Protected Situations: Focus on Pure Economic Harm
Both common and civil law attorneys inquire about the extent to which individuals are protected from injuries caused by others, exploring the boundaries of Lord Atkin's proclamation that "The rule that you are to love your neighbour, becomes in law, you must not injure your neighbour." [1] While a common law jurist will focus on the concept of "duty of care" and seek a decision that has already tackled a similar case, a civil lawyer looks for guidance in the articles of the civil code providing for principles of tort liability, in search of a violation of a protected interest or right. Such a different attitude is in part the result of a basic distinction between rule-based and principle-based models of tort law, [2] corresponding roughly to what has been described above as typical and atypical legal systems.
Legal systems following a rule-based, or typical approach in tort law are generally characterized by a series of causes of action delineated by the law, as in the United States and England, where the "medieval writ system (...) left the common law still bearing the marks of the nominate torts." [3] As noted above, German tort law also provides for a catalogue of rights and interests protected by express legal provisions. [4]
On the other hand, a principle-based approach privileges the formulation of an abstract rule providing a comprehensive discipline of tort law. This is the way followed by the French legal system. In fact, as we have seen above, Article 1382 of the French Civil Code prescribes that "any act whatever of a man which causes damage to another obliges him by whose fault it occurred to make reparation." Such a broad formula does not imply that each and every loss caused through fault establishes tort liability. [5] "[L]egal responsibility is subject to various qualifications, which (...) must be sought in general legal principles or common-sense notions about what civil liability is about. In the course of legal history, precedent and jurisprudence have worked together to implant numerous distinctions into the French law of delict which are invisible on the face of the Code itself." [6]
The Italian legal system follows a middle course. Article 2043 of the Italian Civil Code states: "Any intentional or negligent act that causes an unjustified injury to another obliges the person who has committed the act to pay damages." As was seen above, the requirement that the damage be "unjustified" explicitly limits the range of recoverable losses, even if the results are largely similar to those reached in France - whose general clause lacks the modifier - through the system described in the preceding paragraph.
Notwithstanding the differences in the approach to tort law, all the western legal systems allow for physical injuries and damage to property to be compensated. [7] Furthermore, personality and privacy rights too are consistently recognized and protected all over Europe as testified to also by the significant efforts of the Members States of the European Union to prevent the abuse of sensitive data.
While the worthiness of protecting individuals' life, limb and property has never been put into question, the issue of the compensability of mere patrimonial damage - unrelated to the violation of the former rights - has been the object of debate in European States, and a wide range of approaches and results regarding their protection exists. A comparative analysis of the solutions adopted throughout these countries will help to shed some light on how pure economic damages fall within the scope of tort liability.
In spite of the broad formulation of Article 1382 of the French Civil Code, significant restrictions limit tort liability for pure economic damages through varying the concept of faute as well as confining the notion of compensable damage. Such losses do not rise to the same level as personal injuries and damages to property, where potential tortfeasors must take all the safety measures required to protect the rights of third parties. [8] On the other hand, an individual negligently injuring the president of a company about to negotiate contracts for thousands of dollars, [9] or killing a person who owed a debt to another, [10] would hardly be found liable to make good the damage. In such circumstances, even though nothing would thwart a priori the compensability of similar damages, the harm would not be considered to be a direct consequence of the alleged tortfeasor's action nor to be certain. Moreover, the doctrine of non-cumul of actions in tort and in contract further limits the extent of the protection accorded to mere patrimonial interests. It consists in the refusal to accumulate contractual remedies with those available in tort law. Accordingly an interest that is contractual in nature would not be protected in tort. [11]
Poles apart, German and English law, characterized by a much more rigid approach to tort law, have nonetheless found the way to allow for compensating pure economic damages. The German legal system has expanded the boundaries of contractual liability by adopting the concept of the so-called "contract with protective effects vis-à-vis third parties" - Verträge mit Schutzwirkung für Dritter - which allows victims who have not been privy to the contract with the negligent party, nonetheless, to claim damages in contract. In the same way, the concept of culpa in contrahendo ascribes to contractual liability the violation of the good faith principle during pre-contractual negotiations notwithstanding that a contract has not been concluded. [12]
In England the scope of protection accorded to purely patrimonial interests is to be assessed on a case-by-case basis, however, the seminal decision in Hedley Byrne & Co. v. Heller & Partners[13] is of significant guidance.
The case concerned the delivery of a negligent credit statement by a bank to another bank, asked by one of its customers to enquire the creditworthiness of a company. The House of Lords rejected the claim for the breach of the duty of care against the issuing bank because it was not liable in light of the legal disclaimer declining any responsibility for the credit statement. However the House of Lord affirmed that, when there is a sufficiently proximate relationship between the parties, a person who gives advice based apparently on special skill, owes a duty of care vis-à-vis those who could reasonably rely upon his judgment or his skill. The "proximity" requirement was further explained as meaning a relationship "equivalent to contract... in which, but for the absence of consideration, there would be a contract." [14]
From a comparative point of view the rule provided by Hedley Byrne is quite similar to the requirements set up by the German law. [15] In fact, even though the doctrine of privity of contract formally excludes pure economic losses from the scope of contractual liability, such damages are compensated in similar circumstances to that envisaged by the concepts of "contract with protective effects vis-à-vis third parties" and "culpa in contahendo."
