Fall 2021 - BUS8330 - Global Trade Law

Case Study 2

On January 1st, 2021, Mr. Patino Pascal of Waterloo decided to gift himself a New Year present and purchased a Toyota Micato SUV from the Excellent Autos car dealership based in Cambridge, Ontario, Canada. Mr. Pascal had been introduced to the Toyota Micato through an advertisement in a national car magazine in which the experience of driving the vehicle was described as "almost the same as cruising in an aircraft". The Micato came very strong, sturdy, flashy and had every conceivable gadget intended to make for a unique driving experience. According to Toyota, the Micato SUV's safety features are second to none. To put some icing on the cake, the vehicle came with a two-year warranty for any manufacturing defects. Because the Micato has only recently been introduced to Toyota's manufacturing line, it was only available at Toyota's manufacturing plant in Kobe, Japan. As such, Mr. Pascal's Micato was imported directly from Japan into Canada by Excellent Motors.

While driving the Micato along the Ontario 401 Highway on June 16th, 2021, Mr. Pascal applied the brakes as traffic slowed down. But the brake pedal stayed rigid and failed to function regardless of how much pressure Mr. Pascal applied to it. Mr. Pascal, who had been cruising at a speed of 120 kilometers an hour, lost control of the vehicle and smashed into a truck ahead of him. Mr. Pascal was seriously injured and had to be airlifted to hospital. On impact, the driver of the truck ahead of Mr. Pascal when he lost control of the Micato hit their chest on the steering wheel and suffered serious injuries as well. Both the Micato and the truck were severely damaged.

In spite of the positive public portrayal of the Micato, Toyota had long known that the SUV had some design flaws, especially with regard to the braking system. A tab in the system intended to prevent the loosening of a nut in the system was not fully bent and overtime affected the transmission of braking fluid. Toyota, in fact, were about to recall all 25 Micato SUV vehicles that were sold at the same time as Mr. Pascal's.

Answer the following questions - (15% of Final Grade):

1. Does Toyota owe a duty of care to Mr. Pascal when manufacturing the Micato SUV to ensure that there are no defects in the vehicle? Can Mr. Pascal sue Toyota for the losses he suffered as a result of the accident? What could Toyota say to defend themselves? (5%).

Ans - Yes, Toyota owes a duty of care to Mr. Pascal when manufacturing the Micato DUV to ensure there are no defects in the vehicle. Yes, Mr. Pascal can sue Toyota for negligence while manufacturing the product and due to breach of duty and due care. He can get damages and compensation as a remedy.

It is known that the burden of care is always upon the manufacturer when it comes to the product which involves users such as Mr pascal. It is the responsibility of the manufacturers to ensure safety and take all preventive measures as the use of their product involve human life.

In defence, Toyota can rebut with putting up anything which may prove and make it evident that the mistake was if Mr. Pascal. It was him who was by mistake and because of his misuse of the product, the accident occurred. Any such argument backed with the right evidence would turn the events of the case towards the plaintiff.

1. Assuming that the Excellent Autos car dealership wants to sue Toyota of Kobe, Japan what law will apply and what court will have jurisdiction to decide the case? (5%).

Ans - Yes, Excellent Autos may be able to sue Toyota of Kobe, Japan if may require. No local court of either Japan or the US would have jurisdiction to try the case. Instead, international courts would be involved. International Court of Justice may try the case as per requirement. In other cases, the trial may be taken up to the defendant's home country like in this case Japan and he may be sued there.

1. What is the "neighbour principle" in product liability claims and how does the principle apply in this case? (5%).

Ans - Neighbour principle is the general principle relating to due care. It states that one may and should always take reasonable care to avoid acts and omissions which may have the potential to injure someone else. This means one's negligence or loss of due care may be dangerous for someone else, the first party should always be of utmost care to avoid other's injury.

Like in this case, Mr. Pascal may be a little careful in driving or about the speed he was driving at or in the technique, which may or could've saved the truck driver or that he could not have been so seriously injured. Etc.

