Objectives of Tort - Principles of Justice or Hidden Policy Considerations?

1

“THE TENSIONS WITHIN TORT LAW ARE DUE TO THE FACT THAT TORT LAW TRIES TO DO TOO MUCH. IT PURSUES INCONSISTENT GOALS SUCH AS COMPENSATING FOR INJURY, PROMOTING ECONOMIC EFFICIENCY, DETERRING MISCONDUCT AND REDRESSING WRONGS. TORT LAW WILL ONLY BE COHERENT WHEN ONE OF THESE GOALS IS MADE PARAMOUNT, AND THE REMAINDER PURSUED THROUGH OTHER MEANS.”

a. Introduction

This essay will first provide a presentation of the possible objectives of an action for damages in tort. The various aims mentioned in the statement above shall then be classified and in a second step verified with illustration of current developments in case law.

b. Functions of tort

Tort Law has pursued different aims in its historical development: punishment , appeasement, deterrence, compensation, and efficient loss spreading of the accidents’ costs. They may all be important, but it is questionable if they can all be justified as an appropriate aim of tort law and better ‘pursued through other means.’ #

2

c. Compensation for injury and redressing wrongs

Compensation is often called the ‘main function' of tort law 1 protecting the individual’s interest in physical security. 2 In addition to this, its also redresses wrongs and reestablishes peace between the parties. the development of insurance has made this compensation aim easier to fulfil and some academics even argue that ‘without insurance the tort system would simply cease to operate.’ 3

But strictly speaking this system would mean entitlement to be compensated ‘no matter how rich the claimant or how poor the defendant’ is. 4 This surely is an honorable aim, but is realistically not feasible.

Probably this is the reason why so many attempts have been made to fight the insuffiency of tort law towards compensation. Employers have to be insured against damages resulting of injury suffered by his employees at work. Similarly third -party insurance has been made compulsory for motor accident cases. 5 Victims of violent crimes and medical treatment are compensated by the state. The shortcomings of tort regarding the aim of compensation cannot be ignored.

Furthermore tort law is not consistent, sometimes even contradictory. This is because judges have discretion on defining loss and how it is compensated. The areas of nervous shock and the recovery of economic loss in negligence exemplify this. In both areas the ‘floodgates argument is prevalent’ 6 The famous Hedley Byrne decision 7 which concerned the liability of bankers giving references as to the credit- worthiness of their customers made clear that even damage that has not yet been realised could be compensated. This means providing compensation where loss has not materialized and may not be justified by probability. On the other hand, fear of indeterminate liability has led to a restriction on economic loss liability, and consequently, the victim of a tort is not fully compensated for their actual loss.

1 Encyclopædia Britannica from Encyclopædia Britannica Premium Service.

-16464> [Accessed on March 22, 2006]. 2 Fleming, John G.; The Law of Torts, p. 8.

3 Cooke, John; Law of Tort, p. 7.

4 Jones, Michael A.; ‘Textbook on torts’, p. 16.

5 Cooke, p. 8.

6 Cooke, p. 7 above.

7 Hedley Byrne v. Heller & Partners [1964] AC 465

3

In Bourhill v Young 8 a woman who suffered nervous shock when regarding a dead motorcyclist could not recover damages from his relatives as the motorcyclist owed no duty of care to the woman as a spectator of the accident. The area of nervous shock has long been controversial showing once again the boundaries of the compensation goal of tort law 9 and how they arguably inadequately and inconsistently provide justice.

The system of compensation is not only incoherent, it also faces scathing criticism as it is extremely expensive. About 85 per cent of the value of the sums received for compensation are spent as administrative costs. 10 This is probably why ‘... some advocate that tort rules should minimize accident costs as an instrument for maximizing social welfare and wealth...’ 11 The idea of loss spreading was born. It was realised that not every single wrong could be resolved and some risk of damage simply put a too heavy burden on the defendant and insurers. The question arose who could reasonably avoid the risk of damage.

Geistfeld thinks that ‘these two conceptions of tort law [,compensation and loss spreading,] are fundamentally incompatible and mutually exclusive.’ This is logical as each will have a detrimental effect on the other.

d. Promoting economic efficiency

The application of tort to promote economic efficiency is popular, especially amongst economists. Yet, this development cannot be covered without taking into the account the economic analysis of the law born in the United States in the 1960s, stongly linked to the scholar Ronald Coase 12 (University of Chicago) and judge Guido Calabresi 13 .