The interdependence of tort and contract law shown by Germany and England in respect of pure economic losses is brilliantly encapsulated in the title of an important article by Prof. Markesinis, "An expanding tort law - the price of a rigid contract law," [16] a phrase that "quite obviously cuts in the other direction as well: 'an expanding contract law - the price of a rigid tort law.'" [17]
The Italian experience is characterized by similar uncertainty in the scope of contractual and tort liability. While pure economic harm has generally been ascribed to the law of tort, under the pressure of scholars inclined to adopt the German solution, the Court of Cassation in some cases held that contractual liability was involved. It has been submitted in fact that, also according to Italian law, the absence of a contract does not exclude contractual liability when the "close proximity" requirement is satisfied. Liability in such cases has a contractual nature because it derives from the violation of a specific obligation, rather than from a general rule such as "you must not injure your neighbour." The specific obligation whose violation entails contractual liability is that set forth by the good faith principle according to which the parties in a sufficiently close relationship must act in a correct manner. [18]
Italy shares in the nearly Europe-wide view that intentional torts causing pure economic loss are actionable. [19] Though a single definition of "pure economic loss" does not exist, one source explains that this type of damage "strikes at the victim's wallet and nothing else." [20] It is patrimonial "loss without antecedent harm to plaintiff's person or property," [21] as distinguished from "consequential economic loss," which refers to financial damage resulting from some physical injury to the plaintiff's own person or property. [22] Like intentionally inflicted pure economic loss, this type of damage is often compensated in full. [23]
Legal systems begin to differ regarding the issue of compensability for pure economic harm when it is inflicted unintentionally, and where no direct physical injury to the plaintiff's own person or physical property has been caused. An infinite myriad of circumstances can cause this type of damage, and various authors have devised categories to permit an orderly analysis of the main, recurring fact patterns. [24] One standard case scenario results in what is alternatively known as "ricochet loss" or "relational economic loss," the latter term used throughout the commonwealth countries - even though it is relatively unknown in the United States. It refers to "pure economic loss consequent upon a negligent infliction of harm to the person or property of a third party, or to an ownerless tangible resource." [25] This type of loss will be the subject of the first two Italian cases to be examined below, Superga and Meroni. Common-law states apply a general rule that excludes liability for relational economic loss, known as the exclusionary rule. [26]
Common-law jurists are familiar with the tangle of issues and areas of law converging in such situations. [27] Historically, liability involving third parties, i.e., those not party either to a contractual relationship at the basis of the controversy or to the primary injury in tort, was hindered by the absence of privity of contract between the plaintiff and defendant, preventing the founding of any duty to the plaintiff upon the contract itself. Tort liability was denied based mainly on the policy views embodied in Lord Atkin's sweeping declaration that a duty of care arises where there is foreseeability of harm. [28] Thus, "liability has not been extended to the various forms of negligence by which performance of a contract may be prevented or rendered more burdensome" [29] because no duty is found. [30]
In Europe, similar challenges arise regarding "the traditional views about the relationship between contract and tort law" when dealing with pure economic loss. [31] The classic floodgates argument[32] and other policy and historical reasons have combined in support of an exclusionary rule in a group of "conservative" European states. [33] Another group, which von Bar and Drobnig call the "pragmatic regimes," including England, Scotland and the Netherlands, use a case by case approach principally hinging, as noted above, on a finding of a "duty of care." [34] Though Italy now falls within a third group, referred to as the vliberal regime," along with Belgium, France, Greece and Spain, the cases presented infra will show this was not always the case. Typical of these legal systems is a single general clause in the statute regulating tort law which does not, per se, eliminate or condone pure economic loss, [35] as well as an approach to issues of pure economic loss based strictly on "extra-contractual liability and not crossing over to contract principles." [36]
Tort liability in Italy has progressively expanded over the last half century in a number of ways, including the award of damages for pure economic harm. Three landmark cases of the Court of Cassation trace this progression. Their content illustrates the complex relationships between tort, contract and property law and the institutional and procedural formants used to construct the legal basis of rights in Italy.
The first case, Court of Cassation, Third Civil Division, 4 July 1953, n. 2085 Associazione calcio Torino v. Soc. A.L.I., known simply by the name of the hill east of Turin, "Superga," the site of the airline crash from which the controversy derived, presents the traditional and now obsolete juridical position that disallowed civil liability for cases of pure economic harm for anything except absolute subjective rights (diritti soggettivi assoluti), such as the right to physical integrity or to property. Turin soccer team complained for the extinction of its credit rights, which are mere relative rights, caused by the killing of its players in the air crash. Thus, because plaintiff was not suing for injury to some asset falling within the protected category of "absolute subjective rights," liability was denied.
