Appellant, a courier company, contracted with the Province of British Columbia to deliver an envelope from a government office in Victoria to the Land Registry Office in Prince George. Unknown to the appellant, the envelope contained a Crown grant, in favour of respondent, which respondent wanted registered before the close of business on December 31, 1976. Time was of vital concern to the respondent because, under a longstanding contract, the respondent had agreed to sell to a third party certain lands that it held under lease from the Crown. Under that contract, failure to register the grant within the time stipulated entitled the purchaser to treat the contract as at an end. Registration occurred after the date stipulated in the contract because of the courier's failure to deliver the envelope on time. The third party refused to complete the transaction.
In this action brought against both the Crown and the appellant courier, the trial judge found that the courier was unaware of the envelope's contents and was not informed of the reason for "air shipment only, express", and "special delivery". The claim against the Crown was dismissed both at trial and on appeal and was not pursued further. The trial judge found the courier not liable but a majority of the Court of Appeal came to the opposite conclusion.
Held: The appeal should be allowed.
Per Estey, Chouinard and Lamer JJ.: The principles applicable to negligence generally were sufficient to dispose of this appeal. No duty of care exists unless it is shown that a sufficient relationship of proximity or neighbourhood exists between the parties, "such that in the reasonable contemplation" of the defendant, his carelessness may likely injure the plaintiff. The appellant courier had no knowledge of the existence of the respondent and could not reasonably have known of the existence of a class of persons whose interests depended upon timely transmission of the envelope. There was, therefore, no actual or constructive knowledge in the courier that the rights of a third party could in any way be affected by the transmission or lack of transmission. If a person in respondent's position were included in a class considered to be reasonably within appellant's contemplation, there would be no logical point of breaking off so as to put a reasonable practical limitation on the courier's range of liability.
There was no reliance here by respondent upon any representation or undertaking of the appellant. Respondent, by the time appellant was engaged by the Crown, was in a position of risk through no act of its own. The situation of risk, in which a delay would be fatal to respondent's interests, was created by the terms of the respondent's contract with the third party, in conjunction with the Crown's refusal to allow a representative of the respondent to carry the documents. There was no assumption of risk in reliance on the appellant's undertaking to deliver the documents.
The requirements of proximity were not met on the facts of this appeal. As respondent did not come within a limited class in the reasonable contemplation of a person in the position of the appellant, it was unnecessary to consider whether any circumstance existed to negate or limit the scope of the duty, the class of persons to whom it was owed, or the damages seen in law to flow from a breach of the duty.
The same conclusion can be reached on the basis that the damages here were too remote and consequently not recoverable. If the parties had been in a relationship of contractual privity the losses complained of would not have been foreseeable.
Per Wilson J.: No duty of care was owed by the appellant courier to respondent Hofstrand Farms Limited. The principle established in Anns v. Merton London Borough Council and applied in City of Kamloops v. Nielsen accordingly had no application here. There was no relationship of proximity such that the courier could reasonably have contemplated that its carelessness was likely to cause economic loss to the respondent.
Cases Cited
By Estey J.
Hedley Byrne & Co. v. Heller & Partners, Ltd., [1963] 2 All E.R. 575; Haig v. Bamford, [1977] 1 S.C.R. 466; Candler v. Crane Christmas & Co., [1951] 1 All E.R. 426; Rivtow Marine Ltd. v. Washington Iron Works, [1974] S.C.R. 1189; Junior Books Ltd. v. Veitchi Co., [1982] 3 All. E.R. 201, considered; Anns v. Merton London Borough Council, [1978] A.C. 728; Donoghue v. Stevenson, [1932] A.C. 562; Dorset Yacht Co. v. Home Office, [1970] A.C. 1004; Ultramares Corp. v. Touche, 255 N.Y. 170 (1931); Weller & Co. v. Foot and Mouth Disease Research Institute, [1966] 1 Q.B. 569; Seaway Hotels Ltd. v. Gragg (Canada) Ltd. and Consumers Gas Co. (1959), 17 D.L.R. (2d) 292; Caltex Oil (Aust.) Pty. Ltd. v. The Dredge “Willemstad” (1976), 11 ALR 227; Dominion Tape of Canada Ltd. v. L. R. McDonald & Sons Ltd., [1971] 3 O.R. 627; Bethlehem Steel Corp. v. St. Lawrence Seaway Authority, [1978] 1 F.C. 464, 79 D.L.R. (3d) 522; Spartan Steel & Alloys Ltd. v. Martin & Co. (Contractors) Ltd., [1972] 3 All E.R. 557; Gypsum Carrier Inc. v. The Queen, [1978] 1 F.C. 147, 78 D.L.R. (3d) 175; Welbridge Holdings Ltd. v. Metropolitan Corporation of Greater Winnipeg, [1971] S.C.R. 957; Nocton v. Lord Ashburton, [1914] A.C. 932; Asamera Oil Corporation Ltd. v. Sea Oil & General Corporation, [1979] 1 S.C.R. 633; Hadley v. Baxendale (1854), 9 Ex. 341, 156 E.R. 145; Victoria Laundry (Windsor) Ld. v. Newman Industries, Ld., [1949] 2 K.B. 528; Cornwall Gravel Co. v. Purolator Courier Ltd. (1978), 83 D.L.R. (3d) 267, affirmed [1980] 2 S.C.R. 118, referred to.
