required readings - apsc 450

Faculty of Applied Science University of British Columbia

APPLIED SCIENCE 450 PROFESSIONAL ENGINEERING PRACTICE

ELEMENTS OF ENGINEERING LAW IN CANADA

W. Scott Dunbar, PhD, PEng P. Michael Gannon, PEng, LLB

September 2009

Unruly bunch!

Civil class of 49

Q: What do you get when you cross a librarian with a lawyer? A: All the information you need - but you can't understand a word of it. Q: When does a person decide to become an engineer? A: When she realizes she doesn't have the charisma to be an undertaker.

Word for word in court:

Q: Now doctor, isn't it true that when a person dies in his sleep, he doesn't know about it until next morning?

Q: So the date of conception (of the baby) was August 8th? A: Yes. Q: And what were you doing at that time? Q: Can you describe the individual? A: He was about medium height and had a beard. Q: Was this a male or a female? Q: You say the stairs went down to the basement? A: Yes. Q: And these stairs, do they go up also? A pop-up window that appeared upon closing the web site where some of the above quotes were found said: “It’s very funny to laugh at lawyers, but wait till you get the bill for the 1562 seconds you have stayed at this page.”

Q: How do you drive an engineer completely insane? A: Tie him to a chair, stand in front of him and proceed to fold up a road map the wrong way.

Elements of Engineering Law in Canada (2009) i

TABLE OF CONTENTS List of Figures .................................................................................... iii

Preface ............................................................................................. iv

The Legal System in Canada ................................................................... 1

Sources of Law ................................................................................... 4 Common Law .................................................................................... 4 Statute Law, Regulation and By-laws ........................................................ 6

Civil Law in Quebec ......................................................................... 6 Administrative Law ............................................................................. 7

Association of Professional Engineers and Geoscientists of BC ...................... 8 Judicial Review ............................................................................ 10

Labour Law and Human Rights .............................................................. 10 Ethical Obligations ........................................................................... 10

Business Relationships and Organizations .................................................. 13 Principal-Agent Relationship ................................................................ 13

Authority of the Agent ................................................................... 13 Obligations of Principal and Agent ..................................................... 13 Liabilities ................................................................................... 14 Termination of the Agreement ......................................................... 14

Sole Proprietorship ........................................................................... 15 Partnership .................................................................................... 15 Incorporation .................................................................................. 17 Choice of the Form of Business Organization ............................................. 18 Liability Insurance ............................................................................ 19 Going to Court ................................................................................ 20

Tort Law .......................................................................................... 21 Terminology of a civil case .................................................................. 21 The Rationale for Tort Law ................................................................. 21 Strict Liability ................................................................................. 22 Negligence ..................................................................................... 23 The Test for Negligence ..................................................................... 23

The Duty and Standard of Care ......................................................... 24 Causation ................................................................................... 27 From Breach to Loss - Proximate Cause ............................................... 27 The Actual Loss ............................................................................ 28 After notes ................................................................................. 29

Negligent and Fraudulent Misrepresentation ............................................. 29 Third Party Liability .......................................................................... 31 Product Liability .............................................................................. 34

Disclaimers ................................................................................. 35 The learned intermediary ............................................................... 36 The principal relationships in product liability ...................................... 37 The role of negligence in product liability ............................................ 37

Elements of Engineering Law in Canada (2009) ii

Vicarious Liability ............................................................................ 38 Intentional Torts .............................................................................. 39

Private Nuisance .......................................................................... 40 Trespass .................................................................................... 40 Defamation ................................................................................. 41 Injurious falsehood ....................................................................... 41 Inducement to breach a contract ....................................................... 42

Fiduciary Duty ................................................................................. 42 Duties of Confidentiality ................................................................. 43 Conflict of Interest ....................................................................... 44

Contract Law ..................................................................................... 45 Intention to Create Legal Obligations ..................................................... 45 The Agreement................................................................................ 47

Unilateral and Bilateral Contracts ..................................................... 48 Consideration ................................................................................. 49 Problems Arising from a Contract .......................................................... 50

Certainty of Terms and Implied Terms ................................................ 50 Agreements to Agree ..................................................................... 51 Misrepresentations ........................................................................ 51 Termination of Contract ................................................................. 51

Unjust Enrichment ............................................................................ 51

Dispute Resolution .............................................................................. 53 Civil Litigation ................................................................................ 53 Alternative Dispute Resolution Techniques ............................................... 54

Arbitration ................................................................................. 54 Negotiation ................................................................................. 55 Mediation ................................................................................... 55 Other Methods of ADR .................................................................... 55

Expert Witnesses ............................................................................. 56 Fees ......................................................................................... 56 Ethical Considerations .................................................................... 56

References ....................................................................................... 57

List of Cases ...................................................................................... 57

Appendix A: Third Party Liability ............................................................ 59 Donoghue v. Stevenson ...................................................................... 59 Extension of the Duty of Care .............................................................. 61 Hedley Byrne & Co. v. Heller & Partners Ltd. ............................................ 63

Elements of Engineering Law in Canada (2009) iii

List of Figures Figure 1 The Court System in Canada. ........................................................................................... 2Figure 2 The tests for negligence. ................................................................................................. 24Figure 3 Third party liability of a professional ............................................................................. 31Figure 4 The potential legal relationships in a product liability case ........................................... 37Figure 5 The legal relationships associated with vicarious liability. ............................................ 39Figure 6 Contract formation: the relationship between offers, acceptance, and rejection. ........... 48

Elements of Engineering Law in Canada (2009) iv

Preface Society today has placed considerable responsibility and trust upon the engineering profession as a whole. In turn, the law has imposed heavy obligations upon the engineering profession. Given the complexity of the engineering profession, engineers will often come into contact with various legal institutions (e.g. government agencies, administrative bodies, or even the courts). Thus, an understanding of the basic concepts of law as it applies to engineering practice has become a necessity for today's engineer. These notes are an attempt to provide a basic, “non-threatening” understanding of law as it applies to engineering. The notes have been assembled from materials originally provided by staff at Lindsay Kenney, Vancouver, BC. Additions have been made based on material from legal texts and texts on business and engineering law. Credit has been given where such additions have been made. The notes have also benefited from conversations with several lawyers who prefer anonymity to any kind of link with the author, however distant it might be. You may print one

copy of these notes for your personal use.

DO NOT make additional copies or give your copy to anyone. Destroy any previous versions. Make sure that the copy you use is current as the materials

from one year to the next may have significant changes.

DISCLAIMER These notes are provided strictly for educational purposes and to supplement lectures. They are intended to provide a basic introduction to legal concepts. As such, they should not be used as a basis for making legal decisions that, in any case, should be made with the assistance of legal professionals.

Elements of Engineering Law in Canada (2009) 1

The Legal System in Canada A central concept in any legal system is jurisdiction, the authority to decide disputes between parties. Jurisdiction in Canada is divided between the provinces and federal government according to the Constitution Act of 1867.1 For example, the Constitution gives the parliament of Canada jurisdiction over laws to be applied in criminal matters (i.e. the Criminal Code), immigration, currency and coinage, banking, copyrights and patents, navigation and shipping, communication systems, and taxes; whereas each province has jurisdiction within its geographical boundaries over property rights, operation of police forces, health and education, and licensing of businesses and activities.2

The practices of engineering and geoscience fall under provincial jurisdiction.

The Canadian legal system consists of three levels of courts: courts of first instance (provincial and federal), intermediate appeal courts (provincial and federal), and the Supreme Court of Canada. This is illustrated in Figure 1. Note the separation of provincial courts from federal courts. Where a matter falls in the court stream is a function of jurisdiction; a court can only hear matters over which it has jurisdiction.3

The Supreme Court of Canada is the final court of appeal; however, permission to appeal must first be granted by the Court for a case to even be considered by it. A matter must generally work its way through the successive levels of lower courts before it will be considered by the Supreme Court of Canada.

1 The Canadian Constitution is the supreme law in Canada. It outlines our system of government as well as the civil rights enjoyed by Canadian citizens, residents, or even people just visiting Canada. It is not a single document, but an amalgamation of several. The composition of the Canadian Constitution is set out in section 52(2) of the Constitution Act, 1982. It includes the Charter of Rights and Freedoms, and other Acts and Orders referred to in the Schedule to this Act. For example, the Constitution includes the Constitution Act, 1867 (formerly the British North America Act). 2 As set forth in the Constitution Act, 1867, the federal government has the exclusive right to appoint and pay all provincial and territorial Supreme Court judges. Lower court (i.e. provincial administrative tribunals, small claims and provincial court) judges are all appointed and paid by the territory or province. This “quirk” in the administration of justice originates from the time of Confederation in 1867. Canada wished to, as much as possible, remove regional biases in the interpretation of laws. At the time, the judicial systems of each state in the United States were controlled by biased state legislatures, which promoted division by passing laws that were often unfair to non-residents of the state. Canadians felt that this was one cause of the American civil war and therefore placed responsibility for the appointment of Supreme Court judges in federal hands. Furthermore, the Constitution ensures that the Supreme Court of Canada is comprised of justices (as judges of the Supreme Court are called) from all regions of the country. 3 While the issue of jurisdiction might at first glance appear to be a basic concept, determining jurisdiction (i.e. deciding which court has the authority to consider a matter) can sometimes be fairly complicated. Whenever there is doubt over jurisdiction, government legislation and detailed rules of court must be referred to.


Figure 1 The Court System in Canada. The arrows in the figure show the jurisdictional path of a matter before the Canadian court system. (Source: Canadian Department of Justice) The Provincial Court is responsible for “minor” civil and criminal matters. In some provinces/territories there are specialized provincial (or territorial) courts that deal specifically with criminal, youth, probate (estates and wills), traffic, small claims ($25,000 or less in British Columbia and most other provinces), or family law matters. Provincial/Territorial Supreme Courts4

, appellate courts, and the Supreme Court of Canada have inherent jurisdiction, meaning that their jurisdiction is broader than that which is specifically conferred to them through legislation. On the other hand, provincial courts and administrative tribunals have restricted jurisdiction and can only hear matters over which legislation has conferred them jurisdiction or authority.

Provincial Supreme Courts typically deal with serious criminal and civil cases, divorces, and cases that involve large amounts of money (more than $25,000 in British Columbia). In some provinces or territories, the Provincial Supreme Court is divided into a trial division and an appeal division, the appeals being from decisions made by a lower Provincial Court or administrative body. The courts of appeal are the highest courts in a province or territory. The Court of Appeal hears appeals of decisions made by the superior level courts. Typically a panel of three superior court judges will hear appeals. Unlike the lower courts, appeal courts do not conduct trials or hear witnesses; instead they review written factums, a detailed legal description of the points being appealed) and listen to supporting arguments made by lawyers from either side. Administrative organizations and their respective adjudicative tribunals are established by provincial or federal laws (i.e. legislation) to regulate specialized areas such as:

4 Depending on the province, provincial supreme courts are known by different names such as Superior Court of Justice (Ontario), Supreme Court (BC, Yukon, Northwest Territories, Quebec, Newfoundland and Labrador, Nova Scotia, Prince Edward Island) -- not to be confused with the Supreme Court of Canada, and Court of Queen’s Bench (Alberta, Saskatchewan, Manitoba, New Brunswick).

Supreme Court of Canada

Federal Court of Appeal

Federal Court Trial Division

Tax Court

Provincial Court of Appeal

Provincial/Territorial Courts

Administrative Tribunals dealing with Provincial/

Territorial matters

Administrative Tribunals dealing with

Federal matters

Provincial / Territorial

Supreme Courts


• the practice of engineering [through organizations such as the Association of Professional Engineers and Geoscientists of British Columbia (APEGBC)],

• worker safety (via the BC Workers’ Compensation Board), • telecommunications (the federal Canadian Radio-television and Telecommunications

Commission), • energy resource matters (the National Energy Board), • human rights, licensing, and many other areas of technical specialization.

Tribunals have quasi-judicial powers and are able to make rulings to enforce discipline, compliance with standards, or public policy; they hear arguments and evidence provided by lawyers (as with the regular courts, there is no imperative for a party to be represented by legal counsel…although it is always a good idea) before making a written decision on record. The courts, through an appeal process called “judicial review”, can review tribunal decisions. Even though administrative decisions can be reviewed, they are rarely overturned unless there is a serious error in the application of law or facts because the courts will accord a level of deference to the expertise of the tribunal. The legislation that empowers a tribunal sometimes specifies the degree of deference that a reviewing court must give to tribunal decisions.

In addition to the system of provincial and territorial courts, there is also the federal court system, with its own trial and appeal courts. The Federal Court of Canada has exclusive jurisdiction for judicial review of decisions made by federal tribunals. It can conduct judicial review of federal administrative bodies and also hear matters of maritime law, intellectual property law, taxation, immigration, and the like.5

Further details concerning the BC court system may be found at the Courts of British Columbia web site: http://www.courts.gov.bc.ca/index.asp. This site contains links to other provincial and federal courts, to provincial statutes and to a database of judgments in the BC Courts. Detail about federal courts, and the Canadian legal system in general, can be found at the Department of Justice web site: http://www.justice.gc.ca/en/index.html. Another useful website, where you can obtain actual court decisions for free is the CanLII website: http://www.canlii.org.6

5 Matters over which the federal court system has exclusive jurisdiction are set forth in the Constitution Act, 1982. 6 CanLII is a non-profit organization managed by the Federation of Law Societies of Canada. CanLII's goal is to make Canadian law accessible for free on the Internet.

http://www.courts.gov.bc.ca/index.asp�

http://www.justice.gc.ca/en/index.html�

http://www.canlii.org/�


Sources of Law In Canada, as in the United States and the United Kingdom, there are two important sources of law; common law and statute law (i.e. legislation). Common law consists of rules or precedents developed by the courts over time. Statute law is formed by enactments of legislative bodies, at the federal (i.e., parliament) and provincial levels (i.e., provincial legislatures). Municipal bodies (i.e., city councils) do not make statutes, but rather, they pass bylaws. Municipal bodies obtain all their law-making powers through provincial (or territorial) legislation. Common Law

The common law is a broad body of legal understanding used by the legal profession to provide guidance in applying the law to circumstances where legislation is either missing or unclear. This broad body of understanding is comprised of decisions from past cases (“case law”) in which the courts have ruled. Lawyers will sift through the case law to find similar fact situations to the particular issue they are trying to resolve. These decisions of past courts (called “precedents”) are persuasive in guiding current courts in applying the law. A good lawyer will find the most persuasive decisions from the highest courts (a decision from the Supreme Court of Canada carries much more weight than a decision from a lower court) and apply the principles from those cases against his or her legal issue. The common law has a significant influence on the conduct of engineering, so it is good to have a general understanding of what it is and how it may be applied. Common law originated in England as the result of some significant changes in the governance of that country. After the fall of the Roman Empire in the 5th century, the Romans withdrew from England and the country was invaded by Anglo-Saxons and divided up into a number of kingdoms, whose size was mainly based on the resources (i.e., troops) available to the ruling king. Laws in each kingdom were a combination of local customs, Anglo-Saxon customs, and remnants of Roman law. It was not unusual to find that an act tolerated in one kingdom was grounds for painful punishment in the next kingdom. This situation prevailed until the Norman conquest of 1066, after which William the Conqueror formed a more centralized system of government. Originally William personally dispensed judgments, but this began to interfere with his enjoyment of life and so he appointed judges who traveled throughout the country to hear cases and render judgments. To avoid the chaos caused by the differences between laws in each kingdom prior to 1066, it became necessary to establish an element of predictability in cases across all of England. In order to provide this consistency, the courts adopted the principle of stare decisis, Latin for "let the decision stand". This meant that the rules formulated by judges in earlier decisions were to be similarly applied in later cases. The doctrine of stare decisis was strictly applied by judges and such rigidity continued until the 19th century. However, in the early 20th century, arguments arose in legal cases about which facts of a previous case were relevant to an ongoing proceeding and which were not. Persuasive arguments for, or rational explanations of, distinctions between cases became a significant part of the body of case law. Nowadays, in judgments rendered by the court, one will find


considerable space devoted to explanations of differences and similarities between the case in question and other cases. There is a natural tension between the desire for consistency and the ability to distinguish differences because if the differences cause a previous decision to be effectively reversed by a current decision, then consistency would appear to be lost. However, the flexibility to argue differences between cases far outweighs the disadvantages since it provides the common law with the ability to adjust to the virtually infinite variety of facts in cases, the evolution of technology, and to changes in societal values, thus avoiding unjust decisions.7

Indeed some basic legal concepts concerning contracts, negligence, and intellectual property would not have been developed if such flexibility were not available.

In theory, lower courts are bound by precedents set by higher courts, a situation known as vertical stare decisis.8 Horizontal stare decisis applies in the case of similar level courts; for example, prior provincial court decisions from within the same province or territory, or supreme court decisions from within the same province or territory. When presented with fact evidence similar to that of precedents established in courts of the same level, judges must endeavour to apply the law from those earlier decisions to the case being heard.9 In practice, however, courts often make decisions that appear different from those of precedent cases. This apparent discrepancy in the application of the law is always based on distinctions between the precedent case and the case before the court.10

The use of precedents from other jurisdictions can also be used within your own jurisdiction. For example, case law from similar level courts in other provinces can be used in British Columbia courts; however, where there is conflict between established British Columbia case law and out-of-province case law, British Columbia case law will usually prevail (a similar logic applies in the other provinces and territories). Legal rulings from the United States and the United Kingdom, which have legal systems and practices similar to those in Canada, do not form part of Canadian law, but when “on point” (i.e. when they address a very similar set of facts), may have persuasive value when argued in Canadian courts. Subtle fact differences always exist between cases that appear to be the “same”. Those subtle distinctions may lead to a court making a ruling different than what you might expect. Thus, to be safe when deciding whether to pursue legal action (few things are a “slam dunk” when it comes to the law), it is better to assume that previous cases provide information to guide, but not predict, decision-making in a current case.

7 It is worth noting that differences between cases and changes in technology occur at a much higher frequency than changes in society or its values. 8 Latin for: "to stand by things decided”. 9Having said this, horizontal stare decisis may not always prevail, as the Supreme Court of Canada and the provincial courts of appeal do not consider themselves bound by their own previous decisions, but have the flexibility to change the law to meet changes in technology, societal values, etc. 10 If a lower court does not follow the precedent set by a higher court (usually because the facts of their case can be distinguished, but sometimes because the court may not have all the current and relevant case law before it when making its ruling), there may be grounds for an appeal. Even though a losing party may have a solid legal basis for appeal, the time, energy and financial expense of an appeal may however make the appeal process prohibitive for many.


Statute Law, Regulation and By-laws

Statute law, like the common law, is also a primary source of law, but it is independent of the common law. Parliament at the federal level or legislatures at the provincial or territorial level create statutes. Statutes are enacted to, for example, define crimes (the Criminal Code is a federal statute), create government bodies, or appropriate public money.11

Statutes serve several different roles. Some statutes codify law which has been developed by a large number of court decisions and serve to organize all of these decisions into one place. Examples include the Sale of Goods Act or the Partnership Act. Other statutes establish a principle of law, effectively overriding common law principles established in the courts. A statute limiting, or even eliminating, the potential liability of a government agency which under normal circumstances might be found liable in a particular matter, is an example of this over-riding power of statute law over case law.12

A subset of statute law is regulation. Indeed, regulations cannot exist without parent legislation providing for their existence. Regulations are legislated rules that specify particular behaviour in the context of the area to which the parenting legislation applies. Whereas a statute, or Act, establishes the general parameters of a particular area requiring legislation, regulations are used to “fine-tune” the parent legislation to address technical standards or industry norms. The power to make regulations, and the legislative mechanisms for doing so, is always contained within the parent Act/statute. The legislative process for amending regulations is “easier” than that for amending statutes and this is one of the primary reasons for their existence. Regulations are used in myriad circumstances (for example, with the Builders Lien Act, the Partnership Act, the Railway Safety Act, and many other statutes) and are very important for the practice of engineering. As alluded to earlier, by-laws are also very important for the practice of engineering. By-laws are rules created by municipal bodies (cities, towns, villages, etc.); they enable municipal bodies to govern at a local level. A municipality derives its by-law making powers entirely through legislation. City building and development codes are examples of by-laws that civil engineers regularly come in contact with. Civil Law in Quebec

In England, and in the common law provinces and territories of Canada, law is based on the decisions of the courts as supplemented or modified by statute. However, the province of Quebec is an exception. The province of Quebec, having its origins in the French legal system, follows the civil law, governed by the Civil Code. In the civil law system, judges do not rely as 11 For example, the BC Transportation Act provides the provincial minister of transportation the power to enter into contracts for construction, management and maintenance of highways in the province. It also sets out the required conditions of such agreements. See http://www.qp.gov.bc.ca/statreg/stat/T/04044_01.htm. 12 The ability to make claims against a municipality for damages arising out of negligent inspection by municipal building inspectors, or other negligent action by municipal employees, is often limited by these Acts. It is important to be aware of this and to seek legal counsel when claiming for damages from a municipality.

http://www.qp.gov.bc.ca/statreg/stat/T/04044_01.htm�


heavily on precedent; instead the law in Quebec is deduced from principles laid down in detailed Codes enacted by the Legislature. From a practical standpoint, this difference means that rules established by case law from provinces other than Quebec may not be applicable in Quebec, or vice versa. Administrative Law

Administrative law is considered a branch of public law. It applies to bodies operating under statutory authority e.g. Cabinet, individual ministers, department officials, public inquiries, school boards, municipal governments, some aspects of universities, and independent administrative agencies (such as APEGBC). Administrative law enables the removal of legal or policy matters that are better handled by specialist “expert” panels or bodies from the immediate jurisdiction of the more “generalist” court system. It involves the application of specialist expertise in the enforcement of a set of regulations made by statutes and administered by an agency, which is itself created by a statute. For example, the Canadian Radio-television and Telecommunications Commission (CRTC) regulates telecommunications across all of Canada. A provincial Labour Relations Board deals with labour disputes within a province according to statutes created by the provincial legislature. An agency, if permitted by its enabling legislation, may form an administrative tribunal that has quasi-judicial power to resolve disputes and complaints related to economics, social and professional matters, or to ensure that certain standards imposed by law are enforced. For example, the Workers’ Compensation Board ensures that workplace safety standards are met. The various provincial and territorial associations of professional engineers ensure that professional standards of engineers practising in the province are maintained. Administrative tribunals are created because the area in which they adjudicate is so specialized that it is better run by persons with a specific expertise, versus judges who may have little or no experience in that particular area. There are generally two kinds of administrative tribunals: (1) permanent authorities that come to life and function under enabling legislation, and (2) tribunals of a less permanent or ad-hoc nature such as royal commissions or public inquiries. Some of the common permanent tribunals in British Columbia are:

• The Commercial Appeals Commission, which has jurisdiction to hear appeals from decisions made under 13 statutes, including the Real Estate Act and the Company Act.

• The Labour Relations Board, which oversees the implementation and enforcement of the Labour Relations Act. It has primary jurisdiction to hear and determine an application under the Act and to make relevant orders. Further, the Board's decisions are open to judicial review by the courts only under exceptional circumstances.

• WorkSafe BC (see www.worksafebc.com) which is responsible for the administration and management of the provincial workers’ compensation system under the Workmen's Compensation Act. It compensates all workers injured at the workplace in the province and sets health and safety standards, while monitoring the work place to ensure compliance with those standards.

http://en.wikipedia.org/wiki/Public_law�

http://www.worksafebc.com/�


• BC Utilities Commission holds, which hearings throughout the year dealing with the regulation of public utilities under the following legislation: Utilities Commission Act, Hydro & Power Authority Act, BC Hydro Public Power Legacy and Heritage Contract Act, Gas Utility Act, and the Vancouver Island Natural Gas Pipeline Act. Hearings usually relate to revenue requirements or the rate design of regulated utilities, although the Commission also addresses the granting of certificates for projects, the deregulation of the gas industry and conservation issues.

Association of Professional Engineers and Geoscientists of BC

In British Columbia, the governing organization for engineers and geoscientists is the Association of Professional Engineers and Geoscientists of BC (APEGBC). An engineer or geoscientist who meets the educational, practical, and ethical requirements of APEGBC is permitted to offer his or her services as a professional engineer or geoscientist and to use the designation “P. Eng.” or “P.Geo.” after his or her name. The enabling legislation that gives APEGBC its authority over the profession is the Engineers and Geoscientists Act. It was enacted in 1996, amending the 1948 Engineering Profession Act to include geoscientists. The statute can be found at the following link: http://www.qp.gov.bc.ca/statreg/stat/E/96116_01.htm. APEGBC (and similar provincial associations) is self-regulating in that it possesses the power to impose conditions for entry to the profession and the power to discipline members who practise in a manner that violates the terms of the Engineers and Geoscientists Act or the bylaws of the Association, or who violate the Code of Ethics of the association, or who are otherwise guilty of unprofessional conduct. APEGBC has the powers to directly monitor the practice of its members to determine if violations occur. However, it is more common for the Association to respond to complaints about members. Upon hearing of a complaint about a registered member, an investigative committee (a tribunal) may be formed to determine whether disciplinary action is necessary. Hearings of the committee are like court trials in that lawyers may be present, witnesses may be called and must testify under oath, and evidence may be presented. Disciplinary action can include: a public reprimand, conditions on membership, suspension, or revocation of membership. The resulting decisions are legally binding.

Example Two examples of disciplinary decisions of APEGBC are shown below. The first is a “Stipulated Order” that followed investigation by an Investigation Committee. The second is a “Notice of Suspension” handed down by a Disciplinary Committee Panel. It was considered decent to obscure the identities of the individuals. However, if you are really curious you can find this case (and others) in the archives of the Association’s magazine Innovation at the website www.apeg.bc.ca.13

13 The first thing that most APEGBC members do upon receipt of the magazine Innovation is look at who is in trouble with the Association – “show me the dirt”. (Everybody loves trouble as long as it’s not happening to them.) It is interesting that most of the cases have to do with Civil or Geotechnical engineers. This is interpreted by cynics as indicating that other engineers don’t do anything since they are never in trouble.

http://www.qp.gov.bc.ca/statreg/stat/E/96116_01.htm�

http://www.apeg.bc.ca/�


S T I P U L A T E D O R D E R In the Matter of Xxxxx X Xxx PEng Whereas: 1. Xxxxx X Xxx PEng understands that the Investigation

Committee of the Association of Professional Engineers and Geoscientists of BC (the “Association”) has reasonable and probable grounds to believe and does believe that he, Xxxxx X Xxx PEng, contravened the Engineers and Geoscientists Act, RSBC 1996, Chapter 116 as amended (the “Act”), the Bylaws or the Code of Ethics of the Association; specifically: a) That he demonstrated unprofessional conduct by

signing, sealing and submitting Schedules C-B on June 4 and June 19, 2002 to the chief building official for a single family residence (first project) when the construction of the structural elements of the residence was not in accordance with the plans and supporting documents submitted by Mr Xxx in support of the building permit.

b) That he demonstrated unprofessional conduct by signing, sealing and submitting Schedules C-B on May 28 and June 19, 2002 to the chief building official for a single family residence (second project) when the construction of the structural elements of the residence was not in accordance with the plans and supporting documents submitted by Mr Xxx in support of the building permit.

c) That he demonstrated unprofessional conduct by signing, sealing and submitting Schedules C-B on August 29, 2002 to the chief building official for a single family residence (third project) when the construction of the structural elements of the residence was not in accordance with the plans and supporting documents submitted by Mr Xxx in support of the building permit.

2. Mr Xxx understands that the Discipline Committee of the Association, after an Inquiry and a finding that the allegation set out in the Notice of Inquiry has been proven, has the power and authority, in accordance with Section 32 of the Act, to do one or more of reprimand, impose conditions on membership, or suspend or revoke membership for each contravention the Discipline Committee finds Mr Xxx to have committed.

3. Mr Xxx understands that he has the right at an Inquiry to make full answer and defence and to be represented by counsel.

4. Mr Xxx, after seeking and obtaining independent legal advice, wishes to expedite the resolution of this matter by means of this Stipulated Order and does not wish to proceed to an Inquiry.

5. This Stipulated Order will become binding when accepted by Mr Xxx and the Reviewing Member of the Discipline Committee.

6. Mr Xxx understands that particulars surrounding this Stipulated Order will be published in Innovation and a notice of this Stipulated Order may be otherwise published or distributed.

Therefore:

In recognition of the foregoing, Mr Xxx and the Reviewing Member hereby agree as follows: 1. Mr Xxx accepts that he is in breach of the Act as

alleged in the Notice of Inquiry dated April 3, 2003. 2. The Reviewing Member, after a careful review of all

the information provided, has determined that an appropriate penalty is as follows: Mr Xxx is hereby reprimanded and the following conditions will apply to his membership: a) He must write and pass the Association’s

Professional Practice Examination within six (6) months of the date of this Stipulated Order.

b) He must practise under the direct supervision of a Professional Engineer, approved in advance by the Registrar of the Association, for a period of six (6) months and in the event that he does not pass the Professional Practice Examination within the six (6) month period, he must continue to practise under the direct supervision of the approved Professional Engineer until he does pass the Professional Practice Examination.

3. Mr Xxx understands and accepts that his acceptance of the above penalty has the same force and effect as if the penalty had been ordered by the Discipline Committee after an Inquiry pursuant to Section 32 of the Act, and that Section 34 of the Act therefore applies to the conditions imposed on his membership.

4. Mr Xxx, after carefully considering this matter, accepts the above penalty.

G S Prince PEng, Reviewing Member May 28, 2003

Notice — Xxxxxxx X Xxxxxxx PEng A Discipline Committee Panel (the “Panel”) of the Association of Professional Engineers and Geoscientists of BC (the “Association”) heard an application by the Association on May 27, 2003 pursuant to Section 31(7) of the Engineers and Geoscientists Act proposing that the membership of X X Xxxxxx Xxxxxxx PEng in the Association be suspended immediately.

A Notice of Inquiry had been served on Mr Xxxxxxx and a hearing before a Panel was scheduled to take place the following week; however, Mr Xxxxxxx’s physician was of the opinion that Mr Xxxxxxx was not fit to attend and participate in the Inquiry Hearing.

After hearing the Association’s application, the Panel concluded that Mr Xxxxxxx was not fit to practise professional engineering and ordered that his membership be suspended immediately. Mr Xxxxxxx’s membership in the Association is suspended effective May 28, 2003 at 12 noon.

The suspension will remain in effect until Mr Xxxxxxx is considered fit to attend and participate in an Inquiry Hearing and to undertake his professional responsibilities.

Since Mr Xxxxxxx no longer has the right to practise as a professional engineer, professional responsibility for any of his currently active projects must be transferred to another registered professional.


