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Negligence - Duty of Care

Lavender v. Miller Bernstein LLP (Ont CA, 2018)

Here the Court of Appeal reviews the important decision in Deloitte & Touche v. Livent Inc. (Receiver of) (SCC, 2017)("Livent") on the issue of duty of care in negligence:
[29] In reaching these conclusions, the Supreme Court refined and applied the two stages of the Anns/Cooper analysis. At the first stage, the court asks whether the facts establish a prima facie duty of care. The court then proceeds to the second stage, where it asks whether residual policy considerations justify denying liability in tort. I consider these two stages below.

(a) Stage One: Prima Facie Duty of Care

[30] Most relevant for this appeal, the majority of the Supreme Court in Livent, at para. 20, reaffirmed that there is a prima facie duty of care where there exists a “sufficiently close relationship between the plaintiff and the defendant”. This stage of the analysis involves establishing both reasonable foreseeability and proximity. The majority stressed that these elements are conceptually distinct and must be considered separately.

[31] The majority in Livent reiterated the statement from Cooper that “foreseeability alone” is not enough to establish a prima facie duty of care; the first stage of the Anns/Cooper framework requires “something more”. That “something more” is proximity. The majority observed, at para. 24, that it is useful to consider proximity before foreseeability in cases of negligent misrepresentation or negligent performance of a service because “[w]hat the defendant reasonably foresees as flowing from his or her negligence depends upon the characteristics of his or her relationship with the plaintiff, and specifically, in such cases, the purpose of the defendant’s undertaking.”.

[32] The proximity analysis determines whether the parties are sufficiently “close and direct” that it would be “just and fair having regard to their relationship to impose a duty of care”: Livent, at para. 25, citing Cooper, at paras. 32 and 34. As most recently reaffirmed by the Supreme Court in Rankin (Rankin’s Garage & Sales) v. J.J., 2018 SCC 19 (CanLII), at para. 23, that close and direct relationship must be such that “the defendant is under an obligation to be mindful of the plaintiff’s interests.”

[33] A preliminary question at this stage is whether the relationship at issue falls within a previously established category of relationship in which proximity has already been found to exist. If the relationship falls within a previously established category, or is analogous to one, then proximity is established, without more: Livent, at paras. 26-28. The majority in Livent cautioned, however, that courts must be careful to avoid identifying established categories “in an overly broad manner”: at para. 28. As the majority noted, at para. 52, “the mere fact that proximity has been recognized as existing between an auditor and its client for one purpose is insufficient to conclude that proximity exists between the same parties for all purposes” (emphasis in original). Rather, the majority explained, at para. 28, that “a finding of proximity based upon a previously established or analogous category must be grounded not merely upon the identity of the parties, but upon examination of the particular relationship at issue in each case.”

[34] Where an established proximate relationship cannot be found, courts must undertake a full proximity analysis by examining the relationship between the plaintiff and the defendant. Relevant considerations may include, but are not limited to, “expectations, representations, reliance, and the property or other interests involved” as well as any statutory obligations: Livent, at para. 29, citing Cooper, at paras. 34, 38.

[35] In cases of pure economic loss arising from negligent misrepresentation or performance of a service, two factors are “determinative” of the proximity analysis: (i) the defendant’s undertaking; and (ii) the plaintiff’s reliance: Livent, at para. 30. Where the defendant undertakes to provide a representation or service in circumstances that invite the plaintiff’s reasonable reliance, the defendant becomes obligated to take reasonable care, and the plaintiff has a right to rely on the defendant’s undertaking to do so. These “corollary rights and obligations create a relationship of proximity”: Livent, at para. 30.

[36] However, the plaintiff’s reliance must be within the scope of the defendant’s undertaking – that is, the purpose for which the representation was made or the service was undertaken. Anything outside that scope will fall outside the scope of the proximate relationship and the defendant’s duty of care; the defendant cannot be liable for a risk of injury against which it did not undertake to protect: Livent, at para. 31. Further, as the majority in Livent observed, at para. 31, “the proximity analysis not only determines the existence of a relationship of proximity, but also delineates the scope of the rights and duties which flow from that relationship” (emphasis in original).

[37] Although the proximity and reasonable foreseeability stages are analytically distinct, they are nonetheless connected. In cases of negligent misrepresentation or performance of a service, Livent explains that the proximate relationship informs the foreseeability inquiry: at para. 34. A plaintiff’s injury will be reasonably foreseeable in such cases where (1) the defendant should reasonably foresee that the plaintiff will rely on its representation; and (2) reliance would, in the particular circumstances of the case, be reasonable: Livent, at para. 35. This is also defined by the nature of the defendant’s undertaking. The plaintiff may rely on the defendant to act with reasonable care for the particular purpose of the undertaking, but not for a purpose outside the scope of that undertaking.

(b) Stage Two: Residual Policy Considerations

[38] Where a prima facie duty of care is recognized on the basis of proximity and reasonable foreseeability, the analysis advances to stage two of the Anns/Cooper framework. The court goes on to ask whether there are any “residual policy considerations” outside the relationship of the parties – that is, despite the proximate relationship between the parties and the reasonably foreseeable quality of the plaintiff’s injury – that may negate the imposition of a duty of care: Livent, at paras. 37, 41.

[39] The majority in Livent clarified, at para. 41, that the first stage of the Anns/Cooper framework does most of the analytical heavy lifting. Only in rare cases, such as those considering decisions of governmental policy or quasi-judicial bodies, will liability be denied on the basis of stage two. Residual policy considerations contemplate “the effect of recognizing a duty of care on other legal obligations, the legal system and society more generally”: Livent, at para. 38, citing Cooper, at para. 37.

[40] Accordingly, the Livent majority observed, at para. 42, that rarely, if ever, will a concern for indeterminate liability persist after a properly applied proximity and foreseeability analysis.

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