The position taken by Italy's Court of Cassation in Superga, reflected the conservative trend deriving from laissez-faire 19th century economic thought that limited the confines of tort liability, in keeping with the exclusionary rule described above.
In common-law states, an exception to the exclusion rule apparently survives in the field of "master and servant," whereby one who negligently injures a servant is liable to his master for his loss, allowing recovery of damages for services lost, of value, to the employer[37] and thus, in observance of the duty to mitigate damages "to the extent that the employer plaintiff could make up for the loss of the employee by some adjustment elsewhere in his operation, his damages were automatically reduced." [38] In Superga, and, as we shall see in the case Court of Cassation, Joint Civil Divisions, 26 January 1971, n. 174 S.p.a. Torino calcio v. Romero, simply known as "Meroni," thus named after the renowned soccer player who was killed in an auto accident, the plaintiff soccer team had a greatly reduced possibility to mitigate because of the specialized nature of the performance and highly skilled victims. In a cruel twist of fate, the plaintiff was again the Turin team, suing the tortfeasor who caused Meroni's death.
After 18 years that separate the two cases which present strikingly - almost bizarrely - similar issues and fact patterns, the Court of Cassation reverses itself.
Subsequent case law clarified and eventually expanded the principle enunciated in Meroni to apply also to workers who are easily replaceable. In 1985, the Court of Cassation held:
"While an employer is held responsible for the costs relating to sickness or accidents afflicting its employees whenever these events are connected with a risk of an individual existence - when instead the sickness or accident is the result of a tort by a third party, [the employer] can bring suit against the tortfeasor for compensation of damages, consisting of costs it sustained for the unperformed services provided for under the employment relationship, excluding in any case sums relative to payment of social security contributions during the period of the employee's absence, since these amounts cannot be considered damage caused by unperformed services and do not fall within the relationship of contractual consideration paid for the employee's performance." [39]The court's opinion enunciated the same principle, in its mirror image, from the perspective of the tortfeasor:
Whoever causes damage through tort (regarding in this case, a vehicular accident) to an employee consisting of personal injuries resulting in the victim's absolute, temporary inability with consequent suspension of his performance as an employee, must compensate the employer for damages consisting of the retribution, based on legislation or contract, paid to the employee in the period of absence from work caused by the above inability. The obligation to pay compensation does not extend to the payment of social security contributions, owed due to the simple existence of the employment relationship, even if the employee's performance did not take place.In 1995, further clarification regarding employers' right to compensation was announced by the Court of Cassation:
The employer's right is not conditioned, as erroneously claimed in the challenged opinion, upon whether the injured employee is substitutable or not, but rather derives from the loss suffered for the payments made to the worker of compensation owed him by law or by contract, without having been able to enjoy the correlating job performance. [40]In the De Chirico case the Court held that the harm suffered by the buyer of a forged De Chirico painting caused by a negligent authenticity declaration:
is an injury to the right to patrimonial integrity (diritto all'integrità patrimoniale), and more specifically the right of freely determine transactions concerning the patrimonio (...), as it is reasonable for him to rely on the truthfulness of any relevant statement, whoever makes them, and not be harmed by false statements (...).In addition to these developments, the Court of Cassation has addressed the common scenario that occurs where plaintiff suffers damages when electrical power is interrupted due to defendant's negligence, often referred to as the "cable cases." [42] Unlike the German Courts, which denied liability under such a scenario, in Italy liability for such economic harm was granted, extending the principle announced in Meroni, which had seemed to establish that such liability would only lie where the injury effectively extinguished a credit, as in the case of the death of a debtor. In the landmark case Court of Cassation, Joint Civil Divisions, 24 June 1972, n. 2135 Corti Construction Company v. Pasta Puddu Co., with a very different set of circumstances, the same Court relies largely on Meroni to hold that even a temporary, substitutable and repairable loss of a right to credit is a ground for compensation under Article 2043 Civil Code, as long as the causal nexus between the damage and the unlawful act is present.
The Court has no doubt that an infringement of such a right is - in principle - recoverable and thus the infringement can be characterized as 'unjustified injury' within the meaning of Art. 2043 of the Civil Code. [41]
After the first aperture created in Meroni towards allowing recovery in tort to relative subjective rights, the landmark case of 22 July 1999, n. 500 further expanded tort liability in cases of relational economic harm to include also the so-called "legitimate interests." These are traditionally defined as the position of advantage that an individual holds over an asset constituted by the object of an administrative act. A "legitimate interest" attributes to its holder the right to influence the correct exercise of public powers so as to perfect its interest in the asset. [43] Following a long-standing distinction that comes from the French tradition - "droits subjectifs" actionable in front of the ordinary courts, and "intérêts légitimes" actionable only in front of the administrative courts - the latter could receive protection only through annulment of the administrative decision that had been challenged. However, administrative courts could not award damages. Therefore in the administrative courts there was no remedy, and the ordinary courts were not competent. The case Court of Cassation, Joint Civil Divisions, 22 July 1999, n. 500 Giorgio Vitali v. City of Fiesole overturned the longstanding rigidity in the jurisprudence that denied recovery of damages for legitimate interests.