By Wilson J.
Anns v. Merton London Borough Council, [1978] A.C. 728; City of Kamloops v. Nielsen, [1984] 2 S.C.R. 2, distinguished.
APPEAL from a judgment of the British Columbia Court of Appeal, [1982] 2 W.W.R. 492, 131 D.L.R. (3d) 464, 33 B.C.L.R. 251, allowing an appeal from a judgment of Fawcus J. Appeal allowed.
Michael J. Herman, Lorne M. Alter and Mel Mogil, for the appellant.
Harold A. Hollinrake, for the respondent.
The judgment of Estey, Chouinard and Lamer JJ. was delivered by
1. Estey J.‑‑This appeal concerns a claim in negligence for pure economic loss. The appellant (defendant) entered into a contract on December 29, 1976 with the Province of British Columbia to deliver an envelope from a government office in Victoria to the Land Registry office in Prince George, B.C. Unknown to the appellant, the envelope contained a Crown grant in favour of the respondent (plaintiff) which the respondent wanted registered in the Registry Office at Prince George before the close of business on December 31, 1976. Time was of vital concern to the respondent because, under a long standing contract, the respondent had agreed to sell to a third party certain lands in B.C. which were then under lease by the Crown to the respondent. Under that contract of sale, failure to register the last of a series of Crown grants within the time stipulated entitled the purchaser from the respondent, at his option, to reconvey all lands previously conveyed under the agreement and require a refund of all moneys theretofore paid with interest, or to treat the contract as at an end.
2. In the event, the appellant, although having undertaken in its contract with the Crown to make delivery the next day, did not deliver the envelope containing the Crown grants until January 4, 1977. The third party refused to complete the transaction, and the dispute between the respondent and the third party was eventually settled for $77,000. The amount of the settlement is not in issue.
3. Initially, the action leading to this appeal was brought against both the Crown and the appellant courier, but the claim against the former was rejected both at trial and in the Court of Appeal and was not pursued in this Court. There was a finding by the trial judge, not challenged here, that the appellant courier did not know what the envelope contained, or of the existence of the contract between the respondent and the third party, and that no explanation had been made to the appellant of the need for delivery by "air shipment only, express" and "special delivery". The Crown, in engaging the appellant courier, did so with the approval of the respondent, as both the respondent and the employees of the Crown were in agreement that delivery by registered mail, which was the departmental practice, would at that time of year be inappropriate.
4. The learned trial judge found no duty owed by the appellant courier to the respondent, whatever rights the Crown, as contracting party, might hold in law. It was therefore held that in order to find a duty in the courier, it must have been reasonably foreseeable that a failure on its part to perform its contract with the Crown would cause injury to a third party such as the respondent. The trial court declined to impute knowledge to the appellant from the bare fact of the specific instructions given to the appellant or from the nature of the addressee.
5. The majority in the Court of Appeal came to the opposite conclusion, finding that the duty of care owed by the appellant courier to the respondent was akin to that established by the House of Lords in Anns v. Merton London Borough Council, [1978] A.C. 728. Applying the general principles to be derived from the judgments in that case, the majority concluded that the requisite relationship existed between the respondent and the appellant courier to found liability in the latter in the law of torts, as the respondent came within a known limited class of persons who would foreseeably be damaged by failure on the part of the appellant courier to act with care. The majority found on the facts in this appeal that the "known limited class" likely to be affected by the appellant's carelessness consisted of those "members of the public with business to be transacted at the Prince George Land Registry Office on December 31, 1976, who were directly concerned with the contents of the envelope. It also included government officials working in the Land Registry Office."