Supporting Notes -

WEEK 7 - TORT LAW

What is tort law?

Is it public law or private law?

This is an area of law that falls is private law.

It is the area of law that governs and consists of the rules and principles around a harm caused by one person to another, other than through breach of contract, and for which the law provides a remedy. Remedy is usually compensation in the form of damages (common law).

Recall that, in relation to contract, obligations flow are voluntarily exchanged promises. Tort is the harm related to private obligations that are not contained in contract.

A tort arises when there is wrongful conduct committed by a person against another. The wrongful conduct might result in personal injury (physical), harm to reputation, wrongful interference with someone's possession of the land, among other things.

There are two very broad categories of tort:

1. Intentional tort caused by the deliberate action of a person (committed on purpose) that causes harm to another.
   1. Examples include battery (intentional infliction of harmful or offensive physical contact against someone); false imprisonment (unlawful detention or physical restraint or coercion by psychological means)
2. Unintentional tort - harms caused through careless action or omission. This is now virtually completely collapsed into a single tort called "negligence".
   1. When someone is negligent, that person is liable for damages even though they did not intentionally cause the event in question.
   2. Examples are numerous and very circumstantial. They might include failing to shovel the steps in front of your house, ultimately leading to a delivery person slipping, falling and injuring the person.

We will discuss negligence in detail today.

Negligence: the tort of negligence compensates someone who has suffered loss or injury due to the unreasonable conduct of another. It is one of the most common torts to arise in a business context.

Does tort law cover any sort of law that arises in private interactions between parties outside of contract?

No. Tort law is the set of rules that governs when those private interactions will result in liability. When those actions lead to a finding of fault.

Liability is imposed when there is fault.

The textbook references the Jones v Shafer Estatedecision. In that case, the court found that the death of a driver that hit a truck parked at the side of the road was not the fault of the truck driver. The truck driver had set out flares the night before, but those were stolen. The driver in setting out flares and parking at the side of the road had met the standard of care required in the circumstances. It was an accident without fault.

Distinction between Criminal law and Tort law:

Some torts, especially intentional torts, but also negligence, can overlap with criminal offences in terms of the events (or facts) that given rise to them. The tort of battery is an easy example.

Consider the fact of hitting someone. Clearly, as we noted, this could lead to a lawsuit based in tort for battery. There is also a criminal offence for assault.

There are important differences, even though the same facts lead to two different causes of action, one in tort law, and one in criminal law.

As noted, tort law arises in the private obligations owing one another, where criminal law is considered a violation of society's rules at large. The harm in criminal law is said to be suffered by society (and there is usually a victim).

SLIDE 4:

Compare and Contrast tort Law with Criminal Law

Tort Law:

• Broad Category:Obligations are owed privately (between private persons).
• Purposes: Tort law, the objective is to compensate the victim for the harm suffered due to the culpability of another.
  • Enforces victim's private right to extract compensation from party that caused the loss.
  • It allocates the loss to the person that caused it; not the person that suffered the initial harm. (This is done the extent possible in law).
• Commencing Action:Person injured files a Statement of Claim in court, becoming a Plaintiff commencing legal action. Person who allegedly caused the harm is the defendant.
• This process is called a civil action.
• Must be proven on a balance of probabilities: "more likely than not".
• Different defences (contributory negligence, for example).

Criminal law

• Broad Category:Rules govern behaviour expected of individuals by society. Public law.
• Purpose:Criminal law's objective is to censure behaviour through fine, imprisonment or both (in some countries, not Canada, censure can include death - capital punishment).
• Prosecution considered critical to maintaining a rights-respecting society.
• Criminal law is not concerned with compensation of the victim. That is handled through tort law.
• Commencing Action:Prosecutions are brought by provincial or federal prosecutors. Prosecutions are most often brought by the Crown (federal or provincial). Person on trial is called the "accused" or "defendant"; prosecution called the "prosecution" or "Crown". Victim is called the "complainant".
• This process is called a criminal prosecution.
• Must be proven beyond a reasonable doubt. It is not any doubt - it must be a reasonable doubt. A reasonable doubt is based on reason and common sense, not on sympathy or prejudice. It is not enough that judge or jury thought the accused "probably committed" the act.
• Different defences, including the following examples: duress, self-defence.

