Canada: Making Use Of Unusual Torts In Subrogation

Introduction

Historically, separate and distinct causes of action developed within the law of torts. Suits had to be pleaded within an existing and recognized form of action in order to succeed. This pleading requirement was abolished by the Common Law Procedure Act 1852, the principles of which have been accepted into Canadian provincial law. It is now only necessary to plead facts that may, if proven, give rise to a cause of action in tort. It is not necessary to identify or name the specific nominate tort that constitutes the basis of the action.

In practice, we usually lay out which tort we will be leading facts to prove. In insurance subrogation, we usually work within the framework of negligence, but this doesn't mean that we are limited to it when it comes to executing our subrogated right of action. A review of some lesser known torts demonstrates the spectrum of torts available at common law which can be useful in advancing a subrogation claim.

Nuisance and the rule in Rylands v Fletcher

One particularly broad tort that offers an alternative to negligence is nuisance. The tort of nuisance is similar to another tort, the tort of trespass, insofar as it was designed to protect a plaintiff's "use and enjoyment" of land. Relief may be granted against numerous types of nuisance including overhanging branches, seeping sewage, foul odours, barking dogs, bright lights, traffic vibrations, industrial pollution, the subsidence of supporting soil, errant golf balls, and even unwanted telephone calls.1

Liability in nuisance depends on "proof unreasonableness". The court must weigh the plaintiff's interest in being free from interference against the defendant's interest in carrying on the impugned activity as well as society's interest in allowing some types of activities. Relief is only available if having regard to all of the circumstances, the interference was unreasonable.

The essence of the tort of private nuisance is that ...

Nuisance focuses on the effects of certain activities on neighbouring property holders, the nature of the interest invaded, and the extent of the invasion, rather than on the conduct of the tortfeasor (as in negligence). The essence of the tort of private nuisance is that the tortfeasor has unreasonably and substantially interfered with another's reasonable use and enjoyment of his or her land. Interference can be separated into two categories: material physical damage, and interference with enjoyment of land.

The torts of nuisance and negligence differ in that nuisance focuses on the "interest invaded" rather than on the tortfeasor's conduct causing the invasion. It follows that a person may be held liable in nuisance even though that person would not necessarily be found negligent. Accordingly, it is not necessarily a defence to nuisance to show that all possible care has been taken in carrying on the activity which caused the invasion.

In determining whether there has been an unreasonable interference with the use and enjoyment of the plaintiff's land, the court balances the gravity of the harm caused against the utility of the defendant's conduct in all the circumstances. The court also measures the harm in the context of factors like the character of the locale, and whether or not the plaintiff has an abnormal sensitivity.2

Nuisance is a very broad tort, but a factor to consider when bringing a nuisance claim is the availability of a defence for the target defendant. There are several defences that may be raised in nuisance cases which excuse a defendant from liability for conduct which would otherwise be actionable. They include:

  1. Legislative authority - actions that are implicitly authorized legislatively are not subject to liability.

  2. Statutory immunity - actions that are expressly provided for by the legislature are immune from nuisance as well.

  3. Prescription - a prescriptive right may be acquired to continue to commit certain nuisances if they are done continuously for fifteen years.

  4. Acquiescence or Consent - no liability will be attributed if it is shown that there was an overt consent or active encouragement of the defendant's activity.

  5. Act of a third person - the intervening act of a third party may be a defence if it is unforeseeable, but not if it is the kind of act which should have been foreseen by the defendant.

Rylands v Fletcher

The Rylands v Fletcher rule is one of the situations at common law where there can be tort liability for unintended and non-negligent harm. The rule states that "a person who for his own purposes brings on his lands and collects and keeps there anything likely to do mischief if it escapes, must keep it in at his peril, and if he does not do so, is prima facie answerable for all the damage which is the natural consequence of its escape".