6. Carrothers J., in dissent, started with the same proposition of law as enunciated in the Anns case, supra, but could not find the existence of any "known limited class" which would include the respondent. He wrote:
I consider that, as between the Courier and Hofstrand, there is not any relationship of proximity or neighbourhood such that in the reasonable contemplation of the Courier carelessness on the part of the Courier may likely cause Hofstrand to suffer economic loss.
Consequently, he shared the view of the trial judge that no cause of action arose in the respondent against the appellant on the facts of this case.
7. With due respect to those of a different view, I reach the same conclusion as did the learned trial judge and the learned justice in dissent in the Court of Appeal. Let it be assumed, but only for the purposes of examining the issues arising on the facts of this appeal, that the following excerpt from the judgment of Lord Wilberforce in Anns, supra, at pp. 751‑52, sets out the principle of law applicable in the circumstances now before the Court for the determination of the issues between the remaining parties to this proceeding:
Through the trilogy of cases in this House Donoghue v. Stevenson [1932] A.C. 562, Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465, and Dorset Yacht Co. Ltd. v. Home Office [1970] A.C. 1004, the position has now been reached that in order to establish that a duty of care arises in a particular situation, it is not necessary to bring the facts of that situation within those of previous situations in which a duty of care has been held to exist. Rather the question has to be approached in two stages. First one has to ask whether, as between the alleged wrongdoer and the person who has suffered damage there is a sufficient relationship of proximity or neighbourhood such that, in the reasonable contemplation of the former, carelessness on his part may be likely to cause damage to the latter‑‑in which case a prima facie duty of care arises. Secondly, if the first question is answered affirmatively, it is necessary to consider whether there are any considerations which ought to negative, or to reduce or limit the scope of the duty or the class of person to whom it is owed or the damages to which a breach of it may give rise: see Dorset Yacht case..., per Lord Reid....
The trilogy of cases referred to traces the growth of obligation in the law of negligence, both as to the nature of the interests protected and to the range of potential plaintiffs. In Donoghue v. Stevenson, [1932] A.C. 562, the court was concerned with physical harm caused by a negligently made product to a plaintiff not in privity of contract with the defendant manufacturer. Hedley Byrne & Co. v. Heller & Partners, Ltd., [1963] 2 All E.R. 575, on the other hand, involved a loss caused by a negligently made statement, and the loss was economic rather than physical. Dorset Yacht Co. v. Home Office, [1970] A.C. 1004, arose from the negligent conduct of the servants of the defendant, who was performing a statutory function.
8. Despite this expansion of the principles governing tort liability, however, the courts have remained conscious throughout of the need for reasonable limitations. Nowhere is this need more urgent than in cases involving purely economic losses, many of which, in the words of Cardozo C.J. in Ultramares Corp. v. Touche, 255 N.Y. 170 (1931), may involve the possibility of liability "in an indeterminate amount for an indeterminate time to an indeterminate class".
9. There are various ways of circumscribing, in pure economic loss cases, what otherwise might be an unending chain of liability in an incalculable amount. As Lord Pearce said in Hedley Byrne, at p. 615:
How wide the sphere of the duty of care in negligence is to be laid depends ultimately on the courts' assessment of the demands of society for protection from the carelessness of others.
