TÁMOP-4.1.2.D-12/1/KONV-2012-0008 „Szak-nyelv-tudás” - Az idegen nyelvi képzési rendszer fejlesztése a Debreceni Egyetemen

Dr. Tamás Fézer

Comparative Tort Law E-learning Text Book

Debrecen 2013

TÁMOP-4.1.2.D-12/1/KONV-2012-0008 „Szak-nyelv-tudás” - Az idegen nyelvi képzési rendszer fejlesztése a Debreceni Egyetemen

CONTENTS

Introduction to The Law Of Torts .............................................................................................. 4 I. Categories of Tort Law In Different Jurisdictions .................................................................. 7 1. Functions of Civil Liability and Tort Law Systems ........................................................... 7 A. Full compensation ......................................................................................................... 7 B. Prevention ...................................................................................................................... 8 C. Alternative approaches of full compensation ................................................................ 8 2. Scope of Legislation in Tort Law ..................................................................................... 11 A. Harmonizing Tort Law in the European Union........................................................... 12 B. Dichotomy of Contractual and Tort Liability – Widening the Gap ............................ 13 C. Interpretation of Fault .................................................................................................. 15 D. Damages for Non-pecuniary Losses ............................................................................ 16 E. Conclusions .................................................................................................................. 17 II. Preconditions of a Successful Tort Claim ........................................................................... 18 1. The interpretation and different meanings of fault........................................................... 18 A. The common law approach ......................................................................................... 18 B. The civil law approach ................................................................................................ 19 C. Fault in Business Relations.......................................................................................... 19 2. Wrongful act and omission .............................................................................................. 20 A. Consent ........................................................................................................................ 20 B. Privileges and Immunities ........................................................................................... 21 3. Causation Theories – Limits on Liability......................................................................... 22 A. But for test and substantial causes ............................................................................... 22 B. Multiple Causes ........................................................................................................... 23 C. Third Party Acts........................................................................................................... 24 4. Damages in Different Jurisdictions .................................................................................. 24 A. Classification of Damages in Civil Law...................................................................... 24 B. Damage in Common Law Legal Systems ................................................................... 25 5. Case-law ........................................................................................................................... 25 III. Special Character of Damages for Non-pecuniary Loss .................................................... 43 1. General Rules of the Dutch Civil Code ............................................................................ 45 2. Personal Injures: Statutory Law and Jurisdiction ............................................................. 47

TÁMOP-4.1.2.D-12/1/KONV-2012-0008 „Szak-nyelv-tudás” - Az idegen nyelvi képzési rendszer fejlesztése a Debreceni Egyetemen

3. Statutory Law and Case Law Concerning Special Personal Injuries ............................... 48 4. Non-personal Injuries ....................................................................................................... 49 5. Problem with the Position of ‘Third Parties’ ................................................................... 51 6. Intention and Financial Resources of the Parties: the Right to Reduce ........................... 53 7. Sums ................................................................................................................................. 54 8. The Hungarian Approach ................................................................................................. 55 A. History and function .................................................................................................... 57 B. Preconditions of claiming pain award under the new Civil Code ............................... 58 C. Secondary victims........................................................................................................ 59 D. Calculating non-pecuniary loss ................................................................................... 60 E. Criticism of pain award................................................................................................ 60 9. Conclusions ...................................................................................................................... 61 IV. Differences between delictual liability and contractual liability........................................ 62 1. Parallel Application of Liability Rules ............................................................................. 63 2. Separation of liability concepts for contractual and delictual situations .......................... 64 3. The foreseeability principle .............................................................................................. 65 4. The Relevant Time of Foreseeability ............................................................................... 70 V. Special Liability Forms ....................................................................................................... 71 1. Strict Liability Forms ....................................................................................................... 71 A. Products Liability ........................................................................................................ 73 B. Liability of Air Carriers In Case of Delay, Cancellation and Denied Boarding ......... 83 C. Case-law ...................................................................................................................... 92 2. Vicarious Liability.......................................................................................................... 105 A. Employers’ liability ................................................................................................... 105 B. Liability for people without legal capacity ................................................................ 106 C. Principle’s Liability ................................................................................................... 107 3. Professional Liability, Medical Malpractice .................................................................. 108 A. Vicarious Liability ..................................................................................................... 109 B. Standard of care ......................................................................................................... 109 C. Causation and Proof................................................................................................... 110 D. Compensation ............................................................................................................ 111 E. Contributory Negligence............................................................................................ 111 F. Limitation Period ....................................................................................................... 111 G. Case-law .................................................................................................................... 113