8 Bourhill v Young [1943] AC 92 9 also see Paris v Stepney Borough Council [1951] 1 All ER 42. for risk of harm that may be low under normal circumstances but has to be counter-balanced by the gravity of harm to a particularly vulnerable claimant. Here: Providing goggles for a one-eyed worker.

10 Pearson, 1978, Vol. 1, para. 83.

11 Mark Geistfeld, "Economic Analysis in a Unified Conception of Tort Law", Paper 33. 12 See "The Problem of Social Cost" (Coase, Journal of Law & Economics Vol.3, No.1 (1960) 13 see “Some Thoughts on Risk Distribution and the Law of Torts” (Calabresi, Yale Law Journal, Vol.70 (1961)

4

In the case United States v. Carroll Towing Co, 14 Judge Learned Hand set down an economic approach for the imposal of a duty of care which soon became famous as the ‘calculus of negligence’ or the ‘Hand rule’ (Gravity x Likelihood > Cost.)

It proclaims that compensation rules should be determined by the seriousness and likelihood of loss and compensation at the lowest cost.

The economic analysis, in including probability, focuses primarily on the concept of negligence. Precedent for the application of this Learned Hand test is Bolton v Stone 15 A cricket-ball was hit out of a stadium hurting the plaintiff who stood on a highway approximately 100 yards from the batsman. This had happened only about six times in the last 30 years. The House of Lords also considered the cost of measures to prevent the risk and whether they would have been implemented by the reasonable person.

The principles of economic efficiency are also applicable to procedural rules at a trial where academics try to induce rules to encourage optimal investment in safety and ‘know-how’. 16 Cooter and Rubinstein give a detailed economic analysis of a legal dispute and think that ‘economists can learn from lawyers’ to overcome the ‘tort crisis’ 17 Economic analysis of law at the end of the 60s. Scholars like Brown 18 have analysed the economic effects of liability rules.

Is Tort Law then an enemy of the free market? I would say it is not and argue with Arlen that ‘many markets are not efficient absent tort liability for harms caused.’ 19

The truth is that ‘Tort liability is essential to the effective functioning of a free market economy because it encourages people who impose risks on others to take cost-justified precautions to reduce the expected costs of their activities’ 20 This also means that tort liability’s function is to seek to influence human conduct.

14 159 F.2d 169 (2d. Cir. 1947) 15 Bolton v. Stone [1951] A.C. 850, [1951] 1 All E.R. 1078 (H.L.) 16 Coleman, Jules at Yale University for the Stanford Encyclopedia of Philosophy, accessible at http://plato.stanford.edu/entries/tort-theories/; [Last accessed on 24.03.2006] 17 Cooter, R.D./Rubinfeld, D.L. (1989): Economic Analysis of Legal Disputes and their Resolution; in: Journal of Economic Literature, 27, 1067-1097. Accessible through the page of the University of Saarland http://www.uni-saarland.de/fak1/fr12/csle/material/cooter.rubinfeld.1989.pdf 18 Brown, John P. (1973): Toward an Economic Theory of Liability; in: The Journal of Legal Studies 2(2), 323- 349.

19 Arlen, p. 116.

20 Arlen, Jennifer H. and Bentley MacLeod, W.; Beyond Master-Servant: A critique of vicarious liability, in Madden, see above, p. 111.

5

‘Tort liability can promote the free market by giving people who benefit from, and can influence risk a reason to treat as their own the cost of risk that falls on others, by making risk-imposers pay victims for injuries they cause.’ 21

Case law provides a variety of situations where economic considerations played a major role. In the case Nicholas H, 22 ship inspectors, who were working as a non- profit organization, were held not to be liable for the ship that sank although they had fallen far short in their inspection. Insurance and loss spreading considerations obviously played a key role in this case, as in many others. It seems to be true that ‘in the present tort system the tortfeasor himself rarely pays the damages.’ 23

But it is often not clear whether the decision was based on public policy or on principles of justice or morality. Lord Steyn refused to accept that his decision in Macfarlane v. Tayside Health Board 24 was based on what he calls ‘quicksands of policy’ but on principles of justice, for example distributive justice. 25

e. Deterring misconduct

Calabresi 26 gives us a good insight of the role of punitive damages in the United States where punitive damages are much more fashionable than in European legal systems, for example Germany or the UK.