In Rylands v Fletcher, Fletcher contracted a builder to construct for him an artificial pond/reservoir. While building it, the contractors discovered a series of old coal shafts and passages under the land filled loosely with soil and debris, which joined up with Rylands' adjoining mine. Rather than blocking off these shafts, the contractors left them. Shortly after being filled for the first time, Fletcher's reservoir burst and flooded Rylands's mine. The tort of trespass was inapplicable, as the flooding was deemed not to be "direct and immediate"; the tort of nuisance was rejected as this was a one-off event.

It is generally agreed that Rylands v Fletcher expounds a doctrine of strict liability. However, there is no agreement about whether the same results could not be achieved under negligence law combined with res ipsa loquitur.3 Regardless of this disagreement, there are some cases which would not have been dismissed were it not for the strict liability theory.4

The escape of filth and sewage from a drainpipe also attracts liability.

Rylands v Fletcher has been applied to an overflow from a domestic hot water heater, other home plumbing system, and sprinkler systems. However, the rule does not cover legislatively authorized public sewers and storm drainage built by municipal governments. The escape of filth and sewage from a drainpipe also attracts liability. In the context of fire, home fireplaces are considered natural use and do not attract liability, but accidents caused by fire used for industrial or transportation purposes, including tractor engines and vehicle do. Strict liability does not cover 'ordinary' amounts of household electricity or gas but does encompass those who use or transport large quantities of gas or electricity. Less commonly, Rylands v Fletcher has been used in cases involving poisonous fumes, gas vapours, and herbicides.

Like nuisance, strict liability is subject to defences. There are five major defences available to defendants who are subject to the Rylands v Fletcher rule.

  1. Consent of the plaintiff - can be explicit or implied.

  2. Default of the plaintiff - is a defence akin to contributory negligence.

  3. Act of god - rarely applied, encompasses not every storm or rainfall, but the more extraordinary phenomena of nature which cannot be foreseen.

  4. Deliberate act of a third person - is a defence to strict liability if a defendant can prove that the "escape" in question was caused by a third person's conscious act.

  5. Legislative authority - is a defence where an activity is authorized by legislation, no strict liability is imposed unless the defendant has been negligent.

The Law of Trespass: Land and Goods

Trespass to Land

The tort of trespass to land is committed by entering upon, remaining upon or placing or projecting any object upon land in the possession of another without lawful justification. Trespass does not depend upon the intent to commit a tort. A trespass occurs, regardless of consciousness of wrongdoing, if the defendant intends to conduct itself in a certain manner that in fact constitutes trespass and exercises its volition to do so. While some form of physical entry onto or contact with the land is essential to constitute a trespass, the act may involve the defendant personally entering the plaintiff's land, placing or propelling an object or a third person onto the plaintiff's land, or discharging some substance onto the plaintiff's land.

The difference between trespass to land and nuisance is that trespass is actionable per se whereas nuisance requires proof of loss. Trespass protects possession, whereas nuisance protects the quality of that possession. A key limiting factor in trespass is intent. To establish liability in trespass requires showing intention whereas liability in nuisance may be imposed even if the defendant's conduct was not intentional.

Because trespass may be committed by allowing water to escape onto land, arguing in trespass may offer an alternative route to liability in flood-related claims that involve other parties.

Trespass to Chattels

Trespass to chattels involves direct interference with a person's possessory interest in a chattel. It appears to be still moot whether trespass to chattels is actionable in all circumstances without proof of actual damage, but, by analogy with trespass to land, this would appear to be the case. Trespass to chattels may be a relevant tort in recovery for losses related to an insured's claim on their lost goods. The defendant is liable for all damage which may legitimately follow from an intentional trespass, whether or not such damage was foreseeable. The foreseeability requirement is an issue in negligence claims that a claim in trespass to chattels may overcome.

Some Lesser Known Torts That May Apply

Intentional Infliction of Mental Suffering

The plaintiff must suffer actual harm amounting to more than "mere anguish and fright"...

