CNR+v.+Norsk


 * //__CNR v. Norsk Pacific Steamship Co., 1992 1 SCR 1021__//**
 * Facts: ** CN railway contracted with Public Works Canada for the use of a bridge. A tugboat owned by Norsk collided with the bridge, causing extensive damage. The bridge had to close and CN suffered economic loss as a result. CN sued Norsk for the loss because it was unable to recover under its K with PWC.
 * Issue: ** Can a third party to an accident sue for pure economic loss? Is “contractual economic loss” recoverable in tort?
 * Holding: ** Yes.
 * Reasoning: **// La Forest J.’s dissent: // He starts by saying that there are 5 categories of economic loss cases that involve 5 different policy considerations (Prof. Feldthusen). They are: liability of public authorities, negligent misrepresentation, negligent performance of a service, supply of shoddy goods or structures, and relational economic loss. This is a case of relational economic loss. hhhhhhh

La Forest considers both the majority and the dissent in //Rivtow//. He makes the point that neither judgment allowed the plaintiffs to recover merely because the problem of indeterminacy has been solved. He says CN did not provide arguments as to why they should recover beyond “it would not lead to indeterminate liability.” No argument is presented as to how awarding damages would deter bad behaviour or protect a specific interest that is different from that of the contractual claimant.

He then considers //Kamloops//. He finds that Wilson J.’s decision contests the narrow exclusionary rule, based on sound policy reasons. But he distinguishes the present case by saying that //Kamloops// had a deterrent effect which would not result from imposing duty in this case.

The problem of indeterminacy asserts itself here, in a sense – we don’t want to give CN a big award if they are passing on the loss to consumers.

He considers the negligent misrepresentation cases and finds that foreseeability of the suffering of the victim is not a condition that should apply here, as we are dealing with an accident.

He says that McLachlan considered geographic proximity to be important, but he can find no reason to do so. His concern is the physical effect test of //Caltrex//, which says that if damages arise because of physical effects to property, they will not be irrecoverable because they are economic. He says that there is no “physical effect” to speak of on CN – its trains are not immobilized.

He says CN can best bear the loss, because they would have been best placed to anticipate its cost – so they should bear it.

// McLachlan J’s majority reasons: // She begins by recognizing that there is no one rule for proximity and that it must be appreciated in terms of reasoning by analogy. She says that sufficient proximity was found because of reliance (HB), duty to warn (RT), and statutory duty (KL). She says the categories are not closed.

She says the narrow physical injury rule for PEL makes little sense. There are cases where there is no physical damage but we need to impose liability anyway.

Note that proximity is connected with policy and that a finding of proximity is thus not a finding of liability.

She rejects the argument that certain types of loss should be seen as the by-product of risky activity. This eliminates the central concept of fault. She then considers 3 economics-based arguments against her position: -the insurance argument: it’s cheaper for CN to insure against this than for Norsk. Rejected because this means the victim will always be the better insurer and it will lead to people taking fewer precautions.

-the loss-spreading argument: it is better to spread risk among many parties than to put it on the shoulders of the tortfeasor. Rejected because this, too, will lead to less care and more accidents

-the “you should have provided for this in the K” argument. Rejected because it assumes equal bargaining power, and that parties always K in the interests of econ efficiency.

She then turns to the case. She finds proximity based on the connection between CN and the property damaged, and the fact that CN and PWC were in a “common adventure.” New Rule: when the K creates a joint venture or common adventure, you may recover.

She disagrees with La Forest about the predictability of the test. She says her test provides for predictability as much as is possible.

// Stevenson J.’s minority reasons: // the key bit that’s different is that he says that he expresses reservations about the use of proximity as a test. He finds that “proximity expresses a conclusion […] rather than a principle.”