10. There have been many tests or limitation principles advanced over the years on the theory that, left to itself, recovery for pure economic loss would extend liability in the field of negligence beyond traditional limits. For example, it has been argued that economic losses are recoverable if property loss was foreseeable, though it did not actually occur (Weller & Co. v. Foot and Mouth Disease Research Institute, [1966] 1 Q.B. 569), or if they occur fortuitously with, though not as a result of, physical damage (the "parasitic damage theory", Seaway Hotels Ltd. v. Gragg (Canada) Ltd. and Consumers Gas Co. (1959), 17 D.L.R. (2d) 292). Both propositions were rejected in Caltex Oil (Aust.) Pty. Ltd. v. The Dredge “Willemstad” (1976), 11 ALR 227 (H.C.), per Gibbs J. at p. 244. The "positive outlay test", which would permit recovery of actual expenditures but not of lost gain, was advanced in Dominion Tape of Canada Ltd. v. L. R. McDonald & Sons Ltd., [1971] 3 O.R. 627, but was dismissed by Addy J. in Bethlehem Steel Corp. v. St. Lawrence Seaway Authority, [1978] 1 F.C. 464, 79 D.L.R. (3d) 522, at pp. 474 and 530 respectively. For want of firmer ground Lord Denning, in Spartan Steel & Alloys Ltd. v. Martin & Co. (Contractors) Ltd., [1972] 3 All E.R. 557, advanced the "pure policy test" but this too has been rejected elsewhere: Caltex Oil, supra, per Gibbs J. at p. 244, and Gypsum Carrier Inc. v. The Queen, [1978] 1 F.C. 147, 78 D.L.R. (3d) 175, per Collier J., at pp. 159 and 185 respectively. A test focussing on whether the defendant assumed responsibility for the risk of the plaintiff's loss has received some favourable comment. This test has its roots in Hedley Byrne, supra, and was mentioned by Laskin J. (as he then was) in Welbridge Holdings Ltd. v. Metropolitan Corporation of Greater Winnipeg, [1971] S.C.R. 957, at pp. 966‑67; but failed to attract Dickson J., as he then was, in Haig v. Bamford, [1977] 1 S.C.R. 466, at p. 479. In Spartan Steel, supra, Edmund Davies L.J. suggested that any economic losses which were both direct and foreseeable would be recoverable. These criteria have been accepted elsewhere (see Gypsum Carrier, supra), but also dismissed (see Caltex, supra).
11. However, I started with Lord Wilberforce's enunciation of the law applicable to negligence generally in Anns, supra. Application of the two tests laid out in that passage is sufficient to dispose of this appeal. The first test to be met is that there be shown to exist a relationship of proximity or neighbourhood "such that in a reasonable contemplation" of the actor, his carelessness may likely damage the plaintiff. The second test, once the first has been met, is whether there are present any circumstances which would negate or reduce (a) the scope of the duty, or (b) the class of persons to whom such a duty is owed, or (c) the damage seen in law to flow from breach of the duty.
12. Here we are dealing with the careless performance of an undertaking by contract to provide services in a timely way. In applying the first test to the facts of this appeal, one turns naturally to Hedley Byrne, supra. The judgments in that case contributed much to the development of the concept of proximity as it applies in a case of negligent misrepresentation, and can do so as well in the circumstances here, where the negligence is in the delivery of a service.
13. The facts of Hedley Byrne are well known. The defendant Bank answered a request by another Bank for financial information concerning one of the defendant's customers. In particular, the defendant was asked to verify that its customer would be trustworthy for an advertising contract and in the course of business for a certain amount. On the strength of the defendant's favourable report, the plaintiff placed orders with the customer. The defendant's answers, however, had been given negligently, and when its customer went into liquidation, the plaintiff suffered economic loss.
14. In finding liability in the Bank, the House of Lords was concerned with finding a sufficiently proximate relationship between the plaintiff and the defendant. Lord Reid first dealt with the identification of the class of persons to whom the duty was owed. At page 580, he noted that the Bank:
...knew that the inquiry was in connexion with an advertising contract, and it was at least probable that the information was wanted by the advertising contractors. It seems to me quite immaterial that they did not know who these contractors were....
On the next page, His Lordship stated:
It would be one thing to say that the speaker owes a duty to a limited class, but it would be going very far to say that he owes a duty to every ultimate "consumer" who acts on those words to his detriment.
Lord Morris at p. 588, relating the same principle to the facts, put it this way:
...the [defendant] bank must have known that the National Provincial were making their inquiry because some customer of theirs was or might be entering into some advertising contract in respect of which Easipower, Ltd., might become under a liability to such customer to the extent of the figures mentioned.
Lord Devlin, at p. 608, narrowed the process down to the finding of the answer on the particular facts to the question, "Is the relationship between the parties in this case such that it can be brought within a category giving rise to a special duty?" The expression used by Lord Haldane in the earlier case of Nocton v. Lord Ashburton, [1914] A.C. 932, was "special relationship". Lord Morris (p. 594), Lord Hodson (p. 601) and Lord Pearce (p. 616) all decided that a duty would arise in circumstances where the defendant, being so placed that others would reasonably rely on his judgment or skill, knows that the plaintiff will rely on his statements.