Immediately following the 500/1999 ("Fiesole") decision, the Italian legislature passed Law 205/2000, "Dispositions regarding administrative justice," which introduced an innovative regulation, modifying Articles 33, 34, 35 of legislative decree 80/98. This decree, as noted above, was one of the elements upon which case 500/1999 of the Court of Cassation overturned the jurisprudence that denied compensability of legitimate interests.
Article 7 of L. 205/2000 establishes that the Administrative Court, within both its general and exclusive jurisdiction, has the competence to hear all issues regarding compensability of damages - even through the award of specific performance - and those regarding other consequential patrimonial rights. [44] The extension of power recognized to the Administrative Court's jurisdiction is clear.
Thus the elimination of the reserve jurisdiction of the Ordinary Court over consequential patrimonial rights is explicitly emphasized. The legislature has thus removed the procedural obstacles and simplified procedure, while clearly consecrating the compensability of legitimate interests, already recognized by the decision of the Court of Cassation, United Divisions, 500/1999.
These procedural issues underlying the conflict in Fiesole derive from the dichotomy in jurisdiction between administrative courts and ordinary courts that produce a dual system, "where all legitimate interests against the administration are competence of the administrative judge," typical of some civil law countries, such as Italy, France, Germany and Austria. [45] Instead, in monist systems, i.e., those having a single-court system, like those in the United States, Great Britain and Belgium, ordinary courts normally hear cases individuals might bring against public bodies or officials. [46] A single-court system results in a leveling effect: "the submission of ruler and subject alike to the jurisdiction of the same courts of law." [47]
A few words on terminology are warranted, to prevent confusion. The expression "consequential patrimonial rights," in the text in Fiesole and in Article 7 of L. 205/2000, recalls the term "consequential economic loss" referred to in the introduction to this section, which indicates the converse economic loss of those which are "pure" and therefore not compensable. Consequential economic losses, rather, derive from some antecedent injury to a person or property, and are therefore generally compensable. The Fiesole language, instead, "consequential patrimonial rights," is translated from the Italian "diritti patrimoniali consequenziali," which refers to very specific rights that inure to a party when an illegitimate administrative act has the "consequence" of diminishing his assets. Though both expressions involve to a type of economic loss for which liability may be found, the two should not be confused. This coincidence - or collision - of juridical terminology presents a typical risk in translating legal texts, where misunderstanding can arise because similar terms may be assigned to related, but quite distinct, notions belonging to different legal systems.
It is worth considering, also, that from a comparative perspective, in Fiesole, the illegitimate administrative act could arguably be considered an omission, thus recalling the common-law distinctions between misfeasance and nonfeasance. At common law, before the idea of contract had developed, a duty arose "to serve all comers." Nonfeasance therefore could amount to a tort. This duty survives today, only with regard to "public officers, common carriers, innkeepers, public warehousemen and public utilities, who become liable in tort for non-performance of their contracts, or even for refusal to enter into a contract at all." [48] We shall touch on the topic of misfeasance and nonfeasance again, below.
Though the value of placing the types of pure economic harm into categories - rather than "lumping" them all altogether, which can result in either an "all or nothing" approach or the use of a case-by-case analysis - has been long debated, [49] some utility can be derived from the attempt to classify cases, if only to place some order in the vast array of types of cases that arise. If Superga and Meroni fit within the "ricochet loss" and "relational economic loss" categories of pure economic loss mentioned in the introduction to this section, where does the administrative mix-up at the heart of the controversy in Fiesole lie? Though it does not seem to fall within any of the groups cited by Bussani and Palmer, this type of harm might be that identified by Feldthusen as "public authority's failure to confer an economic benefit." [50] Similar fact patterns have been acknowledged in Commonwealth countries.
In England at least, no liability lies regardless of whether the defendant is a private party or the public administration. Private defendants "will not be liable for foreseeably but unintentionally causing economic loss, even where unlawful means are used." [51] Likewise, "In England there is no House of Lords case holding public officials liable for pure economic loss except for Anns v. Merton London Borough Council[52] which was overturned when Murphy v. Brentwood District Council[53] shut the door on local authorities' tort liability for negligent building inspection." [54]
It is true that the tort of misfeasance in public office has been recently applied in England and other Commonwealth jurisdictions. [55] However, the "misfeasance" element of this special public law tort still requires something more than the mere negligence. According to the leading case, Three Rivers District Council v. Bank of England, "the availability of the tort of misfeasance in public office has been said to be one of the reasons justifying the non-actionability of a claim in negligence where there is an act of maladministration. [56] While the misfeasance can be either a deliberate exercise or non-exercise[57] (thus, "nonfeasance," as described above) of administrative power, the official must have acted either in knowing excess of his power or with malice towards the plaintiff. [58] Lord Steyn, in reviewing the authorities on this matter in Three Rivers, observed:
The case law reveals two different forms of liability for misfeasance in public office. First there is the case of targeted malice by a public officer i.e. conduct specifically intended to injure a person or persons. This type of case involves bad faith in the sense of the exercise of public power for an improper or ulterior motive. The second form is where a public officer acts knowing that he has no power to do the act complained of and that the act will probably injure the plaintiff. It involves bad faith inasmuch as the public officer does not have an honest belief that his act is lawful. [59]Though the illicit act that caused the damage in Fiesole could thus fall within the type of action required by the English tort of misfeasance in public office, the state of mind described above was not even alleged in Fiesole, indicating that the Italian jurisprudence is more liberal than the English rule.
