Documentation:Torts/Negligence Misrepresentation

From UBC Wiki
TORT LAW
CASEBOOK
Introduction
Dignitary Torts
Defamation • Discrimination • Harassment • Intentional infliction of mental suffering • Invasion of privacy • Trespass to the person
Property Torts
Interference with goods • Interference with land • Non-natural use of land • Private nuisance • Public nuisance
Negligence Tort
Duty of care • Breach of duty • Damage • Causation • Remoteness
Negligence Categories
Employment • Environmental pollution • Harmful products • Hosting patrons and guests • Infliction of mental injury • Misrepresentation • Occupation of premises • Professional services • Public authorities • Pure economic loss • Relational economic loss • Rescuers • Shoddy goods or structures • Treatment of indigenous children • Unborn children
Dishonesty & Abuse of Position Torts
Abuse of process • Breach of confidence • Conspiracy • Fraud • Inducing breach of contract • Injurious falsehood • Intimidation • Malicious prosecution • Misfeasance in public office • Passing off • Spoliation • Unlawful interference with economic interests
Strict Liability
Keeping dangerous animals • Non-natural use of land • Ultrahazardous activities • Vicarious liability
Defences
Apportionment of liability • Consent • Defamation defences • Defence of property • Denials • Excuses • Illegality • Legal authority • Limitation • Necessity • Self-defence
Remedies
Apologies • Damages • Injunctions • Insurance • Legal costs • Mitigation • Proprietary
Tort Law & Legal Systems
Charter values • Class actions • Concurrent actions • Constitutional torts • Indigenous dispute resolution • No-fault compensation schemes
Tort Theory
Instrumental theories • Constructive theories • Critical theories • Reflexive theories
Study Resources
1L strategy • Answer exercises • Quizzes • Beswick's course site • Opening Up Tort Law Project
Index
80x15.png

Negligent misrepresentation

Negligent misrepresentation is one of three categories of negligence actions for pure economic loss that have been recognized by Canadian courts (alongside negligent supply of shoddy goods or structures and negligence causing relational economic loss).[1] The cause of action addresses situations where the defendant negligently makes an untrue, inaccurate, or misleading representation of fact, which the plaintiff reasonably relies on to their detriment.[2][3] As with any claim in negligence in Canada, the plaintiff must establish that the defendant owed them a duty of care on the basis of existing precedent or by satisfying the elements of the Anns/Cooper novel duty test.[2] The proximate relationship enquiry under the Anns/Cooper test will tend to determine what harm is reasonably foreseeable to the plaintiff from the defendant's misrepresentation.[4] The primary difference between negligent and fraudulent misrepresentation is the intentionality required by the defendant in making the misrepresentation.[5]

Development of the tort of negligent misrepresentation

Ultramares case summary
Check out this video for a brief summary of the case history leading up to the Ultramares judgement.

Although following Donoghue v. Stevenson and Palsgraf v. Long Island Railroad Co. common law courts became accustomed to recognizing duties of care in respect of negligent acts, courts initially refused to expand the doctrine to encompass negligent statements.

In Ultramares Corp. v. Touche, a defendant auditor negligently prepared and supplied a balance sheet to its client to be used by the client to solicit investments.[6] While the New York Court of Appeals agreed that the audit was made negligently, the Court rejected the proposition that the auditor owed a duty to take care in the economic interests of third party investors who relied on the account it prepared.[7] The Court considered (1) that such an extension of the doctrine might make negligence law coterminious with fraud liability; (2) that concerns of indeterminate liability militated against the recognition of a duty of care; and (3) recognizing such a duty might conflict with the defendant's duty to their employer.[8]

These concerns also prevailed in English law until the decision in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. The House of Lords recognized for the first time a duty of care in circumstances where the defendant promises to perform an undertaking and does so negligently.[9] The House of Lords stated that a duty of care may be found both in contractual relationships and in relationships "equivalent to contract", where there is an assumption of responsibility by the defendant.[10] The Law Lords also recognized that a defendant may shield themselves from tort liability by disclaiming liability when the promise is made to the plaintiff, a fact which was ultimately fatal to the plaintiff's claim in Hedley Byrne.[11]