SLIDE 5:

Tortfeasor: a person who commits a tort.

Joint tortfeasors. Two or more persons whom a court has held to be jointly responsible for the Plaintiff's loss.Where people are found jointly and severally liable each is responsible to the full extent. And then any tortfeasor that has paid the victim, would need to recover from the other tortfeasor.

Slide 6:

Primary liability results from one's own personal wrong-doing.

Vicarious liability results from the relationship the person has with the person who committed the tort. (The tortfeasor).

Is anyone aware of a common relationship giving rise to vicarious liability?Employment.

There is an important defence when a tort occurs that a tortfeasor might point to. Take a look at page 242. Does everyone see the picture of the person reaching on the shelf?

Let's say she fell and successfully sued the employer, maybe arguing that the items should not have been stored in this way and she should not have been required to access those items in an unsafe manner.

What would the employer say?

Where a tortfeasor says that the person harmed contributed in some way to their own injury, the doctrine is called contributory negligence. The defendant is at least partially responsible for the injury.

Another example: get into a car accident that is not your fault, but you weren't wearing a seatbelt, and were jettisoned from the vehicle causing catastrophic injuries.

If your victim contributes to their own injury where the cause of action is negligence - "negligent contribution" - the damages they can recover will be reduced by the amount by which they contributed to their own injury, usually measured as a percentage.

How does the court measure this percentage? It is an art not a science. Looks to case law precedent (past cases) as guides.

Slide 7:

The purposes of damages in tort are to compensate for harm suffered. Recall that in contract the damages are typically related to losses flowing directly from the contractual breach. But in tort, the approach is compensate for all losses caused by the defendant.

Usually this is monetary (i.e. related to money). This is the case even where the loss cannot be measured in money. For example, permanent paralysis is life-altering.

How can a victim really be compensated in money for not being able to walk again?

This speaks to the limits of the justice system. It cannot work miracles.

Types of Damages

Loss that is recoverable is pecuniary compensation for out-of-pocket expenses, loss of future income, and costs of future care.

Loss that is recoverable is also nonpecuniary compensation for pain and suffering, loss of enjoyment of life, and loss of life expectancy.

There are special damages as well. Out-of-pocket expenses related to the injury causing event.

Example: cut down trees trespass. There is loss of trees. Replacement cost. There might be mental distress at losing enjoyment of trees. Additional damages.

There can also be punitive damages this is to punish for outrageous, antisocial, or illegal behaviour. Again, like contract, it relates to the behaviour of the tortfeasor and is applicable where the behaviour is especially offensive.

They are like a fine. They punish offensive conduct.

There are also aggravated damages - compensation for intangible injuries such as distress or humiliation caused by defendant's reprehensible conduct. These are not punitive damages - they are not designed to punish the tortfeasor. They go to the actual harm caused to the victim.

The textbook gives the example of a customer having been falsely imprisoned by store staff. They might also be treated in a humiliating way. The humiliation is its own special form of loss that could result in aggravated damages.

Slide 8:

How is tort risk managed?

• Legal advice
• Liability insurance
• Proper employee training and oversight (managerial decision)
• Managing the property properly
• Know who is invited on the property or who might visit the property. Take steps to manage risk of trespass to property.

WE WILL NOW MOVE ON TO NEGLIGENCE:

What is negligence?Repeating what was said earlier.

It is a tort that results from the careless act that causes harm to another. Carelessness is a failure to show reasonable care.

What is reasonable care? Reasonable care is the care a reasonable person would exhibit in a similar situation.

What is a reasonable person?

It depends on the circumstances, but generally a reasonable person is regarded as being an ordinary person of normal intelligence who uses ordinary prudence to guide his/her conduct. The law does not demand that the reasonable person be perfect.

