canada. Public Works Canada had a contract with CN for them to use the bridge. CN lost business. - Despite lack of privity of contract between CN and Norsk, the majority considered the contractual allocation of the risk to be relevant to assessing the tort liability.Contractual arrangements may limit the right to recovery in tort. - La Forest wrote that CN had occasion to plan ahead, could have contracted with PWC to cover the possibility of loss due to negligence of third parties.

//BG Checo v. BC Hydro// - Checo contracted to erect power lines for Hydro on the condition that Hydro clear the land. Hydro didn't clear land properly but told Checo it had. Checo had to clear the land and sued Hydro for breach of contract and in tort for misrepresentation. - Majority: the clause which allocated the risk of not being cleared did not obviate Hydro's obligation to avoid a misrepresentation - However, tort cannot be used to give a remedy when he has absolved the defendant of that liability in contract - "one cannot sue concurrently in contract and tort where the contract limits or contradicts the tort duty. ... the tort duty ... must yield to the parties' superior right to arrange their rights and duties in a different way. In so far as the tort duty is not contradictd by the contract, it remains intact and may be sued upon." (cb152)

- Contracting parties retain the right to sue in tort but policy concerns relating to the appropriate allocation of risk dictate.

Tort and contracts damages are quite similar: - contracts compensate for the loss of the bargain or profits, putting the plaintiff back in his original position - tort asks what loss was reasonably foreseeable - The test for remoteness in contract leads to a similar result as reasonable foreseeability in tort - Main discrepancy: exclusion of loss of bargain elements in tort compensation. Yet even this difference is disappearing...

Concurrent actions in tort and fiduciary duty: - Equity concerned not with physical damage to person or property but with safeguarding beneficiaires' property interests - Differences from tort: dominance of property interests, different remedies, historical difference law & equity. - Canadian courts broke down the distinction between law and equity, and recognize breach of fiduciary duty in circumstances of power imbalance and trust.

//Norberg v. Wynrib// - Plaintiff alleged her doctor had extorted sexual favours in exchange for drugs. She sued in contract, tort and fiduciary duty. - Sopinka J. applied contractual remedy; McLachlin J. fiduciary remedy; La Forest J. used unconscionability to annul the contract and then found there was the tort of battery.

//Hodgkinson v. Simms// - An investment counsellor failed to disclose that he had an interest in the investments he recommended to his client. - In contract: no damages because the investments were worth the purchase price. In tort: no damages because no harm. In fiduciary duty: restored plaintiff’s damages from investment’s slump //-// Sometimes there remain important differences in the damages that contract, tort and fiduciary breach provide. - La Forest stressed that if concurrence of actions exist, the obligations should not vary substantially depending on the action chosen. How can a universalist approach accommodate the differences between tort & contract versus fiduciary duty? The universalist approach requires similar results regardless of the framing of the action. - La Forest: “where the wrong objected to is really the same, it should be treated the same way [regardless of the cause of action]”

- Concurrency is the first step towards a unified law of obligation. La Forest played an important role, and alerted the court of the pitfalls.

__Part C: Tort Recovery of Pure Economic Loss__ - La Forest played a significant role in the extension of //Donoghue// to pure economic loss. - The sweeping principle opens the door, but when the claimant seeks entry, policy concerns may bar entry. - We may not have come much further than we would have on a moderately flexible view of precedent.

//- Donoghue// in 1932 introduced the concept of reasonable foreseeability and proximity (“closely and directly affected by my act”) - Replaced the old categories of recovery with a single unifying principle - There are two limitations in Lord Atkin’s phrasing: (a) limitation to bodily injury and property damage (b) limitation to those who are in proximity

//Hedley Byrne v. Heller// - Negligent advice given gratuitously (ie: non-contractually) in response to a request. - Loosened limitation (a) of Lord Atkin’s (ie: allowed recovery for economic loss) but tightened limitation (b) of Lord Atkin’s (ie: only persons with //heightened// proximity in the sense of reasonable reliance by the plaintiff).

