Written By Justin Lambert, Keely Cameron, and Connor Wilson

The Alberta Court of Appeal recently considered the latest Supreme Court of Canada decision on pure economic loss in a decision involving a proposed class action for damages related to a pipeline spill. In its decision, the Court of Appeal considered the concept of "pure economic loss," which the Supreme Court of Canada has defined as monetary loss not connected to a physical or mental injury to the plaintiff's person or physical damage to their property.

In the case, the representative plaintiff owned land near, but not on, Glennifer Lake. The representative plaintiff claimed to have suffered a decline in property value because of an oil spill. The proposed class was to consist of those who lived in the quadrangle bounded by the major highways 54, 2, 27 and 22, and allegedly impacted by an oil spill allegedly caused by the defendants.

The Court of Appeal held that the class proceeding could not be certified.

Background on the Decision

The Class Proceedings Act sets out five criteria required for certification. The criteria at issue in this case was whether the plaintiffs' claims disclosed any cause of action. The only possible cause of action available to the plaintiffs was a claim for pure economic loss.

At issue was whether the chambers judge ought to have certified this class proceeding when it was grounded in a claim for economic loss. The Alberta Court of Appeal held that the plaintiffs did not have a claim for pure economic loss in the circumstances and therefore that the chambers judge should not have certified the class proceeding. The Court relied on the Supreme Court of Canada's decision in Maple Leaf Foods to conclude that the plaintiffs' claims did not reveal a cause of action for pure economic loss.

Application of Maple Leaf Foods

The Court of Appeal considered Maple Leaf Foods' clarified approach to the first stage of the negligence analysis in claims of pure economic loss, which requires that a proximate relationship must exist between the plaintiff and the defendant in order for a claim for pure economic loss to succeed.

The chambers judge had found that the plaintiff's properties and the defendant's pipeline were in physical proximity to the contaminated lake, and that this physical proximity was sufficient to establish a proximate relationship for the purpose of a claim in pure economic loss. The Court of Appeal disagreed because the Maple Leaf Foods decision required more than simple physical proximity to establish sufficient proximity.

As the Court of Appeal held: "In Maple Leaf Foods, the Supreme Court held that the law of negligence imposes liability in situations where rights to bodily integrity, mental health or property are interfered with: Maple Leaf Foods at para 18. While this is not a closed list, the Court indicated that a plaintiff will need to show a loss to a particular right. In this appeal the Riegers have not pled interference with any legally cognizable right. Their loss of use of Gleniffer Lake was the loss of use of a public place, and their property was not physically damaged by the oil spill."

The Court of Appeal determined that the plaintiffs and defendants were not sufficiently proximate in their relationship with the Defendant, and the chambers judge's finding that the parties were geographically proximate was not enough to satisfy the proximity requirement in Maple Leaf Foods.

The Court of Appeal agreed with the chambers judge that the plaintiffs could not establish that they had a claim in strict liability, trespass, nuisance, or under the Environmental Protection and Enhancement Act. Since there were no other causes of action to found their claim, the plaintiffs did not succeed.

Decision Regarding Class Size

The Court of Appeal also held that the size of the class was too broad. The chambers judge certified the large geographic area of some 1500 square kilometers, which contained large sections of various towns and waterbodies unaffected by the spill. By drawing the geographic area so broadly, the claim encircles owners affected by the spill to varying degrees, including some certain to be unaffected. The Court of Appeal held that this overly broad class definition created the risk that the class was unnecessarily broad or would fragment in the course of the proceedings.

In Summary

This decision illustrates that claims of pure economic loss are not simply a matter of a plaintiff proving they have suffered a loss. Establishing that the defendant owes the plaintiff an actionable duty of care will be the focal point in claims for pure economic loss.

If you would like to know more about how this decision may affect your business or organization, we invite you to contact the authors, or members of our Class Action Litigation group or Commercial Litigation group.

For additional background, read the Court of Appeal's decision in Rieger v Plains Midstream Canada ULC.

Background on the Supreme Court of Canada's decision in Maple Leaf Foods can be found in our previous insight, Supreme Court of Canada Clarifies Approach to Pure Economic Loss Claims.

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