Judicial Review

The decisions of a particular administrative tribunal may be open to review by the courts depending on the drafting of the statute that creates it and gives it its powers. In some cases, that review is conducted by a separate secondary tribunal as created and prescribed by statute, such as the Commercial Appeals Commission. In other cases, a tribunal decision may be open to review by the Provincial Supreme Court. For example, review of a decision made by an investigative tribunal formed by APEGBC would be made by the BC Supreme Court pursuant to the Judicial Review Procedure Act. Superior courts reviewing a matter will, however, rarely replace the decision of an investigative committee; a significant error in law (i.e. the committee used the “wrong” law or legal principle(s) in arriving at its decision) or serious errors in “fact” (i.e. the wrong facts were used by the committee to arrive at its decision) would be required before a committee decision would be reversed. Labour Law and Human Rights

In each province and in the federal domain, there exist labour standards and other legislation, which establish a floor of rights for workers. They deal with such areas as minimum wage, rest periods, holidays and vacation, maternity and parental leave, equal pay for men and women, rights to notice and severance payments when employment is terminated, and protection against unjust dismissal. In addition, there is human rights legislation, which protects against discrimination in the employment context. Furthermore, there is also specific legislation relating to areas of employment that determines the rights and obligations of employees and employers with respect to pension benefits, labour relations, health and safety, non-payment of wages, workers’ compensation, and unemployment insurance. In some cases, the terms of the employment contract between the employer and the employee may trump the legislative scheme alluded to above. In other cases, in spite of the terms of the employment contract, the rights and obligations as specified in the legislation may be binding. Where legislation makes mandatory and specific provisions, it cannot be overridden by agreement (i.e., a person cannot contract out to a level below a legislated standard).14

Consequently, to fully appreciate what one's rights and obligations are as an employer or employee, one may have to look beyond the employment contract to the corresponding legislation; a sometimes tedious but necessary task.

Ethical Obligations

The general public may often be ignorant of the technical nature of services provided by engineers or geoscientists. As a result, the public places considerable trust in the abilities and performance of such professionals. For this reason, the association of professional engineers and geoscientists in each province or territory has a Code of Ethics/Conduct which designates the standard of conduct required of professional engineers or geoscientists in their relationship to the public, to their clients, and towards their colleagues. Member engineers and geoscientists must 14 For example, hourly workers must be paid overtime for hours worked above a standard work week. Even if a worker agrees to work at a regular rate, labour law requires them to be paid overtime. The same legal principle does not necessarily apply to management or staff workers (i.e. most likely “you”).


conduct their professional practices in such a way as to satisfy public and professional expectations, two of which are public safety and environmental protection.15

The Code applies to engineers and geoscientists acting in their professional capacities.

15 For doctors, the most important goal is the well-being of the patient, while for lawyers it is to uphold the law.


Business Relationships and Organizations An understanding of the forms in which individuals may associate for the purpose of carrying on their professional business is important to the engineer. As an employee, he or she should understand the business organization that he or she is part of. As a private practitioner he or she should be aware of the different forms of association available. A fundamental relationship, perhaps the “atom” of the business organization “molecules”, is that of principal-agent. Principal-Agent Relationship

As a newly-minted engineer, you will quite likely be an employee of a business organization or company. Owners of the business organization or company (principals) need not practice engineering directly but may rely on skilled employees (agents) such as you. This principal-agent relationship is a business relationship in its own right and is typically established by an express agreement such as an employment contract.16

Eventually you may find yourself in the position of employer. Consequently a basic understanding of the principal-agent relationship (or master-servant relationship) and the relevant law of agency will be helpful. Authority of the Agent

An important aspect of the relationship is the ability of the agent to enter into contracts with third parties. Thus, if a company employs you, you may be given the authority to purchase items from suppliers or to form engineering contracts with clients. The rights and duties under such agreements then become those of the principal. The agent has a duty to the principal not to act on behalf of the principal with a third party without the express consent of the principal. Thus, you cannot help the supplier secure other sales, or perform engineering services directly for a client without consent of the company you work for. Obligations of Principal and Agent

According to agency law, the principal has a duty to pay you, the agent, a reasonable fee for the engineering services you render. The principal must also compensate you for any expenses incurred in performing the services. Examples of such expenses might be airfares to job sites, hotels at or near job sites, car rental, use of one’s personal vehicle, etc. The employer may also be required to indemnify you (i.e., cover your posterior) in the event of negligence while performing your duties. The issues of liability and negligence will be discussed later. You, the agent, have a number of obligations to the principal. You must carry out all instructions of the principal, assuming they are lawful. You must also maintain the confidentiality of any information acquired as a result of your employment with the principal. Examples of such information would certainly include engineering reports, company procedures, or compensation packages of company employees. However, one can think of other situations that should be kept confidential, such as an argument between two co-workers or the fact that the president fell off his bicycle. 16 In special cases it may be established by conduct of the agent or principal or by necessity such as in an emergency.


More generally, as an agent, you must place the principal’s interests above your own. You must always act in the best interests of the employer; for example, by trying to obtain the lowest prices for items purchased from suppliers and the highest possible fees from clients. If you discover any information that may materially affect the principal, you must bring that information to the principal’s attention. Liabilities

Your employment as a professional engineer implies that you have the competence or special skills to perform the tasks required. Where additional specialized skills are needed, some employers may assist you with acquiring or maintaining such competence or special skills. If you fail to carry out engineering work according to accepted standards, the principal you work for could become liable for any consequent loss. This is (hopefully) less likely to happen in a larger company where there exist many checks and balances to catch deficiencies. In some circumstances, the agent and not the principal may retain liability for a loss due to the agent’s actions in a work capacity. For example, if you are a freelance consultant to the principal, the principal is your client and, unless the principal has assumed liability for your work via the consulting contract, you may find yourself with part or full liability for losses incurred by a third party (for example, the client of the principal that you are working for, or even a future owner of whatever you worked on, be it a property or a device) for mistakes or errors in professional judgment. Most consulting engineers carry liability insurance to fully or at least partially cover such an eventuality. Liability insurance is discussed in more detail further below. Termination of the Agreement

In the case of an employee contract, either the principal or the agent may terminate the agreement by giving the other party a specified period of notice after which the agreement will terminate. For example, if you find another job, you must inform your employer of your intention to leave after the specified notice period. Likewise, if the company falls on hard times and cannot meet payroll, they are required to inform you that your services will no longer be required after the notice period. (You will then have experienced a “lay off”.) The employer is required to pay you up until the end of the notice period and may be required to give you a severance package. This is discussed in more detail under Employment Law. “You’re fired!” Hopefully no employer ever says this to you. However, in the absence of an agreement to the contrary, an employer has the right to dismiss an employee without notice if the employee has exhibited incompetence, negligence, or has engaged in conduct unbecoming of a professional. This is discussed in more detail in the notes on Employment Law. If an agreement was established in order to complete a certain task, the agreement terminates when the task is completed. This is a typical arrangement for free-lance consultants, who often provide work to several companies.


Sole Proprietorship

A sole proprietorship is the most basic form of business organization. It consists of an individual professional who directly enters into contracts and is personally liable for the performance of those contracts. While the sole proprietor may do business under a particular business name, all business liabilities remain the sole proprietor’s; at law there is no separation between the liabilities of the business and the sole proprietor, they are one and the same. A sole proprietor may choose to do business under his or her own name, or may give the business a name such as “I am engineer”; however, a sole proprietor cannot add “Inc., Incorporated, Ltd., Limited, Co., or company” after the business name in any business transactions, including advertising. Only registered corporations are permitted to use those tags as part of their business name. Corporations will be discussed in more detail further below.

I am engineer

You can register the name “I am engineer” for your sole proprietorship and conduct business under that name, but the sole proprietorship is not legally separate from you, the owner. Thus, if liabilities or problems in contracts arise, you are personally liable. In the event of a legal claim, you have potentially unlimited liability and all available assets under your name or the registered name are potentially at risk. This includes, for example, cash in I am engineer’s bank account or your personal bank account, your oak desk, your house, your power tools, your Ferrari, and that diamond-studded iPod.

To further the point in the above example, you cannot claim bankruptcy of “I am engineer” and expect that your assets will be protected; at law “I am engineer” is not a recognized legal entity, it is simply an extension of you, personally.17

Despite these risks, there are several benefits to setting up a sole proprietorship. One is the ease with which it can be established – it is almost as simple as saying “I’m ready to do engineering” or simply producing what you have designed. Obtaining a business license from your municipality might be required in some cases: e.g. if you are using your basement or garage to build and sell a product. This form of business organization allows you to develop your business more easily without becoming bogged down in all the start-up paperwork normally associated with a more formal type of business. There are also significant tax advantages to engaging in business as a sole proprietor. Although all income derived from work or sales is considered personal income, there are many types of deductions available. For example: business losses (Sales-Expenses<0), the cost of the use of your house as an office (typically a percentage of the mortgage payments), the cost of employing people, the colored paper clips, etc., can all be subtracted from your gross income to arrive at a net taxable amount. These tax advantages reflect deliberate government policy and are intended to promote the development of small businesses in the country. Partnership

A partnership is defined in Canada as “a relationship which subsists between persons carrying on a business in common with a view of profit.”18

17 You can put assets in your partner’s name, but such a partner must be legally recognized as in a marriage or a common law relationship. This normally requires some form of commitment to that partner.

The rules and procedures that apply to a


partnership are set out in the various partnership acts of the provinces. The text of the Partnership Act of British Columbia can be found at the following link: http://www.qp.gov.bc.ca/statreg/stat/P/96348_01.htm As it is a contractual relationship, a partnership requires the agreement of each member to carry on business together. It must be possible to confirm that agreement. Any event that renders a partner incapable of carrying out business, such as death or bankruptcy, will terminate the partnership. The partnership will also be terminated by a unilateral declaration by one of the partners that he or she no longer wishes to remain a partner. A formal partnership agreement (i.e. a legal document) is essential to establish the identity of the partners, the name of the firm, the nature of the business, and other terms of the partnership such as how it may be terminated or how it may admit other partners. Almost all provinces require registration of the partnership and of any subsequent changes made to the partnership. Sometimes, even if a partnership has not been formally registered, it may be inferred if the parties have conducted business as partners. For example, an agreement to share the profits of a venture would likely be deemed a partnership while an agreement to share in the gross revenue would not be. Note the distinction – if the parties agree to share the profits, then they are “carrying on a business in common with a view of profit” in accordance with the definition of a partnership, while if the parties agree to share the gross revenue, then while there may be a view of profit, there is not necessarily a business but rather what might be considered an investment opportunity.

A consulting group

Three engineers decide to form a team to write a proposal to do some review work for a lending institution on the design and associated risks of a large engineering project. Each member of the team works out of her house and has her own business expenses. They agree to share the gross fees according to the amount of work each expects to do on the review. Their proposal is successful. The group would have to agree on how joint expenses are made (e.g., printing and binding the report, joint travel expenses) but the amount of profit received by one member of the team will depend mainly on expenses made by that member to perform his portion of the work and not on the expenses or actions of another member. They are acting as a group of sole proprietors, not a partnership.

Partners in a partnership are jointly liable (i.e. to the extent of their particular share in the partnership)19 for all debts and obligations incurred by any member of the partnership while carrying out the business of the partnership.20

18 This definition is used in all provincial partnership acts.

If the assets of the partnership are insufficient to

19 Whereas liability in contract (i.e. for debts and contractual obligations) is joint, liability in tort (i.e. for wrongful acts and omissions) is joint and several. This means that in a claim against the partnership, an individual partner can be left “holding the bag” for all the other partners if his or her personal assets are greater than the others. The victim of the wrongful act or omission can seek compensation from the partner with the deepest and easiest personal pockets to reach once the direct assets of the partnership are exhausted. The partners are then left to fight amongst themselves (e.g., they can sue each other) to balance things out. (fun, fun, fun) 20 In principal-agent terms, every partner is an agent of the partnership and of the other partners when carrying out the business of the partnership.

http://www.qp.gov.bc.ca/statreg/stat/P/96348_01.htm�


cover a liability, a claim against the partners' personal assets may result. In this sense, the partners are in a similar situation to sole proprietors. Partners may form what is known as a Limited Liability Partnership (LLP) to protect their personal assets. An LLP is part-partnership and part-corporation in that all the partners have a form of limited liability similar to that of the shareholders of a corporation. In an LLP all partners can participate in the management of the business (unlike corporate shareholders, who cannot) without exposing their personal assets to business liabilities (i.e. they have limited liability). In addition to the liability protection available to LLP partners, there may also be some tax advantages over those of a business operating as a corporation. Another way to limit liability is to form a Limited Partnership in which limited partners provide only capital but are not involved in management. Limited partners are not liable for more than the amount of capital they contribute. General partners would manage a Limited Partnership and are fully liable for the debts and obligations of the business. In return for assuming this risk, general partners may be entitled to a greater share of the profits. Obviously, when forming a partnership, you should pay particular attention to who you choose as a prospective partner, since you could be exposing yourself to considerable risks by joining the partnership.21

Each partner has considerable influence in how the partnership is operated and can legally bind the others without prior approval – all of which can lead to conflict. However, aside from the relative ease and low cost of its formation, a primary advantage of a partnership is the ability to combine assets and skills in forming, running and managing a business.

Incorporation

A corporation is a legal person according to law, an entity recognized as having rights and duties of its own. It can hold and dispose of property, be taxed, and sue or be sued in its corporate name. The main advantage of incorporation is limited liability, that is, the liability of shareholders in the corporation is limited to their capital contribution. In the event of corporate insolvency, creditors or other claimants may seize the company’s assets22

but not those of its shareholders; shareholders lose only the money paid for their shares. Other advantages of incorporation include the ability to raise large amounts of capital through share issuance, perpetual duration (even in the event of a primary shareholder’s death or personal bankruptcy), centralized management through a board of directors, and freely transferable ownership.

There are some differences between large corporations and small private companies. For example, to obtain a line of credit in order to operate a small business, the shareholders might be required to provide security or guarantees involving some of their personal assets; which would then be at risk in the event of a claim. In this sense, the liability “protection” of doing business in a corporate form is somewhat defeated; however, lenders do like to protect themselves as best as they can, and as a small business owner this is simply one of your “realities” of doing business. 21 Rule of thumb: Your best friend could be the worst partner. 22 The assets may be financial or physical in nature. Financial assets might be investments in other companies or contracts for engineering work. Physical assets can range from buildings to the coffee maker in the staff lounge.


In Canada, there are both federally incorporated companies as well as provincially incorporated companies. If a company is incorporated as a federal company, it will be governed under the Canada Business Corporations Act, (CBCA).23

If a company is incorporated in the province of British Columbia, it will be governed under the corresponding British Columbia statute called the Business Corporations Act.

The term “corporate veil” refers to the limit on liability of a corporation to the assets owned by that corporation. However, there are situations where the veil can be pierced, so to speak, and the directors of the corporation may be held personally liable. Using the corporation as a means to commit an act that was fraudulent, deceitful, or advanced personal interests, is one (perhaps obvious) way a director (or directors) can attract personal liability. Of more interest to engineers are cases where managers or directors knew of, or ought to have foreseen, a problem with company activities that could lead to harm to the public or damage to the environment and failed to address it – an issue of due diligence. In two 1992 Ontario cases, the directors of Bata Industries and Varnicolor Chemical Ltd. were found personally liable for failing to exercise sufficient control of company activities that could or did result in release of toxic chemicals into groundwater systems. (Smythe et al, 2007:653-654) American case law on corporate veil piercing can be found at http://www.bulletproofveil.com Choice of the Form of Business Organization

Forming a business association can be a complex legal matter with liability as well as tax implications and various factors may affect the choice of a particular form of business organization. There are advantages and disadvantages to each form. These are summarized in Table 1. It is impossible to describe all the issues surrounding the selection of a form of business organization and therefore none of the above should be construed as the definitive word on the subject. Speak to a legal or tax professional and do your homework before entering into any kind of business relationship. 23 Briefly, a CBCA incorporated company can conduct business throughout Canada without re-incorporating in each provincial or territorial jurisdiction that it wishes to do business in (it may still be required to get a business license in a given municipality, however); whereas a provincially or territorially incorporated company must limit its business activities to that jurisdiction, unless it has also incorporated elsewhere.

http://www.bulletproofveil.com/�


Table 1 Factors Relevant to Choosing a Form of Business Organization

Factor Sole Proprietorship Partnership Corporation Difficulty in establishment

Registration may be required, business license may be required

Agreement and registration Significant, can be complex

Cost Low Medium High Maintenance Low Medium High Ability to generate capital

None beyond the owner’s capital and credit

Joint resources of owners in capital and credit

Highest, including share offering

Difficulty in management

Easiest, owner only Significant Highest

Liability of owner Near absolute Shared, but for wrongful acts or omissions can disproportionately fall to one or more partners

Little or none

Transfer of ownership or responsibility

Sale of assets only, with assignment of contracts

More complex Easiest, by sale of shares

Term of operation Maximum term governed by life of owner

Not beyond death or bankruptcy of any partner

Unlimited

Dissolution Easy More complex, can be contentious Most complex, costly, often contentious

Source: After Willes and Willes, 2004: 250

Liability Insurance

Despite the various ways to limit liability when forming a business organization, liability never really goes away when you are acting as a professional. Engineers may incur liability to their clients and to third parties for their failure to perform their professional obligations with reasonable skill, diligence and competence – an occurrence known as negligence. An engineer practising in a business relationship may need liability insurance to cover claims in the event of negligence. Engineers contemplating the purchase of liability insurance must consider the following factors:

a) the scope of insurance coverage offered; b) claims handling and defence capability; c) other insurance related matters; d) the insurer: its claim handling experience, financial strength and performance; and e) costs.

When considering the scope of insurance coverage, an engineer must consider the time period that the policy covers and the types of claims that will be insurable. So, for example, if you are about to start practising some form of engineering that could lead to significant liabilities, ask yourself if the insurance policy that you purchased in 2002 is applicable to the work that you are about to undertake.


The type of insurance coverage is also important. Some policies state that they cover services customarily performed by engineers, while other policies may be more restrictive, limiting coverage to the professional services for which the engineer is qualified. An insurance policy will assist the engineer in three ways. First, it will provide financial protection to the engineer against third parties who claim the engineer has been negligent. Secondly, most insurance policies provide that the insurer will retain and pay a lawyer to defend the engineer in the event of any court proceeding. Thirdly, for certain types of contracts, clients will require certain levels and types of insurance before engineers can even bid on the work. Going to Court

The legal environment is quite a different environment from the technical one to which engineers are accustomed. What might be considered inherently obvious or basic to an engineer is often by no means obvious to the court or to the public. The facts must be established in the courtroom using only evidence provided by the oral and/or written testimony of witnesses, which is very different from establishing facts by, for example, testing a piece of hardware or machinery. There are rules as to what is relevant and admissible as evidence in a courtroom. If the evidence presented to a court is inadequate to establish the facts as claimed, the court cannot and will not infer an implied factual situation. There are two ways to sue another party; either in contract or in tort (in some circumstances it is possible to sue in both, but this is uncommon). In the first scenario, one or more parties have an agreement between them to do business and for some reason that agreement has gone sour. The negatively impacted party or parties have incurred economic losses; they wish to recover those losses and/or eliminate or minimize their exposure to further losses. The terms of the contract will be critical to determining the obligations and respective shortcomings of the parties. In the second case, the actions of one party have caused damage to a second party. There may also be third parties (i.e. parties not involved in a contract between the first and second party) who have been damaged by the actions of the first party. The damaged parties wish to obtain compensation for the damages.24

The following sections will introduce the concepts of tort and contract law that practising engineers need to be aware of.

24 Diagrams showing the relationships between parties are useful. Alternatively you could just go to them.


Tort Law Tort law is a part of the common law that deals with compensation for harm resulting from activities between people that are conducted outside of a strict contractual relationship.25

Tort law is also interesting in and of itself because it often provides the legal mechanism wherein technical issues can be challenged.

Given the wide variety of ways in which engineers interact with each other and with the public, it is no surprise that tort law has become a significant issue for practising engineers. Engineers do not deliberately set out to cause harm (hopefully not!), but owing to the special knowledge and expertise possessed by them, a high standard of performance is expected. An inadvertent mistake or oversight made by an engineer, or an apparent design flaw in a product, can lead to a lawsuit in which the abilities and professionalism of the engineer (or employer of the engineer) may be called into question.26

The consequences of a successful lawsuit against an engineer can be financially disastrous. In some cases, the damage to the reputation of an engineer (or employer) can be so extensive that it becomes impossible to continue working, as clients or customers stay away in droves. For these reasons, tort law should be of particular interest to practising engineers.

A number of cases involving engineering will be used to illustrate some of the principal concepts of tort law. Terminology of a civil case

Tort cases (contract cases, as well) tried in court are denoted P v. D where P is the plaintiff and D is the defendant. Either P or D may appeal the ruling in P v. D if they are not satisfied with the judgment. The party appealing becomes the appellant and the other party becomes the respondent. Civil cases are recorded and stored in various legal databases. A citation of a case has the following notation:

Falkenham. v. Zwicker [1978] 93 D.L.R. (3d) 289 plaintiff versus

(Latin for against)

defendant year of decision volume number

case reporter (database)

series page number

A legal library or web sites such as that of the Canadian Legal Information Institute (www.canlii.org) provide access to case law in Canada. The Rationale for Tort Law

The rationale for tort law is that people have a duty not to cause foreseeable harm to others through wrongful acts or omissions. The primary purpose of tort law is to provide a mechanism for compensating an injured party for the damage resulting from the wrongdoer's breach of this duty of care. Compensation is typically in the form of money and is called damages. Judgments 25 The word tort translates as wrong in French and this has an origin in the Latin word tortus for twisted. 26 Imagine receiving a lawsuit that implies you are incompetent even though you have 10-15 years of experience!

http://www.canlii.org/�


in tort cases also serve an educational purpose by informing society as to the limits of acceptable non-criminal conduct. In this sense, the often large sums associated with tort law judgments also serve as a deterrent to careless behaviour. The adjective used to describe the act that causes the harm or damage is “tortious.” Unlike criminal liability, which arises when a person engages in conduct that contravenes social standards as expressed by criminal laws, thereby becoming a threat to the public, a tortious act results in civil liability. Sometimes a victim of a crime may at the same time also be a victim of tortious activity. The legal system treats the criminal and tortious components of illegal or damaging behaviour differently. In the first case, the “Crown”, or government, will endeavor to prosecute the law-breaking party; whereas in tort law, the party who suffered the harm must independently obtain compensation for the harm, or damages, through the courts. Strict Liability

One basis of tort liability is the notion of fault; a connection between the actions of a person or persons and the resultant damage or injury. Another basis for tort liability is strict liability or liability without intent or negligence, regardless of actual fault or precautions taken. Strict liability cases are uncommon and typically involve the maintenance, handling and transport of dangerous chemicals, materials or animals. The following old (1868) English case set the precedent for modern application of the concept of strict liability.

Rylands v. Fletcher27

The plaintiff owned an underground coal mine and the defendant owned some land overlying the mine. The defendant had a reservoir constructed for his own use. Unfortunately, the reservoir was built over old workings that led to the mine and the mine was flooded. Rylands successfully sued claiming the defendant had strict liability for the entry of water into the mine.

Notice two things about this case. The defendant did not perform any deliberate action that led to the mine flood; rather he was liable by virtue of having the reservoir present on his land. Also note that the contractors who negligently built the reservoir over the old workings were not sued.28

Current negligence law can be viewed as a spectrum of principles, with strict liability at one end and no liability at the other. At the time of Rylands v. Fletcher, there was nothing in between, a very dismal state of affairs. However, there have been many changes in tort law since that time. Canadian courts typically do not apply strict liability in tort law; the tendency is rather to apply the principles of negligence (described below) and to set very high standards of care for potentially dangerous activities, so high that it may be prohibitive to carry out the activity or to obtain insurance for it. American courts use the concept of strict liability more often, particularly in cases involving product liability and damage to the environment.

27 [1868], L.R. 3 H.L. 330. 28 It could be that the engineers or sub-trades involved performed their tasks negligently by today’s standards. The current state of professional practice would require that due diligence be exercised at the beginning stages of a project and it would be very surprising to have a reservoir built over a mine without engineered steps being taken to avoid flooding.


Negligence

Negligence is basically a simple concept: Every person owes a duty of care not to cause injury or damage to an individual or group whom they ought to reasonably anticipate would be injured or damaged by their careless act or omission. An individual or group who is injured or damaged as a result of a careless act or omission must be compensated. In the late 19th and early 20th centuries, negligence law consisted of a specific and limited set of torts. What is interesting from the point of view of a profession such as engineering is that these torts often involved specialists such as apothecaries (the old version of today’s pharmacist), surgeons, carriers (delivery people), and innkeepers, who breached an expected standard of care. Otherwise, individuals were generally not accountable for their careless acts. When the automobile came into common use, the tort of negligently hitting someone with a car became common. The Test for Negligence

Despite the apparent simplicity of negligence, it involves the somewhat nebulous concept of “reasonable anticipation” which seems open to arbitrary definition. Who decides what is reasonable? For example, one can also imagine cases involving manufactured goods, where the scope of liability is potentially unlimited (How many individuals must be considered?). However, over time, negligence law has developed some established principles and procedures to reduce some of the apparent arbitrariness in it. The following sections will describe these principles and illustrate the limits to liability due to negligence in Canada. The test for negligence can be divided into three fundamental parts (Klar, 2003:149); when a plaintiff brings an action against a defendant professional, the plaintiff must prove each of these three items before damages can be recovered (i.e., the burden of proof is on the plaintiff):

1) Duty of care: Does the defendant professional owe the plaintiff a duty of care and if so, what is the nature of that obligation?

2) Breach of the duty of care: If a duty of care exists, was it was breached by the defendant? This requires knowledge of a standard of care.

3) Causation: Was the breach of a duty the cause of the plaintiff’s loss? This is known as cause-in-fact.

Even if these three questions are answered in the affirmative, the plaintiff must then also establish that a legally recognized loss was suffered as a result of the breach. The court must also establish the actual loss. The amount of awarded damages will be limited by any contributory negligence by the plaintiff, or whether the plaintiff knowingly assumed the risk of a loss. Figure 2 illustrates the above concepts.


Figure 2 The tests for negligence. The Duty and Standard of Care

For a professional engineer or geoscientist, a duty of care to a client and to the public at large arises by virtue of the obligations of the profession. For example, an electrical engineer has a duty to ensure that her design of a high voltage power supply for a machine does not endanger the operators of the machine. In general, if the resultant harm to a plaintiff should have been reasonably foreseeable by the defendant engineer (or any engineer with the same training and experience as the defendant) then the defendant owes a duty of care. Once it has been established that a duty of care does exist, the required standard of care must be established. For non-professionals who may commit negligent acts, the standard of care is considered to be that of the ordinary “reasonable person on the street”. The standard of care for practising engineers or geoscientists is higher and is determined in a different way:

A practising engineer or geoscientist must exercise the same degree of skill and possess the same level of knowledge that is generally expected of other members of the profession with the same training and experience.

For example, it would not be expected that an engineer with three years of experience should perform at the same level (or standard) as an engineer with 20 years of experience. Likewise an

Duty of care

Negligence not established

Breach of duty of care Standard

of care

yes

Causation (Cause-in-fact)

yes

yes

What is the actual loss?

Damages awarded

Foreseeable damage?

“But for” test Proximate cause

Contributory negligence Assumption of risk

no

no

no

no


engineer who is a specialist in his or her field would be expected to exercise a greater degree of skill than a non-specialist (“average”) engineer. The courts will commonly look to two sources to determine what standard of care is expected of an engineer in a particular situation:

• Written standards: of professional conduct or of certain types of engineering design, and • Expert opinion: seasoned practitioners may be asked to testify as expert witnesses as to

what they consider to have been a proper standard for the situation being addressed. For example, an expert witness may be asked: Is this widget normally used, or is some other widget the norm? Would other engineers normally design the system differently to avoid risks?

Such standards regularly change with time based on new knowledge or discoveries and a defendant can only be held liable for the standards prevailing at the time of the damage. However, it is incumbent on the engineer to exercise professional diligence and educate him/herself on these changes as part of his/her professional development. Wilful ignorance or laziness are losing defences in a court of law…as they should be! In addition, the courts also consider whether the skill and knowledge of the engineer are commensurate with the engineering task that was undertaken.29

If a professional does have the required skill and knowledge and applies it, the required standard of care would be met even though the design turned out to be defective or the advice turned out to be wrong.

In order for a defendant professional to be found negligent, it must therefore be shown that he or she breached the duty of care owed to the plaintiff by virtue of the obligations of the profession, the specialized knowledge or skill involved, and the prevailing standards concerning how such knowledge or skill is to be used. Typically negligence in professional practice is due to a lack of care, not a lack of skill or knowledge. The following case illustrates some issues concerning how the prevailing standard of care is established.

Hodgins v. Hydro-Electric Commission of Nepean (Ontario)30

In 1967 Hodgins was planning a house addition for an indoor swimming pool. Winch, an electrical contractor, suggested using electrical heat for the addition and took the plans for the addition to Nepean HEC. Runions, a technician of Nepean HEC, made a heat loss calculation to determine the annual cost. Based on this, Hodgins decided to use electricity to heat the addition. However, the actual heating costs for the completed addition were almost twice the estimated cost.

In 1972 Hodgins sued Nepean HEC and won in Ontario Provincial Court. In the trial W. L. Scott, head of the Ontario Electrical League, the professional organization Runions belonged to, gave the following testimony in response to questions from the judge:

Judge Macdonald: And you couldn't quarrel with the figure arrived at?

29 Thus, if you are a junior engineer, freshly graduated, and you are asked to make judgments or decisions that involve a lot of money or risk, you should feel uncomfortable and ask your superiors some pointed questions. 30 [1975] 60 D.L.R. (3d) 1. (Lower court decisions are referred to in this Supreme Court case.)


W. L. Scott: I couldn't quarrel with the factors used, or the actual arithmetic and multiplication of the estimate, but I didn't go out and take measurements of the room. Judge Macdonald: No, I realize that, but if you had been doing it in ‘67, you would have done the same thing? W. L. Scott: Yes, sir.

In rendering his decision, Judge Macdonald stated that Runions breached his duty of care to Hodgins considering the circumstances; that is, Runions knew that Hodgins would rely on the heat loss estimate, and that Runion’s estimate was inaccurate for a room with a swimming pool.

However, Nepean appealed the decision to the Ontario Appeal Court, which dismissed the lower court decision. In his decision to dismiss the 1972 decision, Judge J. A. Evans of the Ontario Appeal Court stated:

Judge J. A. Evans: That the estimate was incorrect is not questioned, but it is not sufficient that the plaintiff establish merely that the Runions estimate was wrong, he must go further and establish that the incorrect estimate resulted from a lack of skill, competence or diligence … [italics added]

Hodgins appealed the decision of the Ontario Appeal Court and the case went to the Supreme Court of Canada in 1975. At the Supreme Court, Justice J. A. Ritchie argued for reversing the 1972 decision as follows:

Judge J. Ritchie: I can find no evidence that Runions acted carelessly or failed to live up to the ascertainable standard of competence and diligence existing in the electrical heating field in 1967 as described by the expert, Scott. [italics added]

A number of things are going on in this case. It was clear that Hodgins would rely on the estimate made by Runions, who had specialist knowledge in the field. Runions therefore owed a duty of care to Hodgins. There are also some technical issues. In 1967, Runions made the heat loss calculations for a room with a concrete floor as there was no established methodology for computing heat loss for a room with a pool. However, he did not anticipate that the water in the pool would cool the room and double heating costs. What is interesting is that, although a methodology for computing heat loss in a room with a pool was not available, a Grade 12 physics student could understand the physics of the situation.31

Given his knowledge, Runions could have and should have cautioned that the estimate would be inaccurate.

The testimony of W. L. Scott is particularly significant in that it demonstrates the importance of evidence (and perhaps the importance of choosing the “right” expert witness). Mr. Scott stated that he would have done the same calculation if faced with the problem in 1967 (methods for computing heat loss due to pools had been developed by 1975.) This was the testimony of an expert supporting the standard of care at the time. The court can (and will) only deal with the evidence before it. Unfortunately for him, Hodgins did not introduce expert testimony from another witness who could have explained the “obvious” physics of the situation and the possibility that Runions could and should have qualified his estimate.32

31 Perhaps an A student, but the point is clear.

With the available evidence, the Supreme Court was able to show that Runions had the required skill and knowledge and applied it according to the standards available at the time. He was therefore not negligent according to the evidence that was provided even though his estimate was incorrect.

