Compara've Private Law

Transcription

1 Compara've Private Law Dr. Anna Plisecka Tor'ous Liability for Pure Economic Loss

2 Defini0on: Pure economic loss Pure economic loss is a harm not causally consequent upon an injury to the person (life, body, health, freedom or other rights to personality) or to property (tangible and intangible assets) [H. Koziol] Generally accepted demarca0on lines: - Contrast to damage resul0ng from death or injury or damage to tangible property - Contrast to rela0on0al economic loss under the heading of loss indirectly resul0ng from death, injury or property damage Dr. Anna Plisecka 2

3 Examples of pure economic loss Negligent statements that cause damage to third par0es: e.g. erroneous informa0on about investments Rela0onal loss (Reflexschäden, indirekte Schäden, dommage par ricochet): e.g. members of the family of the vic0m who suffer a loss of maintenance Cable Cases: e.g. power cuts create damage to the owner of a manufacture Par0cipa0on in the breach of other par0es contracts Dr. Anna Plisecka 3

4 German Law 823 I BGB: Rechtsgüter: life, body, health, freedom, ownership and any other right With its catalogue of protected rights 823 I BGB does not seem to protect against loss of goodwill, market opportuni0es or any other economic interest Excep0on: right to an established and ac0ve business (eingerichteter und ausgeübter Gewerbebetrieb) Dr. Anna Plisecka 4

5 German Law 823 II BGB and 826 BGB can cover this category of damage (e.g. breach of contract) Gap- filling contractual remedies (Vertrag mit Schutzwirkung zugunsten Dri>er =protec0ve effect of a contract for the benefit of a third party) Dr. Anna Plisecka 5

6 The Common Law (England) Some torts allow the recovery of pure economic loss, but are generally restricted to wilful, deliberate or inten0onal acts, e.g. fraud, conspiracy, deceit, passing off, inducing breach of contract With regard to the tort of negligence the courts show restraint to allow claims for pure economic loss (floodgate- argument) Dr. Anna Plisecka 6

7 French Law Ar0cle 1382 C.civ. does not dis0nguish between protected and unprotected interests There is no separate category of pure economic loss Courts accept compensa0on of pure economic loss, if the interests were legi0mate (intérêts légicmes juridiquement protégé) and if the damage is direct and caused by the fault of the defendant Dr. Anna Plisecka 7

8 Why should economic loss be treated differently? The floodgatesʾ argument Lord Denning in Spartan Steel & Alloys Ltd. v MarCn & Co Ltd.: «there would be no end of claims» è French law è The role of insurance è Alterna0ve control instruments (such as causa0on, proof of damage, the duty of the vic0m to mi0gate damages etc.) Dr. Anna Plisecka 8

9 Indeterminacy of Numbers and Amounts Cardozo (1931): «the defendant would be exposed to a liability in an indetermined amount for an indeterminate 0me to an indeterminate class» è unforeseeability of the number of poten0al vic0ms (a general problem in torts) è unforeseeability of the amount of loss (also a general problem in torts) Dr. Anna Plisecka 9

10 Example: Disregarding someone else s contract 1. Court of Appeal 1988, Rickless v. United Ar0sts Corpora0on 2. BGH 19 October 1993, Conspiring wife 3. Cass. civ. 3e, 8 July 1975 Société de copropiété v Servim Dr. Anna Plisecka 10

11 Court of Appeal Rickless v. United Ar0sts Corp. Facts: The actor Peter Seller starred in a series of five Pink Panther films. Except for one movie, he did not himself contract to provide his services but did so through «loan- out» companies, which contracted with produc0on companies created by the producer of the Pink panther series, Blake Edwards. Arer Peter Seller s death, and without having obtained permission, another produc0on company, also created by Blake Edwards, made a sixth Pink Panther movie using previously unreleased material ler over from the earlier films. Such use gave rise to breaches of the contracts between the «loan- out» companies and the original produc0on companies. The personal representa0ves of Peter Sellers and the «loan- out» companies sued the produc0on company and the distributor of that film Dr. Anna Plisecka 11