15. The requirement of proximity of relationship to the founding of tort liability for negligent misstatements causing economic loss was further considered by this Court in Haig v. Bamford, supra, two years prior to the judgment in Anns, supra, but after Hedley Byrne, supra. The Court was there concerned with the liability of an accountant for the negligent preparation of a financial statement for its client, which to the accountant's knowledge the client intended to use in his search for outside investors in a business enterprise. It is not surprising, having regard to the nature of the services provided by the defendant and the nature of the plaintiff's loss, that the Court was primarily concerned with the evolution of the doctrines enunciated in Hedley Byrne. A majority, speaking through Dickson J., as he then was, found that the appropriate test for liability in the circumstances was grounded in the actual knowledge of the defendant of a limited class of persons who would use and rely upon the defendant's statement. Actual knowledge or awareness in the defendant of the specific plaintiff was not a requirement (pp. 476‑77).
16. The forerunner of Hedley Byrne was the dissenting judgment of Denning L.J. (as he then was) in Candler v. Crane Christmas & Co., [1951] 1 All E.R. 426, again a case concerning the liability of accountants in the delivery of professional services. The question put by the court in that case was, "to whom do these professional people owe this duty?" In answer to this question, Denning L.J. stated, at p. 434:
They owe the duty, of course, to their employer or client, and also, I think, to any third person to whom they themselves show the accounts....
The test of proximity in these cases is: Did the accountants know that the accounts were required for submission to the plaintiff and use by him?
On the following page, His Lordship continued:
It will be noticed that I have confined the duty to cases where the accountant prepares his accounts and makes his report for the guidance of the very person in the very transaction in question. That is sufficient for the decision of this case. I can well understand that it would be going too far to make an accountant liable to any person in the land who chooses to rely on the accounts in matters of business, for that would expose him, in the words of Cardozo, C.J., in Ultramares Corpn. v. Touche [supra] ... to
"... liability in an indeterminate amount for an indeterminate time to an indeterminate class."
Whether he would be liable if he prepared his accounts for the guidance of a specific class of persons in a specific class of transactions, I do not say. I should have thought he might be, just as the analyst and lift inspector would be liable in the instances I have given earlier.
17. In Rivtow Marine Ltd. v. Washington Iron Works, [1974] S.C.R. 1189, this Court divided on some aspects of the issue of negligently caused economic loss, but both the majority and the dissenting judgments recognized that, in principle, a defendant could be held liable in tort for economic losses arising wholly in the absence of associated physical injury or damage. Rivtow concerned the liability of the manufacturer of a defectively made crane to the crane's ultimate consumer, for the cost of the repairs and for profits lost while the crane was out of service. The case therefore raised issues of products liability and bears little resemblance to Hedley Byrne, supra, and the cases following it. Consistently with the cases cited supra, however, both Ritchie J. for the majority and Laskin J., as he then was, in dissent referred to the need to find sufficient proximity between the parties to the action. Ritchie J. wrote at p. 1196:
I think it important to stress the fact that the cranes in question were designed for the express purpose of loading and unloading heavy logs, that the site of the logging operation i.e., the coastal areas of British Columbia, was well known to both respondents who were in fact aware of the exact task to be required of the cranes by Rivtow. This is not a case of a negligent manufacturer whose defective or dangerous goods have caused damage to some unknown member of the general public into whose hands they have found their way. These respondents knew that the cranes were going to be used by the appellant and the exact use to which they were to be put.
The remarks of Laskin J. on the need for limiting factors are also apt (p. 1219):
Liability here will not mean that it must also be imposed in the case of any negligent conduct where there is foreseeable economic loss .... The present case is concerned with direct economic loss by a person whose use of the defendant Washington's product was a contemplated one, and not with indirect economic loss by third parties, for example, persons whose logs could not be loaded on the appellant's barge because of the withdrawal of the defective crane from service to undergo repairs.
18. The House of Lords in Junior Books Ltd. v. Veitchi Co., [1982] 3 All E.R. 201, was also concerned with finding a sufficiently proximate relationship between the parties. There, the plaintiff owned a factory in which the defendant sub‑contractor had negligently installed defective flooring. The defendant was held liable for the cost of replacing the flooring and for consequential economic losses. Lord Fraser noted (at p. 204) that the "proximity between the parties is extremely close, falling only just short of a direct contractual relationship." Relying on this fact, he distinguished the case before him from one in which a manufacturer of defective goods had offered them for sale to the general public. Lord Roskill similarly wrote (at p. 211) that the sub‑contractors were "in almost as close a commercial relationship with the appellants as it is possible to envisage short of privity of contract".