The Canadian approach to liability of public bodies for unintentionally caused pure economic loss adopts the analytical formula set forth in Anns v. Merton Borough Council, [60] which was adopted by the Supreme Court of Canada in 1984[61] even after it was discarded by the House of Lords itself. [62] The result is that a few claims have been successful in Canada against governmental action that caused pure economic harm through negligence, and these dealt with situations in which the public authority dealt "directly with the financial interests of individual citizens or corporations," [63] and not merely those of the public at large. [64]
It has been submitted that the legal systems so far concerned differ to some extent in granting to individuals standing to bring a lawsuit for tort against state entities. However, the magnitude of this differentiation sensibly decreases for States members of the European Union when the tort consists in the failure to implement European Directives. The European Court of Justice in Francovich v. Italy held the latter in breach of its obligations as Member State of the EU because of the failure to introduce Directive 80/987/ECC of 20 October 1980 concerning the protection of employees in the event of the insolvency of the employer. Therefore, the decision in Francovich establishes that an individual has a cause of action for seeking the compensation of the damage caused by the impossibility of enforcing before the national courts the rights conferred upon him by European law provisions.
[1]Donoghue v. Stevenson, [1932] All ER Rep 1.
[2]R. Dworkin, "The Model of Rules," University of Chicago Law Review 35 (1967) 14 et seq.
[3]Markesinis et al, Compensation for Personal Injury in English, German and Italian Law, 8.
[4]See §823 of the BGB et seq.
[5]Wagner, Comparative Tort Law, in M. Reimann and R. Zimmerman (eds.), The Oxford Handbook of Comparative Law, (Oxford: Oxford University Press, 2008), 1005-1006; see also C. Castronovo, "Sentieri di Responsabilità Civile Europea," Europa e Diritto Privato, 4 no. 10, 2008, 794; V.V. Palmer & M. Bussani, "Pure Economic Loss: Ways to Recovery," Electronic Journal of Comparative Law, 11, no. 3, 2007, 34.
[6]Wagner, Comparative Tort Law, 1006-1007.
[7]By way of example, a few cases hovering near the limits of compensable damages in several major legal systems include Alcock v. Chief Constable of the South Yorkshire Police, [1991] 4 All E R.907, affirming the right to compensation for psychiatric injury, holding that "A person who sustained nervous shock which caused psychiatric illness as a result of apprehending the infliction of physical injury or the risk thereof to another person could only recover damages from the person whose negligent act caused the physical injury or the risk to the primary victim if he satisfied both the test of reasonable foreseeability that he would be affected by psychiatric illness as a result of the consequences of the accident because of his close relationship of love and affection with the primary victim and the test of proximity in relationship to the tortfeasor in terms of physical and temporal connection between the plaintiff and the accident." See also Harrison v. British Railway Board, [1981] All ER 679, where a rescuee was held liable to a rescuer, who sustained physical injuries while trying to rescue the defendant while trying to board a moving train, deeming such actions as having negligently caused a dangerous situation. In the French Court of Cassation rules have been laid down providing for liability in cases of prenatal injuries, including wrongful birth and wrongful life. See Cass. civ. 1re 16 July 1991, summarized briefly, supra; Cass. Civ. 1re, 25 June 1991, and Cass. Civ. 1re, 26 March 1996. See also Italian Court of Cassation, 11 November 2008, n. 26872 providing a full report of the historical evolution of the issue of the compensability of damages to health as well as other heads of tort liability.
[8]Wagner, Comparative Tort Law, 1015-1016.
[9]Cass. Civ. 2em, 12 June 1987.
[10]Cass. Civ. 2em, 21 February 1979; for an Italian ruling on a nearly identical case, see Court of Cassation, 26 January 1971, n. 174, the so-called "Meroni" case, summarized supra and translated in full infra, where liability was indeed found.
[11]Wagner, Comparative Tort Law, 1017; P. Schlechtriem, "The Borderland of Tort and Contract - Opening a New Frontier?," Cornell Int'l Law J. 21 (1988), 467; Palmer & Bussani, "Pure Economic Loss: Ways to Recovery," 37.
[12]Wagner, Comparative Tort Law, 1017.
[13] [1964] AC 465.