To establish the tort of intentional infliction of mental suffering a plaintiff must make out that the defendant calculated to cause or intentionally caused harm to the plaintiff. For example, the communication of a knowingly false statement may give rise to the presumption that the harm was intentionally caused. The requirement may also be met by establishing that the defendant's actions constituted extremely "flagrant and outrageous conduct". The harm to the plaintiff must be the natural and probable result of the defendant's act. The plaintiff must suffer actual harm amounting to more than "mere anguish and fright"; depression, for instance, would apply.

The tort of intentionally inflicting mental suffering has, to a certain extent, been superseded by negligence, as mental suffering can now be claimed as a head of damage under negligence and in many cases, the burden of proof in negligence is easier to establish. However, the tort of intentional infliction of mental suffering may still help an insurer recover on a subrogated claim in the event that an insurer had to pay out a claim including mental suffering, where no duty of care could be established between the insured and the defendant.

Tort of Breach of Confidence

The unauthorized use of confidential information may give rise to liability and an award of damages. This remedy was historically based on the equitable doctrine that a person who has received information in confidence should not take unfair advantage of it.

In a tort for breach of confidence, the plaintiff must establish:

  1. the information the defendant used was of a confidential quality,
  2. it had been imparted in confidential circumstances, and
  3. detriment was suffered due to unauthorized use.

This tort is useful in subrogation because it is not necessary to establish the defendant intentionally used the information, only that a defendant used it. Consequently, an action can be maintained against a third party who has had no notice that the information he or she has acquired was in breach of confidence. This may allow for a successful claim for a client's economic loss where negligence would otherwise fail.

The Tort of Inducing Breach of Contract

It is a tort for a party without legal justification to induce another to not perform contractual obligations with a third party or to prevent that other from performing contractual obligations with a third party. This interference with the interests of the plaintiff has been described as inducing breach of contract, interference with contractual relations or interference with economic interests.

To succeed, the plaintiff must show:

  1. a contract existed,
  2. the defendant was aware of the contract,
  3. the defendant caused the inducement or wrongful interference, and
  4. the plaintiff suffered damage as a result.

This tort would apply in situations where a defendant intentionally interferes in the plaintiff's contractual relations, as an alternative to incidental interference that may be captured by negligence.

The tort of inducing breach of contract may be useful to insurers in subrogation when looking to personally attribute liability to a director of a corporation that is no longer viable. Courts have imposed personal liability on the directors of the corporations where he/she has acted in his/her own interest rather than in the best interest of the company.

Intimidation

The tort of intimidation can take two forms...

The tort of intimidation can take two forms:

  • Two-party Intimidation - where Party A compels Party B – by means of threatening an unlawful act – to act or refrain from doing some act which then causes loss to Party B; or

  • Three-party Intimidation - where Party A compels Party B – by means of threatening an unlawful act – to act or refrain from doing some act which causes loss to Party C. Party B's conduct to Party C need not be unlawful. An example of this tort is where a defendant intimidates the customers of the plaintiff to withdraw their business from him or her or intimidates an employer to discharge an employee.

To be successful, the plaintiff must establish:

  1. the defendant communicated some form of threat,
  2. the threat was unlawful,
  3. the recipient of the threat complied with the threat,
  4. the defendant intended to injure the plaintiff, and
  5. the defendant suffered loss as a result of the compliance with the threat.

One possible application in subrogation of the tort of intimidation is if an insured ever claimed a loss on something that they were made to pay for when there was no contractual basis to make them pay that expense.5

Passing Off

Passing off is an economic tort which protects the right of an individual, who uses a trade name, mark, guise or symbol to distinguish his or her services or goods in the marketplace, from the misappropriation of that property and related unfair trading practices that may adversely affect his or her business interests. The three necessary components of a passing-off action are the existence of goodwill, deception of the public due to a misrepresentation, and actual or potential damage to the plaintiff.

The tort of passing off will be most applicable to our business clients. Passing off may give us a route to recover for economic losses suffered.

