Tetley (2002) introduction to conflict of laws 5
DAMAGES & MEASURE OF DAMAGES (AN ANCILLARY)
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DAMAGES & MEASURE OF DAMAGES (AN ANCILLARY)Damages consist of the principal sum due (and in some cases accessories such as punitive damages), and the currency in which a contract or judgment should be paid, and interest at a certain rate, from a certain date. Tetley – Conflicts have often arisen because of bad law on damages and the refusal of some courts to award complete compensation to the victim of a breach of an obligation (RII – with discretion to limit the award based on contributory fault or failure to mitigate). Admiralty however, recognizes equity and so the courts may, in their discretion, award proper damages in a fair and just currency, as well as interest at the prime commercial rate, compounded from the appropriate date. In this way a close approximation of restitutio in integrum is awarded which should be the principal aim of any decision on damages in contract or in tort/delict. Basic rule is restitutio in integrum – the placing of the victim of a breach of contract or of a tort/delict in the same position he was in before the event. CivL includes loss of profit in contract and delict, but the ComL generally doesn’t. Damages in ContractCivil Law: Damages in contract in the civil law (expect in cases of fraud) are those that are direct and foreseeable, except in cases of fraud. Common Law: The measure of damages in contract in the common law is found on the two rules of Hadley v. Baxendale (UK, 1854): (i) damages which arise naturally (or the defendant knew or should reasonably be expected to have known would arise form the breach) and (ii) damages which arise from special circumstances (communicated to the defendant at the time of making the contract). Damages in Tort & Economic LossIn the civil law, restitutio in integrum includes loss of profits (i.e. economic loss) in both contract and delict (French CC Art. 1149, in Germany, this is subject to a case-by-case analysis) – they need only be direct and immediate, not foreseeable. The common law is usually much less generous and much less clear with respect to economic loss – there must be physical damage. Economic loss is loss of income, intangibles – loss of profit – pure economic loss is loss of profit and no physical damage. This is often where the conflict arises. Valleyfield Bridge – decide to sue in the Superior Court of Quebec because think will have a better claim. Bridge broke and ships couldn’t pass…no physical damage. In CCQ we accept loss of profit without physical damage. Jarvis Crown – see below in Canada FranceDamages in delict in the civil law are those which are direct and immediate and include “perte de gain” or loss of profit (French CC Art. 1151). Damages in cases of delict or fraud need only be direct and immediate; foreseeability is not necessary. Loss of profits (including economic loss) has traditionally been recoverable in France, in delict, where its occurrence is a direct and immediate consequence of the fault of the defendant, on the basis of the restitutio in integrum doctrine. Has same wording as CCQ…Rodier has criticized it though saying all the jurisprudence says is that it has to be direct and immediate consequence and nothing else is added. United KingdomU.K. courts have rarely awarded economic loss where the claimant has not also received direct physical damage from the defendant. Reliance losses caused by negligent advice are an exception, provided the loss was reasonably foreseeable and there existed a special relationship between the parties. The House of Lords, in Murphy v. Brentwood District Council (1991), confirmed its opposition to the compensation of pure economic loss in tort, the main exception being reliance cases such as Hedley Byrne. PEL was refused in the basic English chartering case of the Mineral Transporter(1986) – there, a time charterer suffered considerable loss of income (but no physical damage of its own), because a ship it had chartered had been damaged and required time for repairs. In The Nicholas H (1995) the court held: “in determining liability for negligence, in both physical damage and economic loss cases, the court must consider, not only foreseeability and proximity, but also whether it is ‘fair, just and reasonable’ to impose a duty of care.” Hedley Byrne – negligent statements that were relied on, creating lost profits…awarded damages… Murphy v. Brentwood – the door was closed to pure economic loss in this case (see above), except above The Nicolas H – House of Lords held that the classification society was too far away…this case is important because it sets a “fair, just and reasonable standard” for establishing physical and economic damages… You can see how these cases are evolving United StatesIt was feared in the U.S. that to allow the recovery of economic loss would open the floodgates to "liability in an indeterminate amount for an indeterminate time to an indeterminate class" (Cardozo in Ultramares Corp.) and the leading American case, Robins Dry Dock (1928), has followed the principle. General Principle: “harm of a general sort to persons of a general class is only actionable if it might have been anticipated by a reasonably thoughtful person, as a probable result of the act or omission.” Nevertheless, economic loss has been awarded in the following cases in U.S. law: (i) commercial fishermen for their loss of opportunity to earn their living as a result of pollution; (ii) economic losses resulting from indirect physical damage - a ship broke a gas pipeline owned by a gas producing company, in consequence, an aluminum plant, which was a client of the gas producing company, was obliged to shut down its operations abruptly and its plant was damaged - eventually dismissed on other grounds; (iii) joint venture operations; (iv) products liability; and (v) economic loss by statute. Robins Dry Dock v. Flint, 1927– the leading case…a ship was being repaired when the shipyard had a fire and the ship-owner had the physical damages but the charter did not, he lost the use of the ship over 6 months or so… State of Lousiana v. Test Bank, 1985 – a barge sank and polluted the river which hurt the fishermen’s ability to make a living…the fishermen didn’t own the fish but they couldn’t make a living…the fishermen won so they are a class of persons who are owed this duty Consolidated Aluminum Corporation v. C.F. Bean Corporation, 1984-88 – court held that you could claim for indirect physical damage…harm of a general sort to person of a general class is only actionable if it might have been anticipated by a reasonably thoughtful person, as a probable result of the act or omission…the court held that the action was not foreseeable and therefore the damages were not recoverable, but the rule was enunciated… In the United States they have slight nuances with respect to this principle and it is further complicated because it depends on which Circuit (there are 13)…there hadn’t yet been a Supreme Court