[14]See Smith v. Eric Bush [1990] I AC 831 and Caparo Industries plc v. Dickman, [1990] 2 AC 605 - concerning liability for allegedly negligent reports. In the first case the House of Lords held the expert who issued the report accountable for the damage incurred by the person who relied thereupon. In the second case cited above the House of Lords dismissed the claim for the compensation of the pure economic damage suffered by the investor who decided to buy the shares of a corporation on the basis of a misleading financial report. The reason was that that audit was not meant to provide an investment advice, but to provide shareholders with information on the corporation. See also Anns v. Merton London Borough Council [1978] AC 728 and Murphy v. Brentwood District Council [1991] AC 398 - concerning local authorities' liability for granting permits of build while it should have known that the necessary requirements were not satisfied. The House of Lords rendered two contradictory decisions: in Anns it held that the respondent authority liable for the cost of repair; in Murphy it ruled that the local authority was not under a duty of care as regards pure economic loss. (Both cases further discussed infra.) See also W. van Boom, "Pure Economic Loss: A Comparative View," in Pure Economic Loss, W. van Boom, H. Koziol, C.A. Witting (eds.), (Vienna, New York: Springer-Verlag, 2004), 20.
[15]Wagner, Comparative Tort Law, supra, 1019.
[16]B.S. Markesinis, An Expanding Tort Law - the Price of a Rigid Contract Law, 103 LQR 354, 1987.
[17]Wagner, Comparative Tort Law, supra, 1019.
[18]See C. Castronovo, "L'obbligazione senza prestazione ai confine tra contratto e torto," in La Nuova Responsabilità Civile, 2nd ed., (eds.) R. Bordon, S. Rossi & L. Tramontano, (Turin: UTET Giuridica, 1997), 177 et seq.; C. Castronovo, "Ritorno all'obbligazione senza prestazione," Europa e Diritto Privato 11 (2009): 679; N. Lipari, "La responsabilità ed il danno," in Diritto Civile, N. Lipari, P. Rescigno, A. Zoppini (eds.), (Milan: Giuffrè Editore, 2009), 234 et seq. See also Italian Court of Cassation, 26972/2008.
[19] "All systems agree that intentionally inflicted pure economic loss is recoverable in circumstances where the conduct in question is regarded as culpable, immoral or contrary to public policy." M. Bussani & V. V. Palmer (eds), Pure Economic Loss in Europe, (Cambridge: Cambridge University Press, 2003) 9. However, "an intention to harm, on its own, to ground liability," will not suffice. "For the interference to be actionable some additional element of unlawfulness must normally be present." See S. Deakin, A. Johnston & B. Markesinis, Markesinis and Deakin's Tort Law, 506. In the broad field of interference with contractual relations, the intentional tort of "Inducing breach of contract," or "interference with contract," extends back to Roman law, where that status of the parties, or a relationship they had which was recognized by law, protected the certain rights. Thus, the pater-familias could sue for violence against his wife, slaves or children based on the theory that they were so closely associated with him that said violence was tantamount to an attack on him. This rule mutated into the common law as master-servant and then trespass. See Prosser, Handbook of Law of Torts, 929 and W.A. Seavey, "Liability to Master for Negligent Harm to Servant," WASH. U. L.Q. (1956), 309, 313. Doctrinal development proceeded through variations of actions on the case, and by 1853, the leading modern case of Lumley v. Guy established tort liability where a defendant persuaded an opera singer to break her contract; the contract between the plaintiff and the opera singer was considered a "right in rem against the world," 1853, 2 El. & Bl. 216, 118, Eng. Rep. 749. In the United States, with evident cross-reliance on contract and property tenets, this tort has been justified thus: "It seems to us that where a party has entered into a contract with another to do or not to do a particular act or acts, he has as clear a right to its performance as he has to his property, either real or personal; and that knowingly to induce the other party to violate it is as distinct wrong as it is to injure or destroy his property." Raymond v. Yarrington, 1903, 96 Tex. 443, 72 SW 580, 73 SW 800.
