Saturday, January 30, 2016

Claim for Pure Economic Loss Can Be Subject to Summary Judgment

In the recent decision of Leo Ocean S.A. v. Westshore Terminals Limited Partnership (*1) the Federal Court of Appeal addressed whether a claim for pure economic loss could be the subject of a summary trial, the claim resulting from the collision of the vessel Cape Apricot with the trestle carrying the conveyor system, roadway, electrical power and water to berth number 1 at the Westshore terminals in the Port of Vancouver.

The terminal was owned by the Vancouver Fraser Port Authority (the “Port Authority”) and operated under lease by Westshore Terminals Limited Partnership (“Westshore”). The Port Authority brought a claim for loss of “Participation Rent” in the amount of $1,027,166.00. Westshore and Leo Ocean S.A., (“Leo Ocean”), the owner of the vessel Cape Apricot, sought the dismissal of the Port Authority’s claim on the basis that it was a claim for pure economic loss and hence not recoverable.

The Port Authority argued that its claim was not barred by the economic loss rule. First, it said that it had sustained actual, physical damage to the property leased to Westshore and that, consequently, it was incorrect to assert that it had only sustained economic loss. Secondly, it said that even if it had sustained economic loss only, it was still entitled to recover its loss. More particularly, the Port Authority argued that, as it had a proprietary or possessory interest, including a future possessory interest, in the property damaged by the Cape Apricot, its claim fell within one of the exceptions to the exclusionary rule in respect of pure economic loss.

At trial, the Judge reviewed the jurisprudence pertaining to the recovery of an economic loss. In particular, the Judge paid attention to the Supreme Court of Canada’s decisions in Canada National Railway Co. v. Norsk Pacific Steamship Co., [1992] 1 S.C.R. 1021, [1992] S.C.J. No. 40 (Norsk), Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd., [1997] 3 S.C.R. 1210, [1997] S.C.J. No. 111 and D’Amato v. Badger, [1996] 2 S.C.R. 1071, [1996] S.C.J. No. 84 where the Supreme Court held that, as a general rule, there was a bar against recovery for economic loss and that certain exceptions to the rule had been recognized, namely cases where a claimant had a possessory or proprietary interest in the damaged property, maritime general average cases and where the relationship between the claimant and the damaged property constituted a joint or common venture. The Judge also examined the House of Lords’ decision in Anns v. Merton London Borough Council, 1977 2 All E.R. 492 (U.K. H.L.), where the House of Lords opined with respect to the issues of proximity and the duty of care and whether, notwithstanding that proximity between the parties had been established, there were policy considerations negating the imposition of a duty of care.

Turning to the facts before her, the trial Judge indicated that the Port Authority’s claim arose in the context of a lease between the Port Authority and Westshore and in the further context that the Cape Apricot had caused damage to the marine terminal facilities under the control of Westshore.

This led the trial judge to say that the lease gave “rise to a genuine issue that the Port Authority holds a proprietary or contingent possessory interest in the property that was damaged by Leo Ocean” and that “[t]he scope of that interest depends upon construction of all relevant terms of the contract, including the many clauses in the Lease that address rent”.

The trial Judge stated that, because there was a dispute between the parties as to whether or not the Port Authority had a proprietary or possessory interest in the leased premises, the motion for summary trial could not succeed.

The Federal Court of Appeal disagreed with the trial judge. Justice Nadon noted that the trial judge made it clear that there were no questions of credibility that had to be determined. Consequently, what needed to be decided by the trial Judge, in the context of the summary trial, was, firstly, whether the Port Authority had a proprietary or possessory interest in the property damaged by the Cape Apricot. If that hurdle was met, then the question was whether the Port Authority’s claim fell within the exceptions to the rule that precludes recovery of a pure economic loss. The Court of Appeal noted that the principal issue before the trial judge was the construction of the lease. Its construction would determine the question of whether or not the Port Authority had a proprietary or contingent possessory interest in the leased premises. The Court of Appeal was of the view that, in fact, a summary trial was the appropriate vehicle to determine the issue.

The Federal Court of Appeal returned the matter to the Federal Court so as to allow it to determine the meaning of the relevant provisions of the lease and the associated consequences.


(*1) 2015 FCA 282


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