Professionals are held to a different reasonable person standard when working in their area of expertise. A lawyer, for example, must be a reasonable person with the specialized legal training of a lawyer. A heart surgeon would the reasonable heart surgeon. An accountant - the reasonable accountant.

Negligence is the tort that covers cases of unintentional harm. That's why I earlier categorized as unintentional torts as opposed to intentional torts.

Negligence covers things like, among others, car accidents where there is not intent, product liability, and poor advice given unintentionally.

It is the category of tort covered by accidents there is only a finding of liability, however, when there is fault.

There is a five step test to showing a negligence action. Each step is important. I will summarize and explain.

ELEMENTS (5-step analysis) to a Negligence Action

Step 1: Does the defendant owe the plaintiff a duty of care? The definition of duty of care is the responsibility owed to avoid carelessness that causes harm to others.

How do you determine the duty of care? To determine if a duty of care is owed you must two-stage test:

1. But note that there are two steps within stage 1 a. reasonable foreseeability and b. proximity.

Reasonable foreseeability:the harm to the plaintiff was a 'reasonable foreseeable consequence of the defendant's negligence.' Reasonable foreseeability considers whether the defendant should objective have anticipated that his or her act or omission would cause harm to the plaintiff.

Proximity:That the parties are in such a close and direct relationship that it would be 'just and fair having regard to that relationship to impose a duty of care in law.' In assessing proximity, the court must take into account all relevant factors arising from the relationship between the defendant and the plaintiff.

Donohue and Stevensondecomposedsnail in ginger beer. Violated duty of care. The person drinking the product had no contract with the manufacturer. The ginger beer was a gift from a friend who bought the beer from a retailer who in turn bought from a manufacturer. But there was proximity. The end use was foreseeable and the consumer was in a relationship of sufficient proximity to the manufacture. That is an example on p. 260.

Palsgraf v Long Island RailroadA porter boosted someone onto a moving train, the passenger fumbled, dropped package, package contained explosives, the explosives exploded, the force caused a large set of scales down the platform to tumble over, and these landed and injured someone waiting on the platform. Not sufficiently proximate. This case actually is used at Step 4, causation, but it illustrates the point about proximity and remoteness.

If you get both reasonable foreseeable and proximity here, you have what is called a prima facie duty of care. Prima facie means at first sight or first glance.

CAN BE A DIFFICULT TEST, BUT KEEP THESE OLD CASES IN MIND.

1. Stage 2 is where the court asks whether there are residual policy considerations outside the relationship of the parties that may negate imposing a duty of care?
   1. These policy considerations are not about the relationship between the parties by the effect of recognizing a duty of care on other legal obligations, the legal system and society more generally.
   2. Examples: these policy considerations operate less strongly where someone is physically injured and more strongly where the losses are purely economic - like economic loss. Do not want to have parties have a duty of care that extends to an unreasonably broad, unknowable and indeterminate extent.

Step 2: Did the defendant breach of the duty of care? Here, the duty of care is the reasonable care owed by a reasonable person. (Defined already). In the professional context, it is the reasonable professional with the relevant training. (Discussed already).

Then we move on to facts about the Victim.

Step 3: Did the Plaintiff sustain damage? Were they personally injured? That might be easily determined based on physical evidence. Did they suffer mental distress? This is less easily determined, but evidence can be brought forward.

Then we move to linking the actions of the defendant to the damage.

Step 4: Was the damage caused by the defendant's breach? To determine this, it is necessary to show legal causation: generally the test is determined by asking whether the harm would not have occurred but for the defendant's actions (or omissions)?

Direct you to the Hankecase on page 264 - 265.

Step 5: Was the damage too Remote? Remoteness of damage is whether the actual harm was reasonably foreseeable or not.If the harm was reasonable foreseeable, then the defendant is liable for the full extent of the harm.

The Supreme Court of Canada has said that the question is whether the actual harm suffered by the plaintiff is 'too unrelated to the wrongful conduct to hold the defendant fairly liable"'.