32 One thing to note is that Runions was a technician and not an engineer. Had he been a professional engineer, the standard expected of him would have been much higher.


This case also demonstrates the importance of testimony provided by technical people. The influence of such testimony on the outcome of a case must not be underestimated. For technically based testimony to be effective at getting to the truth of a matter, the witness giving such testimony must have an ability to communicate challenging concepts to non-experts in the field as well as good understanding of how the legal system works. Causation

Proof of negligence requires establishing that the breach of duty actually caused the injury or damage in question. This is known as cause-in-fact: a fact-based and physical connection between the actions of the defendant and the damage or injury. The legal test for cause-in-fact is the so-called but for test:

Would the damage or injury have occurred but for the negligent actions of the defendant? If the answer is yes, then there can be no causation because the damage or injury would have occurred whether or not the defendant was negligent. However, if the answer is no, then the opposite is true and the damage or injury is related to the actions of the defendant. The but for test is not always satisfactory. An example adapted from Smythe et al (2007: 52) illustrates this very well.

But for this one

PQR Inc. was having renovations done to part of their factory by STU Contractors Ltd. While cutting through a wall, an STU workman sliced through a number of wires, causing the factory’s cooling system to shut down. This was negligent since wiring diagrams were available and should have been consulted. Without the cooling system, the factory could only continue operation for a few hours. The factory manager, M, immediately decided to drive to the nearby town to obtain replacement wire. On his way, a vehicle carelessly driven by Y struck his car and M suffered slight injuries. After examination by paramedics and other considerable delays, M was able to get the replacement wire and return to the factory, but by that time the factory had been shut down due to excessive temperatures. The wire was replaced but four hours of production were lost. Furthermore, it turned out that M’s injury caused him to miss a meeting with an important client causing PQR to lose the opportunity for a lucrative contract.

Application of the but for principle would suggest that the negligent act of the worker was responsible for everything that went wrong in the example; but what about Y? Y is clearly not liable for cutting the wire, but could be blamed for everything else. What about M? M’s decision to leave the factory, rather than send someone else, may also be questioned. Clearly another test is required to determine causation. That test is proximate cause. From Breach to Loss - Proximate Cause

A key question is whether proximity of the relationship between breach and loss can be established (i.e., is there a foreseeable sequence of events that led from breach to loss). The courts will attempt to determine if there is a connection between a negligent act and damage by means of a sequence or chain of events, each of which is foreseeable (Osborne, 2000:85). Given this sequence, proximity between the breach and the loss may be established. The proximity


between breach and loss may be temporal, spatial or logical, or some combination of the three depending on the facts of the case. However, the issue of foreseeability of the sequence is paramount. The defendant is not responsible for a consequence that is merely possible, but is responsible only for a consequence that is probable, according to ordinary and usual experience of people with similar skill and knowledge. The issue of proximity and the degree to which events must be foreseen is demonstrated by the following case:

Falkenham v. Zwicker33

Facts:

Defendant D was driving negligently (speeding) when a cat ran onto the road. D swerved and drove into a farmer's fence causing damage to the fence. The farmer repaired the fence and noticed fence staples lying about; he looked for more and found some of them. Later in the spring, the farmer introduced cattle into the field. Some cows ate the remaining staples, contracted "Hardware Disease" and died. The farmer (Plaintiff P) sued D for the loss of the cows. Issue: Is D liable to P for the loss of the cows or is the injury too remote? Held: • D is liable for the loss because it was foreseeable; • Damage was foreseeable by a reasonable person. The "foreseeable chain of events" argument was

used … accident breaks fence → broken fence means staples on the ground → staples on the ground are likely to be eaten by cows → eating staples likely to cause cow's death.

• Damages were reduced because P had noticed that fence staples were missing yet still introduced cattle into the field.

Note that the chain of events given in this case describes a proximate relationship (temporal, spatial and logical) between the damaged fence, the missing staples, and the dead cows. The court determined that such a sequence would have been foreseeable by a reasonable person. In the “tragic sequence of events” described above involving renovations at PQR’s factory, most of the events after the wires were cut could not be foreseen. The contractor could be held liable only for the physical damage caused by cutting the wires. One might think the contractor would be liable for the loss of production due to the damage, but read on. This should be taken as a warning – professionals who have specialized knowledge are held to a higher standard and this often means being able to foresee a considerable number of potential losses resulting from carelessness, losses that would not be obvious to a non-professional. The Actual Loss

Once negligence has been proven, it must be established that the amount of damage for which compensation is sought was in fact caused by the breach of the duty of care. Damages recoverable under tort law are those which can are reasonably foreseeable at the time of the tort.

33 [1978] 93 D.L.R. (3d) 289 (N.S.T.D.)


Consequently, where a portion of the damage that occurred is not foreseeable, that portion is not recoverable. Damages can be reduced because of contributory negligence of plaintiff. This occurred in Falkenham v. Zwicker where the farmer noticed that fence staples were missing yet still introduced cattle into the field; he could have foreseen that the cows might ingest them and die. Damages can also be reduced if there was an agreement between the plaintiff and defendant concerning assumption of risks. An example is where the defendant engineer advises the plaintiff of the risks associated with a particular design or course of action and the plaintiff agrees to assume the risks. If documentation (and such documentation is important) shows that the plaintiff was well advised by the defendant engineer, understood the risk issues and chose to act against the engineer’s explicit instructions, the damages could be reduced to zero. Generally, where a negligent act or omission causes no physical damage to persons or property, but rather affects only financial interests, the loss is not recoverable. For example, the four hours of lost production in the case involving renovations to PQR’s factory is an economic loss and not recoverable. Where pure economic loss arises from deliberate, non-accidental negligence, or fraudulent conduct, such loss is recoverable.34

After notes

Three things should be emphasized (after Klar, 2003:388-392). First, in the vast majority of tort cases, courts seem to have very little difficulty in determining the issue of cause. Secondly, the courts are only interested in the allegations made and the evidence presented to support them. They cannot consider opinion or anything that is not presented as evidence – to do so would invite chaos. Nothing can be assumed to be known or “obvious” and it is up to those who understand the problem (i.e., engineers) to explain it to laypersons. Thirdly, all that is required to show negligence is the establishment of a probable connection. One sometimes hears that a tort case is judged based on “a balance of probabilities” meaning that a statement is more likely true than not or, alternatively, that just over 50% of the evidence has to favor the Plaintiff in order for him or her to win the suit. Criminal cases require a much higher standard stated as “beyond a reasonable doubt”. Negligent and Fraudulent Misrepresentation

It is not required that the information or advice provided by a professional to a client be accurate, only that the professional use care and skill to avoid misleading the client. The tort of negligent misrepresentation is a relatively recent feature of the common law. Its origins can be traced to the case of Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. (see Appendix A), where the five Law Lords expressed the then novel view that, in appropriate

34 An example of fraudulent conduct leading to huge economic losses is the Bre-X Minerals case where the defendants suggested that Bre-X's mining properties in the Busang area of East Kalimantan, Indonesia held the richest gold deposit ever discovered. In May 1997, independent experts confirmed that no gold was present and that the defendants had been “salting” drill core samples with ground up gold jewelry. (Google “Bre-X” for details.)


circumstances, liability in tort could result from a negligent misrepresentation. Previously, it was generally accepted that liability in tort could not be founded on negligent misstatements in the absence of some contractual or fiduciary obligation (fiduciary obligations are explained in more detail later in this text) or unless fraud was proven. Since Hedley Byrne, the scope of liability in tort for negligent misrepresentation has mushroomed. It is now accepted that the prima facie duty of care that accompanies the making of a representation is one that is owed not only by professional advisors but, as well, by all those who find themselves in a "special relationship" with the person relying on the representation. Such a "special relationship" will be found to exist where the representor should reasonably foresee that his statements will be relied upon by the plaintiff and the latter's reliance would be reasonable in the circumstances. Negligent misrepresentations may also include a failure to disclose significant matters. Failure to disclose significant information was an issue in Hodgins v. Hydro-Electric Commission of Nepean (Ontario). Negligent misrepresentations are a form of negligence, but they involve oral or written statements, not acts. Another distinction is that the user of the statement relied on the information contained in the statement. In fact, reliance on the statement is the causation part of the proof of negligence. If the user would have done the same thing regardless of the existence of a negligent misrepresentation, then there is no cause. Here is an example of a potential negligent misrepresentation that could be relevant after you graduate.

“I’ve studied engineering hard and now I are one. Can I call myself an engineer?”35

Generally, if you are not registered with a provincial association, you have to be careful about this. Context is everything. In a social situation if someone asks what you do for a living, you can say that you are an engineer. (Warning: this might be a conversation stopper.) However, in other situations, care is required. As stated in Osborne (2000:162) “… a duty of care most commonly arises where the defendant has some special expertise, knowledge, skill, information, or access to information that is not possessed by the ordinary person.” In this statement, the defendant could be you if you said to a person that you are an engineer, offered the person some design, advice, or other service based on your special knowledge, the person acted based on your design or service, and damage resulted.

When you graduate and become employed, your employer may give you a business card labeling you “Junior Engineer”, “Systems Engineer”, or something with the word engineer in it. If you are an Engineer in Training with a provincial association, the letters EIT must be placed after your name, but if not, again context is everything and you have to be careful. If the company normally engages in engineering work, then the ordinary person, usually a client, would know this and would expect that your advice or work would be reviewed by the experienced, registered engineers in the company. (They should be, so don’t give advice or provide designs if you are not sure.) However, if you become the only engineer in a company of bicycle manufacturers or programmers and are not registered, then calling yourself an engineer of any kind could lead to trouble if you are providing advice on how to build or design bicycles or how to construct computer programs. An alternative in such cases, if you think it really matters, is to simply put BASc after your name and, if there’s room on the card, you could also insert the type of engineering you did. But you still have to be careful not to mislead anyone into thinking you are registered.

35 Please ignore the bad grammar.


Deliberately misleading someone is a very bad thing to do. An engineer may be liable for fraudulent misrepresentation if he/she makes a misrepresentation:

a) knowing it to be false; b) intending it to be acted upon by its recipient; c) which was in fact acted upon by the recipient; and it d) results in damages to the recipient.

Third Party Liability

Negligence law holds anyone, including professionals, liable for damages caused by their careless actions. However, a professional such as an engineer may be liable to third parties, people or groups they may not know or have never heard of. This is one aspect of the higher standard required of a professional. The legal relationships are shown in Figure 3.

Figure 3 Third party liability of a professional In the above arrangement, professional P works for client C through a contractual arrangement. If P is negligent in the work done for C, liability to C in tort could result. P may also incur liabilities to C under the contract; such liabilities may or may not be related to any negligence. If a third party X suffers damages as a result of actions by P and these damages were foreseeable by P, P could be liable to X in tort. Furthermore, these liabilities apply simultaneously and are not mutually exclusive.36

While it may be easy to understand how a professional such as an engineer could be liable to a client in contract and in tort, it is perhaps difficult to understand how liability to a third party could arise. What are the circumstances? Who could these third parties be? Two landmark twentieth century cases, “Donoghue v. Stevenson” and “Hedley Byrne”, help explain how the concept of third party liability arises and how it has evolved. These two cases are described in Appendix A. The engineer may know an affected third party, but this is uncommon. More likely the third party is an individual or group of individuals whose identities are not known. Examples include 36 It is possible for the client to sue the professional in both tort and in contract, but this is rare. There may be advantages to suing in tort rather than contract. It depends on the terms of the contract. See BG Checo International Ltd. V. BC Hydro and Power Authority (1993), 99 D.L.R. (4th) 577 (S.C.C)

contract

tort

P

X

C


users of a product designed by the engineer or contractors submitting tenders (offers to build) that rely on the design made by the engineer. A professional is normally responsible only for information or advice provided to his/her client. However, in cases where it is intended or foreseeable that the information or advice could be used by a third party (or parties) and the professional was aware of this, the professional owes a duty of care to the third party.

An example of negligent misrepresentation to a third party

Negligent misrepresentation can occur inadvertently in engineering reports or tender documents. Disclaimer statements in such documents are required to inform the reader that the contents of the document are for the use of the client only and apply to a certain time frame. A disclaimer in a report written by an environmental consultant follows (Marston, 1996:37)

This report was prepared by Arthur D. Little of Canada, Limited for the account of Noranda, Inc. The material in it reflects Arthur D. Little’s best judgment in light of the information available to it at the time of preparation. Any use which a third party makes of this report, or any reliance on or decisions to be made based on it, are the responsibility of such third parties. Arthur D. Little accepts no responsibility for damages, if any, suffered by any third party as a result of decisions made or actions based on this report.

The report had to do with some mining properties owned by Noranda. Five years after the report was issued, Noranda sold the properties to Wolverine Tube (Canada) Inc. and told Wolverine that there was no need for an updated report. However, there was such a need and Wolverine sued Noranda for negligent misrepresentation. Noranda then tried and failed to sue Arthur D. Little. The disclaimer clearly absolved Arthur D. Little of any duty of care to Noranda or to Wolverine at the time of the property sale.

Notice in the above example that Wolverine tried to sue Noranda who then tried to sue Arthur D. Little. Why did Wolverine not sue Arthur D. Little directly? The answer is they could have and may have succeeded were it not for the disclaimer. Given the number of potential third parties that may rely on the advice of a professional, one might think this duty of care to third parties could lead to unlimited liability and restrict the ability of the professional to say anything useful or provide any meaningful information to a client. The courts recognize this. A large body of case law established over the years has led to a two-part test for liability to third parties:

1) Proximity of the relationship between plaintiff and defendant: Could carelessness on the part of the defendant (a professional) lead to damage to the plaintiff (the third party) and could the defendant reasonably know this? Alternatively, would the statements of the defendant be relied upon by the plaintiff to his or her detriment and is such reliance foreseeable by the defendant?

2) Mitigating considerations: Are there any considerations which limit (a) the scope of the duty of care and (b) the class of persons to whom it is owed or (c) the damages which a breach of the duty may cause?

The proximity issue is particularly relevant in cases where engineers prepare designs to be used by others. In such cases there is a direct and foreseeable relationship between the engineers and the users. An example of this is the following case.


Edgeworth Construction v. N. D. Lea & Associates Ltd. 37

Facts:

• Edgeworth submitted tenders to the province to complete road construction; • Their tender was based, in part, on an engineering report furnished by the province and prepared by

N.D. Lea & Associates Ltd. • Edgeworth says that there were errors in the drawings and specifications prepared by N.D. Lea &

Associates Ltd. which resulted in Edgeworth losing money on the project; • Edgeworth sued N.D. Lea & Associates Ltd. and the individual engineers who affixed their seal to the

drawings and specifications.

Issue: • With respect to negligent misrepresentation, does an engineering firm, who prepares drawings and

specifications for the province, owe a duty of care to other parties who rely on those drawings and specifications?

• Do the individual engineers employed with the engineering firm owe a duty of care to other parties who rely on those drawings and specifications?

Held: The engineering firm knew that it was providing its services for the purpose of allowing tenderers to submit a bid. The fact that it knew that the drawings and specifications were being used by a definable group (the tenderers), and that Edgeworth, being a member of this definable group reasonably relied on these drawings and specifications, establishes a prima facie duty of care owed to Edgeworth by N.D. Lea & Associates. The contract between the province and Edgeworth did not subsume this duty of care. While the representations in the designs became the representations of the province once they were incorporated into the contract, they were still the representations of N.D. Lea & Associates. The court was not prepared to find sufficient proximity between the individual engineers working at N.D. Lea & Associates and Edgeworth, such that a duty of care existed. The court said that the presence of a seal on a document only verifies that it was prepared by a qualified engineer and does not guarantee its accuracy.

The issue of mitigating considerations has been well tested in the courts, particularly with respect to the purpose and audience of the information or advice. The information or advice provided by a professional is normally intended for a particular audience and only for a particular purpose, i.e., the scope of the duty of care and the group of people to whom it is owed is limited. Liability is therefore restricted to the use of the information for the same purpose as that for which it was prepared. This issue arose in the following case.

327973 British Columbia Ltd. v. HBT Agra Ltd. 38

Facts:

• Holland hired the Defendant to prepare an engineering assessment on a parcel of land that he was planning to subdivide.

• An engineering report was prepared and Holland proceeded to subdivide the property. • Holland attached the Defendant’s engineering report to the restrictive covenant at the land titles office

when he subdivided the property.

37 [1993] 3 S.C.R. 206, [1993] S.C.J. No. 101 38 [1994] B.C.J. No. 2851


• The Plaintiff purchased one of the lots and began attempting to develop the property. • In developing the property, the Plaintiff came across a “soft spot” which it turned out was an

exploratory mine shaft that had been filled with old car bodies, stumps, and other miscellaneous fill. • The Plaintiff sues the engineer for negligent misrepresentation as the report did not contain this

information, and the Plaintiff lost money in trying to overcome the subsidence problem.

Issue: Are the factors necessary for a cause of action in negligent misrepresentation present here?

Held: The defendant engineer was not advised, nor was it foreseeable, that his report would be attached to the restrictive covenant. The engineer was hired for the limited purpose of satisfying the City that the land could be subdivided into two parcels. Accordingly, the Plaintiff was not within a foreseeable class of users of the report.

In the case of accountants who prepare the financial statements of a company, such statements are intended to be used only to assist the management of the company, not a person who may use the information to make a decision to buy or sell the shares in the company. Despite this, to limit potential exposure to liability, accountants often insert disclaimers in financial statements to define the audience. Technical and engineering information is perhaps different in that it can be used in a wide variety of ways and this makes it essential that disclaimers be used to clearly state the intent and audience. Product Liability

The area of tort law that concerns itself with products having caused damage is called product liability. Here the same principles of tort law, such as negligence and fraud apply. However, some complexities arise. Consider the following examples from Smythe et al (2007:58) and ask who should be liable.

Example 1

X runs a small refreshment booth at a beach and buys supplies from Y Bottling Co. He sells a dark green bottle of ginger ale to A, who gives it to her friend B. B drinks half the contents and becomes violently ill. The remainder of the bottle is found to contain a decomposed snail. B is hospitalized and is unable to return to work for several weeks. Example 2

P buys a Q company sports car from a dealer R. On being driven away from the showroom, the car loses a defective front wheel and collides with a parked vehicle, injuring the occupant, S.

Example 3

M bought from ski shop N a set of thermal underwear manufactured by O company. Although it was inspected, the underwear contained a toxic acid and when it came into contact with perspiration caused M a severe burn.

Example 4

J buys a bottle of cough medicine, manufactured by K company, from her local drugstore. To try to get rid of her cold she drinks two stiff whiskies, takes a dose of the medicine, and goes to bed. During the night she


has a heart attack. The cough medicine is extremely dangerous if taken with alcohol, but there was no warning to that effect on the bottle or package.

A retailer may be liable to the buyer for breach of an implied contractual undertaking that the product they have purchased is not defective. Thus the injured party may seek compensation by suing for breach of contract. However, where there is no contract between the injured victim and the party responsible for the product, the victim can sue the provider in tort for the damage caused by the product. In Example 1, X sold the soft drink to A, not to B the injured party. Thus there is no contract with B and B must sue X and/or Y Bottling in tort to claim damages. Similarly, in Example 2, the injured party S has no contractual relationship with the dealer R, but could sue them (if they knew the wheels were defective, but did nothing) or the company Q in tort. Example 3 illustrates the principle that manufacturers may be liable for all defects in their products which, given available technology, can be reasonably expected to be detected. The claim that additional inspection will add to the cost of production will not be accepted – you cannot knowingly make defective products that could cause harm. This has implications for methods of detecting defects. For example, if the defect is such that the product could cause harm, then detection by random sampling methods is not acceptable. Example 4 goes one step further. Although the product may not be defective, there may be dangers if it is not used properly or if dangers could result from its use. Manufacturers owe a continuous duty of care to consumers to warn of such dangers, even after the product is on the market. However, to successfully claim damages, a plaintiff must satisfy the court that had a warning been given, the product would not have been used in the way it was used. Disclaimers

Sometimes the liability associated with the use of a product can be avoided by means of a disclaimer statement that specifically describes the conditions under which the product is to be used. These are useful and essential to avoid “obvious” potential liabilities. However, one can well imagine the difficulty of wording a disclaimer that deals with all possible uses.

Example of a disclaimer

The text of part of the disclaimer of a manufacturer of computer and electronic products is shown below:

Warranty does not apply if the product has been altered, modified, or damaged. xxxxxxxx makes no other warranty of any kind, expressed or implied, including any warranty of merchantability, fitness of the product for any particular purpose even if that purpose is known to xxxxxxxx, or any warranty relating to patents, trademarks, copyrights or other intellectual property. xxxxxxxx shall not be liable for any injury, loss, damage, or loss of profits resulting from the handling or use of the product shipped.

For things like computers and electronic products, which can be used in a variety of applications, this disclaimer might keep them out of trouble. Wording is everything and lawyers should write such disclaimers. However, note that this applies to all their products. What if one of the products could only be used in a very small number of applications for which the risks are or


could be well known? Could it be said that the manufacturer could reasonably foresee the risks? This is the subject matter of various product liability cases. Disclaimers cannot absolve a manufacturer or provider of services in the case of gross negligence, which is the failure to use even the slightest amount of care in a way that shows recklessness or wilful disregard for the safety of others. It is difficult to conceive of cases in engineering practice where gross negligence would occur since engineers are, by training, sensitive to the safety and well being of the public. However, for the sake of an example, consider a company that offers rock-climbing tours, a high-risk recreational activity. If a tour member is injured when safety equipment provided by the company unexpectedly fails, a valid release form (disclaimer) signed by the tour member may protect the company from a lawsuit. However, if the company knows (or should have known) beforehand that the equipment is defective and uses it anyway, it would not be protected by the release. The complexity and sophistication of manufactured products makes it difficult for manufacturers, distributors and consumers to detect dangers in a product. Thus, failing to discharge the continuous duty of care and to warn consumers or users of the potential dangers of a product becomes an expected risk of doing business. The learned intermediary

There is a variation of the continuous duty to warn. This is where the product is technically complicated and requires expert knowledge for its use, or where the nature of the product is such that it is impossible for the consumer to receive a warning directly from the manufacturer. In such cases the duty to warn may be discharged by issuing a warning to a learned intermediary who then has a duty to transmit the warning to the ultimate consumer or user. There are many opportunities for engineers to become learned intermediaries. Manufacturers may warn them of the dangers or risks of products or equipment to be used in the design of other systems. It is then essential that the engineers tell the owners or ultimate users of the system of the dangers or, if possible, make changes to the design that will mitigate the risks. This is also important for engineers involved in product or equipment sales. However, a manufacturer cannot automatically assume that an engineer or similar technical professional becomes a learned intermediary once informed of any dangers associated with use of its product. The following case illustrates this.

Bow Valley v. St. John Shipbuilding et al39

Bow Valley Industries retained Saint John Shipbuilding to construct a drilling rig off the Grand Banks of Newfoundland. Bow Valley wanted a heat trace system provided by Raychem to help prevent the pipes from freezing during winter operation. Bow Valley specified insulation known as Thermaclad, also manufactured by Raychem, to keep moisture from the insulation and the heat trace wires.

A fire broke out on the rig which caused extensive damage to electrical and communication cables. The Thermaclad insulation was completely incinerated and this may have contributed to the extent of the damage. The rig had to be towed back to shore and was out of commission for several months. Bow Valley

39 [1997] 3 S.C.R. 1210 (Available at http://scc.lexum.umontreal.ca/en/1997/1997rcs3-1210/1997rcs3-1210.html)

http://scc.lexum.umontreal.ca/en/1997/1997rcs3-1210/1997rcs3-1210.html�


sued St. John and Raychem for negligence, claiming that they had a duty to warn Bow Valley of the fire risks associated with using Thermaclad. Raychem had detailed knowledge of the inflammability characteristics of Thermaclad through its own testing. During manufacture, St. John had asked Raychem for, and received, these test data. Nonetheless, it was held that Raychem could not treat St. John as a learned intermediary between itself and Bow Valley for three reasons: 1) St. John was not as “learned” as Raychem, 2) Thermaclad was not a technically complex product requiring supervision in its use, and 3) because it was possible for Raychem to directly inform Bow Valley of the risks. It was also held that Bow Valley, despite the fact that it knew that Thermaclad would burn under some circumstances, had not accepted the risks of using Thermaclad. It therefore followed that both St. John and Raychem owed Bow Valley a duty to warn.

Product liability is one of the most common forms of potential liability facing an engineer today. Unless liability is clearly, reasonably, and responsibly disclaimed, and/or the duty to warn has been discharged, an engineer who designs or manufactures a product which causes damage as a result of a defect which arose from the engineer’s negligence, can be found liable, regardless of who is injured or to whom the damage resulted. The principal relationships in product liability

The various relationships associated with product liability are illustrated in Figure 4. A manufacturer M sells a product to retailer R who then sells it to purchaser P. The product is defective and injures P and a third party T. P can sue R in contract and R can sue M for its loss, also in contract. P and T can sue M in tort. T might also be able to sue R in tort, if R should have discovered the defect. A learned intermediary L may be present who, based on information from M, would inform R, P and possibly T of problems or dangers associated with the use of the product.40

Figure 4 The potential legal relationships in a product liability case (adapted from Smythe et al, 2007:59) The role of negligence in product liability

Negligence provides a particular combination of incentives to manufacturers and buyers of products. To illustrate this, two extremes are considered: (1) in a case where “no liability” existed, there would be no incentive for manufacturers to improve a product to avoid accidents 40 See http://www.strosbergco.com/current.php?location=5 for descriptions of some current class action suits concerning various products.

contract

cont

ract

tort

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R M

P

L

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because they would not be held liable. The onus would therefore be on the buyer or user to prevent accidents while using the product; in contrast, (2) in the case of strict liability, there is strong incentive for a manufacturer to improve its product to avoid accidents because the manufacturer would always be held liable regardless of who was at fault; conversely, in this situation there is no incentive for the buyer or user to do anything to reduce their exposure to harm. A negligence standard provides incentives to both the manufacturer and buyer/user of a product. The manufacturer wishes to avoid claims of negligence and therefore spends money on product improvements to avoid accidents. To avoid liability in the event of an accident during use of its product, the manufacturer needs to show that its actions in producing or marketing the product did not independently contribute to the accident, or that it took sufficient steps to minimize the potentially harmful effects of its product. Similarly, the buyer or user of the product must take steps to ensure that his or her use of the product does not contribute to or cause personal injury to him/herself or to a third party. There is therefore motivation on both parties to spend money on ways to prevent an accident or mitigate its consequences. Whether the efforts of manufacturer and buyer/user are sufficient or efficient is an analysis that the courts are often asked to determine. Vicarious Liability

In the context of employer/employee relations, the employer may be held liable for the negligence of the employee. This is known as vicarious liability and it is based on the idea that those who profit from an activity should also be liable for losses due to that activity. To establish vicarious liability on the part of the owner, negligence by the employee must be proven and in addition it must also be shown that the employee's negligent conduct occurred while acting in his or her role as an employee. This is a form of strict liability because the defendant (the employer) will be held liable despite the absence of any carelessness on his or her part. It is important to establish whether an employer/employee relationship exists. Generally, if an employer directs what work is to be done by a person and the manner in which it is to be done, and remunerates the person for the work, then the person is considered an employee. If such control is not present, then the person is an independent contractor. However, if the relationship between an owner/employer and a person is complicated (e.g., part-time work, casual or intermittent work, outsourcing of non-core activities, short-term contracts, etc.), this test for employment is inadequate. As a result of several cases, the courts have specified four factors as a test for employment of a person:

1) the degree of control by the owner/employer over the person as to what work will be done and how it will be done;

2) the ownership of tools or equipment; 3) the opportunity for profit – if there is no opportunity for profit, then the person is an

employee; and 4) the risk of financial loss.

A finding of vicarious liability of the employer for the acts of the employee, however, does not necessarily mean that a negligent employee cannot be found independently liable in tort. The


possible relationships are shown in Figure 5. Suppose the victim V is injured by A while A is acting in the course of his employment. V could decide to sue A in tort. V could also decide to sue the employer E, who would normally have a greater ability to pay damages. (In practice, V would likely sue both A and E.) If V does sue A, it is possible that A is indemnified by insurance as part of an employment contract with E. Alternatively if E cannot or does not wish to use insurance to compensate V, E may be able to sue A. In all these potential lawsuits, consideration must be given to the ability of the various parties to pay.41

Figure 5 The legal relationships associated with vicarious liability. Victim V who suffers injuries or damage by A while A is in the employ of B. (after Smythe et al, 2007:49) For the above relationships to hold, it is not necessary that there be an employer/employee relationship. If the wrongful actions or omissions are the result of activities of volunteers, independent contractors, or others as sanctioned by an employer, the employer may still be liable.

Example

Imperial Contractors contracted with Parkinson Corp to build a waste processing plant. During testing of the plant, several workers suffered respiratory damage as a result of the release of toxic gases. The accident was the result of inadequate protection provided by Imperial Contractors against such releases. Imperial Contractors and not Parkinson Corp would very likely be liable for the injuries. On the other hand, Parkinson does have a duty to take reasonable care to hire competent engineers and contractors. Also, if the construction and testing work is inherently dangerous to third parties, Parkinson has an obligation to see to it that the contractor takes reasonable precautions to avoid damage or injury.

Intentional Torts

The list of intentional torts is long but includes: public and private nuisance, trespass, assault and battery, false imprisonment, stalking, harassment, invasion of privacy, defamation, and economic or business torts. Chapter 4 of Osborne (2000) is entirely devoted to intentional torts. One might think that intentional harm done to a person would be the subject of a criminal action; this is the case in some situations and it is possible for the same act to give rise to both criminal and civil

41 Commonly phrased as the question: “Should we bother to extract blood from this stone?”

V

V sues A in tort

E sues A to compensate V

A indemnified by E

A

E V sues E in tort


liability. However, the difference between the two processes is that tort law provides compensation to the plaintiff for the harm done whereas criminal law may not. Assuming that your engineering career will not lead you to the torts of assault and battery, false imprisonment, stalking, harassment, or invasion of privacy, only the intentional torts of private nuisance, trespass and defamation should be relevant. There are several types of business torts but inadvertence is likely the only reason an engineer would be guilty of a business tort and so awareness of most of these torts is not important; only injurious falsehood and inducement to breach a contract will be discussed. Private Nuisance

A private nuisance is the interference with an occupier’s use and enjoyment of his or her land.42

Property owners (and tenants who may be on the property) have a right to normal use and enjoyment of their property, free from interference such as noxious fumes, excessive noise, or liquids or water (including groundwater) that find their way into the structures that normally occupy the property.

Trespass

Trespass is defined as the act of entering property belonging to another without justification or authority. There are some points to note with regard to trespass:

• Defence of Property: Prior to using reasonable force to remove a trespasser, a verbal request for the trespasser to leave is required.

• Necessity: Trespass may be defensible if the trespasser’s presence is of necessity (e.g., seeking shelter in a life-threatening situation).

• Legal Authority: e.g., a police officer with a search warrant has legal authority to enter a property.