19. On the facts as revealed by the evidence before the Court in this appeal, the appellant courier had no knowledge of the existence of the respondent, nor, because of the Crown practice of not disclosing the nature of the documents being forwarded, could it reasonably have known of the existence of a class of persons whose interests depended upon timely transmission of the envelope. There was, therefore, no actual or constructive knowledge in the courier that the rights of a third party could in any way be affected by the transmission or lack of transmission of the envelope in question. If a person in the position of the respondent is included in a class considered to be reasonably within the contemplation of the appellant, there is no logical point of breaking off so as to put a reasonable practical limitation on the courier's range of liability. It is a stretching of concept to conclude that anyone who might conceivably be affected by a failure by the Province of British Columbia to register a Crown grant within the calendar year, constitutes a "limited class" the existence of which is known to a courier employed to deliver the Crown grant to a registry office. In the words of Lord Reid in Hedley Byrne, supra, "...it would be going very far to say that [the defendant] owes a duty to every ultimate `consumer'...."
20. Another aspect of proximity which was stressed in Hedley Byrne, supra, and by Lord Roskill in Junior Books, supra, at p. 214, is reliance by the plaintiff upon the undertaking or representation made by the defendant. Lord Reid, in discussing the special relationships which would give rise to a duty of care, stated (at p. 583):
...and I can see no logical stopping place short of all those relationships where it is plain that the party seeking information or advice was trusting the other to exercise such a degree of care as the circumstances required, where it was reasonable for him to do that, and where the other gave the information or advice when he knew or ought to have known that the inquirer was relying on him.
At page 594, Lord Morris stated:
My lords, I consider that...it should now be regarded as settled that if someone possessed of a special skill undertakes, quite irrespective of contract, to apply that skill for the assistance of another person who relies on such skill, a duty of care will arise.... Furthermore if, in a sphere in which a person is so placed that others could reasonably rely on his judgment or his skill or on his ability to make careful inquiry, a person takes it on himself to give information or advice to, or allows his information or advice to be passed on to, another person who, as he knows or should know, will place reliance on it, then a duty of care will arise.
(Emphasis added.)
21. What was the reliance here by the respondent? There was none. The respondent was, by the time of the appellant's engagement by the Crown, in a position of risk through no act of its own. The situation of risk, in which a delay would be fatal to the respondent's interests, was created by the terms of the respondent's contract with the third party, in conjunction with the Crown's refusal to allow a representative of the respondent to carry the documents to Prince George himself. There was no assumption of risk in reliance upon the appellant's undertaking to deliver the documents. The respondent did not rely on the appellant in any way prior to the creation of this risk. The respondent did not permit the engagement of the appellant or reject the idea of engaging another courier by reason of any representation made by the appellant. Nor was the decision not to use the facilities of the Post Office motivated by any act or statement by the appellant.
22. In sum, the requirements of proximity contained in the principles enunciated in Hedley Byrne, supra, and confirmed in Anns, supra, are not met on the facts of this appeal. As I have concluded that the respondent did not come within a limited class in the reasonable contemplation of a person in the position of the appellant, it is unnecessary to proceed to the second stage or test set out by Lord Wilberforce in Anns, supra.
23. The Anns principle sets out a broad and independent right and a concomitant liability in the law of negligence. It has found application in a variety of ways and circumstances in the courts of this country and elsewhere in the years since it was decided. Doubtless, the principle and its reach will be the subject of discussion in the courts as the law of torts continues to evolve. This appeal does not, on its facts, face the Court with the need to re‑examine the parameters of the doctrine or its definitive role in our jurisprudence. No doubt the courts of this country will continue to search for reasonable and workable limits to the liability of a negligent supplier of manufactured products or services, to the liability of a negligent contractor for contractual undertakings owed to others, and to the liability of persons who negligently make misrepresentations. In this search courts will be vigilant to protect the community from damages suffered by a breach of the "neighbourhood" duty. At the same time, however, the realities of modern life must be reflected by the enunciation of a defined limit on liability capable of practical application, so that social and commercial life can go on unimpeded by a burden outweighing the benefit to the community of the neighbourhood historic principle.
24. While the foregoing effectively disposes of this appeal, the same conclusion can be reached through an alternative route. According to established principles, the damage in this case is too remote, and consequently is not recoverable.