Unjust Enrichment

The law of restitution is that body of law, drawn from principles of both law and equity, which is designed to prevent one party being unjustly enriched at another's expense. Unjust enrichment is a cause of action in itself and the granting of a remedy for unjust enrichment does not depend upon finding another cause of action. An unjust enrichment occurs when there is:

  1. the receipt by the defendant of a benefit,
  2. at the plaintiff's expense,
  3. in such circumstances that it would be unjust to allow the defendant to retain the benefit.

The action related to unjust enrichment may apply in any circumstance where an insured suffered an economic loss to the benefit of another. The paid claim could be subrogated to disgorge the defendant of their unjust enrichment.

Battery

A person who proves that a defendant made direct physical contact with him or her makes their case for battery.

A person who proves that a defendant made direct physical contact with him or her makes their case for battery. The onus then shifts to the defendant to establish that the contact was neither intentional nor negligent; or that the plaintiff consented to the contact.

A payout for an insured's medical expenses might be eligible for subrogation through battery if the insured was injured by another's intentional act. This could include a punch or kick, and other forms of strikes such as hitting a person with sticks, rocks, or even pushing someone to harm.

Negligent Misrepresentation

Though a relatively recent feature of the common law, the tort of negligent misrepresentation was first recognized by the House of Lords in Hedley Byrn; it is now an established principle of Canadian tort law. The Supreme Court of Canada confirmed that an action in tort may lie, in appropriate circumstances, for damages caused by a misrepresentation made in a negligent manner.6

To make out a claim of negligent misrepresentation there are five general requirements:

  1. there must be a duty of care based on a "special relationship" between the representor and the representee;
  2. the representation in question must be untrue, inaccurate, or misleading;
  3. the representor must have acted negligently in making said misrepresentation;
  4. the representee must have relied, in a reasonable manner, on said negligent misrepresentation; and
  5. the reliance must have been detrimental to the representee in the sense that damages resulted.7

The tort of negligent misrepresentation may assist recovery on subrogation claims where an insured claims a financial loss caused by another. This could include lost profits or any other insured business interest lost because of another's misrepresentation.

Conclusion

While negligence and breach of contract will typically be the most applicable causes of action in the subrogation context, there may be additional causes of action available which do not depend upon finding specific fault with the conduct of the third party. Strategic use of these causes of action can often permit recovery of losses even where the third party is morally blameless.

Footnotes

1 Other categories considered at common law include: 1. Access Obstruction, 2. Agricultural Operations, 3. Air Pollution, 4 Dangers Adjoining Highways, 5. Depriving Land of Support, 6. Fences, 7. Fire Hazard, 8. Floodlighting, 9. Foreign Substances Invasion, 10. Harassing Telephone Calls, 11. Highway Obstruction, 12. Hospital Proximity, 13. Land Flooding, 14. Light Obstruction, 15. Loss of View, 16. Navigable Water Obstruction, 17. Noise and Vibration, 18. Ruinous Structures, 19. Things Alluring to and Dangerous to Children, 20. Trees, 20.1. Video Surveillance, 21. Water Flow Disruption, 22. Water Pollution.

2 Antrim Truck Cetnre Ltd. v Ontario (Transportation), 2013 SC 13, and Allen M. Linden & Bruce Feldthusen, Canadian Tort Law, 10th ed (Toronto: LexisNexis Canada, 2015) at 609-621.

3 The principle that the occurrence of an accident implies negligence.

4 MacDonald v Desourdy Construction Ltée, [1972] NSJ No 183, 27 DLR (3d) 144 on blasting.

5 Metropolitan Conference Centre Inc. v Hunter, 2016 ABCA 83 (Day before event, manager made demands as to set-up of event and communicated these to couple's event planner — Manager required extra fees from couple failing which requested decor would not take place).

6 Queen v Cognos Inc, 1993 1 SCR 87 at 108.

7 Ibid at 110.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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