//Home Office v. Dorset// - The //Donoghue// principle should apply unless there is a valid reason for it not to (e.g.: economic loss is often intentionally caused)

//Anns v. Merton London Borough Council// - //Donoghue// restated without limitations (a) or (b). - Victory for universalist approach; no more limitations based on strict categories or rules. - Now, general rule of recovery and a general rule of limitation (adverse policy considerations) - However, UK repudiated //Anns// in //Murphy v. Brentwood District Council// saying //Anns// stood for ‘no principle at all’ //–// said economic loss only exists in cases of negligent misrepresentation like //Hedley Byrne.// Autralisa rejected //Anns//, too. - Canada upheld //Anns// in //Kamloops//. La Forest encouraged this.

- In free market system, one party may suppose its conduct may cause economic loss to another. But there are important policy reasons to restrict the application there. So //Anns// almost stands for no principle at all. - //Anns// raises the fear of indeterminate liability for an indeterminate class (Justice Cardozo). - Canada had to answer these problems. Answer: to use the second branch of //Anns// to exclude undesirable claims. How to define this branch? Two options: (a) leave it to judges to decide on a case-by-case basis – law would be clarified incrementally (b) rule stating in advance when there’s recovery for pure economic loss, setting out closed categories of recoverable loss. SCC has vacillated between (a) and (b) – neither has triumphed.

//CN v. Norsk// - Stevenson used universal principle of //Ann//s, saying economic loss is not distinguishable from physical loss. - McLachlin accepted pure economic loss but required heightened proximity. Using approach (a), a case-by-case enunciation of the universal principle. Possibility to recognize new instances of recovery for pure economic loss in the future. CN was, for practical purposes, in the same position as PWC, so a heightened proximity. No risk of indeterminate damages to indeterminate class. - La Forest’s dissent: economic loss not //generally// recoverable, only recoverable in certain limited circumstances and categories (listed by Prof. Feldthusen). Instead of the //Anns// approach that of universal rule subject to exception, this is //Anns// upside down: universal exception subject to certain exceptions. The first branch of //Anns// does not function as expected. This is antithesis of universalist reasoning.

//Winnipeg Condominium v Bird Construction// - La Forest majority: first branch of //Anns// met, and second branch met because of risk of physical injury. - Heavy influence of Prof. Feldthusen’s categories to address the intractability of unlimited //Anns//-era liability. - A category-based approach need not be blindly formalistic but can be sufficiently flexible to account for new circumstances and policies. - Some have narrowly construed //Winnipeg Condo:// to mean no recovery if no risk of personal injury. This is inconsistent with //Anns// (see Laskin’s dissent in //Rivtow//).

- Court has not chosen between La Forest’s categorical approach and McLachlin’s universalist approach. Courts have acknowledged that categories are malleable and new categories can exist – not strict formalism. La Forest used flexible categories to limit the unbriddled scope of //Anns//.

//Edgeworth:// McLachlin: where reasonable reliance from //Hedley Byrne// met, no policy reason to exclude recovery for pure economic loss. Similar to La Forest’s category approach.

//Hercules Management:// La Forest: there is reasonable foreseeability but no personal claim (only for the purpose of shareholders as a body). - ‘reading down’ of //Anns// under the second branch.

//Bow Valley Husky// - Lessee of a drilling rig destroyed by a fire, due to negligence of defendants McLachlin (La Forest agreeing): first branch satisfied but second not because lessees not distinguished from other investors in the project. Problem of indeterminate liability not offset by heightened proximity between plaintiff and defendant.

Still a vacilation between (a) proceeding from universal principle to define case-by-case approach and (b) laying down //a priori// categories of recovery. Court looks at established categories as indicative of situations of loss, but not willing to use the list of categories as an exclusionary rule, to the detriment of the universal principle in //Anns//.

__Conclusion:__ //- Anns// promised to eliminate the exceptions of //Donoghue// and end the debate between formalism and universalism. Yet practical need to find limits for recovery of economic loss led SCC to reject most cases. - Universalist principles are alive in Canada, but tempered by pragmatic formalist considerations. - **Has it been worth it? Is Canada further ahead than the UK and Australia which rejected //Anns?// Canada’s case-law is less tidy, but it leaves open the door to a unified law of private obligations. This promise may compensate for the untidiness.** - Canada is different from UK and Australia – influence of the broad principles of the CCQ. The Charter has affected legal reasoning – courts strive to articulate principles instead of incremental application. - La Forest has made an enormous contribution: opened door to more rational law of private obligations and thoughtfully tacked problems revealed.