25. In Asamera Oil Corporation Ltd. v. Sea Oil & General Corporation, [1979] 1 S.C.R. 633, this Court held (p. 673):
We therefore approach the matter of the proper appraisal of the damages assessable in the peculiar circumstances of this case on the following basis: that the same principles of remoteness will apply to the claims made whether they sound in tort or contract subject only to special knowledge, understanding or relationship of the contracting parties or to any terms express or implied of the contractual arrangement relating to damages recoverable on breach....
In contract cases, the "rule" in Hadley v. Baxendale (1854), 9 Ex. 341, 156 E.R. 145, has long been accepted as stating, in general terms, the proper test by which remoteness of damages should be measured:
Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if those special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract.
26. Hadley v. Baxendale, supra, itself involved delay in the performance of a contract of carriage. The defendant was held not liable to compensate the plaintiff, a mill owner, for profits lost due to his failure to deliver a mill shaft promptly, on the basis that he could not be taken to have known of the "special circumstance" that until the shaft was delivered, the mill could not operate. In Victoria Laundry (Windsor) Ld. v. Newman Industries, Ld., [1949] 2 K.B. 528, another case involving late delivery, Asquith L.J. commented (at p. 537) that lost profits are rarely recovered from carriers. However,
This was not, it would seem, because a different principle applies in such cases, but because the application of the same principle leads to different results. A carrier commonly knows less than a seller about the purposes for which the buyer or consignee needs the goods, or about other "special circumstances" which may cause exceptional loss if due delivery is withheld.
In that case, the plaintiff was able to recover lost profits from the defendant, who knew of the nature of the plaintiffs' business, that the boiler was required for the business, and that the plaintiffs wanted to put it into use "in the shortest possible space of time". In an analogous Canadian case, Cornwall Gravel Co. v. Purolator Courier Ltd. (1978), 83 D.L.R. (3d) 267, affirmed [1980] 2 S.C.R. 118, the defendant courier was held liable for profits lost when it failed to deliver the plaintiff's tender on time. There, the courier had been told that the package contained a tender and that delivery had to be made before a certain time. In the ordinary course of events, it would be obvious that unless the tender arrived before the deadline, a contract could be lost. Therefore, the defendant had actual knowledge of "special circumstances", and this fact justified holding it liable for the plaintiff's lost profits.
27. This appeal, however, involves very different circumstances. The appellant courier had no knowledge of the fact that the envelope contained a Crown grant, and even if it had, unlike a tender there is nothing about a Crown grant which would suggest to the reasonable person in the position of the courier that its failure to effect timely delivery could result in consequential lost profits to anyone. Assuming even that the appellant had had notice both of the nature of the contents of the package and of the existence of a contract between the Crown grantee and a third party whose performance depended on timely delivery, in this case the terms of that "improvident" contract (as it was described by Carrothers J.A. in the Court of Appeal) from which the economic loss flowed were so extraordinary that they must fall within the category of special circumstances" requiring communication to the defendant under the rule in Hadley v. Baxendale, supra. It is clear, therefore (there being no such communication), that if the parties had been in a relationship of contractual privity, the losses complained of would not have been foreseeable. They are no more foreseeable because the respondent sued in tort.
28. In the circumstances here revealed, I would for these reasons set aside the judgment of the Court of Appeal and restore the judgment at trial, with costs to the appellant here and below.
The following are the reasons delivered by
29. Wilson J.‑‑I agree with my colleague, Estey J., that no duty of care was owed by the appellant courier to the respondent Hofstrand on the facts of this case. The principle established by the House of Lords in Anns v. Merton London Borough Council, [1978] A.C. 728, and applied by the majority of this Court in City of Kamloops v. Nielsen, [1984] 2 S.C.R. 2, has accordingly no application in this situation.
30. I would respectfully adopt the following excerpt from the dissenting reasons of Carrothers J. in the British Columbia Court of Appeal:
I consider that, as between the courier and Hofstrand, there is not any relationship of proximity or neighbourhood such that in the reasonable contemplation of the courier carelessness on the part of the courier may likely cause Hofstrand to suffer economic loss.
31. For these reasons I would dispose of the appeal as proposed by Estey J.
Appeal allowed with costs.
Solicitors for the appellant: Alexander, Guest, Holburn & Beaudin, Vancouver.
Solicitors for the respondent: Bull, Housser & Tupper, Vancouver.
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