It is not common for engineers to personally enter private property without permission. However, trespass may not necessarily be the entry of one or more people onto a property. Trespass can occur, for example, by crossing into a property to transport materials, even for a brief time, or by placing something so close to a property boundary such that a small part of it lies on both properties, or by drilling under or into a property43

.

42 Public nuisance is a special and legally complex category of nuisance in which a plaintiff’s public rights are interfered with (e.g. use of a highway or navigable waterway, or the right to not be exposed to dangerous gases or substances in a public place, etc.) 43 An incident at Lake Peigneur in Louisiana is a fine example of trespass by drilling. Texaco was drilling in this lake to see if any oil was trapped by underlying salt deposits. It was known that the Diamond Crystal salt mine lay underneath the lake and Texaco asked the mine if the drilling could intersect the mine cavity. No answer was received but drilling proceeded anyway. In the early morning of November 21, 1980, a large whirlpool formed at the base of the drill rig and the entire lake drained into the salt mine. Fortunately no deaths resulted but some people had to move quickly. Since fresh water dissolves salt rather efficiently, Diamond Crystal sued Texaco for loss of the mine and settled for $32 million. See http://members.tripod.com/~earthdude1/texaco/texaco.html (Is this only trespass or is it trespass and private nuisance? Discuss.)

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Defamation

Defamation is making an untrue statement that causes injury to the reputation of another. There are two types: libel, a written defamation and slander, a spoken defamation. The test to determine if defamation has occurred is whether the character, ability, or business reputation of the plaintiff were harmed in the eyes of the public. There are three defences to the accusation of defamation:

• Truth of statement: The alleged defamatory statements are true. However, the defendant must prove that they are true and this could be difficult.

• Absolute privilege: Complete immunity from liability for defamation exists for statements made in courts, parliament, inquiries etc. This is considered to be in the public interest as otherwise there would be a restraint on open political and legal debate.

• Qualified privilege: There is immunity from liability for defamation provided a statement was made in good faith and with an honest belief in the accuracy of the statement. For example, letters of reference are subject to qualified privilege; if the statements had to be defended in court, it would be difficult to get such letters. Criticism in the press and statements made in administrative tribunals are other examples in which qualified privilege exists, as long as there is an honest belief in the opinions being made.

Injurious falsehood

Just as people can be defamed, so can products and businesses. False statements made about a business, product or property that result in an economic loss are grounds for an injurious falsehood lawsuit. Trade libel occurs when a person makes false statements that disparage a business and its goods or services resulting in economic loss for the business. Designs, reports or other engineering services provided by an engineering company are products that can be defamed by trade libel. The plaintiff must prove four things for a trade libel claim to succeed:

1) The defendant made a false statement (or statements) disparaging the plaintiff’s business, products or services. The false statement may be related to the competence of the employees, to the quality of the products or services, or even to the viability of the business.

2) The statement must have been made to a third party, i.e., to current or future customers. 3) It must be shown that the defendant knew the statement was false, had no regard as to

whether it was true or false, or acted out of malice toward the plaintiff. Osborne suggests that if the defendant knew the statement was false or had no regard for the truth of the statement, the lack of malicious intent will not provide protection for the defendant. (Osborne, 2000:275)

4) Damage to the plaintiff’s business (pecuniary damage) must have occurred. This may also be difficult to prove unless there is evidence of a loss of contracts or customers. A general decrease of revenue is not sufficient unless it can be linked to the statements made and not to other factors of the economy.


There are two defenses to a charge of trade libel:

• The statement was true. • The statement was made as a general comparison between a business, products or

services in the spirit of fair competition claiming or implying superiority of the defendant’s product over the plaintiff’s without making any false allegations.

For engineers, comparisons between engineering businesses or services made for competitive purposes may not amount to trade libel, they may nonetheless be unethical. False or even partially true allegations are most certainly unethical. In the case of trade libel against an engineering business, the connection between the product and the engineer (or engineers) could be close enough that the engineer’s reputation is defamed. This is an important strategic consideration if one is considering a lawsuit for trade libel because malice and damage to the engineering business are notoriously difficult to prove. For this reason if the statement damages the reputation as well as the business of the plaintiff, it is sometimes easier to sue for defamation in which malice and economic damage are not an issue. Instead of trying to defame the products of a competitor, one could try to pass off his or her products as those of the competitor thereby “cashing in” on the reputation of the competitor. This is a bit difficult to do with professional services, but one should never underestimate the imagination of others. Inducement to breach a contract

A person who is not party to a contract and who incites or attempts to influence a contracting party to break the contract has committed a tort known as inducement to breach a contract.44

Engineers and other professionals who, in the course of their professional duties, advise that it is not in a client’s best interests to pursue a contract are not held liable for inducement provided it can be shown that they are acting in the interests of the client.

Fiduciary Duty

In addition to duties under tort and contract (see below), the engineer may have a fiduciary duty as a result of the nature of relationships with employers, sub-contractors, or clients. A fiduciary duty is a heightened duty of care of a party’s interests resulting from trust or power given to the engineer. There are three general characteristics of a fiduciary relationship (Smythe et al, 2007:72):

• The fiduciary has scope for the exercise of some discretion or power. • The fiduciary can unilaterally exercise that power or discretion so as to affect the

beneficiary’s interests. • The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the

discretion or power. 44 Offering incentives such as signing bonuses to employees of competitors may be construed as inducement to breach an existing employment contract, but if the employee leaves the competitor after providing sufficient notice, there is no breach, even if the employee received and spent the bonus.


The relationship between an engineer and a client is not inherently fiduciary. The courts will look at a particular case to determine if the above characteristics are present, particularly power and vulnerability. For example, if a client provides the engineer access to accounts, free use of the client’s facilities, and authority for making decisions that would affect the markets in which the client operates, that engineer would have a fiduciary duty to the client. However, such power and discretion are rarely assigned to engineers (or any advising professional). The case Canadian Transit Co. v Girdhar45

illustrates the requirements of a fiduciary relationship.

Canadian Transit v Girdhar

Facts: • Canadian Transit operates a bridge crossing between Windsor and Detroit; • Girdhar is an engineering consultant hired by Canadian Transit to work on a project related to this

crossing; • Girdhar is also working as an engineering consultant for the Peace Bridge Authority, which operates a

crossing several hundred kilometers away in Fort Erie; • Canadian Transit says that because Peace Bridge Authority is a direct competitor of Canadian Transit, it

is a breach of Girdhar’s fiduciary duty to be working with both companies on a similar project; • They are suing for an injunction against Girdhar working for Peace Bridge Authority.

Issue: Does a fiduciary relationship exist between Girdhar and Canadian Transit?

Held: The facts of the case do not give rise to a prima facie case of fiduciary duty. The two bridge projects are hundreds of kilometers apart, the duties of the engineers are to study two different road systems for two different clients. The information as to one is not transferable to the other. The skill acquired by the engineers in performing various projects is their own, not their client’s. There can be no complaint about the defendant using skill acquired at Windsor in its work at Fort Erie, so long as it does not use confidential information.

Note the mention of confidential information in the judgment. The need for confidentiality can give rise to a fiduciary duty. Duties of Confidentiality

Often the engineer will have or be privy to trade secrets or special know-how of an employer or client. Consequently, it is likely that the contract between the engineer and his or her client or employer will require a duty of confidentiality, which will apply during and after the period of engagement. Where the engineer is serving strictly as an employee, it is likely, that his or her employment contract will spell out the extent of his or her duties to keep information gathered on the job confidential. Where the engineer simply has a contractual relationship with another party to supply goods or services, the duty of confidentiality may be spelled out in the contract. The drafting of these clauses may imply more than simply a duty to keep information confidential; it may impose upon the engineer a greater degree of loyalty. It may restrict the engineer's future activities, placing limitations with whom he or she can work. Therefore, it is

45 [2002] O.J. No. 2933


recommended that the engineer get a clear picture of the scope of his duties to the employer at the time of contracting. Further, while formulating a contract, the engineer needs to be somewhat of a fortuneteller of future opportunities. For example, if you accept work for a particular client, or type of client, or even in a certain place, this may later result in you being ineligible for work for other clients. For example, should you choose to work in a particular region of the world, you may later find yourself unwelcome in a neighbouring region, should a dispute between the regions arise. The point here is not to encourage you to turn down work, but to point out the importance of thinking through the ramifications of the work that you accept. It is possible that due to the nature of the relationship, in cases where the contract does not expressly state the duties of confidentiality, that the courts may imply such duties into the contract. Therefore, in sum, the engineer should bear in mind, that often, whether expressly stated or not, there is a duty to keep certain information acquired on the job confidential. Conflict of Interest

Situations involving a conflict of interest are another example of a breach of fiduciary duty. A simple definition of a conflict of interest is: where a duty is owed to two or more parties whose interests may be competing. Many examples of these occur in engineering practice. A large consulting engineering company with several active projects may have to be careful that the client for one contract is not in competition with another client. Another example is where your sister works for a supplier of equipment to one of your clients. If you recommend only that supplier’s equipment to the client, perhaps to keep your sister employed and despite the higher price and lower quality of the equipment, you could be in a serious and obvious conflict of interest. Often these cases have ethical implications, but if damage to a client results from the conflict of interest, the court may find the engineer liable for the loss. If you should happen to find yourself in a potential conflict of interest situation, you should take steps to remedy it. Often immediate and full disclosure to the parties affected will suffice; the parties can then decide whether and how to proceed. You should seek competent legal advice for circumstances in which you are uncertain of your course of action.


Contract Law When two or more parties enter into an agreement to obtain goods or services, or perhaps to ensure that certain conditions prevail, they enter into a contract, which is a legally enforceable promise or set of promises. Contracts are the primary means of transferring property and services in a market economy. Contract law is unique since it permits the parties to form their own legal relations and to determine what obligations each will accept. Engineers may be involved in a variety of contracts. One of the more important types of contract is between an engineer and an owner of a project. Engineers are often involved in administering contracts between owners and contractors; contractors and sub-contractors; employment contracts and contracts for supply of goods and services. The rules of contract law define when a contract arises, how it is interpreted and what legal consequences flow from it. A contract is a legal concept (although it is not necessary that it be in writing, it most often takes a tangible paper form), which comes into existence once certain elements are established:

• intention to create legal obligations, • an agreement resulting from an offer (or offers) and acceptance, • consideration, • the legal capacity to contract, and • legality

The parties to a contract must have the financial ability and competence to enter into a legal relationship. This means that a contract formed by minors, persons of unsound mind, and persons who are incapacitated by drugs or alcohol is unenforceable. Also unenforceable is a contract that requires either party to do anything that is against prevailing law. Intention to Create Legal Obligations

The law presumes that parties to a contract intend to create a legal relationship. This is a necessary presumption because, without the presumption, it would be difficult to prove that the parties did, in fact, intend to enter a legal relationship; one would have to enquire as to the state of mind of the parties. Given this presumption, in situations of dispute, it is therefore necessary to prove that there was no intention of entering a contract. Agreements between friends or members of a family are two situations where the courts assume there is no intent to create a legal relationship. Otherwise, for example, forgetting to take out the garbage after agreeing to do so would give a spouse the right to sue for breach of contract. This is unreasonable and could seriously strain the resources of the courts. Advertisements, the display of goods, or invitations to tender are presumed to be invitations to receive offers rather than legally binding promises. An advertiser is not legally bound by the statements made in an advertisement, although the claims about a product cannot be misleading. Likewise, the display of goods in a store is only an invitation for a shopper to take the goods and


pay for them at a cashier at which point a sales contract is formed. The relationships between statements and intent are summarized in the table below.

Form of statement Intent Advertisement, display of

goods, or invitation to tender Invitation to receive offer

Offer Creation of a legal

relationship In practice, to determine whether the element of intent exists, the courts will try to ascertain whether it can be reasonably inferred from the conduct of the parties that they intended to create legal obligations. The objective test is how a “reasonable bystander” would interpret the conduct of the parties. The mere fact that one party may have reservations about entering into legal relations with the other party may not be enough to render the agreement unenforceable. A common situation for engineers is where governments or companies request engineering companies to bid on contracts for goods or services. In these situations the party inviting the tenders has an implied contractual obligation to be consistent in their consideration of all bids received. This is illustrated by the case of MJB Enterprises Ltd. v. Defence Construction (1951) Ltd et al 46

, an appeal resulting from a trial in Alberta. A brief of the case follows:

MJB Enterprises Ltd. v. Defence Construction (1951) Ltd et al

Facts: • The respondent invited tenders for the construction of a pump house, the installation of a water

distribution system and the dismantling of a water tank on the Canadian Forces Base in Suffield, Alberta

• The respondent awarded the contract to the lowest tenderer of the four received despite the fact that the bid did not comply with the tender specifications. The tender documents included a “privilege clause” that stated that the lowest or any tender would not necessarily be accepted.

• The winning bid included a hand-written note outlining a schedule of final costs even though amendments to the tender documents required tenderers to submit only one price. The other tenderers complained that this note constituted a qualification that invalidated the tender.

• The respondent nevertheless determined that the note was merely a clarification and accepted the bid.

• The appellant, who had submitted the second lowest tender, brought an action for breach of contract claiming that the winning tender should have been disqualified and that its tender should have been accepted as the lowest valid bid.

• The trial judge found that the note was a qualification but held that, given the presence of the privilege clause, the respondent was under no obligation to award the contract to the appellant as the next lowest bidder.

• The Alberta Court of Appeal dismissed the appeal. • The appellant then appealed further to the Supreme Court of Canada.

Issue: Does the inclusion of a “privilege clause” in the tender documents allow the respondent to disregard the lowest bid in favor of any other tender, including a non-compliant one?

46 [1999] 1 S. C. R. 619 (Available at http://scc.lexum.umontreal.ca/en/1999/1999rcs1-619/1999rcs1-619.html)

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Held: The Supreme Court reversed the Alberta Court of Appeals’ decision.

The Agreement

It is important to know when and how a contract is formed. Generally, a contract is formed when one side makes an offer and the other side communicates an acceptance of that offer. For the sake of clarity, it is best to express the terms of a contract in writing; however an oral agreement can still form a legally binding contract. The following are the characteristics of an offer:

• An offer is a tentative promise made by the offeror, subject to conditions or involving a request to the other party, the offeree.

• An offer must contain sufficiently definite details, such that upon its acceptance the contract is formed.

As discussed above in the section on intent, an offer must be distinguished from an invitation to receive offers or an invitation to treat; an invitation to treat merely indicates a willingness to receive offers, whereas upon acceptance of an offer a contract is formed. A required characteristic of an acceptance is a positive nature (i.e., no ifs, ands, buts or maybes). Acceptance can be in words or it can be implied by conduct. An example is when one receives a product ordered via telephone or through the mail. 47

Other requirements of an acceptance are:

• The offeree must agree to the conditions or request made in the offer. • For acceptance to create a contract, it must be in the same terms as the offer. • For a valid contract, the acceptance must be communicated to the offeror;48

once accepted and communicated, a contract is formed and the offer cannot be withdrawn.

The general rule is that an offer is not considered accepted until the offeror receives the acceptance. However, an exception to this rule was made in England in the 1800s for offers and acceptances posted in the mail. This has become known as the post-box rule, which may be expressed as:

An offeror who uses the post office to send an offer is assumed to be willing to have the same means used for acceptance. The offeree completes an acceptance when a properly addressed and stamped letter of acceptance is placed in the mail.

From this it follows that the offeror may be bound by a contract without knowing it exists but the offeree would know that it exists. The reason for this is related to an allocation of risk: The offeror took a chance that the post office will deliver the offer on time and therefore should be willing to accept the risk that the letter of acceptance will not necessarily arrive within an anticipated timeframe. However, an offeror could require a specific means of communication in its offer in order to limit this risk of exposure.

47 A contract may also be formed by clicking an icon or button on a web site where products are sold. 48 Acceptance can also be done in silence if that is an agreed method.


An acceptance may be conditional, the conditions being changes to the terms of the offer. This leads to a counter-offer, which is quite common in most business transactions. However, it must be noted that when a counter-offer is made, the earlier offer has been rejected and ends.

Example

A sent a fax to B offering to sell her car for $2000. B replied (counter-offered) by fax: “I will give you $1900 for your car.” Nothing was heard from A for two days. B, who had (ahem) non-business interests in A and did not wish to offend her, finally sent a fax to A saying: “I have reconsidered and will buy your car for $2000.” (i.e., B will accept A’s original offer to sell.) However, there is no contract since B’s counter-offer brought A’s original offer to sell for $2000 to an end. For a contract to exist B must explicitly make an offer to buy and A must accept it.

Instead of counter-offering, B could have simply asked if A was willing to consider a lower price. The original offer would have still stood and B would have been free to accept it within a reasonable period of time. The relationships between offers and acceptance and the existence of a contract are shown in Figure 6.

Figure 6 Contract formation: the relationship between offers, acceptance, and rejection. (after Willes and Willes, 2004:107) Unilateral and Bilateral Contracts

Two types of contract may be distinguished. A unilateral contract is one in which an offer is accepted by actual performance of an act described in the terms of the offer. This is known as acceptance by performance. These agreements do not require communication of acceptance before a contract is formed. An example is the offer of a discounted price upon presentation of a coupon cut from a magazine or newspaper. Another example is the tendering process where, in return for receipt of bids from contractors, the offeror promises to consider them. There is some danger with this mode of acceptance since the offeror could withdraw the offer before the offeree completes the work required to accept the offer. However, the courts have held that the offeror

Offer

Unconditional acceptance

Conditional acceptance

Rejection

Contract formed

Counter-offer

No contract

Original offer ends


is not permitted to withdraw the offer unless that right is reserved in a clear statement. Thus, to avoid unlimited obligations, discount coupons are valid for specific periods and invitations to tender may specify conditions under which the offer may be withdrawn. A bilateral contract occurs when a promise is made by the offeree as a form of acceptance, rather than acceptance by performance. Since the offer is a tentative promise, the contract is, in effect, a promise for a promise. Also each party is both a promisor and a promissee. Bilateral contracts are very common. In employment contracts the employer promises to pay a salary and the employee promises to work for some future period. The client of an engineer promises to pay in exchange for a promise by an engineer to provide design and supervisory services. Credit sales are yet another example: at the time of formation of the sales contract and for some time afterwards, the goods may not be delivered by the seller nor paid for by the buyer. Consideration

For a promise to be legally enforceable the recipient of a promise must give something in exchange for that promise. That something is called consideration. Consideration may take the form of: (1) another promise, (2) an act, or (3) the payment of money. Engineers are typically nice people and some have an annoying tendency to provide services to clients, potential clients, friends or friends of friends without fee. Such offers are called gratuitous promises. Even though the offer of such services is accepted, there is not adequate consideration (in fact, there is no consideration) and there is therefore no enforceable contract. Despite the lack of enforceable contract, once an engineer begins to perform a service without consideration, he or she has an ethical and legal duty to carry it out with reasonable care. If damage results from the performance of the service, the engineer may be liable in tort. The duty of care arises for anyone who performs a service without consideration but, in the case of professionals such as engineers, the duty and standard of care are easier to define. Gratuitous promises can cause trouble even when a contract is in place.

Example

A held an option (a form of contract) to purchase certain mining claims from B provided a certain amount of work was done on the claims before an expiry date. However, before the expiry date A realized that he would not be able to complete the work. B understood this and agreed to allow A to proceed with the work. As a result, A did not hurry to complete the work before the expiry date, but did complete it soon after. However, B then refused to sell the claims saying that the original expiry date applied. A brought the case to court. The court did not allow B to revert to the original expiry date.

This is a case of promissory estoppel or equitable estoppel.49

49 estopped = prevented

B made a gratuitous promise to A by agreeing to extend the expiry date. However, even though there was no consideration (e.g., a signed document or payment of cash by A to B) to make the promise enforceable, the legal concept of “equity” requires the promise to be kept. Thus there should be relief for the party that relies on the gratuitous promise, in this case A, who acted on B’s agreement that A could proceed with the work after the expiry date.


Problems Arising from a Contract

Numerous problems may arise to make a contract unenforceable: Certainty of Terms and Implied Terms

Engineers sometimes enter into “handshake” agreements with clients. This can sometimes be an effective way of conducting business quickly; however, while it has its benefits, there are risks associated with conducting business in this manner that must be weighed. Generally speaking, verbal agreements can form legally binding contracts. Verbal agreements, however, are much more susceptible to general misinterpretation, and therefore misunderstandings, than written contracts.50

It is prudent practice to set the terms of your understanding down on paper before proceeding with any work so as to minimize the risk of ambiguity and avoid potential problems down the road. If a difficult problem occurs, a disagreement may arise over what the terms of the contract really mean and that is when the “solids” may begin to come into contact with the proverbial wind-generating device. Where the terms of a contract are unclear, it may be held to be unenforceable for lack of certainty, but this is rarely found where the parties themselves treated the contract as binding. A valid oral agreement, even one accepted by the courts, cannot contradict a term or terms in a written contract. For example, if the terms of a contractual agreement state that changes to an aspect of the work shall be made in writing, but the parties subsequently verbally agree to change terms of their agreement, in the event of a misunderstanding the court may enforce the contract according to what was in the written document. In addition to terms expressly stated, the court may find terms that are implied in a contract. The court may imply terms where it is satisfied that the parties actually intended the term in question and would have included it, had it been drawn to their attention at the time the contract was made, although this is rare and only happens when necessary. An example of implied terms in a construction contract is “that materials and workmanship shall be of proper standard or quality and the design shall be suitable to the task.” Situations may arise where work proceeds before a contract is formally accepted or before all details of the contract have been agreed upon. In such cases the question may arise whether the formal contract, once formed, applies to the work already performed. Whenever possible, the courts will imply a term of retrospective operation of the contract provisions or will view the final acceptance as applying retrospectively to work done in anticipation of the eventual acceptance.

50 Certain contract types (which fall under the Statute of Fraud, found in most Canadian provinces), such as those involving the legal transfer of land, must be in writing.


Agreements to Agree

Some agreements may be found to be unenforceable, as they may constitute agreements to agree. An agreement to agree differs from a binding contract, in that it leaves a central matter to be agreed upon at a later date. However, where the parties indicate a genuine intention to enter into a binding contract and the missing terms are not essential (in essence a promise for a promise), the court may find the contract enforceable. Misrepresentations

Just as misrepresentations are cause for concern in tort law, they are equally a concern in contract law. Where a representation is false and is relied upon by the other party, the contract may be held to be unenforceable. Misrepresentations may be innocent or fraudulent. Fraudulent misrepresentations occur when the parties know that an element of a contract is false or act recklessly, without concern for its truthfulness. The distinction between fraudulent and innocent misrepresentations is relevant because the legal remedies differ for each.51

Termination of Contract

A contract can be terminated in the following ways:

• when all parties have performed all obligations under it; • at any time by mutual consent of all the parties; and • where one party to the contract breaches the contract by indicating, either by word or

through conduct, that it no longer intends to be bound by the contract. When this occurs, the other party has two options: (1) maintain the contract in force, and sue on it, or alternatively, (2) accept the repudiation as termination of the contract.

Unjust Enrichment

There exists a growing area of law, known as the law of restitution, which has its roots in the notions of equity and fairness. The law of restitution provides compensation for situations of unjust enrichment, which occur when one party is enriched at the expense of another without legal justification. For a finding of unjust enrichment, there is a three part test:

For the principle to succeed, the facts must display (1) an enrichment, (2) a corresponding deprivation, and (3) the absence of any juristic reason, such as contract or disposition of law for the enrichment.

It should be noted that doing something for free may not necessarily lead to an unjust enrichment. An example of the situation where an unjust enrichment may be found to have arisen is when an engineer performs work for a property owner on the expectation of receiving some benefit, such as future referrals, but such referrals are not forthcoming due to a falling out between the parties. It may be said, that the services provided by the engineer constituted an unjust enrichment to the 51 We will not delve into these as part of this course; however, those of you with sufficient curiosity can look up some of these differences on the Internet.


other party, and compensation may still be possible under the law of restitution. The property owner was enriched, the engineer suffered a corresponding deprivation, and there was no legal reason for the enrichment because there was no contract between the parties. This example illustrates the power of the law of restitution and the possibility of recovery where otherwise not possible under contract or tort law. When unjust enrichment is found to have occurred, there are two possible remedies: quantum meruit or a finding of a constructive trust. Quantum meruit is the amount a person deserves for services rendered. When goods or services are requested, there is an implied promise for payment of what the goods or services are reasonably worth. The court may order the paying of money by the party unjustly enriched to the other, equivalent to the value of services rendered, as valued by the court. The principle of quantum meruit also dictates that, absent a loss by the recipient of the work due to work partially performed, the party who either fully or partially performs services for another should get paid for that portion of the work that is satisfactorily completed and at a rate that merits the services rendered.

Example

A asks engineer B for technical assistance with an electronic circuit. B provides the assistance. Afterwards A asks B what her fee is and B suggests a certain sum. A refuses to pay it. In an action for payment for services performed, the court may give judgment in favour of B in the amount she requested or for some other amount it finds reasonable. If instead, A had agreed to the figure suggested by B but later changed his mind about paying, the court would not concern itself with what it considered reasonable; it would give judgment in favour of B for the amount agreed upon.

Alternatively, the court may find that B has constructive trust over the property owned by the unjustly enriched party (A) as a result of the unjust enrichment and, therefore, the true owner of that property is B. Constructive trust remedy is only found where the unjust enrichment was of a nature that it made substantial contributions to the property in question. This might arise in the above example if B made substantial contributions to the circuit design – the court may grant her ownership of all or part of the circuit and even related components, and their patents.


Dispute Resolution Where a dispute arises between an engineer and another party, there are various methods of resolving the dispute. Litigation is often the first type of dispute resolution that comes to mind, but as discussed below, litigation should almost always be the last resort…after alternative means of dispute resolution have failed. Civil Litigation

The process of civil litigation involves strict procedures and deadlines. To initiate a lawsuit, the Plaintiff's lawyer files a Notice to Defendant (sometimes called a Writ of Summons) and a Statement of Claim. The Notice or Writ advises the Defendant that an action is being commenced in court that requires an answer or response. The Statement of Claim spells out the facts alleged by the Plaintiff and his or her grievance. Within a prescribed period, the Defendant must file an Appearance, which indicates who his or her lawyer will be and what his or her intention of defending against the claim is. Shortly thereafter, the Defendant's lawyer files a Statement of Defence, wherein the Defendant responds to the Plaintiff's Statement of Claim, admitting, denying or providing his or her own version of events. In the Statement of Defence the Defendant may also counter-sue the Plaintiff. The Plaintiff then has the opportunity to respond to the Defendant's filings. Once both parties have filed their respective documents, they agree to set down the dispute for trial. In preparation for Supreme Court trials, each party may examine the other under oath in what is called an Examination for Discovery.52

Other procedural requirements include Discovery of Documents and written questions and answers in the form of Interrogatories. Failure to comply with the procedural requirements may result in various motions to the Court for relief.

Where the issues are clear and the facts are not greatly in contention, the courts may allow the parties to agree to proceed with a streamlined trial in which limits may be placed on such things as the time spent on Discovery or on the types of questions permitted in Interrogatories. Once a dispute has gone to trial and a decision has been rendered, a party to the dispute may want to appeal the decision (the party appealing the Court’s decision is the “Appellant”, the other party is called the “Respondent”). In almost all cases, a right to appeal is provided. The court that rendered the decision cannot hear the case again and therefore a higher court must deal with the appeal. If there is significant new evidence not considered in the lower court decision, the appeal court may ask the Provincial Supreme Court to re-try the case. Otherwise, if the lower court decision is believed to have been based on errors in law53

52 Examination for Discovery is not available at the Provincial (Small Claims) level.

, the Provincial Court of Appeal will hear the appeal and render a decision. If one of the parties is not satisfied with this decision, permission must be obtained from the Provincial Court of Appeal to appeal the decision to the Supreme Court of Canada, the final court of appeal for all civil and criminal cases. The Supreme Court can decide whether to hear the appeal of a civil case and will do so if the case involves a

53 Such errors could include misinterpretation of the law when applied to the facts of the case, or the admission of Respondent’s evidence that should have been inadmissible.


matter of public importance or an issue of law. (The Supreme Court of Canada will always hear the appeal of a criminal case if it involves a legitimate issue.) Judges without a jury try most civil cases in Canada. Appeal cases are always tried by judges only. There are disadvantages to civil litigation. First and foremost is the cost: $250/hr is a reasonable rate for a lawyer who may work for many hours and incur expenses while preparing a case and examining it in court; then there are court costs. A second problem is the delay – it may be a few years before the court has enough time to hear a case. In the end, the court’s decision may not be entirely favorable, even if at the outset the case appeared to be a sure bet. Very few (about 2%) civil disputes end up at trial. The rest are resolved by alternative methods discussed below. Some view this as a failure of the system to render justice; however, litigation is a failure of the parties to resolve their issues without the assistance of the court. Alternative Dispute Resolution Techniques

Alternatives to litigation, collectively called Alternative Dispute Resolution (ADR) techniques, have been developed, as litigation becomes increasingly expensive and time consuming. These alternatives include: arbitration, negotiation, mediation, or combinations or variations of these.54

Whereas once a plaintiff files a Statement of Claim, the defendant is required to respond, the parties in dispute both enter ADR voluntarily to resolve their dispute.

Arbitration

Arbitration is a process of dispute resolution conducted by an independent third party. The basis of the process lies in a written agreement by parties to submit present or future differences to arbitration. Such an agreement may have been entered into as a term in a written contract between the parties or may be entered into separately by the parties after a dispute has arisen. Normally the parties agree to be bound by the results of the arbitration. Public sector disputes and labour disputes often require resolution through arbitration. The independent third party may be an arbitration board or a sole arbitrator. An arbitration board typically consists of three members, one selected by each of the parties in the dispute, the other selected by the persons so nominated.55

The board or sole arbitrator is expected to hold a hearing or hearings during which each party is given the opportunity to present their side of the dispute.

Arbitrations are conducted outside the court system. Unless the terms of the arbitration agreement specify otherwise, the standard provisions of the various provincial acts governing the conduct of arbitration apply.

54 Samuels and Sanders (2007: 157) report a case where two software company presidents in Australia resolved their $100,000 dispute by means of an arm-wrestling competition. One might expect this of Australians – it is very cost-effective and way more fun than a trial. 55 Odd numbers of members of an arbitration board should be selected for obvious reasons.


The exact procedures of an arbitration hearing are established by the parties involved. Arbitration must be carried out in a fair and unbiased manner in which witnesses are examined under oath and a thorough investigation is made of the circumstances of the dispute, albeit in a less formal manner than in court. If it is determined that arbitration procedures do not satisfy the conditions of fairness or demonstrate bias, then the courts may replace the decision of the arbitration board. Negotiation

Negotiation involves a neutral third party, known as the negotiator, whose function is to engage the parties involved (who may or may not be in the same room) in an attempt to identify the important issues and find a common ground upon which to resolve the dispute. Often something that the parties initially believed to be a primary issue turns out to be of secondary importance. The procedures for negotiation are under the control of the parties involved and this is one of the primary advantages of negotiation over litigation or arbitration. Costs are also much lower and the process ends once the settlement is reached. The settlement is in the form of a contract and is therefore binding. The proceedings of a negotiation are privileged so that if a subsequent dispute between the parties does wind up in court, statements made during negotiation are inadmissible as evidence. Mediation

Mediation is an assisted negotiation in which a mediator plays a neutral role while trying to establish common ground between the parties in dispute. The key difference between a mediator and a negotiator or arbitrator is that, generally, a mediator will play a more intrusive role in the proceedings. For instance, a mediator will set an agenda for the discussion and will try to keep the parties on track. The mediator may discuss the case in separate meetings with one of the parties. Confidential information may be disclosed during such meetings which, of course, cannot be disclosed to the other party without its consent. Mediation has become a very popular method for resolving disputes. However, it can fail and when it does, the parties often enter into arbitration. Other Methods of ADR

There are combinations and variations of the above three techniques and litigation. A mini-trial may be conducted before a judge for the purpose of fact-finding. Witnesses may present verbal evidence, but in the interest of speed, it is often presented in written form. The judge may render a non-binding decision or an advisory opinion based on the evidence. If it does not provide a resolution, the decision or opinion will at least serve to aid the parties in deciding whether to pursue future dispute resolution methods, including litigation. A settlement conference is an informal meeting and is essentially mediation with a judge acting as mediator. There is also binding arbitration, a combination of mediation and arbitration. In some cases, the court may appoint a referee to assist the parties with their dispute and possibly negotiate a settlement.


