On January 31, 2022, the Alberta Court of Appeal (ABCA) issued its decision in Rieger v. Plains Midstream Canada ULC.[1] The ABCA adopted the analysis as set out in the Supreme Court of Canada (SCC) decision, 1688782 Ontario Inc. v. Maple Leaf Foods Inc.,[2] which addresses the narrow avenues and difficulty of bringing tort based claims for pure economic loss.
In Rieger, the plaintiff sought to certify a class action against the defendant, Plains Midstream Canada ULC, for damages incurred in relation to an oil spill that caused the temporary closure of the Red Deer River and Gleniffer Lake in 2012. At the time of the spill, the proposed representative for the class action was attempting to sell two lots which were located at, but did not abut, the Gleniffer Lake. The representative did not allege that their property had been physically damaged by the oil spill. Rather, the suit was brought against the defendant for, among other things, the alleged diminution of their property value. The plaintiff’s claim in this regard was based in negligence, claiming damages for “pure economic loss,” being a “monetary loss that is unconnected to a physical or mental injury to the plaintiff’s person, or to physical damage to property.” This is distinct from “consequential economic loss,” being monetary loss that results from damage to the plaintiff’s rights. [3]
The lower court in Rieger granted certification, finding that the plaintiff’s claim was not “hopeless” (the threshold required to bar certification), as the law was, at the time of the decision, unsettled as to whether pure economic loss could form a valid cause of action in this particular circumstance. However, shortly after the release of the lower court’s decision, the SCC released its decision in Maple Leaf Foods, making it clear that the plaintiff’s claim for pure economic loss was, in fact, hopeless.
In Maple Leaf Foods, the SCC confirmed that while pure economic loss may be recoverable in certain circumstances, “there is no general right, in tort, protecting against the negligent or intentional infliction of pure economic loss.”[4] Rather, as with other negligence-based claims, the claimant must satisfy the requisite elements of negligence. In particular, the claimant must establish a duty of care and, as a precondition, a proximate relationship between the claimant and defendant.[5]
Following Maple Leaf Foods, the ABCA in Rieger determined that the plaintiff could not establish a proximate relationship between its property and the defendant’s pipeline. Specifically, the ABCA found that the plaintiff’s claim did not fit within one of the three following recognized categories for pure economic loss, so as to establish a sufficiently proximate relationship to create a duty of care, and maintain a claim for pure economic loss:
1) Negligent Misrepresentation or Performance of a Service: Where the defendant undertakes to provide a representation or service in circumstances that invites the plaintiff to reasonably rely on that undertaking. In such circumstances, the defendant is obligated to take reasonable care. Should they fail to do so and damage is caused, the defendant may be liable for resulting pure economic losses.[6]
2) Negligent Supply of Shoddy Goods or Structures: Where a defendant contractor negligently creates a construction defect that poses a real and substantial danger, the affected plaintiff may successfully claim against them for expenditures incurred in preventing the injury from occurring, even if no other loss has been suffered. In these situations, the source of the operative duty of care must correspond to the plaintiff’s rights in person or property.[7]
3) Relational Economic Loss: Where a plaintiff satisfies the onerous burden of demonstrating that there is a novel duty of care owed under the circumstances of the matter. The focus of the legal test in such a case will be on whether the plaintiff can show that it has a sufficiently proximate relationship with the defendant, such that a duty of care encompassing any resulting pure economic losses can be found to exist.[8]
With the benefit of the Maple Leaf Foods analysis, the ABCA found it to be “plain and obvious” that the plaintiff’s claim for pure economic loss would be unable to succeed. The ABCA found that none of the above-noted categories existed in the circumstances. The plaintiff was unable to show that a novel duty of care should be recognized.[9] The ABCA granted the defendant’s appeal and overturned the lower court’s certification.
Takeaway
In the wake of Rieger, the following can be understood with respect to negligence claims for pure economic loss in Alberta:
- Although there is no general right protecting against the negligent or intentional infliction of pure economic loss in Canada, it is possible to bring a legal claim for negligence resulting in pure economic loss provided certain criteria are met;
- As in all negligence-based claims, a claim in negligence for pure economic loss requires a plaintiff to establish the four requisite elements of negligence, with the most important component being proximity between the claimant and defendant;
- At present, there are three categories of claims where damages for pure economic loss have been recovered in Canada: (1) negligent misrepresentation or performance of a service; (2) negligent supply of shoddy goods or structures; and (3) relational economic loss. Each of these categories carries its own unique considerations but also arises out of the general negligence analysis; and
- The context and factual background of the matter are highly relevant and will be instrumental in determining whether a claim is likely to succeed, particularly where the claimant is required to establish a novel duty of care.
For further questions about this area of law or the recovery of pure economic loss in Canada, please contact Miller Thomson’s Commercial Litigation Group.
[1] Rieger v. Plains Midstream Canada ULC, 2022 ABCA 28 [Rieger]
[2] 1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2020 SCC 35 [Maple Leaf Foods]
[3] Rieger, at para 35, citing Maple Leaf Foods, at para 17
[4] Rieger, at para 35, citing Maple Leaf Foods, at para 19
[5] Rieger, at para 35
[6] Rieger, at para 43
[7] Rieger, at para 44, citing Maple Leaf Foods at para 45
[8] Rieger, at para 45
[9] Rieger at para 50.