[20]von Bar & Drobnig, The Interaction of Contract Law and Tort and Property Law in Europe, 119. [21]Ibid. [22]R. Perry, "Relational Economic Loss: An Integrated Economic Justification for the Exclusionary Rule," Rutgers Law Review, 56, no. 3 (2004) 716. "The normal rule is that relational losses of this kind are not recoverable: the claimant must show damage to his property before he can recover anything." Deakin, Johnston & Markesinis, Markesinis and Deakin's Tort Law, 136. [23] "Consequential damages are compensated in full in all common law jurisdictions." Ibid. 716-717. See also Bussani & Palmer, Pure Economic Loss in Europe, 7. [24]See Bussani & Palmer, Pure Economic Loss in Europe, 10-14, where the authors propose four such categories: ricochet loss; transferred loss; closure of public markets, transportation corridors, and public infrastructures; and reliance on flawed data, advice or professional service. In "Economic Loss in the Supreme Court of Canada: Yesterday and Tomorrow," Can. Bus. L.J. 17 (1990-91) 357-58, Bruce Feldthusen, instead, identified five categories based on Canadian jurisprudence: the independent liability of statutory public authorities; negligent misrepresentation; negligent performance of a service; negligent supply of shoddy goods or structures; and relational economic loss. The last of these, "relational economic loss," and Bussani's and Palmer's first category, "ricochet loss," describe essentially the same circumstances. Ricochet loss "classically arises when physical damage is done to the property or person of one party, and that loss in turn causes the impairment of plaintiff's right." Bussani & Palmer, Pure Economic Loss in Europe, 10. A thorough comparison view of courts' treatment of pure economic loss from the Canadian point of view, is provided in Canadian National Railway Co. v. Norsk Pacific Steamship Co., [1992] 1 S.C.R. 1021. [25]Emphasis added. Perry, "Relational Economic Loss," 716. [26]Ibid. In the United States, a bright line rule was identified in the leading case Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303, 309 (1927) holding that "[a] tort to the person or property of one man does not make the tortfeasor liable to another merely because the injured person was under a contract with that other, unknown to the doer of the wrong." Justice Holmes delivered the opinion, which relied notably on the English case of Elliott Steam Tug Co. v. Shipping Controller, [1922] 1 K.B. 127. The United States' approach is described by W. Tetley, in "Damages and Economic Loss in Marine Collision: Controlling the Floodgates," J. Mar. Law & Com. 22 (1991) 539, which the author describes as "pragmatic," 575. [27] "The relation between the remedies in contract and tort presents a very confusing field, sill in process of development, in which few courts have made any attempt to chart a path." Prosser, Handbook of Law of Torts, 614. [28] "There must be, and is, some general conception of relations living rise to a duty of care, of which the particular cases found in the books are but instances... The rule that you are to love your neighbour becomes in law you must not injure your neighbour; and the lawyer's question, Who is my neighbour? receives a restricted reply. You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who then, in law, is my neighbour? The answer seems to be - persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question." Donohue v. Stevenson [1932] A.D. 562, 580. [29]Prosser, Handbook of Law of Torts, 938. [30] "The critical element on which the pure economic loss cases turn is the duty question." P.T. Burns & J. Blom, Economic Interests in Canadian Tort Law, LexisNexis Canada (2009), 348. This view, though referring to Canadian law, reflects the general common-law rule. [31]von Bar & Drobnig, The Interaction of Contract Law and Tort and Property Law in Europe, 124. [32]This argument held sway in Italy also, until recently. In limiting liability, courts considered the need to prevent, inter alia, an excessive proliferation of potential claims from hindering the flow of judicial traffic and an opening to self-serving demands. See G. Alpa, U. Ruffolo, V. Zeno-Zencovich, (eds), "Diritto di credito e diritto di godimento," in 1. I criteri di imputazione della Responsabilità civile, G. Alpa, U. Ruffolo, V. Zeno-Zencovich, (eds), in Casi e questioni di diritto private, IX - Atto illecito e responsabilità civile, Mario Bessone, (ed.) 8th ed. (Milan: Giuffrè Editore, 2000), 177. [33]Ibid. 125-132. These are Austria, Finland, Germany, Portugal and Sweden, where pure economic loss simply is not included among the so-called "absolute rights" protected by tort law. Ibid. 126. [34]Ibid. 125. [35]In Italy, Civil Code Article 2043, in fact, makes no mention of pure economic loss, but rather speaks generally of "danno ingiusto," or an "unjustified damage." [36]von Bar & Ulrich Drobnig, The Interaction of Contract Law and Tort and Property Law in Europe, 125. According to the authors, the resort to "contractual and statutory solutions is a standard means of tempering the rigidity of the law of tort" in conservative regimes. [37]Prosser, Handbook of Law of Torts, 938. See Mineral Industries Inc v. George, 1965, 44 Misc. 2d 764, 255 NYS2d 114. [38]W.M. Landes & R.A. Posner, The Economic Structure of Tort Law, (Cambridge, Mass: The President and Fellows of Harvard College, 1987), 254. [39]Court of Cassation, Third Civil Division, 26 August 1985, n. 4550. [40]Court of Cassation, Third Civil Division, 25 June 1993, n. 7063. [41]Court