Expert Witnesses

Engineers and other professionals are sometimes called to give expert opinion evidence in court proceedings or in arbitration. Where inferences to be drawn in court relate to technical matters, sometimes a party to the dispute will seek the help of a qualified expert who can express opinions about such matters. The expert's opinion may be based on first hand evidence, on facts or data presented at trial, or even on data not admissible in evidence, provided it is the type of data reasonably relied upon by experts in forming opinions on the subject in their particular field of competence. In this sense, expert opinion is an exception to the rules of evidence, which do not permit opinions to be used as evidence. The decision as to whether or not a person is qualified to testify as an expert witness is made by the trial judge, who has considerable latitude in this respect. The usual basis for qualification includes, but is not limited to, educational background, work experience, professional registration, membership and activity in professional societies, research, writings, etc. A fundamental question is whether the professional has the experience, expertise, and skill in the area of expertise to be able to give reliable testimony. Fees

It is recommended that one determine from the outset whether the lawyer or the client will be responsible for the expert's fees. An expert's work can have several phases, and therefore careful record keeping is strongly recommended. The phases may include: (1) investigation and gathering of evidence and reference materials, (2) analysis, (3) conclusion and opinion, (4) reporting, and (5) testifying in court. Ethical Considerations

Although often an expert will be engaged by a lawyer because the lawyer expects the opinion to support his or her client's position, the engineer or expert must remain neutral and seek to discover the truth from the facts and data in as complete and unvarnished a way as possible. The goal of expert testimony is to help the court understand the technical or specialized issues associated with the case. Unfortunately, some expert witnesses have the reputation of being a “hired gun” ready to give expert testimony in favor of your case, whatever the particulars of the case may be. This is unethical. It is also unethical for a professional engineer to charge a fee for expert testimony that is contingent upon the outcome of the trial (e.g., a percentage of the money awarded if the client is successful). In this case, the interests of the professional would be the same as those of the client in that both would want the highest settlement possible, whereas the court is interested in unbiased expert opinion to obtain a fair trial. In essence, the professional would have placed his or her interests above the public interest, which is not the goal of any profession. If the court hears of such a fee arrangement, it would likely assume that the expert’s testimony is biased and


render it inadmissible. In one case, APEGBC reprimanded a professional engineer for entering into a contingent fee arrangement for his expert testimony.56

References Klar, L. 2003. Tort Law, 3rd edition. Thomson-Carswell, Toronto. Marston, D. L., 1996. Law for Professional Engineers, 3rd edition. McGraw-Hill, Toronto. Osborne, P. H., 2000. The Law of Torts. Irwin Law. Samuels, B. M. and Sanders, D. R., 2007. Practical Law of Architecture, Engineering, and

Geoscience, Canadian edition, Pearson Prentice Hall. Smyth, J. E., Soberman, D. A., and Easson, A. J., 2007. The Law and Business Administration in

Canada. 11th edition. Pearson Education, Canada. Willes, J. A. and Willes, J. H., 2004. Contemporary Canadian Business Law. 7th edition.

McGraw-Hill Ryerson. Yogis, J. A., 2003. Canadian Law Dictionary. Barron’s Educational Series. List of Cases In order of appearance in the main text: Rylands v. Fletcher, [1868], L.R. 3 H.L. 330. Hodgins v. Hydro-Electric Commission of Nepean (Ontario), [1975] 60 D.L.R. (3d) 1. Falkenham v. Zwicker, [1978] 93 D.L.R. (3d) 289 (N.S.T.D.) Edgeworth Construction v. N. D. Lea & Associates Ltd., [1993] 3 S.C.R. 206, [1993] S.C.J. No. 101 327973 British Columbia Ltd. v. HBT Agra Ltd., [1994] B.C.J. No. 2851 Bow Valley v. St. John Shipbuilding et al, [1997] 3 S.C.R. 1210 Canadian Transit v Girdhar, [2002] O.J. No. 2933 MJB Enterprises Ltd. v. Defence Construction (1951) Ltd et al, [1999] 1 S. C. R. 619

56 The BC Professional Engineer, October 1991. In the Matter of Roger Hill, P.Eng.


Appendix A: Third Party Liability As shown in the diagram below, a professional P can be liable to a client C in contract and tort and to a third party X in tort. Furthermore, these liabilities apply simultaneously and are not mutually exclusive.57

While it may be easy to understand how a professional such as an engineer could be liable to a client in contract and in tort, it is perhaps difficult to understand how liability to a third party could arise. What are the circumstances? Who could these third parties be? A bit of legal history, in the form of two landmark 20th century cases, helps to clarify how the concept of third party liability arises and how it has evolved. These two cases will be presented below. Donoghue v. Stevenson58

During the evening of August 26, 1928, Mrs. May Donoghue and a friend went to the Tally café in Wellmeadow Place in Paisley, Scotland. Her friend ordered a ginger beer and ice cream from the cafe owner, Francis Minchella who poured some of the ginger beer into a tumbler to make an ice cream float. Mrs. Donoghue drank the float from the tumbler. When her friend poured the remainder of the ginger beer into the tumbler, a decomposed snail came out of the bottle. As a result of consuming the ginger beer, Mrs. Donoghue became ill and sued the manufacturer.

The bottle of ginger beer was not filled at the cafe and was sealed with a metal cap to maintain the aerated quality of the ginger beer. Based on this, it was clear that the snail had gotten into the bottle at the factory where the ginger beer was manufactured. As the bottle was opaque, there was no way that the cafe owner, Mrs. Donoghue or her friend could see the contents. This proved to be an important factor in the case.

57 It is possible for a client to sue a professional engineer in both tort and in contract, but this is rare. There may be advantages to suing in tort rather than contract. This would depend on the terms of the contract. See BG Checo International Ltd. v. BC Hydro and Power Authority [1993], 99 D.L.R. (4th) 577 (S.C.C.) 58 Donoghue v. Stevenson [1932] A.C. 562

contract

tort

P

X C


The manufacturer, David Stevenson, said he was not responsible because the beer was not served to Mrs. Donoghue; rather it was served to her friend who bought it from the cafe owner, Minchella. Under the law at that time, the manufacturer was right. There had been two earlier English cases involving mice in beer bottles (!) in which it was found that the beer manufacturers owed no duty of care to the consumer. Manufacturers only owed a duty to the retailer, implied by a sales contract, that the product is not defective. In turn, the retailer owed a similar implied duty to the purchaser. In this case it was Mrs. Donoghue’s friend who purchased the ginger beer and thus Mrs. Donoghue had no recourse. Suing her friend was presumably not an option. In part, based on this, the Scottish court did not find in favor of Mrs. Donoghue. However, the case finally went to the English House of Lords who, in 1932, three years after the incident, overturned the decision of the Scottish court. There were many reasons for the decision and much discussion by five Lords, two of whom dissented. The opaque bottle formed the basis of one of the key arguments for applying a duty of care of the manufacturer to any potential consumer – if the user/customer cannot examine the product, then it is up to the manufacturer to inspect it before it goes on the market. More details below.

Sources: http://news.bbc.co.uk/2/hi/uk_news/scotland/3001512.stm http://www.paisleyonline.co.uk/html/the_paisley_snail.html http://www.scottishlawreports.org.uk/resources/keycases/dvs/mrs-donoghue-journey.html

Memorial plaque and bench erected on the site of the cafe to commemorate the case

The Tally café in Wellmeadow Place, Paisley Scotland

http://news.bbc.co.uk/2/hi/uk_news/scotland/3001512.stm�

http://www.paisleyonline.co.uk/html/the_paisley_snail.html�

http://www.scottishlawreports.org.uk/resources/keycases/dvs/mrs-donoghue-journey.html�


Stevenson died before the case could be brought before the court and his executors settled out of court for a sum of £200.59

What happened to Mrs. Donoghue after the trial is unknown.

The original Stevenson bottle. As pleaded in the case, the bottle is brown and opaque, rendering impossible the

intermediate examination of its contents. (Source: http://www.scottishlawreports.org.uk/resources/keycases/dvs/mrs-donoghue-journey.html)

Extension of the Duty of Care

The most significant result of this case was the extension of the duty of care. Prior to the case, the duty of care was confined to a very narrow set of circumstances which typically included an act that caused physical injury to an individual or property. Emotional harm, economic loss, and harms caused by the written word or acts of omission were not considered. These were Victorian times during which considerable emphasis was placed on self-reliance and social responsibility. Duties of one party to another arose from voluntary agreements between the parties. If there was no legal duty of care, as in a contract, the common law was reluctant to impose one. In an earlier (1929) case, Mullen v. Barr & Co. (1929 S. C. 461), in which a mouse was found in a bottle of beer, a judge made a statement that typified the attitude and approach taken to the duty of care

In a case like the present, where the goods of the defenders are widely distributed throughout Scotland, it would seem a little short of outrageous to make them responsible to members of the public for the conditions of the contents of every bottle which issues from their works. It is obvious that, if such responsibility attached to the defenders, they might be called on to meet claims of damages which they could not possibly investigate or answer.

59 See http://www.scottishlawreports.org.uk/resources/keycases/dvs/donoghue-v-stevenson.html for more details on the case.

http://www.scottishlawreports.org.uk/resources/keycases/dvs/mrs-donoghue-journey.html�

http://www.scottishlawreports.org.uk/resources/keycases/dvs/donoghue-v-stevenson.html�


“Buyer beware” seemed to be the guiding principle. However, there also seems to be a desire to avoid the potential for chaos associated with a multitude of claims of a duty of care to any member of the public who consumes the beer. In Donoghue v. Stevenson, the judge Lord Atkin narrowed the potential range of liability by his “neighbour principle”:

You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law is my neighbour? The answer seems to be — persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.

The narrowing of the duty of care occurs in two ways: through the notion of proximity – “persons who are closely and directly affected” and the concept of forseeability – “ought reasonably to have them in contemplation as being affected”. The idea that proximity gives rise to a duty of care was not new, but proximity extended beyond mere physical proximity where acts could cause personal injury or property damage. However, the issue of whether a duty of care arises because one can foresee people being affected by one’s actions was a new concept. The figure below shows the relationships between the parties before and after the case.

Before the case, Minchella, the café owner, owed a duty of care to his customer to serve products free of poisons. Stevenson, the manufacturer, owed a duty of care to Minchella to ensure that the contents of the bottle were free of decomposed snails and other poisonous substances. Donoghue had no recourse. However, the case rendered Stevenson liable to Minchella and to Donoghue because it was reasonable to foresee that Donoghue, a third party, could share a bottle of ginger beer and thus be affected by the manufacturer’s actions. One of the judges, Lord Thankerton, explained the mechanism by which third party liability arose in this case:

Minchella Stevenson

The friend

contract

Before After

Minchella Stevenson

The friend

contract

Donoghue

tort


The special circumstances from which the appellant claims that such a relationship of duty should be inferred may, I think, be stated thus - namely, that the respondent, in placing his manufactured article of drink upon the market, has intentionally so excluded interference with, or examination of, the article by any intermediate handler of the goods between himself and the consumer that he has, of his own accord, brought himself into direct relationship with the consumer, with the result that the consumer is entitled to rely upon the exercise of diligence by the manufacturer to secure that the article shall not be harmful to the consumer. [italics added]

In other words, there was no way anyone, not Minchella, not May Donoghue’s friend, and not May Donoghue herself, could inspect the contents of the bottle without opening it and draining it into some container other than the one containing the ice cream. Should every consumer be required to do this? The manufacturer has thus placed himself in a direct relationship with any potential consumer. This case is one origin of third party liability, although there were previous cases involving defective products and concerns about the liability of manufacturers. It is a product liability case where the actions of a manufacturer are called into question. In 1963 the following case was tried in England and gave rise to third party liability of professionals or others with specialized knowledge for their written or oral communications. Hedley Byrne & Co. v. Heller & Partners Ltd.60

Hedley Byrne & Co. were advertising agents who were considering Easipower Ltd. as a potential client. However, Hedley Byrne had doubts about Easipower’s financial status and asked their bankers to obtain a statement of Easipower’s financial position from Heller & Partners who were merchant bankers with whom Easipower had an account. Specifically Hedley Byrne asked whether Easipower were trustworthy to the extent of £100,000 per year. Heller & Partners replied as follows:

CONFIDENTIAL

For your private use and without responsibility on the part of this bank or its officers

Dear Sir: In reply to your inquiry we advise that Easipower Ltd. is a respectably constituted company, considered good for its ordinary business obligations. Your figures are larger than what we accustomed to see. Yours truly Heller & Partners

60 Hedley Byrne v. Heller & Partners [1964] A.C. 465


Hedley Byrne did not communicate directly with Heller but its bankers informed them of the contents of the letter, including the disclaimer of responsibility at the top. As a result Hedley Byrne accepted Easipower as an account and placed extensive advertising space and time for it, running up a balance of several thousand pounds. Shortly afterwards Easipower became insolvent and went into liquidation, able to pay only a small portion of its debt to Hedley Byrne. Hedley Byrne sued Heller for the resulting loss, claiming that Heller’s response to the request for information was a negligent misrepresentation of Easipower’s creditworthiness, that is, Heller breached both the duty of care and the duty to use their skill and knowledge. Notice that Hedley Byrne had no contractual relationship with Heller. For this reason, in the original trial it was held that the defendants owed no duty to Hedley Byrne. The following year, 1964, the case went to the House of Lords where it was stated that if there was a foreseeable relationship between the maker of a statement and the receiver of the statement, then there could be liability for the economic loss. Thus Heller did indeed owe a duty of care to Hedley Byrne; they should have foreseen that its statements would be used by the customer of the bank requesting the information. However, in this particular case, there was no liability as there had been a disclaimer attached to the statement, so there was no ‘voluntary assumption of responsibility’. Although Heller was not required to pay damages, Hedley Byrne established the principle of liability to third parties for negligent misrepresentation and forms the basis for the liability of professionals to third parties.

Employment Law In British Columbia

Presented By: Ena Ackerman University of British Columbia Applied Science 450: Professional Engineering Practice October 18, 2007 © 2004-2007 Bull, Housser & Tupper

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INTRODUCTION The relationship between a non-union employee and employer is governed by the following regimes: 1. the common law, which includes written contracts; 2. the Human Rights Code, R.S.B.C. 1996, c. 210; 3. the Workers’ Compensation Act, R.S.B.C. 1996, c. 492; and 4. in some cases, the Employment Standards Act, R.S.B.C. 1996 c. 113. From the above legal regimes, this paper will touch upon the following topics: • Common Law obligations

• Confidentiality • Employment Contracts

• Non-Competition Agreements • Employment Standards in British Columbia • Human Rights Code • Workers Compensation Act

THE COMMON LAW Most employment relationships are not governed by a written employment agreement. Furthermore, in many instances where there are documents between an employee and employer, the document does not include all of the terms of the employment relationship. Where there is no written contract or where the written contract is not complete, the common law will imply terms into the relationship and impose duties onto both the employer and the employee. Under the common law, an employer owes the following duties to an employee: • an employer must not dismiss an employee without cause or reasonable notice. • in carrying out any dismissal, the employer must not act in bad faith. • an employer must not force an employee to take a demotion, without notice or cause. Under the common law, an employee owes the following duties to an employer: • to attend at work; • to carry out the lawful orders of an employer; • to perform his or her duties in a competent manner; • to serve his or her employer honestly and faithfully; • not to engage in a “conflict of interest”.


In addition to the above, some employees owe increased duties of confidentiality. Disputes arising under the common law are resolved through the Court. DUTIES OF AN EMPLOYER Reasonable Notice It is an implied term of every employment contract that, absent cause, an employer must provide an employee with “reasonable notice” of termination. Such notice, to be effective, must be clear and unequivocal. The purpose of providing “reasonable notice” is to provide the employee with time to find alternative employment. What constitutes reasonable notice varies from case to case. There is no set formula under the common law upon which to determine reasonable notice. The usual refrain of one month per year is not accurate. “Reasonable notice” under common law is also different from the notice required to be given under the Employment Standards Act, which will be discussed below. When determining what would be a reasonable notice period, employers often consider Court decisions in similar cases. The Court determines reasonable notice on an individual basis but considers the following factors: • age of the employee; • length of service; • character of the employment; and • availability of similar employment given the training and education of the employee. In some cases, the notice period will be lengthened where the employee was induced to leave secure or long-term employment to join the employer and was then terminated by the new employer without cause. Notice periods vary widely. Although the Court had indicated that the upper limit of the reasonable notice period was twenty-four months, recent awards exceeding twenty-four months have been made by the Court where the employer has acted in bad faith. Cause An employer is entitled to dismiss an employee without reasonable notice for cause. The employer will bear the onus in any subsequent litigation to prove that it had cause to dismiss the employee without providing reasonable notice. In British Columbia, the Court is generally very reluctant to find that cause exists. The onus placed upon employers is a high one. The employer must show that the employee’s conduct went to “the root of the employment contract” with the result that the relationship was “too fractured” to expect the employer to provide a second chance.


Examples of the type of conduct which has been found to warrant immediate dismissal include: • Theft • Dishonesty such as lying, and in some instances silence.

Not all acts of dishonesty will give the employer the right to dismiss an employee for cause. The Supreme Court of Canada has held that such a determination depends upon the nature and circumstances of the dishonest conduct. The court made the following comments:

… I am of the view that whether an employer is justified in dismissing an employee on the grounds of dishonesty is a question that requires an assessment of the context of the alleged misconduct. More specifically, the test is whether the employee’s dishonest conduct gave rise to a breakdown in the employment relationship. … In accordance with this test, a trial judge must instruct the jury to determine (1) whether the evidence established the employee’s deceitful conduct on a balance of probabilities; and (2) if so, whether the nature and degree of dishonesty warranted dismissal. …

* * * Underlying the approach I propose is the principle of proportionality. An effective balance must be struck between the severity of an employee’s misconduct and the sanction imposed.

Dishonesty may take the form of omission of important information, particularly where the employee is in a position of trust or where the information is of fundamental importance to the employer. Whether the employee lied or whether the employer simply avoided the issue when she knew the issue to be important, the result is the same.

• Wilful disobedience to clear instructions or well-known policies or procedures, without

reasonable excuse. The Court has stated:

I begin with the proposition that an employer has a right to determine how his business shall be conducted. He may lay down any procedures he thinks advisable so long as they are neither contrary to law nor dishonest nor dangerous to the health of the employees and are within the ambit of the job for which any particular employee was hired. It is not for the employee nor for the court to consider the wisdom of the procedures. The employer is the boss and it is an essential implied term of every employment contract that, subject to the limitations I have expressed, the employee must obey the orders given to him. It is not an answer for the employee to say: “I know you have laid down a rule about this, that or the other, but I did not think that it was important so I ignored it”. But it may be an answer, on the question of whether disobedience is repudiatory, that the employer so conducted himself that the reasonable man would conclude, and the employee did in fact, conclude, that the employer considered the rule of little or no importance. For instance, if an employer had a rule that equipment was to be covered at the end of the day and the rule was ignored by the employees to the knowledge of the employer, he could hardly come to work one morning and discharge the lot for failing to obey the rule.


To justify the dismissal on such grounds there is an onus on the employer to establish there were acts wilfully carried out by the employee in defiance of clear and unequivocal instructions of a superior or refusal to carry out policies or procedures well known by the employee as being necessary in the fulfilment of the employer’s objectives.

• Insolence and insubordination • Conflict of interest, by acting in a manner which adversely affects the interest of the

employer; • Incompetence

Serious or gross incompetence gives rise to the right of an employer to dismiss the employee. Where incidents are sufficiently serious, the plaintiff may be dismissed without warning.

• Intoxication, causing harm to the employer. • Absenteeism or lateness Even with respect to theft and dishonesty, the employer must show that it has not “accepted or condoned” the conduct by not dismissing the employee or delaying in dismissing the employee. In most cases, to succeed in dismissing an employee for incompetence, absenteeism or intoxication, the employer must show that it has warned the employee of the consequences of his conduct (that is that the employee’s job is in jeopardy) and given the employee a reasonable time to correct the conduct. Again, the employer must not delay in taking action. Bad Faith In carrying out a dismissal, an employer must not act in “bad faith”. Bad faith has not been defined definitively. The Supreme Court of Canada, however, has stated:

The obligation of good faith and fair dealing is incapable of precise definition. However, at a minimum, I believe that in the course of dismissal employers ought to be candid, reasonable, honest and forthright with their employees and should refrain from engaging in conduct that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive.

The obligation not to act in bad faith is not an independent obligation, there must also be a wrongful dismissal. Therefore, if an employer provided reasonable notice but acted in bad faith when carrying out the dismissal, there is no course of action by the employee. Where an employer is found to have acted in bad faith, the notice period to which the employee is entitled is increased. The purpose of so doing is twofold: • to compensate an employee for the negative impact such conduct may have on his or her

ability to find alternative employment (thereby mitigating his or her damages); and • to punish employers for callous and insensitive treatment.


In British Columbia, at least one Court has commented that the duty imposed upon an employer is “not [to] treat an employee unfairly or to create impediments to his or her search for new employment”. The Court is careful not to define too rigidly the types of conduct which may constitute bad faith, nor does the Court merely look at the effect of the conduct on the employee’s ability to find alternative employment. Conduct which does not affect the ability to find alternative employment may be compensated if it caused humiliation, embarrassment or damage to the employee’s self-esteem. Some examples of conduct which amounted to “bad faith” are: • dismissing an employee abruptly, shortly after he had received a favourable review and using

“hardball” tactics, including alleging cause, which made it more difficult for the employee to find alternative employment;

• dismissing an employee one day after giving her a message complimenting her on her performance and making untrue and derogatory comments about her in the close-knit industry in which she worked;

• wrongfully accusing an employee of theft or fraud and telling potential employers; • alleging fraud and refusing to provide a letter of reference; • making knowingly false misrepresentations about future employment prospects upon which

the employee relies; • dismissing a disabled employee on the employee’s return to work from leave; • hiring a replacement worker for an employee who was laid-off temporarily, without telling

the employee of the termination; • dismissing an employee for cause based upon allegations which were not investigated

properly, were unsubstantiated and in some cases untrue; and where the employee was employed in a specialized industry with little hope of finding alternative employment in the circumstances;

• abolishing the employee’s position while the employee was on vacation, and alleging and maintaining cause against the employee after his termination when it was clear that there was no basis;

• alleging cause after the termination and telling persons outside the company that the plaintiff had been dishonest and had come to work under the influence of alcohol;

• giving the employee ninety days to improve her performance, but then firing her after forty days for ‘incompetence’;

• making false statements to potential and an actual future employers; alleging “illegality” and fraudulent conduct, which allegations were only abandoned shortly before trial; and suggesting, then withdrawing, an allegation that monetary incentives were being paid by the plaintiff to salesmen of the defendant;

• making unfounded allegations in the close-knit industry against the employee of forgery, insurance fraud, mortgage fraud, incompetence, unprofessional organisational abilities, disobedience, drug and/or alcohol abuse, and misuse of a cellular phone;

• carrying out the dismissal in public, alleging that the employee had resigned but alleging cause as an alternative, and subsequently offering the same employee a new job with much reduced responsibilities and salary.


The following are examples of conduct which did not constitute bad faith: • dismissing an employee without cause or reasonable notice; • failing to negotiate a severance package; • failing to provide a reference and making an allegation of cause which although not

successful, was made on some objectively justifiable grounds, coupled with the fact that there was no evidence of emotional trauma or “hard ball” tactics on the part of the employer;

• maintaining an allegation of just cause until after examinations for discovery; • maintaining an allegation of cause unsuccessfully, but where the employee had committed

serious errors of judgment; • telling an employee that he was being “laid off” when he was, in fact, being terminated,

coupled with the fact that there was no significant impact of the conduct on the employee; • offering a “take-it-or-leave-it” offer of income continuance, then later attempting to induce

the employee to accept the minimum statutory payment in settlement of his claim, where the employer was forthright and did not allege cause;

• reducing the amount of severance pay offered after the employee refused to sign a release; • delay in paying the statutory minimum severance pay and vacation pay; • irritability or rudeness on the part of the employer prior to the termination, when the

dismissal itself was conducted in private and the fact of the dismissal was kept confidential during the notice period, the employer gave the plaintiff an explanation for her firing which attributed no blame to the plaintiff and gave a laudatory letter of reference;

• failing to offer an employee who was being terminated at the age of 50, with 31 years service with the government, to ‘bridge’ him to retirement or pay out his accumulated sick time;

• making a comment to other employees after the termination that the employee “was given ‘umpteen’ chances to improve but never did;

• eliminating a bonus which constituted constructive dismissal and advising of the elimination in a written memorandum dropped in the employee’s mailbox, all in the context of a deteriorating relationship between the parties;

• failing to extend early retirement benefits to two employees who had resigned and were working through their notice periods;

• making an allegation of cause then withdrawing it soon thereafter, coupled with the sudden dismissal of an employee after a long-running dispute between the employee and her superior.

Quantifying the bad faith element of the dismissal is not an easy task. Typically the more egregious the conduct, the higher will be the award, particularly where the conduct hinders the employee’s ability to find alternate employment. In many of the decisions in British Columbia, the Court has not specified the extent to which the notice period was extended as a result of bad faith conduct and the Court of Appeal has stated that the existence of bad faith is just one more of the factors to be considered in determining a reasonable notice period. However, a few cases have indicated extensions of two to six months.


DUTIES OF AN EMPLOYEE All employees owe a general duty of good faith and fidelity to their employer. In addition, certain senior employees, known as fiduciaries, owe special duties to the employer. Such duties exist during the employment and after the employment relationship is terminated. Confidential Information and Trade Secrets It is clear that employees are not entitled to use confidential information obtained during the course of employment. However, determining what information is truly confidential is often problematic. One particular type of confidential information which an employee may obtain from an employer is a “trade secret”. Trade secrets include a process, tool, mechanism, formulae, or recipe which is known only to the employer and the employees who are required to know it due to their employment The employer must in fact keep the trade secret “secret”, and must intend to protect the secrecy of the information. A classic example of a trade secret is the recipe or formula for making Coca Cola. It is difficult to establish that certain information is a “trade secret”, but when that is established, employees are bound by their obligations of loyalty and good faith not to disclose or make use of the trade secret in competition with the employer or in circumstances where that information may be used in competition with the employer. In contrast, customer lists often are not considered to be confidential. For example, if a list of customers can be generated from a public document, such as a telephone book or a trade journal, it is difficult for the employer to persuade the Court that the customer names are confidential. However, where a list of the employer’s customers would be difficult to generate, the Court is more inclined to consider the information to be confidential and to deserve protection. Absent a written agreement to the contrary, the current law allows a regular (non-fiduciary) employee to resign from his or her position with a company, start up or join a competitive business, and immediately begin soliciting clients of his or her former employer. This is provided that the employee does not remove any physical property belonging to the former employer, including physical or electronic customer lists, pricing information, client portfolio information or the like. The employee may memorize customer names, then later look up the names of customers in the telephone book, and contact them directly for the purpose of soliciting their business in competition with the former employer. In other words, ordinarily customer names are not necessarily confidential nor is the fact that they are customers of the company. What remains confidential is the document on which their names are printed or the database on which the names are stored.


Competition with Former Employer Unless there is a written contract or the former employee was a fiduciary, the former employee is entitled to compete with the former employer and solicit the former employer’s customers, so long as the former employee does so without using the former employer’s confidential information. A fiduciary is more restricted in competing with a former employer. A fiduciary may not directly solicit business from customers of the former employer for a reasonable period of time following the termination of the employment. In most cases a fiduciary may not secure a business opportunity belonging to or offered to his or her former employer, even where the company did not and could not have taken advantage of the opportunity, and when the employee did not pursue the opportunity until after the termination of the employment relationship. It is often difficult to determine whether an employee was sufficiently senior to be considered a fiduciary. Senior executives of the companies are likely fiduciaries. Employees who were so involved in the direction and management of a company that he or she was equivalent to a director or officer will generally be considered fiduciaries. Usually a significant senior managerial role, involving greater responsibility than minor supervisory duties, must be established before an employee will be considered by the court to be a key employee with fiduciary obligations to the employer. Before an individual can be considered to be a “key” employee, the following circumstances must exist:

1. the responsibilities of the employee in question must include the exercise of some discretion or power;

2. the employee must be able to exercise that power or discretion unilaterally so as

to affect the legal or practical interests of the employer; and 3. the employer must be peculiarly vulnerable to or at the mercy of the fiduciary

holding the discretion or power. EMPLOYMENT CONTRACTS Employment contracts allow employers and employees to address up front the implied common law duties. Written employment contracts often address such issues: • what constitutes reasonable notice; • confidentiality; • ownership of intellectual property; • unfair competition.


In most cases, but not all cases, the Court will enforce the terms of a written contract. In particular, the Court is wary of enforcing contracts which restrict an employee’s ability to earn income after being terminated by the employer. The Court will also not enforce a written contract which violates the Employment Standards Act, which issue will be discussed below. CONFIDENTIAL AND PROPRIETARY INFORMATION Written contracts stipulating what information is proprietary, and what information the employee must treat as confidential, can assist an employer to protect its information. An employer can make clear to an employee its expectations of what is confidential and remove or minimize ambiguity. A strong provision in an agreement will also act as a deterrent to an employee who may be inclined to release such information. Simply describing particular information as confidential is not enough. Where the information was not treated as confidential or cannot reasonably be considered proprietary, the Court may decline to enforce the contract against the employee. Generally confidential information is defined in an agreement as widely as possible but confidential information does not include information which is in the public domain or information possessed by the employee before they commenced employment. Accordingly, it is important for employers to take steps to maintain the confidentiality of information it does not want third parties to know. Whether or not confidential information is protected in a contract, proving a breach will often be difficult. An employer may also use Confidentiality Agreements to protect and retain intellectual property developed by the employee during the course of his/her employment and require that any such interest be assigned or transfer to the employer. The scope of the protection can cover work conceived outside regular working hours and work not specifically instructed to be undertaken by the employer. This can remove any dispute as to whether the property was truly developed outside work. NON-COMPETITION AGREEMENTS AND RESTRICTIVE COVENANTS In general, the Court seeks to protect employers against unfair competition while protecting a former employee’s ability to earn income through fair competition with the employer. The line between what the Court considers to be fair and unfair competition is exceedingly difficult to draw and will depend on the particular facts relating to the specific employment relationship in question. As a general rule, the Courts refuse to enforce contracts that are in restraint of trade on the basis that all interference with individual liberty of action in trading is contrary to public policy and therefore void. If a contract which interferes with trade falls within certain exceptions, the Court may enforce it. Restrictive Covenants will be enforceable only if they fall within an exception to the general rule, in that they are reasonable in the circumstances.


