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Pure Economic Loss

In Mandeville v. The Manufacturers Life Insurance Company (Ont CA, 2014) the Court of Appeal expounded on the nature of damages for "pure economic loss":
[146] Pure economic loss is loss suffered by an individual that is not accompanied by physical injury or property damage: Martel Building Ltd. v. Canada, 2000 SCC 60 (CanLII), 2000 SCC 60, [2000] 2 S.C.R. 860, at para. 34; D’Amato v. Badger, 1996 CanLII 166 (SCC), [1996] 2 S.C.R. 1071, at para. 13; and Design Services Ltd. v. Canada, 2008 SCC 22 (CanLII), 2008 SCC 22, 1 S.C.R. 737, at para. 30.

[147] In the present case, the appellants are claiming damages equivalent to the benefits the class members would have received had they been treated as eligible policyholders upon Manulife’s demutualization. The damages sought are “not causally connected to physical injury to their persons or physical damage to their property”: Design Services, at para. 30. The injury or damage complained of consists of alleged harm to the class members’ economic interests, rather than any physical harm or damage to their person or property. As such, the claim is seeking recovery for pure economic loss.

[148] What difference does it make to this action that the appellants’ claim is for pure economic loss? The Supreme Court answered these questions in Martel, at para. 35, saying that such claims require greater scrutiny when the court is deciding whether to recognize a duty of care:
As a cause of action, claims concerning the recovery of pure economic loss are identical to any other claim in negligence in that the plaintiff must establish a duty, a breach, damage and causation. Nevertheless, as a result of the common law’s historical treatment of economic loss, the threshold question of whether to recognize a duty of care receives added scrutiny relative to other claims in negligence. [Emphasis added.]
[149] At para. 37 of Martel, the Court set out the policy reasons underlying the common law’s traditional reluctance to permit recovery for pure economic loss:
First, economic interests are viewed as less compelling of protection than bodily security or proprietary interests. Second, an unbridled recognition of economic loss raises the spectre of indeterminate liability. Third, economic losses often arise in a commercial context, where they are often an inherent business risk best guarded against by the party on whom they fall through such means as insurance. Finally, allowing the recovery of economic loss through tort has been seen to encourage a multiplicity of inappropriate lawsuits.
[150] Nonetheless, the Canadian jurisprudence shows that there is no automatic bar to recovery for pure economic loss. Over time, recovery for pure economic loss has been permitted in five categories of negligence claims:
1. the independent liability of statutory public authorities;

2. negligent misrepresentation;

3. negligent performance of a service;

4. negligent supply of shoddy goods or structures; and

5. relational economic loss.

See Canadian National Railway Co. v. Norsk Pacific Steamship Co., 1992 CanLII 105 (SCC), [1992] 1 S.C.R. 1021, at p. 1049; and Martel, at para. 38.

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