case. The door is slightly open but there is little chance unless you have a good case in equity. A Canadian Look at American Conflicts of Law Theory, p.78 CB American conflicts theory depends on two major factors that are different from most of the world, their legal system and their social practices. Tetley discussed the U.S. system of corrective justice – state doesn’t force individuals or corporations to do many things (i.e. class action against McDonald’s by the public instead of the government legislating against fat content in foods) – c ars have become safe through lawsuits and consumer activism. The U.S. legal system is also very different… All of this affects the U.S approach to conflicts of law – equity has taken over interstate conflict Idea of the better law or the “best” law…multiple numbered rules…Tetley’s methodology Discusses the American social justice system (p.85) – implications. Distributive justice (state distribution – generally fairer), as in Canada (with Medicare, automobile insurance) vs. corrective justice Personal injury is a major part of the American legal system, as opposed to ours and England, where we have workers compensations for injury, etc. American procedural law – jury trials – Prestige: one of the reasons that Spain has decided to sue in the United States is because at a jury trial they can expect much more sympathy and damages. American rule – one of the reasons that U.S. split off from England is the unfairness of the English legal system (courts) – court costs were also very high and were preventative of cases being brought before the courts Other issues – contingency fees, discovery, forum non conveniens – a useful American tool The American legal system resulted in a different approach to law – corrective justice and the legal system lead in almost every case now to the court deciding on equitable principles – Juenger and MacDougall. AustraliaGenerally applies Hadley and is based on English foundations, using remoteness or foreseeability. Economic loss has generally been refused under Australian law in the absence of any accompanying bodily injury or property damage (The Mineral Transporter, 1983). QuebecSimilar position to that of France and civil law jurisdictions generally regarding recovery for loss - CCQ Art. 1607 – “entitled to damages for bodily, moral or material injury which is an immediate and direct consequence of the debtor’s fault.” (See also CCQ Art. 1611, 1613, 1621). 1607 CCQ – creditor is entitled to damages for any loss resulting directly and immediately from the debtors fault… 1611 CCQ – compensations for amount of loss he has sustained and damages he has been deprived…basis for pure economic loss 1613 CCQ – in contract, liable only for damages that were foreseen or foreseeable at the time the obligations was contract where the damages do not result from intentional or gross fault and even then must be direct or immediate 1621 CCQ – when punitive damages provided for by law, they cannot exceed what is sufficient for their preventative purpose…punitive damages are assessed in light of all of the appropriate circumstances in light of the gravity of the debtors fault, his patrimonial situation, the extent of the reparation for which he is already liable to the creditor and th fact that the payment of the damages is holy or partly assumed by a third person… The problem with the CivL, according to Tetley, is that it is not as ever evolving as the ComL – Quebec CivL is more so though as we have jurisprudence to influence the interpretation of the Code. There is a broader view of PEL in the CivL… CanadaThe Supreme Court of Canada in The Jervis Crown, Norsk v. CNR (1992) awarded economic loss. The court held that “pure economic loss is prima facie recoverable where, in additional to negligent and foreseeable loss, there is sufficient proximity between the negligent act and the loss.” In particular it was held by the majority that each case must be judged on its particular facts. See below. Jervis Crown (CNR v. Norsk) – there was a bridge leased by CNR and the Norsk damages it, forcing the CNR to detour around it, which would cause them to lose money…the CNR claimed for having to drive 60 extra miles…the captain admitted that he had seen trains go across and that he knew that knocking down the bridge would force the CNR to go around and would cause damages…the court said that in this case the damage was foreseeable, calling for an incremental approach in cases like this In Martel Building v. Canada (2000) – Supreme Court held that pure economic loss was not compensable in tort in Canadian common law, except in five types of cases: (1) independent liability of statutory public authorities; (2) negligent misrepresentation; (3) negligent performance of a service; (4) negligent supply of shoddy goods or structures; (5) three types of contractual relational economic loss cases, i.e. where the defendant’s tort deprives plaintiff of the benefit of his contractual right to use a third party’s property. These three cases arise where (a) where plaintiff has some possessory or proprietary interest in the damaged property; (b) general average case; and (c) where the plaintiff and third party are involved in a joint venture. This is complicated and has many subdivisions – in Anns the SCC declared that none of these categories are closed – an extension of contractual relational economic loss would be considered under the Anns analysis. In Anns v. Merton London (1978) – Two-part test propounded by Lord Wilberforce for determining when to award damages in tort for pure economic loss still applies in Canada, although no longer in England. The Supreme Court has indicated that this “flexible two-stage analysis” of Anns has been applied to each of the first four categories of economic loss in Canada and that it is likely that any extension to the categorical exceptions of contractual relational economic loss also would be considered under the same analysis. First must ask whether sufficient relationship of proximity or neighborhood such that it is within the reasonable contemplation of the defendant that carelessness on his part may be likely to causes damage to the plaintiff – prima facie duty of care arises. Then, it is necessary to consider whether there are any considerations which ought to negative, reduce or limit the scope of duty or the class of person to whom it is owed or the damages to which a breach of the duty may give rise. Reliance loss has also been awarded in Canada (See Rivtow Marine v. Washington Iron Works 1974, Kamloops v. Nielson 1984). Problems Are damages procedural or substantive? Tetley claims that they are ancillaries and have a proper law of their own. Problem of Currency – used to be that can only render a judgment in Canadian dollars…today in most jurisdictions you need not render a judgment in the currency of the forum. Problem of Interest – should be so that the person recovers fully and there is restitutio in integrum and that such a result is fair and just. 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