Restrictive covenants typically will restrain an employee from engaging in a competitive business in any capacity for a certain period of time in a certain geographic area. The Court will allow enforcement of a non-competition agreement where the restriction is reasonable with reference to the interest of the parties concerned and the interest of the public at large. The employer’s primary interest is to prevent an employee from unfairly using the employee’s confidential knowledge or special relationship to compete. The scope of the restriction must be reasonable when viewed against each individual employee’s interests. “One size fits all” contracts are at risk of being too broad to be enforced against a specific employee unless the lowest common denominator is used. The courts will not fix the clause if it is found to be too restrictive. The whole clause will be unenforceable. The Court will not ‘blue pencil’ restrictive covenant clauses. The term ‘blue pencil’ refers to the practice of inserting alternatives into a restrictive covenant clause. For example, the clause may state that the employee will not compete in (a) Canada or, in the alternative, (b) British Columbia, for a period of (a) 5 years, or, in the alternative, (b) one (1) year. The Court often focuses on whether the scope of the restriction on the employee is overly broad. For example, an employer who seeks to restrain an employee from competing altogether with the employer’s business will often find that the Court will not enforce the contract. By contrast, the Court is more likely to enforce a contract which restrains an employee from contacting only those particular customers with which the employee had contact during a limited time before the termination of the employment relationship, or prohibits competition only in that aspect of the business in which the employee was involved or prohibits an employee from soliciting remaining employees. Other circumstances such as the source of the business connection may be relevant in determining whether such clauses would be enforceable. Restrictions which are too broad geographically, or too long in time will be unenforceable on the basis that they are an illegal restraint of trade. EMPLOYMENT STANDARDS ACT IN BRITISH COLUMBIA

INTRODUCTION Employment standards in British Columbia are governed by the Employment Standards Act (the “Act”). The purpose of the Act is to provide employees in British Columbia with at least basic standards of compensation and conditions of employment. The Act provides minimum standards. Employers and employees are free to enter into agreements which provide higher standards than the Act but cannot enter into an agreement which offers less than the Act. TO WHOM DOES THE ACT APPLY?


The Act applies to all employees in British Columbia unless the employee is specifically exempted from the Act. The exemptions are contained within the Employment Standards Regulation. Some employees, such as professional engineers and lawyers, are exempted from the operation of the Act as a whole. Other employees, such as managers and “high technology professionals” are exempt only from portions of the Act. WHAT IS THE SCOPE OF THE ACT? The Act regulates the following areas: • minimum wages • pay days • how wages are paid • deductions and assignments • wage statements and payroll records • hours of work and overtime • statutory holidays and vacations • pregnancy leave and parental leave • jury duty • notice periods and termination MINIMUM WAGES The minimum wage is currently $8.00 per hour. The only exceptions to the minimum wage are in respect of live-in home support workers, live-in day camp leaders, resident caretakers and farm workers. The minimum wage is calculated on a different basis for such workers. For employees who have no paid work experience before November 15, 2001, the first job/entry level minimum wage of $6.00 per hour applies. However, after they have worked for a total of 500 hours with one or more employers, these employees are entitled to the regular minimum wage.


HOURS OF WORK AND OVERTIME The following is a table which outlines the rights of various employees. REGULAR EMPLOYEES LAWYERS, HIGH

TECHNOLOGY PROFESSIONALS

OTHER EMPLOYEES OF HIGH TECHNOLOGY COMPANIES

Must pay overtime after: 8 hours per day OR 40 hours per week

No overtime pay (But no excessive hours)

Must pay overtime after: 12 hours per day OR 80 hours per two weeks

Must pay statutory holiday pay. No statutory holiday pay Must pay statutory holiday pay. Must give 24 hours’ notice of any change in shift.

No notice required Must give 24 hours’ notice of any change in shift.

Must give a 30 minute meal break after 5 hours of work.

No meal break Must give a 30 minute meal break after 5 hours of work.

Split shifts must be completed within 12 hours.

No limit on split shifts. Split shifts must be completed within 12 hours.

Must pay a minimum daily pay of 2 hours.

No minimum daily pay. Must pay a minimum daily pay of 2 hours.

Must give 32 hours free from work each week.

No work-free period. Must give 32 hours free from work each week.

VACATIONS Under the Act, employees are entitled to two weeks of vacation per year after one year of employment and after five years of employment, the employee is entitled to three weeks. After one year of employment an employee is entitled to vacation pay of 4% of his annual income and after five years of employment, 6%. MATERNITY LEAVE This part of the Employment Standards Act applies to most employees. An employee wishing to commence maternity leave may do so commencing no sooner than 11 weeks immediately before the anticipated date of birth. The employee must request the leave in writing at least 4 weeks before the day the employee proposes to begin the leave. The employer may require that the leave request be accompanied by a medical certificate stating the expected or actual date or the date the pregnancy terminated or the reasons requesting additional leave. The employee is entitled to up to 17 consecutive weeks leave of absence without pay which may commence at any time up to 11 weeks prior to the delivery. Additionally, if, for reasons related to the birth of the child the employee is unable to return to work, further leaves of absence may be taken for up to an additional 6 consecutive weeks. An employee shall not return to work before the expiration of 6 weeks following the actual date of birth of the child unless:


(a) the employee makes a request in writing to the employer at least one week prior to

the date of return to work; and (b) if required by the employer, she furnishes the employer with a certificate from a

medical practitioner stating that she is able to resume work. In cases where a pregnancy has terminated prior to actual birth or where birth was premature resulting in the employee being unable to make the normal written request for leave of absence, then upon the employee’s request, the employee may be granted a leave of absence without pay for up to 6 consecutive weeks. A request for maternity leave must be made in writing at least 4 weeks before the employee proposes to begin his or her leave. An employer may require requests for maternity leave be accompanied by a medical practitioner’s certificate stating the expected or actual birth date or the date the pregnancy terminated. The Employment Standards Act prohibits the employer from terminating an employee for reasons relating to the pregnancy. Additionally, an employer is prohibited from changing the conditions of employment for reasons related to the pregnancy unless it first obtained the employee’s written consent. PARENTAL LEAVE In addition to the 17 weeks of maternity leave, a birth mother may take up to an additional 35 unpaid weeks as parental leave. A maternity leave and a parental leave must be taken consecutively for a maximum total leave of absence of 52 weeks. If no maternity leave is taken, a birth mother may take an unpaid parental leave of 37 weeks, to be completed within 52 weeks after the birth of the child. Birth fathers and adoptive parents are entitled to a parental leave of absence, without pay, for a period of up to 37 weeks, to be completed within 52 weeks after the birth of the child or after the child is placed with the adoptive parent. A birth father, birth mother, or an adoptive parent may take up to 5 additional weeks of unpaid leave, beginning immediately after a parental leave, if the child has a physical, psychological or emotional condition requiring an additional period of parental care. A request for parental leave, with the exception of a request for parental leave made by a birth father or an adopting parent, must be made in writing at least 4 weeks before the employee proposes to begin his or her leave. An employer may require requests for parental leave be accompanied by a medical practitioner’s certificate or other evidence of the employee’s entitlement to leave.


EFFECT OF MATERNITY AND PARENTAL LEAVES An employer is not required to pay an employee during maternity or parental leave. Employees can claim benefits for these leaves under the Employment Insurance Act. The service of an employee who is absent from work due to pregnancy is considered continuous for the purposes of vacation entitlement, vacation pay, severance pay and notice of termination, and any pension, medical or other plan beneficial to the employee. The employer shall continue to make payments to such plans in the same manner as if the employee were not absent if the total cost of the plan is normally paid by the employer. The employee may elect to continue to pay his or her share of any plan that is paid jointly by the employer and the employee, in which case employer contributions must continue as well. The employee is entitled to all increases in wages and benefits the employee would have been entitled to had the leave not been taken. NOTICE PERIODS AND TERMINATION The following notice periods are required under the Act:

Length of Service Notice Required 0-3 months 0 3-12 months 1 week 1-2 years 2 weeks 2-3 years 3 weeks 3-4 years 4 weeks 4-5 years 5 weeks 5-6 years 6 weeks 6-7 years 7 weeks 7 years plus 8 weeks

The notice periods required by the Act are lower than the notice periods required by common law. Accordingly, an employee may seek both common law notice and notice under the Act.


EFFECT OF WRITTEN EMPLOYMENT CONTRACTS Written contracts may appear to offer a way to avoid some of the provisions of the Act. However, section 4 of the Act provides that any provision of an employment agreement which violates the Act is of no effect. Upon that basis, the Employment Standards Tribunal and the Court will only give effect to a contract which meets or exceeds the provisions of the Act Under section 4, an employee cannot agree to waive the protections guaranteed by the Act. Even if the employee agrees in writing to waive the protections under the Act, he can change his mind. Upon the basis of section 4, the Employment Standards Tribunal has struck down the following types of agreements: • waiver of minimum wage; • working for free, on a trial basis; • paying wages late; • paying straight time for overtime worked; • working as an independent contractor; • permitting deductions for salary of such items as property damaged or lost by the

employee; • calculation of salary to include overtime; • setting the reasonable notice period at thirty days. An employer and an employee may enter into a contract which provides better terms than an employee would get under the Act alone. In such an instance, the employer would be bound by the contract. HOW ARE COMPLAINTS MADE UNDER THE ACT? Beginning in 2002, in an effort to encourage employees to try to solve problems in cooperation with their employer, the Branch implemented a new complaint resolution process. The Branch now requires that, except under very unusual circumstances, a new Employment Standards Self-Help Kit be completed and given by the employee to his or her employer before a complaint can be made. The Kit attempts to help define the problem and provides materials to assist in resolving the problem prior to the formal complaint process. For example, in order to assist with wage problems, the Kit includes a letter to the employer, written by the Branch, along with a detailed Request for Payment form. If the use of the Self-Help Kit does not resolve the problem, the employee must make a written complaint to the Branch. Complaints may be made at any time while an employee is still employed but must be made within six months of the last day on which the employee worked. Complaints can go back for a period of six months. For example, if an employee claims she is entitled to overtime, she can make a claim for overtime pay up to six months after she stops working and that claim would cover the previous six months of her employment.


After a complaint is made, the Director must accept and review the complaint and may conduct an investigation. Prior to making a determination, and in accordance with the complaint resolution process, the Director may arrange a mediation session between the parties. If the parties agree on a solution, the Director may draft a settlement agreement. Otherwise, the Director of Employment Standards will issue a Determination. A party may appeal a Determination to the Employment Standards Tribunal. The Tribunal may: • refuse to hear an appeal; • decide the appeal on the information it already has before it; • accept submissions in writing; • conduct a full hearing. If the Tribunal conducts a hearing, it will not hear evidence which was not made available to the investigator. Accordingly, the parties to a complaint should co-operate fully with the Director when an investigation is being carried out. REMEDIES UNDER THE ACT Under the Act, the usual remedy is that an employees are paid compensation. However, if the employee is dismissed as a result of requiring leave under the Act or the employer misrepresents the nature of the position to a potential employee, that employee may be re-instated to the original position or paid compensation in lieu of reinstatement. The employer may also be required to pay the employee or other reasonable and actual expenses incurred because of the contravention. Section 79(4) provides the remedy:

(4) In addition, if satisfied that an employer has contravened a requirement of section 8 or Part 6, the director may require the employer to do one or more of the following: (a) hire a person and pay the person any wages lost because of the contravention; (b) reinstate a person in employment and pay the person any wages lost because of

the contravention; (c) pay a person compensation instead of reinstating the person in employment; (d) pay an employee or other person reasonable and actual out of pocket expenses

incurred by him or her because of the contravention. In the Tribunal decisions thus far, reinstatement has not been awarded. In most cases, compensation is awarded. The Tribunal has described the remedy as follows:

In our opinion, Section 79(4) is perhaps the most restorative remedial provision in the Act, giving the Director broad jurisdiction to place the terminated employee in the same position he or she would have been in but for the wrongful action of the employer. As a remedial provision, it calls for a liberal and broad interpretation: Machtinger v. Hoj Industries Ltd. (1992) 91 D.L.R. (4th) 491 (S.C.C.). In our view, the remedies under the Act must be fair, compensatory and promote compliance. These principles are reflected in the purposes of the Act set out in Section 2 and the Act itself. With respect to compensation, the general principle of damages must be to put the individual in the same position the individual would have been in but for the breach of the statutory obligation.


Section 79(4) permits a remedy not available at common law. We are not in any way limited to, for example, such damages as might have been awarded in an action for wrongful dismissal. In our view, the statutory remedy should not be narrowly constructed and we have the power to fashion a remedy that is fair, compensatory and promotes compliance with the Act. In short, the remedy depends on the extent of the injury suffered because of the breach. Some of the factors we have considered are those relied on by the Tribunal in a recent decision Afaga Beauty Service Ltd. (BCEST # D318/97): length of employment with the employer; the time needed to find alternative employment; mitigation efforts undertaken; other earnings during the period of unemployment; projected earnings from previous employment; etc. The Tribunal is not limited to considering only those factors as which factors are appropriate will depend on the specific circumstances of each appeal. We do not agree with the Director that Ms. Prickrell's entitlement to compensation extends to the date of the Determination (November 4, 1997). As noted above, there was an inordinate and unexplained delay between the date of Ms. Prickrell's complaint and the date of the Determination. We consider that compensation for "loss of employment" is included in the total amount of compensation to which Ms. Pickrell is entitled when we adopt and apply the various factors enunciated above and in Afaga Beauty Service Ltd. (BCEST # D318/97).

In that decision, the pregnant employee was dismissed on September 20, 1995, ostensibly for cause. She gave birth to her child in October, 1995. The compensation she was awarded was in the Determination was lost wages from the date of her dismissal to the date of the Determination, some two years later. There have been determinations where damages have been awarded for emotional pain and suffering - usually under the heading of “expenses”. However, the Tribunal has found that such damages are not provided under the Act but fall within the scope of the Act. OVERLAP BETWEEN THE COURT AND THE ACT The following actions are ones which can be pursued through the Court: • a claim for damages for wrongful dismissal; • a claim for damages for the breach of any term of an employment contract; • an action in debt to recover amounts owing to the employee. The above actions overlap with certain provisions of the Act: such as the right to severance pay, unpaid wages. There may also be overlap where there is a contract of employment which deals with vacation pay, overtime and statutory holiday pay. THE EFFECT OF SECTION 118 OF THE ACT The Act itself contemplates that there will be an overlap of rights and avenues to pursue. Section 118 of the Act provides:

Subject to section 82, nothing in this Act or the regulations affects a person's right to commence and maintain an action that, but for this Act, the person would have had the right to commence and maintain.

Section 82 of the Act provides:


Once a determination is made requiring payment of wages, an employee may commence another proceeding to recover them only if (a) the director has consented in writing, or (b) the director or the tribunal has cancelled the determination.

Thus, section 82 prohibits concurrent actions to recover wages which are the subject of a determination. What claims may not be brought in the Courts? • Claims in respect of which a determination is made: section 82. However, since the

limitation period for unpaid wages extends back only two years under the Act, there may still be a right on the part of the employee to seek unpaid wages going back beyond that time.

• Claims for vacation pay, overtime, minimum wage, etc. where there is no contractual right to such pay.

HUMAN RIGHTS CODE In 1974, the Human Rights Code came into operation. This legislation has now been superseded in 1984 by the Human Rights Code. DISCRIMINATORY PUBLICATION The Human Rights Code prohibits any person (which includes an employer) from publishing or displaying before the public a notice, sign, symbol, emblem or other representation indicating discrimination or an intention to discriminate against a person or class of persons in any manner prohibited by the Act. DISCRIMINATION IN EMPLOYMENT ADVERTISEMENTS The Human Rights Code prohibits any person from publishing an advertisement in connection with employment or a prospective employment that expresses a limitation, specification or preference as to race, colour, ancestry, place of origin, political belief, religion, marital status, physical or mental disability, sex, sexual orientation or age unless a limitation, specification or preference is based on a bona fide occupational requirement. DISCRIMINATION IN WAGES The Human Rights Code provides that an employer shall not discriminate between his male and female employees by employing an employee of one sex for work at a rate of pay that is less than the rate of pay at which an employee of the other sex is employed by that employer for similar or substantially similar work. The concept of skill, effort and responsibility is used to determine what is similar or substantially similar work.


The Human Rights Code provides that a difference in the rate of pay between employees of different sex based on a factor other than sex does not constitute a failure to comply with the Human Rights Code where the factor on which the difference is based would reasonably justify the difference. Examples might include a seniority system or an incentive program. The Human Rights Code also prohibits an employer from reducing the rate of pay of one employee in order to comply with this section. In situations where an employee is paid less than the rate of pay to which he is entitled under this section, he is entitled to recover from his employer the difference between the amount paid and the amount to which he is entitled, together with the costs, but no action can be commenced later than 12 months from the termination of the employee’s services and the action applies only to wages of an employee during the 12 month period immediately preceding the date of the termination of his services or the date of the commencement of his action, whichever date occurs first. DISCRIMINATION IN EMPLOYMENT The Human Rights Code prohibits a person from refusing to employ or refusing to continue to employ a person or discriminating against a person with respect to employment or any term or condition of employment because of the race, colour, ancestry, place of origin, political belief, religion, marital status, family status, physical or mental disability, sex, sexual orientation or age of that person or because of his conviction for a criminal conviction charge that is unrelated to the employment or to the intended employment of that person. Age discrimination is prohibited only in respect of persons between the ages of 19 and 65. This provision does not apply as it relates to age, to any bona fide scheme based on seniority, or as it relates to marital status, physical or mental disability, sex or age, to the operation of any bona fide retirement, superannuation or pension plan or to a bona fide group or employee insurance plan. Also the provision does not apply with respect to a refusal, limitation, specification or preference based on a bona fide occupational requirement. THE QUESTION OF INTENTION The prohibitions in the Human Rights Code apply to practices whether or not there was an intention to discriminate. WHAT IS A BONA FIDE OCCUPATIONAL QUALIFICATION? The Human Rights Code provides for discrimination in employment decisions if it is based on a bona fide occupational qualification or requirement. Bona fide occupational qualifications or requirements, depending on the legislation in use, have been dealt with extensively in human rights cases. It is the employer’s obligation to show that a bona fide occupational requirement exists. This was addressed in Ontario Human Rights Commission et al. v. The Borough of Etobicoke (1982) 40 N.R. 159 (S.C.C.), where Mr. Justice McIntyre stated at pp. 165-66:



Page 20

To be a bona fide occupational qualification and requirement a limitation, such as a mandatory retirement at a fixed age, must be imposed honestly, in good faith and in the sincerely held belief that such limitation is imposed in the interests of the adequate performance of the work involved with all reasonable dispatch, safety and economy, and not for ulterior or extraneous reasons aimed at objectives which could defeat the purpose of the Code.

In addition, it must be related in an objective sense to the performance of the employment concerned, in

that it is reasonably necessary to assure the efficient and economical performance of the job without endangering the employee, his fellow employees and the general public.

The answer to the second question will depend in this, as in all cases, upon a consideration of the evidence

and of the nature of the employment concerned. WORKERS’ COMPENSATION ACT British Columbia employers are required to register with the Workers Compensation Board (“WCB”) and abide by its scheme. The scheme set up under the Workers’ Compensation Act allows workers to be compensated for lost wages and expenses as a result of work place injuries and illnesses. The employer pays for this scheme through assessments as a percentage of payroll. The amount of assessments are based on the inherent danger of the employer’s industry and on the employer’s experience rating. The more accident prone the employer’s work place is, the higher its assessments will be. The benefit of the scheme to the employer is that the Act bars employees from suing their employers or other employers for additional monies as a result of a work place injury or illness. Occupational health and safety is also governed by this Act. The WCB has many inspectors responsible for enforcing safety standards and the WCB is given extensive powers to compel employers to provide a safe work environment.

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Engineering Law: Patents, Trade Secrets,Copyright, Industrial Designs and Trademarks

Patents

A patent is a monopoly granted by the Federal government, giving the patent owner the exclu-sive right to make, use or sell an “invention.” Most novel, useful and unobvious products,processes, machines, etc. qualify as inventions. But public use, sale or other non-confidentialdisclosure of an invention may destroy one’s ability to patent that invention. In Canada, apatent application must be filed before any disclosure which makes the invention available to thepublic anywhere in the world. Disclosures by or derived from the inventor do not bar the grantof a Canadian patent unless they occur more than one year before the patent application is filed. In the United States, a patent application must be filed no later than one year after any publicuse or sale of the invention in the USA, or description of the invention in any printed publica-tion anywhere. In many other countries any public use, sale or other non-confidential disclo-sure of the invention before the filing of a patent application bars the grant of a valid pat-ent—unlike Canada and the United States, most countries provide no grace period for disclo-sures by or deriving from the inventor.

Only the actual inventor or her assignee or other legal representative may obtain a valid patent. If two or more applications to patent the same invention are co-pending then, in Canada, thepatent is granted to whoever filed the first Canadian patent application. In the United States,conflicts of this sort are settled by adversarial proceedings in favour of whoever first conceivedthe invention and diligently reduced it to practice. In either country, the prevailing party’srights must derive from a bona fide inventor. One who applies to patent an invention copiedfrom someone else is not an inventor and cannot obtain a valid patent. But even a defectiveapplication of that sort can prevent the actual inventor from obtaining a Canadian patent becausepatentability is lost if the invention is described in a previously filed application.

A patent’s term varies by country. In Canada, patents are granted for a 20-year term, countingfrom the date the patent application is filed in the Canadian Intellectual Property Office (CIPO). United States patents also issue for a 20-year term. Once a patent expires the invention is in thepublic domain and may be freely exploited. Most countries, including Canada and the UnitedStates, charge “maintenance fees” which must be periodically paid to keep the patent in forcethroughout its term.

Before a patent application is prepared, a search is usually conducted to assess the invention’snovelty and obviousness (i.e., its potential patentability). Any previous patent or publicationanywhere in the world which discloses the invention usually prevents the grant of a valid patent

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for the invention. Since worldwide searches are prohibitively expensive, an investigation oflimited scope is made, typically utilizing Internet databases of patent documents published overthe past few decades by major Patent Offices. See for example:

Canada: http://patents1.ic.gc.ca/intro-e.htmlUSA: http://www.uspto.gov/patft/index.html

If feasible, the search should also cover non-patent literature. No search can guarantee patent-ability of an invention. But searches generally facilitate reasonable assessment of the prospectsfor obtaining commercially worthwhile patent protection, enabling one to decide if the time andcost of seeking patent protection is justifiable.

If the search results are favourable, a patent application may be prepared. It must describe theinvention (with drawings, where appropriate) in sufficient detail to enable a skilled person toconstruct a working embodiment of the best mode of the invention known to the inventor. Theapplication includes “claims” defining the scope of patent protection requested. If too broadlyworded, the claims may be invalid as encompassing not only the invention, but also thingswhich are old. If too narrowly worded, the claims may not protect against competitors whomake minor modifications to avoid infringement.

Patent applications must be filed in each country in which patent protection is desired, exceptthat a single European patent application may be filed to cover most European countries. Mostindustrialized countries belong to an international convention which permits foreign patentapplication filings to be deferred for up to one year after the first filing. Subsequent applica-tions which claim priority in relation to the first-filed application are deemed to have been filedsimultaneously with the first application. Canada and many other industrialized nations alsobelong to the Patent Cooperation Treaty, which further assists in preserving patent rights intreaty countries, with reduced complexity and expense.

Most Patent Offices employ technically trained Examiners who scrutinize patent applications forutility, novelty, inventiveness and compliance with formal requirements—particular attentionbeing given to the claim language. More often than not, Examiners raise objections that areusually answered by amendment of the application, argument, or both. Examination can takeconsiderable time, so patents normally issue two years or more after the application is filed. Sometimes, Examiners’ objections are fatal to the patent application, but in most countriesvarious appeal procedures are available.

Although every patent must name one or more individual inventors, the inventors do notnecessarily own the patent rights. The patentee may instead be the inventors’ employer—havingacquired the patent rights pursuant to an employment contract executed by the employee-invent-ors. Or, the patentee may have acquired the patent rights pursuant to a contract of purchase andsale executed by the inventor(s). In some cases the patent rights may be transferred to anotherparty without any contract or other documents having been executed by the inventor(s). Forexample, an employer may in some cases be able to obtain a Court order decreeing that it ownsthe rights in a patent surreptitiously obtained by an employee for an invention purportedlypursued “on the employee’s own time and without using any of the employer’s resources,” ifthe patented invention comes within the scope of the employee’s employment duties. Owner-ship disputes can also arise between joint inventors, or between different employers whoembark on a project together but subsequently disagree over the ownership of an inventionjointly made by employees of both employers.

Patents can be licensed on various terms. In a licensing scenario, the patentee retains owner-ship of the licensed patents(s) and permits the licensee to make, use and/or sell articles



embodying the invention. The license agreement may include provisions respecting exclusivityor non-exclusivity of the licensed rights, whether those rights may be sub-licensed, thegeographic territory in which the licensee may operate, performance targets the licensee mustmeet—including sanctions if the targets are not met, royalty payments—including minimumroyalties, responsibility for pursuing infringers, rights to future improvements made by thepatentee or by the licensee, rights to terminate the license agreement, and much more.

Trade Secrets

Unlike patent protection, no formal governmental recognition is required to obtain trade secretprotection. Trade secret protection is the antithesis of patent protection: full public disclosureof an invention is essential to the grant of a valid patent (the patent application, incorporatingfull details of the invention, is typically published by the Patent Office about 18 months after theearliest filing), but trade secret protection endures only while the “secret” is kept. Thus, tradesecret protection is inappropriate if routine examination of a device, process etc. will reveal thesecret. If a trade secret owner inadvertently allows the secret to slip out, trade secret protectionis lost. Essentially, the law enables a trade secret owner to prevent others from unfairlyexploiting the secret if they obtain it through fraud, theft, breach of an obligation of confidence,etc.

Copyright

“Copyright” means the exclusive right to reproduce an original literary, dramatic, musical orartistic work and includes the exclusive right to produce, reproduce, perform, publish, trans-late, convert, adapt, publicly present, record or broadcast the work or any substantial part of it.

Copyright applies to original literary, dramatic, musical and artistic works, whatever their modeor form of expression. To be “original”, the work must be the product of the author’s skill andlabour—not copied from another’s work. The work need not be the product of genius or exhibita high degree of creative skill; the author’s labour is also significant. Telephone directories,maps or engineering drawings as well as books, plays, songs, paintings or computer programsare all proper subject matter for copyright.

Copyright does not extend to the idea underlying the work but only protects a particularexpression of that idea. Thus, anyone may implement someone else’s ideas as expressed in anengineering feasibility study concerning soil stabilization in earthquake-prone areas withoutinfringing copyright, so long as the written language in which the previous idea was expressedis not substantially copied.

In Canada, copyright arises automatically for works capable of protection, provided the authorwas a Canadian citizen or citizen of a qualifying foreign country when the work was created;and, if the work has been published, first publication took place in Canada or in a qualifyingforeign country. Most industrialized countries “qualify.”

Subject to certain exceptions, the author of a work is generally the first owner of the copyright. If the author makes the work in the course of employment, the author’s employer usually ownsthe copyright.

Because copyright arises automatically in Canada, no special steps need be taken to secureCanadian copyright protection. However, copyright registration is desirable if a disputeappears likely, or if formal evidence of title is desired or required.



You have probably seen the Universal Copyright Convention notice which appears on copies ofpublished works, such as a book’s title page. For example: “© 2006 John Smith” where 2006 isthe year of first publication of the work and “John Smith” is the copyright owner (as explainedabove, the owner is not necessarily the author of the work). This notice has little legalsignificance in Canada—it does not indicate that the copyright is registered, but it can serve tonotify the reader of the existence of copyright which can be important to preserve the ability torecover damages in a copyright infringement lawsuit.

Industrial Designs

An industrial design registration is a Federal grant protecting the unique ornamental, visual oraesthetic features of an article. To be valid, Canadian registration must be applied for withinone year of first publication, public use or sale, anywhere in the world, of the design or ofarticles displaying, bearing or embodying the design. Purely functional or utilitarian featuresare not registrable as industrial designs but may, if novel, useful and unobvious be patented. Ideas cannot be protected by industrial design registration.

The initial term of Canadian industrial design protection is five years, which may be renewedfor one 5-year renewal term.

Only the “proprietor” of an industrial design may register it. The proprietor is the design’sauthor, unless another party paid the author to create the design, in which case the other party isthe proprietor.

To register a design one files an industrial design application in the CIPO’s Copyright &Industrial Design Branch. The application is scrutinized by a government employed Examineras to form and content, degree of originality and conflict with previously registered or co-pending designs. It is frequently necessary to respond to one or more Examiner’s Reportsbefore the application is allowed. As in the case of patents, separate registrations must beobtained in each country in which protection is desired. The United States equivalent to aCanadian industrial design registration is a “design patent.”

Trademarks

A trademark is a word, logo, symbol or design (or some combination thereof) displayed oncommercial goods or their labels or containers, or displayed in the provision or advertisementof services, to identify the goods or services to purchasers. The trademark generally indicatesthat the goods or services come from, or are approved or sponsored by the same source as othergoods or services associated with the same trademark.

In general, a trademark is registrable if it is not (1) primarily merely a name or surname; (2)clearly descriptive or deceptively misdescriptive of the character or quality of the goods orservices; (3) the name in any language of the goods or services; (4) confusing with a previouslyregistered trademark; or, (5) a prohibited mark such as the Royal Arms or the symbol of theRed Cross.

Before applying to register a trademark it is advisable to conduct a search for similar marks thatcould preclude registration of the mark of interest. If the search results are favourable, atrademark application is tailored to suit the applicant’s circumstances, and filed in the CIPO’sTrademark Branch. The application is scrutinized by an Examiner who may raise objections ofform or substance. For example, the Examiner may object that the goods or services descrip-



tion is insufficiently specific, that the mark is descriptive, or a surname, or confusing with apreviously registered trademark, etc. The application may be amended or written argumentssubmitted to overcome such objections. After any objections are overcome, the application isadvertised in the Canadian Trademarks Journal. This gives others an opportunity to learn of theapplicant’s intention to register the mark and to oppose registration—if they have valid reasonsfor doing so (i.e. prior use of a conflicting trademark).

Although Canadian law recognizes limited rights in unregistered trademarks, it is generallypreferable to register a trademark. A trademark registration gives the registrant the exclusiveright to use the trademark throughout Canada in association with the goods and servicesmentioned in the certificate of registration.

MICHAEL DAVIS Thinking Like an Engineer: The Place of a Code of Ethics in the Practice of a Profession

Most discussions of engineering ethics dismiss the idea of codes of ethics from the outset. Codes are described as self-serving, unrealistic, inconsistent, mere guides for novices, too vague, or unnecessary. 1 I will not do that here. Instead, I will argue that a code of professional ethics is central to advising individual engineers how to conduct themselves, to judging their conduct, and ultimately to understanding engineering as a profession. I will begin with a case now commonly discussed in engineering ethics, finding my general argument in a detailed analysis of a particular choice. While I believe the analysis to be applicable to all professions, I shall not argue that here.

I. THE CHALLENGER DISASTER2

On the night of 27 January 1986, Robert Lund was worried. The Space Center was counting down for a shuttle launch the next morning. Lund,

Early versions of this article were presented to the Society of Hispanic Professional Engineers, Chicago Chapter, Io June I987; and to the American Society of Civil Engineers, University of Illinois at Chicago, Student Chapter, 4 May I 988. I should like to thank those present, as well as my colleague Vivian Weil, for many helpful comments.