This is called the Thin skull rule: the principle that a defendant is liable for the full extent of a plaintiff's injury even where a prior vulnerability makes the harm more serious than it otherwise might be. Hemophiliac example.

There is the case of Mustapha v Culligan, a 2008 SCC decision.Fly in water bottle. Man said he was very concerned about cleanliness. Court said that the damage was too remote - the company only would be liable if person of ordinary mental fortitude would be injured. Plaintiff could not show that an ordinary person would be injured for finding fly in water bottle. Here, that did not happen. So the thin skull rule did not apply.

Defences:

1. Contributory Negligence: already covered.
2. Voluntary Assumption of risk - signing a waiver when entering a ski hill, participating in a sporting event. Perhaps even entering into a fight voluntarily (not self-defence).The defence is that no liability exists as the plaintiff agreed to accept the risk inherent in the activity.

SPECIAL RISKS FOR CERTAIN BUSINESSES:

PROFESSIONALS THAT PROVIDE ADVICE

Special forms of negligence Negligent Misstatement (or Negligent Misrepresentation):When negligence takes the form of words, the tort is known as negligent misstatement or negligent misrepresentation.

Remember, you can sue for this under contract where you have a contract with someone as well. Or sue at tort. Can arise when getting advice from a professional.

A financial services expert might be held to a professional standard, especially if they have a certification or professional designation. Special care should be considered here, to ensure that advice is provided to the standard of the reasonable professional.

Note that the duty is owed to the client - not to a third party who might have heard your advice. The court would say that the negligence analysis fails at the second step of the duty of care analysis: there is a policy reason to exclude liability unlimited liability to an unlimited class of persons.

NEGLIGENCE AND PRODUCT LIABILITY

Donahue v Stevensonis an example of a product liability case: it is one of the first and the one that established the duty of care in negligence in the common law.

Product liability is liability relating to the design, manufacture, or sale of the product.

NEGLIGENCE IN THE SERVICE OF ALCOHOL.The person serving alcohol in the course of business owes a duty of care owed to impaired persons to assist them or prevent them from being injured. Also, liability extends to injuries sustained by others by impaired persons in the establishment.

Negligent Standard versus Strict Liability:

Negligence is based on careless acts or omissions.

Strict liability does not flow from intention or carelessness: the principle that liability will be imposed irrespective of proof of negligence. Business are less likely to encounter this in Canadian tort law and more likely to confront it in regulatory law.

INTENTIONAL TORTS - and other TORTS

These include torts relate to property use. It can be fairly complicated.

When someone is injured on another person's property, the duty of care owed to that injured person varies depending on the legal category of the person.

Contractual entrant: any person who has paid (contracted) for the right to enter the premises. This might include someone who paid an entry fee.

These persons are owed the highest duty of care at common law. This is relevant to things like a negligence action (like a slip and fall case).

Invitee:Any person who comes onto the property to provide the occupier with a benefit. E.g. delivery person.

• Must warn invitee of any unusual danger of which he knows or ought to know.
• You see beware of dog signs; or watch your step signs; or Warning about a low wires overhead.
• There is no requirement to warn of a usual or common danger than ordinary reasonable person can be expected to know and appreciate.

Licensee:Any person whose presence is not a benefit to the occupier but to which the occupier has no objection. For example when someone is accessing an adjacent business and crosses the property to get to that adjacent business.

• Responsible for any unusual danger of which they are aware or that they have reason to know about.
• There is some overlap between licensee and invitee.
• These categories are blurry.

Trespasser is the last category:someone who goes on the land without invitation of any sort and whose presence is either unknown to the occupier of the land, or if known, is practically objected to.

Example is burglar, but not every example is so stark.

• There is a duty of care owed, but it is the lowest: there is at least the duty to act with common humanity toward him.
• Where the trespasser is a child, the courts have found the duty might be higher, or simply allowed ordinary claims of negligence where the trespasser is the child.

In a lot of provinces, including Ontario, legislation has stepped in to modify this approach. The Occupiers' Liability Act replaces these categories with a generalized duty of care closer to the neighbour principle in Donoghue v Stevenson.