12 Rickless v. United Ar0sts Corpora0on Held: The court of first instance gave judgment for the plain0ffs. The court of appeal dismissed the appeal, holding: - that the defendants had breached the performer s rights and were liable for those breaches. - that, under the terms of agreements concluded for each of the five films, the defendants were obliged to use the actor s performances only for the film to which the agreement related. - since, the making of the sixth film cons0tuted a breach of that nega0ve convenant, the defendants were liable in tort for procuring such breach Dr. Anna Plisecka 12

13 Court of Appeal Bingham LJ: «could the defendants be held liable for inducing a breach of nega0ve covenants? The defendants argued that they could not. I found that conten0on startling, and a familiar example will show why. Take the case of an employment contract containing a valid covenant against compe00on for 12 months arer termina0on. The contract comes lawfully to an end. The employee has performed all the service required of him and has received all the pay to which he is en0tled. The only contractual term remaining in force is the employee s nega0ve covenant not to compete. A third party, knowing of the covenant, induces the employee to work for him during the period of the convenant and in obvious breach of it. It is accepted that an ac'on would lie against the employee. But if the defendants are right, no ac0on would lie against the third party. They contend that it would not. I can find no basis in principle for such anomalous result, which conflicts with both the law and the prac0ce as I have long believed them to be.» Dr. Anna Plisecka 13

14 Observa0ons 1. Where is the problem of pure economic loss in this case? 2. On what legal basis does judge Bingham found his decision against the defendants? 3. What about contractual liability in this case? 4. What are the restric0ons against opening the floodgates of compensa0on for pure economic loss in this case? Dr. Anna Plisecka 14

15 BGH 19 October 1993 Facts: The plain0ff bought a house in In 1974, arer marriage, he conveyed the house to his wife, and the conveyance was duly recorded in the Landregister. The couple subsequently entered into a notarized contract whereby they agreed that the wife had put up one- sixth of the value of the house and the plain0ff five- sixths and that, in case of divorce, the wife accepted the obliga0on to return the property to the plain0ff on payment by him of one- sixth of the value of the house. Arer the plain0ff and his wife had separated in June 1979, the wife, without the knowledge of her husband, granted three liens (Grundschulden), each of DM over the property. The liens were entered in the Landregister in August They were later given to the bank as collateral security for a loan. The wife failed to make any repayment to the bank. In February 1984, the divorce was pronounced and the court ordered the wife to return the property to the plain0ff. The defendant bank thereupon terminated the credit to the wife and ini0ated proceedings for the compulsory sale of the property by public auc0on (Zwangsversteigerung) Dr. Anna Plisecka 15

16 The claim The plain0ff sued the bank, claiming - that his ex- wife had wished to cause him harm by issuing liens on the property which she was obliged to return in the event of divorce. - that the defendant bank was aware of that fact and that it colluded with the wife to cause injury to the plain0ff. The plain0ff relied on 826 BGB against the defendant bank to seek a declara0on that the compulsory sale of the property was unlawful Dr. Anna Plisecka 16

17 BGH «The defendant acquired the real estate securi0es from the person formally holding 0tle at the request of the owner registered in the Land Register. Unknown to the defendant when he made the acquisi0on, the priority no0ce of conveyance in favour of the plain0ff did not preclude assignment of the real estate securi0es already effected. ( ) The defendant was not required to inquire as to whether the plain0ff s former wife ( ) incurred tor0ous liability to third par0es by effec0ng and assigning liens (Grundschulden) by way of security. Contractual claims are not amongst the rights infringement of which in itself gives rise to claims in tort. Nor does the moral order oblige an independant third party in a case of conflict to subordinate its own interests of the contrac0ng par0es. Thus, there is no claim under 826 BGB for damages against a third party simply on the ground of his coopera0on in the viola0on by the debtor of his creditor s rights under the contract.» Dr. Anna Plisecka 17