of Cassation, 4 May 1982, n. 2765. However the same Court in the seminal Fiesole case abandoned the idea of a "right to patrimonial integrity". It held that such a rights under Italian law was nonexistent. See Castronovo, Sentieri di Responsabilità Civile Europea, supra, p. 801 [42]This type of case was mentioned supra in the German case, BGHZ 29, 65, where the court denied liability under section 823 I BGB because "acts which damaged the commercial or industrial enterprise indirectly only were not regarded as illegal acts." (Emphasis added.) [43]See A. Trabucchi, Istituzioni di Diritto Civile, 42nd ed. (Padua: Cedam, 2005), 67. [44]Article 7, para. 4, reads: "The regional administrative tribunal, within its jurisdiction, is competent to adjudge also all issues relevant to eventual compensation of damages, including integration through specific performance, and other consequential patrimonial rights." The regional administrative tribunal is often referred to in its abbreviated form: "TAR." [45]A. Tarzia, "Public Administration," Chapter Six in Introduction to Italian Public Law, ed. G.F. Ferrari, (Milan: Giuffrè Editore, 2008) 118. [46]Ibid. [47]C. Harlow & R. Rawlings, Law and Administration, 3rd ed. (Cambridge, Cambridge University Press, 2009), 8. [48]Prosser, Handbook of Law of Torts, 615. For cases holding public officers liable in tort, see: Horner v. Terpin, 1934, 63 S.D. 309, 258 N.W. 140; Moffit v. Davis, 1934, 205 N.C. 565, 172 S.E. 317 and Hupe v. Sommer, 1913, 88 Kan. 561, 129 P. 136. [49]Perry, "Relational Economic Loss," 717-722. [50]Feldthusen, "Economic Loss in the Supreme Court of Canada," 357-358. [51]Deakin, Johnston & Markesinis, Markesinis and Deakin's Tort Law, 506. And "unlawful means" is not constituted by mere negligence, as in Fiesole, but rather means "acts which the defendant was not at liberty to commit." Ibid. 519. Clearly some degree of scienter is required, as is evidenced by reviewing the range of torts actionable in England. These include: inducing a breach of contract; interference with contract; inducing breach of fiduciary duty, inducing breach of statutory duty, interference with the claimant's trade or business by unlawful means, where the "unlawful means" can include: physical threats, fraud and misrepresentation, crime, interference with statutory obligations, economic duress and conspiracy. Ibid. 510-527. [52] [1978] A.C. 728 at 751-52 (H.L.). [53] (1990), [1991] 1 A.C. 398 (H.L.). [54]Burns & Blom, Economic Interests in Canadian Tort Law, 356. [55]Deakin, Johnston & Markesinis, Markesinis and Deakin's Tort Law, 399. [56] [2000] 2 WLR 1220 at 1231; [2001] UKHL citing Calveley v. Chief Constable of the Merseyside Police [1989] A.C. 1228, at 1238. [57]Harlow & Rawlings, Law and Administration, 620. [58]Deakin, Johnston & Markesinis, Markesinis and Deakin's Tort Law, 399. [59] [2000], 2 WLR 1220, 1231. [60] [1978] A.C. 728 at 751-52 (H.L.). [61]Kamloops (City) v. Nielsen, [1984] 2 S.C.R. 2 at 10, 10 D.L.R. (4th) 641 at 662-63. In this case, negligence was found against the city of Kamloops when its building inspectors failed to follow-up after having detected defects in a foundation of a house, which later collapsed due to its inaction. Canada's Supreme Court found negligence, holding that the requisite proximity required under the formula that had been articulated in Anns indeed existed, since the statutory norms setting forth the duty to inspect were aimed at protecting citizens from pure economic loss. [62]Burns & Blom, Economic Interests in Canadian Tort Law, 349. [63]Ibid. 353. "Thus public officials have been held under a duty of care with respect to implementing a judicial decision, [Holland v. Saskatchewan (Minister of Agriculture, Food and Rural Revitalization), 2008 SCC 42], carrying out a decision to stabilize loose rock in a cliff overhanging a highway, [Lewis (Guardianad litem of) v. British Columbia, [1997] 3 S.C.R. 1145, 153 D.L.R. (4th) 594] and implementing an inspection system for highway safety [Just v. British Columbia, [1989] 2 S.C.R. 1228, 64 D.L.R. (4th) 689] or fire safety [Laurentide Motels Ltd. v. Beauport (City), [1989] 1 S.C.R. 705] in a reasonable manner." [64]Ibid. 355. The leading case, Cooper v. Hobart, [2001] 3 S.C.R. 537, 206 D.L.R. (4th) 193, 2001 SCC 79, pointed out the importance, under the Anns formulation, that the exercise of such governmental power involve a requisite proximity with the financial interests of those affected and not deal with a wide segment of the market at large. Other Canadian cases where negligence was found for pure economic loss include Strata Plan NW3341 v. Canlan Ice Sports Corp (2001), 93 B.C.L.R. (3d) 136, 2001 BCSC 1214, affd. [2002] 11 W.W.R. 37, 2002 BCCA 526, in what might be considered non-feasance, inasmuch as the defendant municipality was liable for damage resulting from its decision not to inspect for certain types of building code provisions. Similarly, in Brewer Bros. v. Canada (Attorney General) (1991), [1992] 1 F.C. 25, 80 D.L.R. (4th) 321 (F.C.A.), the Canadian Grain Commission failed to assure a sufficient security was posted by a grain elevator operator that went bankrupt after several farmers had extended it credit. The farmers sued and recovered $420,000 from the Canadian government. In Atlantic Leasing Ltd. v. Newfoundland (1998), 162 D.L.R. (4th) 54 (Nfld. C.A.), a two-and-a-half-year delay in securing approvals for a lease by a provincial government rendered it liable to the plaintiff who sued when it defaulted on its financing on the property.