The TORT OF NUISANCE is a tort related to property:

Any activity on an occupier's property that unreasonably and substantially interferes with the neighbour's rights to enjoyment of the neighbour's own property:

• Noxious or offensive smell
• Material or dust blowing in
• But not shadow: there is no nuisance if sunlight is blocked.

Trespass:wrongful interference with someone's possession of the land. It can arise in the following ways:

• Person comes onto property w/out occupier's express or implied permission
• Person comes on to property with implied consent or expressed consent, then asked to leave but refuses.
• Person leaves an object on the property without the occupier's express or implied permission.

Can you see the overlap with nuisance? Some say nuisance is just a form of trespass but it survives as a separate tort for historical reasons.

Other intentional torts arising in business:

Assault: threat of imminent physical harm by disturbing someone's sense of security.

Battery: intentional infliction of harmful or offensive physical contact.

**Note these two - there is a tort of assault and a tort of battery. Different than the criminal offence of assault (which looks a lot like battery the tort of assault is different, as you can see from the definition).

False imprisonment: unlawful detention or physical restraint or coercion by psychological means:example could be detaining a customer in a store suspected of shoplifting when that person has done nothing wrong.

Note that there is a section of criminal code that allows for citizen's arrest under s. 494(1)(a) of the Criminal Code. This gives a private individual the right to detain a person where there another person is committing an indictable offence or, on reasonable grounds, is believed to have committed a criminal offence and is escaping from and freshly pursued by persons who have lawful authority to arrest that person.

Deceit or fraud:false representation intentionally or recklessly made by one person to another that causes damage.

PASSING OFF:note page 295. This is of interest to you. The tort of passing off occurs when one person represents goods or services as being those of another. An example is when a business name is used that is so similar to an existing business name that the public is misled into thinking that the businesses are somehow related. It might also happen where marketing materials look similar between similar products.

How do you demonstrate passing off?

You must show the following to prove passing off:

1. Goodwill or a reputation is attached to the product or business. Goodwill is an intangible asset to attract customers/business.
2. Misrepresentation - express or implied - by the alleged tortfeasor has led or is likely to lead members of the public into believing that the product is the alleged victim's.
3. The plaintiff has suffered or will likely suffer damages, such as lost sales.

INTERFERENCE WITH CONTRACTUAL RELATIONS

Inducing someone to break a contractual obligation owed to another. Its origins are in employment relationships. Enticing a person to break their contract with another can lead to this tort.

Defamation:this is meant to protect the reputation of individuals against unfounded and unjustified attacks. The public utterance of a false statement of fact or opinion that harm's another's reputation. Traditionally two forms: slander (oral) and libel (written).

Here are the key elements of defamation:

1. The defendant's words were defamatory in that they would tend to lower the plaintiff's reputation in the eyes of a reasonable person.
2. The statement did in fact refer to the plaintiff.
3. The words were communicated to at least one other person beyond the plaintiff.

There are defences to this kind of claim:

1. Defence of justification: defendant shows the statement is substantially true.
2. Qualified privilege: statement being relevant, without malice, and communicated only to a party who has a legitimate interest in receiving it. (Not available if made with ill-will or dishonesty).
3. Fair comment: plaintiff cannot show malice and defendant can show that the comment concerned a matter of public interest, was factually based, and expressed a view that could honestly be held by anyone. You could have this defence arise in a restaurant review that is unfavourable.
4. Responsible communication on matters of the public interest: where some facts that are incorrectly reported by the publication is a matter of public interest and the publisher was diligent in trying to verify the information.
5. Absolute privilege: this applies to parliamentary or judicial proceedings. So for example, inside the House of Commons, a Member of Parliament can make a defamatory statement and there is no tort claim that can be founded. But that same comment made outside of the House by the same person, could ground a claim.

Injurious or malicious falsehood:the utterance of a false statement about another's goods or services that is harmful to the reputation of those goods or services.

• The difference between this tort and defamation is that the statement is about goods and services, not the person. The line can be blurry.