18 The principle in German Law «In accordance with setled BGH- case- law, involvement by a third party in a breach of contract is contra bonos mores only if his interference with the contractual rela0ons is marked by a par0cular lack of considera0on for the person concerned. Such a lack of considera0on may above all be cons0tuted by collusion with the debtor under the contract in order specifically to frustrate the claims of the creditor concerned. The allega0on of conduct contra bonos mores is well- founded only in cases of serious offences to feelings of decency, where the course of conduct of a third party is incompa0ble with the basic requirements of a proper view of the law.» Dr. Anna Plisecka 18

19 Observa0ons 1. Where is the problem of pure economic loss in this case? 2. On what legal basis does the BGH found his decision for the wife? 3. What about contractual liability in this case? 4. What are the restric0ons against opening the floodgates of compensa0on for pure economic loss in this case? Dr. Anna Plisecka 19

20 Cass. civ. 3e, 8 July 1975 Société de copropiété v Servim Facts: On 19 June 1969 Mrs Saba0er by a unilateral promise granted the Pravat Company an op0on over certain real property that she owned; the op0on was exercisable un0l September On 11 July 1969, Pravat assigned the benefit of that op0on to the plain0ff. On 21 September 1969, Pravat assigned the benefit of that op0on to the defendant, the Servim company. On 22 September Servim learnt of the earlier assignment of the op0on to the plain0ff. On 3 October 1969, Mrs Saba0er formally conveyed the property to Servim. As a consequence of the conveyance, the plain0ff lost the benefit of that op0on that Pravat had assigned to him Dr. Anna Plisecka 20

21 Cour de cassa0on «Having regard to Art C.civ.: The beneficiary of a promise of sale is en0tled to invoke against a person who is not a party to that promise either the fraud with which that person is associated or merely the fault of which that person was guilty in agreeing to acquire a building which it knew to be subject to the promise. ( ) It is clear from the court of appeal s own findings, that, arer learning of the promise of sale binding Pravat to SCRI under the document of 22 September 1969, Servim was not informed by a leter from the notary dated 26 September 1969 of the difficul0es that might arise owing to the existence of that promise, and that Servim itself indicated to the notary, in a leter of 3 October 1969, that it relieved him of all liability. Having thus established all the elements cons0tu0ng a fault (faute), the court of appeal, in deciding as it did, applied Ar0cle 1382 C. civ. incorrectly.» Dr. Anna Plisecka 21

22 Observa0ons 1. Where is the problem of pure economic loss in this case? 2. On what legal basis does the Cour de cassa0on found his decision against the defendants? 3. What about contractual liability in this case? 4. Are there any restric0ons against opening the floodgates of compensa0on for pure economic loss in this case? Dr. Anna Plisecka 22

23 Comparison Liability of a third- party accomplice to a contractual breach è Common Law: induc0on to breach of contract (inten0onal); è German Law 826 BGB: non considera0on (contra bonos mores) of the other par0es contract; inten0onal harm of the other par0es contract è French Law: tor0ous liability for breach of contract even if the benefit is only due to a negligent behaviour French Law does not consider pure economic loss a special ques0on, whereas the German Law and the Common Law are restric0ve about this special kind of loss Dr. Anna Plisecka 23

24 Further examples 1) House of Lords: Carparo Industries plc.v. Dickman: Tor0ous liability for economic loss sustained by Carparo who relied on the accuracy of an audit delivered by Dickman 2) Bundesgerichtshof, 26 November 1986: Inaccurate audit: Tor0ous liability for economic loss sustained by the buyer of a limited liability company Dr. Anna Plisecka 24

25 Policy Considera0ons Deterrence: do we need liability for pure economic loss, if there is already a ra0onal liability (sterring from another contract)? Degree of protec'on: Are pure economic interests less worthy than life, limb and property? Jus'ce: Is the nature of the damage really decisive when deciding, whether the torweaser should be allowed to walk free or to pay? Balance of interests: Would it be the best to allow courts to decide about the compensa0on of pure economic loss because of the facts and the interests in ques0on? Dr. Anna Plisecka 25