1. See, e.g., John Ladd, "The Quest for a Code of Professional Ethics: An Intellectual and Moral Confusion," in AAAS Professional Ethics Project, ed. Rosemary Chalk, Mark S. Frankel, and Sallie B. Chafer (Washington, D.C.: American Association for the Advancement of Science, I98o), pp. I 54-59; Samuel Florman, "Moral Blueprints," Harper's 257 (I978): 3o-33; John Kultgen, "The Ideological Use of Professional Codes," Business and Professional Ethics Journal I (I982): 53-69; and Heinz C. Luegenbiehl, "Codes of Ethics and the Moral Education of Engineers," Business and Professional Ethics journal 2 (I983): 4I-61. Note also how small a part codes have in a text on engineering ethics, such as Mike Martin and Roland Schinzinger, Ethics in Engineering, 2d ed. (New York: McGraw-Hill, I989), esp. pp. 86-92, I03-4·

2. The following narrative is based on testimony contained in The Presidential Commis-

Thinking Like an Engineer

vice-president for engineering at Morton Thiokol, had earlier presided over a meeting of engineers that unanimously recommended against the launch. He had concurred and informed his boss, Jerald Mason. Mason informed the Space Center. Lund had expected the flight to be postponed. The Center's safety record was good. It was good because the Center would not allow a launch unless the technical people approved.

Lund had not approved. He had not approved because the temperature at the launch site would be close to freezing at lift-off. The Space Center was worried about the ice already forming in places on the boosters, but Lund's worry was the "0-rings" sealing the boosters' segments. They had been a great idea, permitting Thiokol to build the huge rocket in Utah and ship it in pieces to the Space Center two thousand miles away. Building in Utah was so much more efficient than building on-site that Thiokol had been able to underbid the competition. The shuttle contract had earned Thiokol $150 million in profits.

But, as everyone now knows, the 0-rings were not perfect. Data from previous flights indicated that the rings tended to erode in flight, with the worst erosion occurring on the coldest preceding lift-off. Experimental evidence was sketchy but ominous. Erosion seemed to increase as the rings lost their resiliency, and resiliency decreased with temperature. At a certain temperature, the rings could lose so much resiliency that one could fail to seal properly. If a ring failed in flight, the shuttle could explode.

Unfortunately, almost no testing had been done below 40°F. The engineers' scarce time had had to be devoted to other problems, forcing them to extrapolate from the little data they had. But, with the lives of seven astronauts at stake, the decision seemed clear enough: Safety first.

Or so it had seemed earlier that day. Now Lund was not so sure. The Space Center had been "surprised," even "appalled," by the evidence on which the no-launch recommendation had been based. They wanted to launch. They did not say why, but they did not have to. The shuttle program was increasingly falling behind its ambitious launch schedule. Congress had been grumbling for some time. And, if the launch went as scheduled, the president would be able to announce the first teacher in space as part of his State of the Union message the following evening, very good publicity just when the shuttle program needed some.

sion on the Space Shuttle Challenger Disaster (Washington, D.C.: U.S. Government Printing Office, 1986), esp. I :82-103.

Philosophy & Public Affairs

The Space Center wanted to launch. But they would not launch without Thiokol's approval. They urged Mason to reconsider. He reexamined the evidence and decided the rings should hold at the expected temperature. Joseph Kihninster, Thiokol's vice-president for shuttle programs, was ready to sign a launch approval, but only if Lund approved. Lund was now all that stood in the way of launching.

Lund's first response was to repeat his objections. But then Mason said something that made him think again. Mason asked him to think like a manager rather than an engineer. (The exact words seem to have been, "Take off your engineering hat and put on your management hat.") Lund did and changed his mind. The next morning the shuttle exploded during lift-off, killing all aboard. An 0-ring had failed.

Should Lund have reversed his decision and approved the launch? In retrospect, of course, the answer is obvious: No. But most problems concerning what we should do would hardly be problems at all if we could foresee all the consequences of what we do. Fairness to Lund requires us to ask whether he should have approved the launch given only the information available to him at the time. And since Lund seems to have reversed his decision and approved the launch because he began to think like a manager rather than an engineer, we need to consider whether Lund, an engineer, should have been thinking like a manager rather than an engineer. But, before we can consider that, we need to know what the difference is between thinking like a manager and thinking like an engineer.

One explanation of the difference stresses technical knowledge. Managers, it might be said, are trained to handle people; engineers, to handle things. To think like a manager rather than an engineer is to focus on people rather than on things. According to this explanation, Lund was asked to concern himself primarily with how best to handle his boss, the Space Center, and his own engineers. He was to draw upon his knowledge of engineering only as he might draw upon his knowledge of a foreign language, for example, to help him communicate with his engineers. He was to act much as he would have acted had he never earned a degree in engineering.

If that explanation of what Mason was asking of Lund seems implausible (as I think it does), what is the alternative? If Mason did not mean that Lund should make his knowledge of engineering peripheral (as it seems Mason, himself an engineer, did not when he personally reexam-

I 53 Thinking Like an Engineer

ined the evidence), what was he asking Lund to do? What is it to think like an engineer if not simply to use one's technical knowledge of things? That is a question engineers have been asking for almost a century. Answers have often been expressed in a formal code of ethics.

That may seem odd. What business, it may be asked, do engineering societies have promulgating codes of ethics? What could they be thinking? Ethics is not a matter for majority vote but for private conscience, or, if not for private conscience, then for experts; and the experts in ethics are philosophers or clergy, not engineers. Such thoughts make any connection between engineering and ethics look dubious. So, before we can say more about what Lund should have done, we have to understand the connection.

II. THE PossiBILITY OF ENGINEERING ETHics

A code of (professional) ethics generally appears when an occupation organizes itself into a profession. Usually, the code is put in writing and formally adopted. Even when formalization is put off, however, the code may still be a subject of frequent reference, whether explicitly, as in "our code of ethics," or implicitly, as in, "That would not be proper for one of us."

Why this connection between codes of (professional) ethics and organized professions? Several explanations have been offered over the years.3 But, for our purposes, the most helpful is that a code of ethics is primarily a convention between professionals. 4 According to this explanation, a profession is a group of persons who want to cooperate in serving the same ideal better than they could if they did not cooperate. Engineers, for example, might be thought to serve the ideal of efficient design, construction, and maintenance of safe and useful objects. A code of ethics

3· See, e.g., Robert M. Veatch, "Professional Ethics and Role-Specific Duties," Journal of Medicine and Philosophy 4 (1979): 1-19; Benjamin Freedman, "A Meta-Ethics for Professional Morality," Ethics 89 (1978): 1-19; and Lisa Newton, "The Origin of Prof~ssionalism: Sociological Conclusions and Ethical Implications," Business and Professional Ethics journal I (1982): 33-43.

4· For more on this explanation, see my "The Moral Authority of a Professional Code," NOMOS XXIX: Authority Revisited, ed. J. Roland Pennock and John W. Chapman (New York: New York University Press, 1987), pp. 302-38; "The Use of Professions," Business Economics 22 (1987): 5-10; "Professionalism Means Putting Your Profession First," Georgetown journal of Legal Ethics 2 (1988): 352-66; and "The Ethics Boom: What and Why," Centennial Review 34 (1990): 163-86.

154 Philosophy & Public Affairs

would then prescribe how professionals are to pursue their common ideal so that each may do the best she can at minimal cost to herself and those she cares about (including the public, if looking after the public is part of what she cares about). The code is to protect each professional from certain pressures (for example, the pressure to cut corners to save money) by making it reasonably likely (and more likely than otherwise) that most other members of the profession will not take advantage of her good conduct. A code protects members of a profession from certain consequences of competition. A code is a solution to a coordination problem.

According to this explanation, an occupation does not need society's recognition in order to be a profession. It needs only a practice among its members of cooperating to serve a certain ideal. Once an occupation has become a profession, society has a reason to give it special privileges (for example, the sole right to do certain work) if, but only if, society wants to support serving the ideal in question in the way the profession has chosen to serve it. Otherwise, it may leave the profession unrecognized.

A profession, as such, is like a union in that it is organized to serve the interests of its members, and unlike a charity or government, which is organized to serve someone else's interests. But professions differ from unions in the interests they are organized to serve. Unions are, like businesses, primarily organizations of self-interest. They exist for the benefit of their members, just as businesses exist for the profit of their owners. A profession, in contrast, is organized to help members serve othersaccording to a certain ideal expressed in its code of ethics. In this sense, professions are organized for public service. That, I think, is true by definition. But it is not a mere semantic truth. When a group of individuals constitute themselves as a "profession," they explicitly invoke this way of understanding what they are up to. They invite examination according to the standards proper to such an undertaking. They give what they do a distinct context.

Understanding a code of (professional) ethics as a convention between professionals, we can explain why engineers cannot depend on mere private conscience when choosing how to practice their profession, no matter how good that private conscience, and why engineers should take into account what an organization of engineers has to say about what engineers should do.s What conscience would tell us to do absent a cer-

5· Here, then, is an important contrast between my position and the "personal analysis" of professional duties one finds, for example, in Thomas Shaffer, "Advocacy as Moral Dis-

155 Thinking Like an Engineer

tain convention is not necessarily what conscience would tell us given that convention. Insofar as a code of professional ethics is a kind of (morally permissible) convention, it provides a guide to what engineers may reasonably expect of one another, what (more or less) "the rules of the game" are. Just as we must know the rules of baseball to know what to do with the ball, so we must know engineering ethics to know, for example, whether, as engineers, we should merely weigh safety against the wishes of our employer or instead give safety preference over those wishes.

A code of ethics should also provide a guide to what we may expect other members of our profession to help us do. If, for example, part of being an engineer is putting safety first, then Lund's engineers had a right to expect his support. When Lund's boss asked him to think like a manager rather than an engineer, he should, as an engineer, have responded, "Sorry, if you wanted a vice-president who would think like a manager rather than an engineer, you should not have hired an engineer."6

If Lund had so responded, he would, as we shall see, have responded as "the rules of the engineering game" require. But would he have done the right thing, not simply according to those rules but all things considered? This is not an empty question. Even games can be irrational or immoral. (Think, for example, of a game in which you score points by cutting off your fingers or by shooting people who happen to pass in the street below.) People are not merely members of this or that profession. They are also persons with responsibilities beyond their professions, moral agents who cannot escape conscience, criticism, blame, or punishment just by showing that they did what they did because their profession required it. While we have now explained why an engineer should,

course," North Carolina Law Review 57 (1979): 647-70; or Charles Fried, "The Lawyer as Friend: The Moral Foundations of the Lawyer-Client Relation," Yale Law Review 85 (1976): 106o-89. Unlike these others, I do not treat professional activity as primarily involving a relation between one person with an important skill (the professional) and a series of others (the client, patient, or whatever). The appeal of the personal analysis probably comes from focusing too much on professions, like law and medicine, that have a clearly defined client. One feature of engineering that should make it more interesting to students of professional ethics than it has been is the absence (or relative unimportance) of individual clients. In this respect, engineering may represent the future of law, and perhaps even of medicine.

6. Cf. my "The Special Role of Professionals in Business Ethics," Business and Professional Ethics ]ournal7 (1988): 83-94.


as an engineer, take account of his profession's code of ethics, we have not explained why anyone should be an engineer in this sense.

Let me put the point more dramatically. Suppose Lund's boss had responded to what we just imagined Lund to say to him: "Yes, we hired an engineer, but-we supposed-an engineer with common sense, one who understood just how much weight a rational person gives a code of ethics in decisions of this kind. Be reasonable. Your job and mine are on the line. The future of Thiokol is also on the line. Safety counts a lot. But other things do, too. If we block this launch, the Space Center will start looking for someone more agreeable to supply boosters."

If acting as one's professional code requires is really justified, we should be able to explain to Lund (and his boss) why, as a rational person, Lund should support his profession's code as a guide for all engineers and why, even in his trying circumstances, he cannot justify treating himself as an exception.

III. WHY OBEY ONE's PROFESSIONAL CoDE?

The question now is why, all things considered, an engineer should obey her profession's code. We should begin by dismissing two alternatives some people find plausible. One is that Lund should do as his profession requires because he "promised," for example, by joining an engineering society having a code of ethics. We must dismiss this answer because it is at least possible that Lund never did anything we could plausibly characterize as promising to follow a formal code. Lund could, for example, have refused to join any professional society having a code (as perhaps half of all U.S. engineers do). Yet, it seems such a refusal would not excuse him from conducting himself as an engineer should. The obligations of an engineer do not seem to rest on anything so contingent as a promise, oath, or vow. So, the "convention between professionals" (as I called it) is not a contract. It is more like what lawyers call a "quasicontract" or a "contract implied in law"; that is, an obligation resting not on an actual agreement (whether express or tacit) but on what it is fair to require of someone given what he has voluntarily done, such as accepted the benefits that go with claiming to be an engineer.

The other plausible alternative we can quickly dismiss is that Lund should do as his profession requires because "society" says he should. We may dismiss this answer in part because it is not clear that society


does say that. One way society has of saying things is through law. No law binds all engineers to abide by their profession's code (as the law does bind all lawyers to abide by theirs). 7 Of course, society has ways of saying things other than by law, for example, by public opinion. But it seems doubtful that the public knows enough about engineering to have an opinion on most matters of engineering ethics. And even on the matter before us, can we honestly say that society wants engineers to do as their code requires (treat safety as paramount, as explained below) rather than (as most people would) treat safety as an important consideration to balance against others?

However that question is answered, it seems plain that neither public opinion nor law should decide what it is rational or moral to do. Mter all, there have been both irrational laws (for example, those requiring the use of outmoded techniques) and immoral laws (for example, those enforcing slavery). The public opinion supporting such laws could not have been much less irrational or immoral than the laws themselves.

The two answers we have now dismissed share one notable feature. Either would, if defensible, provide a reason to do as one's profession requires quite independently of what in particular the profession happens to require. The answers do not take account of the contents of the code of ethics. They are formal. The answer we shall now consider is not formal. It is that supporting a code of ethics with a certain content is rational because supporting any code with a content of that sort is rational.

Consider, for example, the code of ethics drafted by the Accreditation Board of Engineering and Technology (ABET) and adopted by all major American engineering societies except the National Society of Professional Engineers and the Institute of Electrical and Electronic Engineers. The code is divided into "fundamental principles," "fundamental canons," and (much more detailed) "guidelines." The fundamental principles simply describe in general terms an ideal of service. Engineers "uphold and advance the integrity, honor and dignity of the engineering profession by: I. using their knowledge and skill for the enhancement of

7· Some engineers, so-called Professional Engineers (PEs), are bound by law in exactly the way lawyers, doctors, and other state-licensed professionals are. But most engineers in the United States-nearly go percent-are not so licensed. They practice engineering under the "manufacturer's exemption." They can practice engineering only through a company with a PE, who must ultimately "sign off" on their work.


human welfare, II. being honest and impartial, and serving with fidelity the public, their employers and clients [and so on]." What rational person could object to others' trying to achieve that ideal? Or at least, what rational person could object so long as their doing so did not interfere with what she was doing? Surely every engineer-indeed, every member of society-is likely to be better off overall if engineers uphold and advance the integrity, honor, and dignity of engineering in that way.

Below the fundamental principles are the fundamental canons. The canons lay down general duties. For example, engineers are required to "hold paramount the safety, health and welfare of the public," to "issue public statements only in an objective and truthful manner," to "act in professional matters for each employer or client as faithful agents and trustees," and to "avoid all conflicts of interest." Each engineer stands to benefit from these requirements both as ordinary person and as engineer. The benefits for an engineer as ordinary person are obvious: As an ordinary person, an engineer is likely to be safer, healthier, and otherwise better off if engineers generally hold paramount the public safety, only make truthful public statements, and so on. How engineers stand to benefit as engineers is less obvious. So, let us try a thought experiment.

Imagine what engineering would be like if engineers did not generally act as the canons require. If, for example, engineers did not generally hold paramount the safety, health, and welfare of the public, what would it be like to be an engineer? The day-to-day work would, of course, be much the same. But every now and then an engineer would be asked to do something that, though apparently profitable to his employer or client, would put other people at risk, some perhaps about whom he cared a great deal. Without a professional code, an engineer could not object as an engineer. An engineer could, of course, still object "personally" and refuse to do the job. But if he did, he would risk being replaced by an engineer who would not object. An employer or client might rightly treat an engineer's personal qualms as a disability, much like a tendency to make errors. The engineer would be under tremendous pressure to keep "personal opinions" to himself and get on with the job. His interests as an engineer would conflict with his interests as a person.

That, then, is why each engineer can generally expect to benefit from other engineers' acting as their common code requires. The benefits are, I think, clearly substantial enough to explain how an individual could


rationally enter into a convention that would equally limit what he himself can do.

I have not, however, shown that every engineer must benefit overall from such a convention, or even that any engineer will consider these benefits sufficient to justify the burdens required to achieve them. Professions, like governments, are not always worth the trouble of maintaining them. Whether a particular profession is worth the trouble is an empirical question. Professions nonetheless differ from governments in at least one way relevant here. Professions are voluntary in a way that governments are not. No one is born into a profession. One must claim professional status to have it (by taking a degree, for example, or accepting a job for which professional status is required). We therefore have good reason to suppose that people are engineers because, on balance, they prefer to have the benefits of being an engineer, even given what is required of them in exchange.

If, as we shall now assume, the only way to obtain the benefits in question is to make it part of being an engineer that the public safety, health, and welfare come first, every engineer, including Lund, has good reason to want engineers generally to adhere to something like the ABET code. But why should an engineer adhere to it himself when, as in Lund's case, it seems he (or his employer or client) stands to benefit by departing from it?

If the question is one of justification, the answer is obvious. Lund would have to justify his departure from the code by appealing to such considerations as the welfare of Thiokol and his own self-interest. An appeal to such considerations is just what Lund could not incorporate into a code of ethics for engineers or generally allow other engineers to use in defense of what they did. Lund could not incorporate such an exception into a code because its incorporation would defeat the purpose of the code. A code of ethics is necessary in part because, without it, the self-interest of individual engineers, or even their selfless devotion to their employer, could lead them to harm everyone overall. Lund could not allow other engineers to defend what they did by appeal to their own interests or that of their employer for much the same reason. To allow such appeals would be to contribute to the breakdown of a practice Lund has good reason to support.

I take this argument to explain why, all things considered, Lund

!60 Philosophy & Public Affairs

should have done as his profession's code requires, not why he should have done so in some premoral sense. I am answering the question "Why be ethical?" not "Why be moral?" I therefore have the luxury of falling back on ordinary moral principles to determine what is right, all things considered. The moral principle on which this argument primarily relies is the principle of fairness. Since Lund voluntarily accepts the benefits of being an engineer (by claiming to be an engineer), he is morally obliged to follow the (morally permissible) convention that helps to make those benefits possible. 8 What I have been at pains to show is how that convention helps to make those benefits possible, and why, even now, he has good reason to endorse the convention generally.

I have been assuming that engineers do in fact generally act in accordance with the ABET code, whether or not they know it exists. If that assumption were mistaken, Lund would have had no professional reason to do as the code requires. The code would be a dead letter, not a living practice. It would have much the same status as a "model statute" no government ever adopted, or the rules of a cooperative game no one plays. Lund would have had to rely on private judgment. But relying on private judgment is not necessary here. Lund's engineers seem to have recommended as they did because they thought the safety of the public, including astronauts, paramount. They did what, according to the code, engineers are supposed to do. Their recommendation is itself evidence that the code corresponds to a living practice.9

8. I hope this appeal to fairness will raise no red flags, even though the principle of fairness has been under a cloud ever since the seemingly devastating criticism it received in Robert Nozick, Anarchy, State, and Utopia (New York: Basic Books, 1974). I have, it should be noted, !iniited my use to obligations generated by voluntarily claiming benefits of a cooperative practice that are otherwise not available. Most attacks on the principle of fairness have been on the "involuntary benefits" version. See, e.g., A. John Simmons, Moral Principles and Political Obligations (Princeton, N.J.: Princeton University Press, 1979), pp. I 18-36. And even those attacks are hardly devastating. One can either refine the principle, as Richard Arneson has done in "The Principle of Fairness and Free-Rider Problems," Ethics 92 (1982): 616-33; or, as in my "Nozick's Argument for the Legitimacy of the Welfare State," Ethics 97 (1987): 576-g4, show that Nozick's original criticism, and most subsequent criticism, depends on examples that, upon careful examination, fail to support the criticism.

g. I am not claiining that the engineers treated safety as paramount because they knew what the ABET code said. When you ask a lawyer about a professional code, she is likely to tell you she studied the ABA code in law school and, claiming to have a copy around, will produce it after only a few minutes of searching her desk or bookshelves. When you ask an engineer the same question, he is likely to tell you that his profession has a code while admitting both that he never studied it and that he has none around to refer to. Yet,


So, when Lund's boss asked him to think like a manager rather than an engineer, he was in effect asking Lund to think in a way that Lund must consider unjustified for engineers generally and for which Lund can give no morally defensible principle for making himself an exception. When Lund did as his boss asked (supposing he did), he in effect let down all those engineers who helped to establish the practice that today allows engineers to say "no" in such circumstances with the reasonable hope that the client or employer will defer to their professional judgment, and that other engineers will come to their aid if the client or employer does not defer.

Lund could, of course, still explain how his action served his own interests and those of Thiokol (or, rather, how they seemed to at the time). 10 He could also just thumb his nose at all talk of engineering ethics, though that would probably lead to the government's barring him from working on any project it funds, to fellow engineers' refusing to have anything to do with him, and to his employer's coming to view him as an embarrassment. What he cannot do is show that what he did was right, all things considered.

This conclusion assumes that I have not overlooked any relevant consideration. I certainly may have. But that is not important here. I have not examined Lund's decision in order to condemn him but in order to bring to light the place of a code of ethics in engineering. There is more to understand.

IV. INTERPRETING A CODE OF ETHICS

So far we have assumed that Lund did as his boss asked, that is, that he thought like a manager rather than an engineer. Assuming that allowed us to give a relatively clear explanation of what was wrong with what Lund did: Lund acted like a manager when he was also an engineer and should have acted like one.

anyone who has spent much time with working engineers knows they do not treat safety in the same way managers do (hence Mason's plea to "take off your engineering hat"). The engineers' code of ethics seems to be "hard-wired" into them. Interestingly, engineers are not the only professionals for whom the written code seems to play so small a part. For another example, see my "Vocational Teachers, Confidentiality, and Professional Ethics," International journal of Applied Philosophy 4 (1g88): II-2o.

10. I do not claim that he would explain his decision in this way. Indeed, I think his explanation would be quite different, though no less troubling. See my "Explaining Wrongdoing," journal of Social Philosophy 20 (1 g8g): 74-go.


We must, however, now put that assumption aside and consider whether engineering ethics actually forbids Lund to do what it seemed he did, that is, weigh his own interests, his employer's, and his client's against the safety of the seven astronauts. Ordinary morality seems to allow such weighing. For example, no one would think you did something morally wrong if you drove your child to school, rather than letting him take the bus, even if your presence on the road increased somewhat the risk that someone would be killed in a traffic accident. Morality allows us to give special weight to the interests of those close to us. I I If engineering ethics allows that too, then Lund-whatever he may have thought he was doing-would not actually have acted unprofessionally. Let us then imagine Lund's reading of the ABET code. What could he infer?

Of the code's seven fundamental canons, only two seem relevant: (I) "[holding] paramount the safety, health and welfare of the public" and (4) "[acting] in professional matters for each employer or client as faithful agents or trustees." What do these provisions tell Lund to do? The answer is not all that clear. Does "public" include the seven astronauts? They are, after all, employees of Thiokol's client, the Space Center, not part of the public as are, say, those ordinary citizens who watch launches from the beach opposite the Space Center. And what is it to be a "faithful agent or trustee" of one's client or employer? Is it to serve all the interests of a client or employer, or only the financial ones? And how is one to determine even those? Does the client or employer have the final word, or may an engineer make an independent assessment? Mter all, the actual result of Lund's decision was a disaster for both employer and client, though one both employer and client may have thought themselves justified in risking. And what is Lund to do if the public welfare requires what no faithful agent or trustee could do? Does "holding paramount" the public welfare include sometimes acting as a faithful agent or trustee would not act?

These questions are surprisingly easy to answer if we keep in mind the connection between professions and codes of ethics, remembering especially that a code is not a stone tablet inscribed with divine wisdom but the work of engineers, a set of rules that is supposed to win the sup-

I I. Here, then, is why I reject the "universalistic" interpretation of engineering ethics in, e.g., Kenneth Alpern, "Moral Responsibility for Engineers," Business and Professional Ethics journal 2 (Ig83): 39-48.


port of engineers because the rules help engineers do what they want to do.

The language of any document, codes included, must be interpreted in light of what it is reasonable to suppose its authors intend. ' 2 For example, if "bachelor" appears undefined in a marriage statute, we interpret it as referring to single males, but if the same word appears in direc-

. tions for a college's graduation ceremony, we instead interpret it as referring to all students getting their baccalaureate, whether male or female, single or married. That is the reasonable interpretation because we know that marriages usually involve single males (as well as single females) rather than people with baccalaureates while just the reverse is true of graduation ceremonies. So, once we figure out what it is reasonable to suppose engineers intend by declaring the "public" safety, health, and welfare "paramount," we should be able to decide whether interpreting "public" so that it includes "employees" is what engineers intend (or at least what, as rational persons, they should intend) and also whether they intend the paramountcy requirement to take precedence over the duty to act as a faithful agent or trustee.

The authors of a code of engineering ethics (whether those who originally drafted or approved it or those who now give it their support) are all more or less rational persons. They differ from most other rational persons only in knowing what engineers must know in order to be engineers and in performing duties they could not perform (or could not perform as well) but for that knowledge. It is therefore reasonable to suppose that their code of ethics would not require them to risk their own safety, health, or welfare, or that of anyone for whom they care, except for some substantial good (for example, high pay or service to some ideal to which they are committed). It also seems reasonable to suppose that no code they authored would include anything people generally consider immoral. Most engineers are probably morally decent people, unlikely to endorse an immoral rule.

But what if that were not true? What if most engineers were moral

I 2. I am not here committing the "originalist fallacy" common a few years back in debates over how to interpret the U.S. Constitution. Though the first codes of ethics for American engineers were adopted early in this century, all have undergone radical revision within the last two decades. More importantly, as will be made plain below, I use "authors" to include all those who must currently support the code. My notion of interpretation is therefore much closer to that found in Ronald Dworkin, Law's Empire (Cambridge, Mass.: Harvard University Press, 1986).


monsters or just self-serving opportunists? What then? Interpreting their code would certainly be different, and probably harder. We could not understand it as a professional code. We would have to switch to principles of interpretation we reserve for mere folkways, Nazi statutes, or the like. We would have to leave the presuppositions of ethics behind.

But, given those presuppositions, we can easily explain why a code of engineering ethics would make holding the public safety paramount a duty taking precedence over all others, including the duty to act as a faithful agent or trustee. Rational engineers would want to avoid situations in which only their private qualms stood between them and a use of professional knowledge they considered morally wrong or otherwise undesirable. Each would, as we saw, want to be reasonably sure that the knowledge of other engineers would serve the public, even when the interests of the public conflicted with those of employer or client. Given this purpose, what must "public" mean?

We might interpret "public" as equivalent to "everyone" (in the society, locale, or whatever). On this interpretation, the "public safety" would mean the safety of everyone more or less equally. A danger that struck only children, or only those with bad lungs, or the like, would not endanger "the public." This interpretation must be rejected. Since few dangers are likely to threaten everyone, interpreting "public" to mean "everyone" would yield a duty to the public too weak to protect most engineers from having to do things that would generally make life for themselves (and those they care about) far worse than it would otherwise be, even allowing for the occasional benefit they might obtain as individuals.

We might also interpret "public" as referring to "anyone" (in the society, local, or whatever). On this interpretation, public safety would be equivalent to the safety of some or all. Holding the public safety paramount would mean never putting anyone in danger. If our first interpretation of "public" made provisions protecting the public too weak, this second would make them too strong. For example, it is hard to imagine how we could have electric power stations, mountain tunnels, or chemical plants without some risk to someone. No rational engineer could endorse a code of ethics that made engineering virtually impossible.

We seem, then, to need an interpretation of "public" invoking some more relevant feature of people, rather than, as we have so far, just their number. I would suggest that what makes people a public is their relative innocence, helplessness, or passivity. On this interpretation, "pub-


lie" would refer to those persons whose lack of information, technical knowledge, or time for deliberation renders them more or less vulnerable to the powers an engineer wields on behalf of his client or employer. An engineer should hold paramount the public safety, health, and welfare to assure that engineers will not be forced to give too little regard to the welfare of these "innocents."

On this third interpretation, someone might be part of the public in one respect but not in another. For example, the astronauts would be part of the public with respect to the 0-rings because, not knowing of the danger, they were in no position to abort the launch to avoid the danger. The astronauts would, in contrast, not be part of the public with respect to the ice forming on the boosters because, having been fully informed of that danger, they were in a position to abort the launch if they were unwilling to take the risk the ice posed. This third interpretation of "public" thus seems to be free of the difficulties that discredited the preceding two. We now seem to have a sense of "holding the public safety paramount" that we may reasonably suppose rational engineers would endorse.

On this interpretation, the engineer's code of ethics would (all else equal) require Lund either to refuse to authorize the launch or to insist instead that the astronauts be briefed in order to get their informed consent to the risk. Refusing authorization would protect the public by holding the safety of the astronauts paramount. Insisting that the astronauts be briefed and decide for themselves would hold the safety of the public paramount by transferring the astronauts from the category of members of the public to that of informed participants in the decision. Either way, Lund would not, under the circumstances, have had to treat his own interests, those of his employer Thiokol, or those of his client the Space Center as comparable to those of the public (assuming, of course, what is not true, that we have considered all the public interests relevant here).

Is this the correct interpretation of "public"? It is if we have taken into account every relevant consideration. Have we? There is, of course, no way to know. But there is good reason to think we have. We can easily show that the only obvious alternative is wrong. That alternative is that "public" refers to all "innocents" except employees of the client or employer in question. Employees are to be excluded because, it might be said, they are paid to take the risks associated with their job. On this

166 Philosophy & Public Affairs

interpretation, Lund would not have to hold the safety of the astronauts paramount, since they would not be part of the public.

What is wrong with this fourth interpretation of "public"? Earlier, we understood "innocents" to include all persons whose lack of information, training, or time for deliberation renders them vulnerable to the powers an engineer wields on behalf of his client or employer. An employee who takes a job knowing the risks (and is otherwise able to avoid them) might be able to insist on being paid enough to compensate for them. She could then truly be said to be paid to take those risks. She would not be an "innocent." But she would, under our third interpretation, also not in that respect be part of the public to which an engineer owed a paramount duty. She would have given informed consent to the risk in question. So, the third and fourth interpretations would not differ concerning such an employee.

On the other hand, if the employee lacked the information to evaluate the risk, she would be in no position to insist on adequate compensation. She could not be said to be paid to take those risks. She would, in other words, be as innocent of, as vulnerable to, and as unpaid for the risks in question as anyone else in the public. Since nothing prevents an engineer, or someone for whom an engineer cares, from being the employee unknowingly at risk, engineers have as much reason to want to protect such employees as to protect the public in general. "Public" should be interpreted accordingly; that is, according to our third interpretation.