Elements of negligent misrepresentation

The Supreme Court of Canada in Queen v. Cognos Inc. set out the elements of negligent misrepresentation, following the seminal House of Lords decision in Hedley Byrne[12], as follows:

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

The "special relationship" referred to by the Court is that which establishes a duty of care.[2] As stated by the Court in Cognos, negligent misepresentation "does not require an expansion of tort law into previously uncharted and hence unknown waters. Rather, it simply requires an application of well established principles of the law of negligence."[2]

Applying the Anns/Cooper framework in the context of negligent misrepresentation in Canada

Proximity

Two primary factors governing a court's proximity analysis for negligent misrepresentation were set out by the Supreme Court of Canada in Deloitte & Touche v. Livent Inc.[4] Proximity is determined by the defendant's undertaking and the plaintiff's reasonable reliance on that undertaking; the defendant's specific undertaking to provide a representation or a service invites the plaintiff's reliance on that undertaking.[13] The plaintiff's reasonable reliance is restricted to the purposes of which the representation was made, as a defendant will not be liable for a risk of injury which they did not undertake to protect.[14] As such, the proximity analysis in the context of negligent misrepresentation will determine both the existence of a proximate relationship between the parties and the scope of that relationship.[14]

Foreseeability

The Supreme Court of Canada in Deloitte stated that an injury to the plaintiff will be deemed reasonably foreseeable if the defendant should have reasonably foreseen the plaintiff's reliance and such reliance would be reasonable in the particular circumstances.[15] In other words, whether the injury to the plaintiff was reasonably foreseeable in the circumstances is chiefly determined by the relationship of proximity between the parties and with reference to the defendant's undertaking.

Policy concerns

In the news
Makers of COVID-19 protective equipment seek over $5 billion in damages
Canadian manufacturers of COVID-19 protective equipment are suing the federal government for negligent misrepresentations that allegedly pushed them to invest in the manufacturing of personal protective equipment. The Canadian government, however, denies that the plaintiff's reliance on their statements was reasonable, as they did not contract with any of the plaintiffs.[16]
Black and white image of a young boy wearing a COVID-19 protective face mask looking upwards.

Negligent misrepresentation actions tend to engage policy concerns of indeterminate liability.[17] However, the majority in Deloitte considered that a properly applied Anns/Cooper analysis will tend to narrow concerns of indeterminate liability.[18] This is because a court's proximity analysis relates to the defendant's specific undertaking, and as such, the scope of that undertaking will tend to restrict recovery to a specific amount, class of plaintiff, and time window.[19]

Comparing negligent misrepresentation to fraud

As described by the Ontario Court of Appeal in Carom v. Bre-X Minerals Ltd., there are "substantial similarities" between negligent and fraudulent misrepresentation.[5] The primary difference between the two torts is the requisite mental element required for each tort. For negligent misrepresentation, the defendant only needs to make the misrepresentation negligently or carelessly. Whereas fraudulent misrepresentation requires a higher level of intentionality by the defendant, requiring a minimum of recklessness, without belief in the truth of the statement.[5]

Intersections with contract law

Regarding concurrent claims under contract law and tort law, the Supreme Court of Canada in BG Checo International Ltd. v. British Columbia Hydro and Power Authority confirmed that parties may pursue actions under contract and tort law, provided the terms of the contract do not preclude the plaintiff from suing in tort.[20] On the issue of concurrent claims for negligent misrepresentation and breach of contract, the majority stated:[21]

Where a given wrong prima facie supports an action in contract and in tort, the party may sue in either or both, except where the contract indicates that the parties intended to limit or negative the right to sue in tort. This limitation on the general rule of concurrency arises because it is always open to parties to limit or waive the duties which the common law would impose on them for negligence. This principle is of great importance in preserving a sphere of individual liberty and commercial flexibility... a plaintiff may sue either in contract or in tort, subject to any limit the parties themselves have placed on that right by their contract. The mere fact that the parties have dealt with a matter expressly in their contract does not mean that they intended to exclude the right to sue in tort.  It all depends on how they have dealt with it.