This certain type of damages which he also calls ‘noncompensatory damages' or even 'tort fines', basically aims to discourage a certain behaviour which is detrimental to society. In the late 1970s, the motor vehicle manufacturer Ford Motor Co. produced a car with a design defect creating a risk that the car may explode when struck from the rear. The manufacturer cynically calculated that it would be cheaper to pay damages to the victims than to redesign the vehicle. 27 In Grimshaw v Ford Motor Co. 28 the courts then awarded exemplary amounting to $ 125 million, $ 3.5 after the appeal. This case shows the powerlessness of civil law against unmoral behaviour and its permeability to moral attitudes. In my opinion this case has been wrongl y decided as tort law has not the aim of punishing.

21 Arlen, p. 117.

22 [1995] 3 All ER 307, HL 23 Jones, p. 15.

24 [1999] 3 WLR 1301.online: http://www.scottishlawreports.org.uk/Resources/keycases/mfvthb/mcfarlane -v- tayside-report-hl.html 25 Clerk & Lindsell, p. 13.

26 Calabresi, Guido; The complexity of torts – the case of punitive damages, in Madden as above, p. 333. 27 Jones, p. 20.

28 (1981) 119 Cal App 3d 757

6

In the UK, the role of deterrence in Tort Law can be found in the Roman principle of ‘Ex turpi causa non oritur action’. It means that no cause of action may be founded upon an immoral or illegal act. This is shown quite clearly in Revill v Newsbury, 29 where a burglar was shot by the owner of the house and did not loose his right to recover damages. The punishment lies in the fact that the criminal may lose his claim for compensation.

It is the sole task of criminal law to impose sanctions for crimes so that society can achieve justice and enjoy a more peaceful environment. These sanctions are enforced by the state. The state has the monopoly on the use of force and the instruments of force. In civil law, on the other hand, disputes are typically between private parties. ‘The purpose of criminal law is to protect the public interest and punish wrongdoers. The purpose of tort is to vindicate the rights of the individual and to compensate the victim for loss, injury or damage suffered by him, but the distinction in purpose between criminal law and tort is not, and never has been, entirely crystal -clear.’ 30 f. Conclusion

It is clear that tort law does pursue different aims that contradict each other. Nevertheless, remedies to solve this problem exist.

Abraham argues that ‘lawyers tend to overrate the importance of tort, both as method of deterring unsafe conduct and as a source for compensation...’ 31 and calls tort an ‘inefficient compensation mechanism' and emphasizes the strength of compensating through the method of first-party insurances, and therefore in the realm of contract law rather than tort.

‘Loss distribution as principal goal has long been out of academic fashion... [as the loss is now distributed by other means]... private first-party and social insurance' 32 .

The area of public law could contribute. In a welfare state, full compensation for accidents can be achieved by funds like the Road Accident Scheme as an alternative compensation system. One no longer has to bend the rules of liability to meet needs.

29 Revill v Newbury [1996] QB 567

30 Coleman

31 Abraham, p. 85.

32 Abraham, Kenneth A., Twenty-First Century Insurance and Loss Distribution in Tort Law, in Exploring Tort

Law, by Madden, M. Stuart, CUP, 2005, p 82.

7

Tort law cannot be based purely on economic efficiency. As we could see in the car manufacturer case above, this strict analysis ceases to work and because the calculation is not appropriate to all circumstances and, on occasion, it should hopefully never be applied, such as to compromise human life.

Ultimately it can be seen that Tort Law has to be kept seperate from punishment and deterrence, which are matters of Criminal Law.

I come to the conclusion that if there is a purpose for Tort Law then its primary goal

should be compensation.

8

References and Bibliography

Books & articles

Abraham, Kenneth A. Twenty-First Century Insurance and Loss

Arlen, Jennifer H.

and Bentley MacLeod, W. Beyond Master-Servant: A critique of

Brown, John P.

Calabresi, Guido Cooke, John Cooter, R.D. / Rubinfeld, D.L Fleming, John G Geistfeld, Mark Jones, Michael A.

Online sources Coleman, Jules Stanford Encyclopedia of Philosophy,

9

Cases Bolton v. Stone [1951] A.C. 850, [1951]

Bourhill v Young Grimshaw v Ford Motor Co. Hedley Byrne v. Heller & Partners Macfarlane v. Tayside Health Board Nicholas H Paris v Stepney Borough Council R. v. Altrincham Justices ex p. Pennington [1975] QB 549. Revill v Newbury [1996] QB 567

10