V. PROFESSIONAL RESPONSIBILITIES

Given the argument developed so far, engineers clearly are responsible for acting as their profession's code of ethics requires. Do their professional responsibilities go beyond the code? The answer, I think, is clearly yes. Engineers should not only do as their profession's code requires, but should also support it less directly by encouraging others to do as it requires and by criticizing, ostracizing, or otherwise calling to account those who do not. They should support their profession's code in these ways for at least four reasons: First, engineers should support their profession's code because supporting it will help protect them and those they care about from being injured by what other engineers do. Second, supporting the code will also help assure each engineer a working environment in which it will be easier than it would otherwise be to resist


pressure to do much that the engineer would rather not do. Third, engineers should support their profession's code because supporting it helps make their profession a practice of which they need not feel morally justified embarrassment, shame, or guilt. And fourth, one has an obligation of fairness to do his part insofar as he claims to be an engineer and other engineers are doing their part in generating these benefits for all engineers.

GLOBE AND MAIL, JANUARY 8, 2005

Tsunami spotlight: Brad Searle holds son Lachlan and his wife, Jillian, right, carries Blake as they arrive home in Perth, Australia.

By Arthur Schafer

It's not as if she had scads of time to contemplate the philosophical niceties of her predicament. One moment, Jillian Searle was breakfasting with her two young boys. The next moment, they were assaulted by the massive tsunami that washed over their hotel in Phuket. Trying to keep hold of both boys seemed to promise death for all three of them. Her decision was made in an instant. She clutched the baby and released Lachlan. Choosing which of your children shall live, and which shall perish, must rank as just about the cruelest dilemma imaginable. Thousands of Canadian parents who saw or listened to the interview with Ms. Searle must have asked themselves, as I asked myself: "What would I have done in her place?" The truth is, of course, that none of us really has a clue. In real life, we have never faced a choice even remotely similar to the choice faced by Ms. Searle. We may, however, have read William Styron's book Sophie's Choice, or seen the Hollywood adaptation in which a mother is compelled by a sadistic Nazi official to choose one of her children for immediate execution or else witness the execution of both. Some applauded while others condemned the mother, Sophie, for selecting one of her children to die in order that the other might live. But who could truly say they know what they would themselves do in such an extraordinary and terrifying situation?

Jillian’s Choice 2 Globe and Mail, January 8, 2005

My personal fear is that in Jillian Searle's place I might become paralyzed with anxiety, thereby condemning both children to death. (I am one of those people marked out by nature as a "sinker" rather than a "floater" and share Lachlan's fear of water.) Or perhaps I would resolutely hang on to both children, accepting death for the children and myself, rather than "play God" by choosing which shall live and which shall die. This much seems clear: Even those, such as this newspaper's own Christie Blatchford, who believe that Ms. Searle made the morally wrong choice, are being unreasonably harsh when they condemn Ms. Searle's moral character. She was compelled to react instantaneously. People who do their best in an emergency deserve to have some slack cut for them by those of us who judge from the safety and comfort of our living rooms. Or so I believe. It is also worth mentioning that, when she released her grip on Lachlan, Ms. Searle attempted to transfer his hand to a nearby stranger. That manoeuvre didn't work, but Lachlan managed, by sheer luck, to grab hold of some floating debris, which saved his life. Thus, against the odds, mother and both children survived, though it won't quite do to declare that "all's well that ends well." The classic legal case involving decision-making in extremis is the English case of The Queen v. Dudley and Stephens (1884). Dudley and Stephens were shipwrecked sailors who saved their own lives by killing and eating the flesh of the moribund cabin boy. They pleaded not guilty to the charge of murder, arguing that, since they faced imminent death from dehydration and starvation' the extremity of their circumstances justified what would otherwise have been a crime. Chief Justice Lord Coleridge, in delivering his guilty verdict, was not unmindful of the "terrible temptation" faced by the sailors and their "awful suffering." He also acknowledged how difficult it would be for anyone deprived of food and water for many days "to keep the judgment straight and the conduct pure." Having admitted that he could not vouch for his own conduct in such a dire situation, Lord Coleridge nevertheless sentenced both of the sailors to death. Interestingly, the sentence given to both sailors was subsequently commuted by the Crown to six months' imprisonment. Law sometimes requires to be tempered by mercy. Now, of course, Jillian Searle committed no crime whatsoever, except perhaps the "moral crime," as some would see it, of favouring her more vulnerable younger son over her almost as vulnerable older son. If one has to make a life-or-death choice, then choosing to protect someone because he's more vulnerable seems on the face of it to be a reasonable criterion. Some philosophers have argued, however, that it is always wrong to make such a choice. They claim that, when the value of human life is at stake, it is "inherently" wrong for any human being to engage in a selection process. If all cannot live then, rather than "play God," we should allow all to die.


I have put this proposition to my bioethics students over a period of many years, and to conferences of. transplant physicians and surgeons. I have never yet encountered anyone who actually thinks that when a life-saving resource is in short supply – whether a kidney for transplant or a mother's hand for rescue – we should refuse to save as many lives as possible. From the foregoing remarks, you will have concluded, correctly, that I think Jillian Searle made an ethically defensible choice; indeed, the morally right choice. But even if I am mistaken in this belief, I would still want to insist that it would be wrong to label her as a morally bad person or a morally inadequate mother. Arthur Schafer is a professor of philosophy and director of the Centre for Professional and Applied Ethics at the University of Manitoba. By Margaret Somerville

The tsunami disaster seems so close in Australia, where I've been visiting. One Aussie told how he had been in the nightclub in Bali when the bombs exploded and he had escaped. Now, he was on the beach in Phuket when the sea exploded and once again had escaped. A friend remarked, "You wouldn't want to take your next holiday with him!" But the story of Jillian Searle, the Australian woman who decided to let her five-year-old son go, is discussed in hushed and serious tones. It's too awful even to think about. What hasn't been discussed is the question of media ethics that it raises. Should the media have reported this, and in this way? What about when the child sees the footage in the future or when others recognize him as that child – the child whose life his mother chose to risk? A friend with whom I was watching the TV report, who has four sons, gasped and said, "That poor child. Now, he will always think his mother didn't love him best!" She believes that a second child is often the mother's favourite, because she is usually more laid back, less aggressive, more affectionate than with the first. As a young mother herself, she lived in many countries and recently found all the letters she had written to her mother while away – her mother had kept them. She said she wouldn't be able to show them to her sons who are now all in their 30s and 40s, because they might see she loved one son best – although she pointed out the favourite changed from time to time. We discussed whether all parents have a favourite. We also spoke about whether everyone feels guilty about such feelings. I recently said to my 85-year-old aunt in Adelaide – my mother's younger sister, who was as much a mother to me as my mother – that my mother much preferred my younger brother. She agreed in a matter-of-fact way and said, "But you were your father's favourite, so that's fair!" But what about when such feelings get translated into life-and-death decisions as in this case? Could it be a survival mechanism that when both children can't be saved, at least one will be? Might the younger child be preferred because the relationship is less complicated and complex? Might mothers have to prefer a younger child who is more dependent and needy for that child to


have any chance of survival? What if mothers just doted on the oldest and the others never had a chance? Michael Meaney's work at McGill University on the genetic basis of certain behaviour – for instance, nurturing in rats – comes to mind here. Might we be genetically programmed to act in extreme situations where analysis is not possible so as to give all the children some chance of survival? My grandmother was a Fitzgerald and her family crest shows a monkey with a broken chain around its neck sitting on top of a chimney with a baby in its arms. The legend is that centuries ago when the family castle in Ireland was invaded and the family annihilated, the pet monkey broke its chain and snatched the youngest son from his crib and took him to the chimney top. Through that child, the family survived. The most urgent ethical issue, however, is to stop the damage to this mother and her child – first do no harm – and to the extent possible repair it. There but for the grace of God go I – and that's all of us. Ethicist Margaret Somerville holds professorships in both law and medicine at McGill University.

Lindsay KenneyLindsay Kenney

APSC 450APSC 450INTRODUCTION TO THE INTRODUCTION TO THE

LEGAL SYSTEMLEGAL SYSTEM

Gregory S. Miller, P.Eng., LLBGregory S. Miller, P.Eng., LLB


Useful Source of LawUseful Source of Law

http://www.courts.gov.bc.ca/

BC caselaw available – updated every day

Contains links to other useful websites

http://www.courts.gov.bc.ca/


Imagine There Is No LawImagine There Is No Law

No taxes, no governmentNo taxes, no governmentNo crimes, no police, no protectionNo crimes, no police, no protectionNo compensation for injuryNo compensation for injuryNo property rightsNo property rightsNo consumer goodsNo consumer goodsNo social services (schools, hospitals)No social services (schools, hospitals)

Example: New Orleans 2005 where hurricane Katrina causes a storm surge which overtops the levies and floods the City. Electrical power, water distribution, emergency services, transportation infrastructure, etc. suddenly cease to exist. The result is chaos.


What is the law?What is the law?

a set of rules that enable people to live a set of rules that enable people to live together and respect each others’ rightstogether and respect each others’ rights“right” “right” –– an ability to act with an ability to act with impugnityimpugnity“privilege” “privilege” –– an ability to act under an ability to act under certain circumstances, which may be certain circumstances, which may be withdrawn by the state withdrawn by the state

So what is law? • “merely a set of rules that enable people to live together and respect

each others’ rights” • “the body of principles recognized and applied by the state in the

administration of justice” • “a rule of civil conduct, prescribed by the supreme power in a state,

commanding what is right, and prohibiting what is wrong.” As the citizens of New Orleans found in 2005, the law has to be more than a theoretical concept. If the state is unable or unwilling to exercise its power to enforce the law, it ceases to exist as do the other rights and privileges of a civilized society. • “right” – an ability to act with impugnity • “privilege” – an ability to act under certain circumstances, which may

be withdrawn by the state;


Development of the LawDevelopment of the Law

Canadian Law is patterned after English LawCanadian Law is patterned after English LawRoman conquest in 43BC Roman conquest in 43BC –– LexLex RomanaRomanaWithdrawal of Rome in 5th C led to rise of Withdrawal of Rome in 5th C led to rise of decentralized government under local kingsdecentralized government under local kingsLaw varied from kingdom to kingdomLaw varied from kingdom to kingdomNorman Conquest in 1066 Norman Conquest in 1066 –– more centralized more centralized control under an overall kingcontrol under an overall kingDevelopment of “common law”Development of “common law”

• BC / Canadian law is based upon British law: • Until 1849, this area administered by Hudsons Bay Co. • In 1849 – Colony of Vancouver Island • In 1858 – Colony of British Columbia on mainland established • In 1866 – both colonies united • 1871 BC joins confederation • The law of British Columbia was specifically acquired from the

law of England, as it existed on November 19, 1859 • See (English Law Act)

• How did Britain develop law? • Roman conquest of Britain in 43BC – Lex Romana

• Written laws (Code); • Applied across the country; • Enforced by the Roman Legions;

• withdrawal of Rome in 5th C led to rise of decentralized government

under local kings • anybody who could field troops to enforce law was king • law became what the (your) king said it was (local custom) • varied from kingdom to kingdom (and, potentially, from day to

day) • local custom prevailed until Norman Conquest in 1066 – more

centralized control under an overall king (William the Conqueror)

• Originally, the King dispensed law personally • Developed into what we have today:

• Parliament, police, courts


Sources of LawSources of Law

Constitutional LawConstitutional LawCommon Law & EquityCommon Law & EquityStatute LawStatute LawAdministrative LawAdministrative Law

These are the primary sources of law in BC / Canada


Constitutional LawConstitutional Law

Relationship between people and state;Relationship between people and state;Written / partly written / unwrittenWritten / partly written / unwrittenCanadian Constitution:Canadian Constitution:•• British North America Act (1867)British North America Act (1867)•• Constitution Act (1982)Constitution Act (1982)

• How we, as citizens, have agreed to govern ourselves:

• can be entirely written in single document (eg US Constitution) • Alternatively, can be a patchwork of documents (eg UK - Magna

Carta, Bill of Rights, etc.) • can also be unwritten, consisting of traditions

• Canadian Constitution • Pre-1867, Britain ruled British North America directly; • 1867 – Canada established by British North America Act of British

Parliament, which divides the powers between federal and provincial governments

• 1982 – constitution was “patriated” by Canada Act of British

Parliament / Constitution Act of Canadian Parliament, latter consisting of: • Canadian Charter of Rights and Freedoms • contents of British North America Act • amending amending formula ( 7 & 50 rule) to deal with

“entrenched” rights and obligations • result is a constitution which is entirely under our own control

• section 91 gives exclusive powers to federal government

• trade and commerce • bankruptcy and insolvency • navigation and shipping

• bills of exchange and promissory notes • etc. • all matters not given exclusively to provinces

• section 92 gives exclusive powers to provinces

• property and civil rights • matters of a local and private nature in a province • licencing of certain businesses and activities • solemnization of marriage

• The Canadian Charter of Rights and Freedoms • Prior to 13th C, sovereigns held absolute power though they

would consult – that tradition (curia Regis) brought from Normandy by William the Conqueror

• Early 14th C, Edward I agreed not to levy taxes without consulting parliament

• Parliament became supreme - could pass virtually any laws • now, Acts of Parliament have to be in accordance with Charter

so, arguably, Charter is supreme • Charter is interpreted (necessarily) by unelected judiciary (part

of the separation of powers) • US separation of powers is clear (executive, legislative,

judiciary) • Canadian separation of powers is unclear (at federal level,

PM has control of executive and legislative and appoints the judiciary)


Common Law & EquityCommon Law & Equity

King dispensed justiceKing dispensed justice•• Delegated to “judges”Delegated to “judges”•• Judges traveled in circuitJudges traveled in circuit•• “stare “stare decisisdecisis””Property LawProperty LawCriminal LawCriminal LawTort LawTort LawContract LawContract LawEquityEquity

• Originally, the King dispensed law personally but later delegated

authority to trusted officials (Judges); • King Henry II1 established a central judiciary • post-1180AD judges went on circuit throughout England • 1234AD – king’s judges began keeping records • 1290AD – decisions recorded for use by others in “Year Books”,

resulting in the “common law” (common throughout England) • 1477AD – introduction of printing to England, Year Books improved • 16th C AD – regular law reports • today, legal publishers and Courts make decisions available to public • Common law basis is “stare decisis” – “let a decision stand” or “stand

by a previous decision” • law developed in specific categories, to suit more complex society:

• property law – basic to a simple system of law: 1 1154AD to 1189AD

• king owns all land but lends to nobles in return for military

resolve disputes re: land

criminal law – also basic to a simple system of law:

sed and

contract law – necessary for more developed societies: es exist;

equity: appeal to king where common law too rigid

to give

hancery formed 15th C and equity rules developed

equity and common law merged in late 19th C

• Supreme Court of BC is both a Common Law Court and a Court of

service • needs to• needs to ensure order

•

• “king’s peace” necessary for society to function; • certain activities (“crimes”) are outlawed, supervi

enforced by state; •

• manufacturing / buying / selling not practical until rul• “Law Merchant” – developed by Guilds but absorbed by royal

courts •

• direct• King had inherent ability to supercede common law

“equity” • Court of C

•

Equity – can fairly and seamlessly apply both


Statute LawStatute Law

““statutumstatutum” (it is decided)” (it is decided)Laws mandated by governmentLaws mandated by governmentCan coCan co--exist with Common Lawexist with Common LawCan codify Common LawCan codify Common LawCan override Common LawCan override Common Law

• “statutum” – latin, meaning “it is decided” • statutes are laws mandated by government, easy to change (good and

bad) • override common law / codify common law

• eg. Vancouver Charter / Local Gov’t Act eliminate gov’t liability in certain situations (overriding common law);

• eg. Sale of Goods Act codified the common law • statute process:

1. A bill (essentially a proposed law) is presented to a legislative body (Parliament or provincial legislature).

2. A motion is made (and passed) to have the bill 'read' a first time.

3. The bill is then printed and circulated to the members to study. 4. The bill is later brought forward for debate (second reading) in

principle. 5. If the bill passes the second reading stage, it is sent to a

Committee for study and amendment on a clause by clause basis.

6. Once passed by the Committee, the bill is reported in final form by the Chair of the Committee for a third reading.

7. The bill is then debated for a final time by way of a motion to have the bill read a third time.

8. If passed by a majority vote, the bill at the federal level goes to the Senate where a similar process is followed.

9. Once a bill has been passed by the House of Commons and Senate (or a province legislature) it goes to the Governor-General (or Lieutenant-Governor, if provincial) for royal assent – virtually automatic.

10. The bill becomes a law on receipt of royal assent, and effective as a law when proclaimed in force.

• Common law and statute law can exist together (as in BC and Canada

generally) • English Law Act was the first ordinance of the new colony of BC • It stated that the law of England, as it existed on November 19,

1859 (statute and common law), was adopted as BC law; • can go all the way and “codify” laws (as has Quebec), so all are

written; • can go part way and "codify" portions of the common law (eg Sale of

Goods Act)


Administrative LawAdministrative Law

Government delegation of rule making Government delegation of rule making authorityauthorityAdministrative boards and tribunals:Administrative boards and tribunals:•• Workers Compensation BoardsWorkers Compensation Boards•• Canadian Radio and Telephone Canadian Radio and Telephone

CommissionCommission•• Labour Relations BoardLabour Relations Board•• Association of Professional Engineers and Association of Professional Engineers and

GeoscientistsGeoscientists

• governments create boards / tribunals by statute to deal with certain activities • eg Labour Relations Board / CRTC / WCB / APEGBC

• statute allows tribunals to create their own procedure

Classification of Laws • substantive – set out rights and duties of individuals • procedural – how you enforce the rights and duties • public law – deals with the relationship between government and

individuals • private law – deals with the relationship between individuals;


HEY, BE CAREFUL OUT THERE!HEY, BE CAREFUL OUT THERE!


APSC 450APSC 450TORT LAWTORT LAW

Gregory S. Miller, P.Eng., LLBGregory S. Miller, P.Eng., LLB


TortsTorts

Latin, meaning “twisted or crooked”Latin, meaning “twisted or crooked” Covers area of “civil wrongs”Covers area of “civil wrongs” Mostly judgeMostly judge--made (common law)made (common law) Primary Objective Primary Objective –– compensationcompensation Secondary Objective Secondary Objective -- deterrencedeterrence

from the Latin “tortus”, meaning twisted or crooked; morphed through French into English as “wrong”; tort law is concerned with “civil wrongs” as opposed to “criminal wrongs”;

civil - citizen v. citizen; criminal - state v. citizen;

entirely judge-made (almost); primary objective of tort law is compensation for injuries; secondary objective is deterrence (punitive damages);

2


Development of Tort LawDevelopment of Tort Law

Writ of TrespassWrit of Trespass•• 1313thth CC•• Responded to direct application of forceResponded to direct application of force•• Became the “intentional” tortsBecame the “intentional” torts•• “Actionable Per Se” “Actionable Per Se” –– no proof of damageno proof of damage

Writ of Trespass on the CaseWrit of Trespass on the Case•• 1414thth CC•• Responded to indirect application of forceResponded to indirect application of force•• Became the “unintentional” tortsBecame the “unintentional” torts•• Damage must be provenDamage must be proven

Writ of Trespass:

arose in 13th century as remedy for obvious forcible wrongs, the type of wrongs which would provoke retaliation - breach of the king’s peace;

elements of trespass were force and direct and immediate injury to person, lands or goods;

actionable per se (without proof of damage); defendant has to raise issue of excuse or justification; roughly became the “intentional torts”; trespass to person became:

assault; battery; false imprisonment;

original fine and imprisonment were gradually eliminated, leaving damages;

Writ of Trespass on the case:

arose during the 14th century for those situations which didn’t necessarily involve force and direct damage;

plaintiff has to prove wrongful intent or negligence and damage; became “negligence”

example of the distinction between trespass and case: A throws log over fence and hits B - trespass; log doesn’t hit B, but he trips over it later - case;

3


Bases of LiabilityBases of Liability

IntentionIntention NegligenceNegligence Strict LiabilityStrict Liability

intention

foresight & desire of consequences (intention); foresight of probability but no desire (recklessness); requires volition (conscious choice); mistake doesn’t negate; youth/mental disability will negate;

negligence:

not a state of mind; conduct measured against reasonable person;

strict liability:

simple causal connection between act and injury; applies only to ultra-hazardous activities;

4


Intentional TortsIntentional Torts

BatteryBattery AssaultAssault False ImprisonmentFalse Imprisonment DefamationDefamation


BatteryBattery

Intentional harmful or offensive contact Intentional harmful or offensive contact with anotherwith another

“Actionable Per Se”“Actionable Per Se” Intention relates to touching, not harmIntention relates to touching, not harm

battery = intentional harmful or offensive contact with another, whether

direct or indirect; co-existent with criminal sanction; protection of bodily security is the obvious goal; avoiding societal chaos is another goal (avoiding “eye for an eye”

conduct); proof of actual harm is not required - the touching itself is sufficient; not necessary for skin to be touched:

clothing being worn; object being carried; horse being ridden;

intention relates to the touching, not the harm; provocation is not an excuse: victim need not even be aware of the touching at the time;

as when asleep or under anesthetic; as when a child doesn’t realize what is happening;

5


AssaultAssault

Intentional creation of apprehension of Intentional creation of apprehension of imminent batteryimminent battery

“Actionable Per Se”“Actionable Per Se” Reasonable belief of victim is sufficientReasonable belief of victim is sufficient

assault = intentional creation of apprehension of imminent battery; protection of freedom from fear of interference with bodily security; actionable without proof of damage (“actionable per se”); need proximity in space and time: telephone threats may not be sufficiently proximate in space; “I will beat you next week” may not be sufficiently proximate in time;

the actual intention of the defendant to use violence need not be proven, as

the plaintiff need only reasonably believe that he is in danger of violence; doesn’t extent to a third party: telling Bob that “I will beat Joe” isn’t sufficient;

6


False ImprisonmentFalse Imprisonment

Intentional wrongful confinement of Intentional wrongful confinement of another person within fixed boundariesanother person within fixed boundaries

“Actionable Per Se”“Actionable Per Se” Must be complete confinementMust be complete confinement Applies to everyone (incl. police)Applies to everyone (incl. police) Police have statutory protectionPolice have statutory protection

false imprisonment = intentional wrongful confinement of another person

within fixed boundaries; protects freedom of movement; actionable without proof of damage (“actionable per se”); must be complete confinement:

not complete if reasonable mode of egress known to victim; victim need not be aware of the confinement at the time:

for example, a child who may not be aware; available against government officials;

police, prosecutors; Police are shielded from honest mistake by S.25 Crim code if

reasonable and probable grounds: if find committing summary offence; if reasonable and probable grounds that has, is, or about to commit

indictable offence; must state grounds for arrest unless too obvious or fleeing; ultimate charge does not have to be arresting charge;

if arrest required, give police the information and let them use their

discretion - don’t want police acting as your agent because you don’t have same protections;

7


DefamationDefamation

A false statement about a person to A false statement about a person to his/her discredithis/her discredit

Publication to third person requiredPublication to third person required Truth is defenceTruth is defence Libel Libel –– written / recordedwritten / recorded

•• “Actionable Per Se”“Actionable Per Se” Slander Slander –– oraloral

•• Proof of damage requiredProof of damage required

“a false statement about a man to his discredit”;

can be caused by referring to someone as a “liar”, “crook”, “drunk”, “traitor”;

standard: what “ordinary decent folk in the community, taken in general” would

feel;

interpretation: natural and ordinary meaning:

particular characteristic or activity may yield defamatory meaning; calling unionist a scab might be defamatory, manager not;

the time and place of the publication may make a difference; calling someone a communist during the McCarthy era;

the form of the communication:

words: actions eg. defamation by drawing;

who may be defamed:

living people; non-natural persons:

corporations, partnerships; professional associations; municipal corporation; school board; trade union;

defamation must be communicated to a third person for it to be actionable; every participant in the publication is liable - those who prepared the libel

and those who distributed and disseminated the libel; “publication takes place when the words complained of are heard or read”;

8 apology:

publication of a full apology at the earliest opportunity is a means of mitigating the damages;

Defences

justification: truth is a complete answer to an action for defamation, falsity presumed;

absolute privilege: The smooth functioning of society requires that full and frank statements be made at certain times without fear of prosecution for defamation. Such occasions are: judicial proceedings; parliamentary proceedings; executive communications;

covers ministers of the Crown; may not cover civil servants;

does extend to spousal communications;

qualified privilege: conditional immunity attaching to certain occasions if the otherwise

defamatory statements are made without malice; four main types of occasions:

protection of one’s own interest: “akin to self-defence”; must be limited to that reasonably necessary to respond to the

original attack; common interest or mutual concern: moral or legal duty to protect another’s interest:

eg comments made by a father to a daughter concerning the daughter’s prospective husband;

public interest: eg members of the public in reporting crimes to the police;

malice: will defeat the claim of qualified privilege; will affect the assessment of damages;

9 the plaintiff must prove malice once a claim of privilege has been

accepted by the judge; ill-will or indirect motive;

excess of privilege: if the words are clearly outside the scope of the privilege, liability

will attach;


Unintentional TortsUnintentional Torts

Strict LiabilityStrict Liability NegligenceNegligence NuisanceNuisance

10


Strict LiabilityStrict Liability

““The person who, for his own purposes, The person who, for his own purposes, brings on his land and collects and brings on his land and collects and keeps there anything likely to do keeps there anything likely to do mischief if it escapes, must keep it in at mischief if it escapes, must keep it in at his peril; and if he does not do so, is his peril; and if he does not do so, is prima facie answerable for all the prima facie answerable for all the damage which is the natural damage which is the natural consequence of its escape”consequence of its escape”

Rylands v. Fletcher

“The person who, for his own purposes, brings on his land and collects and keeps there anything likely to do mischief if it escapes, must keep it in at his peril; and if he does not do so, is prima facie answerable for all the damage which is the natural consequence of its escape. He can excuse himself by showing that the escape was owing to the Plaintiff’s default; or perhaps, that the escape was the consequence of vis major, or the act of God …”

the theory has been held not to apply to:

overflow of domestic hot water heater; overflow of home plumbing systems; overflow from a sprinkler system; fire used for domestic purposes;

the theory has been held to apply to:

over flow of water industrial and commercial uses; fire used for industrial or commercial purposes; fire used in unusual ways:

to thaw frozen pipes; to smoke out a rat;

poisonous fumes from a fumigation activity;

11


NegligenceNegligence

ABC RuleABC Rule•• Duty of care existsDuty of care exists•• There has been a breach of that dutyThere has been a breach of that duty•• Damage has resulted from the breachDamage has resulted from the breach

Duty

how does a Court decide, in a particular case, whether a duty is owed by the defendant to the plaintiff? The Court looks to the “neighbour principle” from Donoghue v. Stevenson;

“The rule that you are to love your neighbour becomes in law you must not injure your neighbour; and the lawyer’s question, Who is my neighbour? Receives a restricted reply. You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law, is my neighbour? The answer seems to be – persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.”

BC v. RBO Architecture [1994] B.C.J. No. 1297 Architect engaged by owner to provide design Engineer engaged by architect to provide subconsulting Engineer (and its employees) can be liable to owner in tort

12 Dha v. Ozdoba [1991] B.C.J. No. 303 Engineer is liable to employer for competence of design Municipality may also be liable (to employer) for approval of plans

Sergius v. Janax Design & Drafting Services Ltd. [1992] B.C.J. No. 302 Sergius purchased a house with a defective foundation This was a pure economic loss for which no duty of care was owed by

the foundation engineer Cooper v. Hobart 2001 SCC 79 A duty of care requires both foreseeability of damage and proximity

Fiduciary duty is different (see Landview Construction v. Simic

Engineering [1994] B.C.J. No. 113) the 3 criteria which must be met in order for a fiduciary relationship to

exist:

1. Fiduciary has the scope to exercise discretion or power; 2. Fiduciary can unilaterally exercise that power so as to affect the

beneficiary’s interests; 3. Beneficiary is peculiarly vulnerable to the fiduciary holding that

power.

Typically applies to: Lawyers; Trustees; Physicians; Spiritual advisors; Etc.

13

Breach

to determine “b”, one must first ascertain the nature and quality of the duty owed - this is the standard of care;

the standard of care is set by law objectively:

what would the reasonable person have done? some subjectivity in recognition that children, mentally disabled,

professionals, etc. may owe a different amount of care (a different standard of care);

experts/professionals:

the reasonable person test is modified to the “person of average competence exercising a particular calling”;

“every recognized professional group has its own individual standard to which all members of the profession must conform”;

specialists may be required to conform to the standard of like specialists;

Hilton Canada Inc. v. S.N.C. Lavalin Inc. [1999] N.S.J. No. 188 the engineer inspected a structure prior to purchase and concluded that

no major structural defects existed; corrosion of the steel beams supporting the structure discovered later; an engineering firm can be liable for the acts of its non-professional

employees if the standard of structural engineers is not met; if the standard of care at the time of the inspection was such that the

corrosion might not have been found, there is no breach;

14 White Rock Lodge Properties v. BC Hydro [1993] B.C.J. No. 515 geotechnical engineers did not identify a weak, thin layer of clay in the

foundation soils; A slide, thought to be the result of this layer, caused damage and delay

in the construction of a condominium; No breach of duty, because it couldn’t be shown that average

geotechnical engineers would have identified;

15

Causation

the “but for” (also called the sine qua non) test is the most common means of determining causation-in-fact:

but for the negligence of the defendant, the damage would not have occurred;

Metropolitan Toronto Condominium Corp. No. 902 v. Macklingate Development Inc. [1998] O.J. No. 6229 Defendant may have breached Building Code in the installation of

fireplaces in condominiums Such a breach is not conclusive of connection with damage, so

negligence not proven Stanco Projects v. British Columbia 2006 BCCA 246 Tendering case Engineer breached law of tendering by “bid shopping” BC (Engineer’s client) liable to contractor for such Engineer liable to client

Mustapha v. Culligan 2008 SCC 27 Not an engineering case Culligan supplied water bottle containing fly Plaintiff suffered psychological injury from seeing fly No liability unless a person of “ordinary fortitude” would suffer

multiple causes;

can cause problems for the “but for” test: if two or more parties set independent fires which then engulf

the plaintiff’s house, each could say that the result would have occurred without their conduct;

16 the “substantial factor” test:

“if the acts of two people are both substantial factors in bringing about the result, then liability is imposed on both”;

Two Negligent Defendants (Onus):

where two defendants have acted negligently and one only has caused a loss to the plaintiff, but the plaintiff is unable to prove which caused the loss, both will be considered to have caused the loss unless one can exculpate himself;

this principle does not apply where the plaintiff has been contributorily negligent;


NuisanceNuisance

The The unreasonableunreasonable interference with the interference with the use and enjoyment of land by its use and enjoyment of land by its occupieroccupier

Unreasonable Unreasonable guagedguaged by:by:•• Type and severity of harmType and severity of harm•• Character of localeCharacter of locale•• Abnormal sensitivityAbnormal sensitivity•• Utility of conductUtility of conduct

in the most general terms, nuisance involves the unreasonable interference

with the use and enjoyment of land by its occupier or some right by the public;

damage must be proven; damage is typically indirect, in the sense that it does not arise from the

direct application of force; the focus of the tort of nuisance is the type of harm that is suffered, rather

than some narrow form of prohibitive conduct; liability flows to those who create the nuisance or allow it to continue.

17


HEY, BE CAREFUL OUT THERE!HEY, BE CAREFUL OUT THERE!