A plaintiff may elect to choose to pursue both claims and avail themselves to whichever cause of action yields a higher quantum of damages, if they differ.[22] For example, in BG Checo, the quantum of damages yielded by a claim for negligent misrepresentation was higher than that yielded by their claim for breach of contract.[23] The court explained the difference between the quantum of damages as follows:[24]

The measure of damages in contract and for the tort of negligent misrepresentation are:

Contract: the plaintiff is to be put in the position it would have been in had the contract been performed as agreed.

Tort: the plaintiff is to be put in the position it would have been in had the misrepresentation not been made.

Discussion questions

  • Is it principled for the defendant's undertaking to govern what harm is reasonably foreseeable to arise from the plaintiff's reliance on the defendant?
  • Do you agree with the majority's conclusion in Deloitte that a proper application of the Anns/Cooper framework will often circumvent any concerns about indeterminate liability?[18]
  • What is the primary difference between negligent and fraudulent misrepresentation? What other differences may exist given that negligent misrepresentation is subject to the same analysis as other negligence claims?
  • How are the approaches taken regarding negligent misrepresentation in other common law jurisdictions, such as the UK and USA, similar to the Canadian approach?


  1. ↑ 1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2020 SCC 35 (§19.3.2.2) at paras 21–23.
  2. ↑ Jump up to: 2.0 2.1 2.2 2.3 2.4 Queen v. Cognos Inc., 1993 CanLII 146 (SCC).
  3. ↑ Jump up to: 3.0 3.1 Di Feo, Vanessa (2022). "CM Callow v Zollinger, Reconceptualized Through the Tort of Negligent Misrepresentation". Appeal: Review of Current Law and Law Reform. 27: 120.
  4. ↑ Jump up to: 4.0 4.1 Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63 at paras 30–31.
  5. ↑ Jump up to: 5.0 5.1 5.2 Carom v. Bre-X Minerals Ltd., 2000 CanLII 16886 (ONCA) at para 44.
  6. ↑ Ultramares Corp. v. Touche, (1931) 255 NY 170 (NYCA) at paras 2–6.
  7. ↑ Ultramares Corp. v. Touche, (1931) 255 NY 170 (NYCA) at paras 13–22.
  8. ↑ Ultramares Corp. v. Touche, (1931) 255 NY 170 (NYCA) at paras 22–26.
  9. ↑ Hedley Byrne & Company Ltd. v. Heller & Partners Ltd., [1963] UHL 4 (BAILII) at para 107.
  10. ↑ Hedley Byrne & Company Ltd. v. Heller & Partners Ltd., [1963] UHL 4 (BAILII) at para 113, citing Norton v. Lord Ashburton, [1914] AC 932.
  11. ↑ Hedley Byrne & Company Ltd. v. Heller & Partners Ltd., [1963] UHL 4 (BAILII) at para 122.
  12. ↑ Hedley Byrne & Company Ltd. v. Heller & Partners Ltd., [1963] UHL 4 (BAILII).
  13. ↑ Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63 at para 30.
  14. ↑ Jump up to: 14.0 14.1 Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63 at para 31.
  15. ↑ Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63 at para 35.
  16. ↑ Bronskill, Jim (14 Feb 2024). "Makers of COVID-19 protective equipment seek over $5 billion in damages from Ottawa". CBC.
  17. ↑ Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63 at paras 133–134.
  18. ↑ Jump up to: 18.0 18.1 Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63 at para 42.
  19. ↑ Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63 at para 52, 55, & 68–75.
  20. ↑ BG Checo International Ltd. v. British Columbia Hydro and Power Authority, 1993 CanLII 145 (SCC) at 14–15.
  21. ↑ BG Checo International Ltd. v. British Columbia Hydro and Power Authority, 1993 CanLII 145 (SCC) at 26–27.
  22. ↑ BG Checo International Ltd. v. British Columbia Hydro and Power Authority, 1993 CanLII 145 (SCC) at 39.
  23. ↑ BG Checo International Ltd. v. British Columbia Hydro and Power Authority, 1993 CanLII 145 (SCC) at 40-42.
  24. ↑ BG Checo International Ltd. v. British Columbia Hydro and Power Authority, 1993 CanLII 145 (SCC) at 37.
Retrieved from "https://wiki.ubc.ca/index.php?title=Documentation:Torts/Negligence_Misrepresentation&oldid=858956"