Kamloops (City) v. Nielsen

Kamloops (City) v. Nielsen
Supreme Court of Canada
Hearing: November 22, 1982 Judgment: July 26, 1984
Full case name: City of Kamloops v. Jan Clemmensen Nielsen, Wesley Joseph Hughes and Gladys Annetta Hughes Citations: [1984] 2 S.C.R. 2 Ruling: Kamloops appeal dismissed.
Court membership
Chief Justice: Bora Laskin Puisne Justices: Roland Ritchie, Brian Dickson, Jean Beetz, Willard Estey, William McIntyre, Julien Chouinard, Antonio Lamer, Bertha Wilson
Reasons given
Majority by: Wilson J. Joined by: Ritchie and Dickson JJ. Dissent by: McIntyre J. Joined by: Estey J.

Kamloops (City) v. Nielsen, [1984] 2 S.C.R. 2 ("Kamloops") is a leading Supreme Court of Canada (SCC) decision setting forth the criteria which must be met in order for a plaintiff to make a claim in tort for pure economic loss. In this regard, the Kamloops case is significant because the SCC adopted the “proximity” test set out in the House of Lords decision of Anns v. Merton London Borough Council, [1978] A.C. 728. Kamloops is also significant as it articulates the “discoverability principle” in which the commencement of a limitation period is delayed until the plaintiff is aware of the material facts on which a cause of action are discovered or ought to have been discovered by the plaintiff in the exercise of reasonable diligence. This is later adopted and refined in Central Trust Company v. Rafuse, [1986] 2 S.C.R. 147. Finally, Kamloops develops the law governing circumstances where a plaintiff can sue the government in tort.

Facts

A house in Kamloops, British Columbia had insufficient foundations which were discovered upon inspection by the city. Stop work orders were issued but not enforced. The house was sold to the Neilsens. On discovering the construction deficiencies, the Neilsens sued the city for negligent performance of inspection.

Issues

Under statute, the city had a discretion whether to inspect construction. The city argued that it could not be liable for exercising that discretion. The statute also fixed a limitation period in which a plaintiff could sue the city, and the city argued the limitation period had expired. Finally, the city argued that the damages sought were considered to be “pure economic loss”, which at law were generally not recoverable.

Results

The exercise of the statutory discretion granted to the city to inspect was a policy decision. A plaintiff cannot sue government for a policy decision; however, once the city elected to inspect, the enforcement of that inspection was an operational decision which could give rise to a duty of care. On a breach of that duty of care, a plaintiff could sue. The court concluded that the city breached its duty of care by negligently enforcing inspection.

The court concluded that the limitation period had not expired when the action was started. While the lawsuit had commenced after the limitation period, if measured from the time the city failed to properly inspect. The court held that the commencement of a limitation period was delayed until the material facts on which a claim is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence. This principle is later refined by the SCC in Central Trust Company v. Rafuse.

Finally, the court held that the plaintiffs could recover its loss despite its categorization as “pure economic loss”. The SCC adopted the “Anns Test” (from Anns v. Merton London Borough Council), which allows a claim in tort for economic loss when:

a. there is a sufficiently close relationship between the parties so that in the reasonable contemplation of the defendant, carelessness on its part could cause damages to the plaintiff; and

b. there are no considerations that should serve to limit or negative the scope of the duty, the class of persons to which it is owed, or the damages to which a breach of the duty would give rise.

Since its decision in Kamloops, the SCC has enumerated five categories of compensable economic loss, originating in Canadian National Railway Co. v. Norsk Pacific Steamship Co., [1992] 1 S.C.R. 1021. While the categories are not closed, those identified to date are:

a. The Independent Liability of Statutory Public Authorities;

b. Negligent Misrepresentation;

c. Negligent Performance of a Service;

d. Negligent Supply of Goods or Structures;

e. Relational Economic Loss.

While Anns has since been overturned in the United Kingdom, on a number of occasions the SCC has reaffirmed the Anns Test in Canada. Examples include Dobson (Litigation Guardian of) v. Dobson (1999) and Cooper v. Hobart (2001).

See also

• List of Supreme Court of Canada cases (Dickson Court)

External links

• Full text of the decision from CanLII