TÁMOP-4.1.2.D-12/1/KONV-2012-0008 „Szak-nyelv-tudás” - Az idegen nyelvi képzési rendszer fejlesztése a Debreceni Egyetemen

I NTRODUCTION TO T HE L AW O F T ORTS Legally protected interests require not only declarative norms in legal systems but efficient and ready to use legal instruments in order to get restitution or recovery from the party who infringed any of the rights granted to individuals and businesses by the law. Legal protection usually has two dimensions in most legal systems. Constitutional provisions or historical constitutional principles (in Anglo-Saxon legal systems) may constitute crimes (felonies or misdemeanors) to legalize criminal power of the state, being the highest sovereign. Criminal or penal law may not provide real restitution to the injured person. The main purpose of the existence of criminal sanctions is to deteriorate individuals to commit crimes against the members of society. This is why criminal procedure makes the defendant to the central position of the trial, trying to recover the case step by step, while finding the right sanction to make the defendant a better person again. Criminal law does not put much emphasis on providing recovery to the injured individual, the afflicted person. We may only find restorative elements in criminal justice if we take into account the moral indemnification criminal sanctions mean to the aggrieved party. Knowing that someone who infringed a legally protected interest of mine got some kind of criminal punishment (like imprisonment, monetary fine, etc.) may provide moral satisfaction while not trying to fix the wrongs the crime caused. However, the existence of criminal sanctions and criminal law in general is essential in order to create prevention in society, granting that immoral and illegal acts against others must remain unpunished. The other element or dimension of the protection of legal interest and rights are the instruments existing in the theory of private law. Private law has never wanted to serve as another leash on the defendant. Private law has a concept of restoring the original conditions before the illegal behavior was conducted. The main purpose of private law sanctions is to make the plaintiff, the aggrieved party whole again. Civil Codes have an idea of original pecuniary conditions and private law norms try to protect this idealistic state of life. If the defendant disrupts this ideal state with some kind of conduct, private law is ready to restore the original settings. The instruments private law can use to achieve this task may be a lot more limited than what criminal law has. The palette of sanctions must not lead to any infringements or limitations on personal freedoms of the defendant. No sanctions against personal freedom, no forced work regulations, just pure economic, pure monetary instruments constitute the private law legal protection. This is why the most effective protective instrument that gives a response to the unlawful acts or omissions in private law is compensation, the law of damages. The law of damages is about to provide monetary support to the plaintiff, the injured person, the aggrieved party in order to help him be whole again. The law of damages wants to give exactly the same monetary compensation to the plaintiff as what the extent of damages he or she suffered. However we cannot deny there are certain similarities in the law of damages in private law to the punitive sanctions of criminal law. Paying damages is a direct response to an unlawful act or omission and it is a real obligation for the defendant, just like its punitive counterparts. There is a great difference on what unlawful acts lead to these sanctions in the two legal regimes. Criminal law needs precisely defined crimes, and even in the common law legal systems, no crime exists without dedicated statutes. Nullum crimen sine lege means no crime without law. If the legislator does not specifically constitute some behavior as crime, no criminal sanctions can be applied. These crimes must be truly specific. All the actual circumstances that constitute a crime must be 4

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defined in criminal law. Unless all these circumstances can be proved in the actual case, nobody can be guilty for a nominated crime. In the law of damages, causing damages to another person, independently from the fact whether these damages are monetary or nonpecuniary is always unlawful, disregarding the actual act or omission that resulted from these negative outcomes. In most legal systems in the world, there is some kind of general duty of care principle that prohibits causing damages to another, even without providing a list of specific unlawful behaviors. This also means a lot more behavior might be illegal and unlawful in the concept of private law than in the mind of criminal theorist. Private law does not care about the road to damages; the existence of loss, the existence of damages qualifies the road (e.g. the behavior) unlawful. It is very hard to squeeze all the unlawful acts in private law in one single definition. Since there is a clear dividing line in the development of private law in England and the rest of the European continent, we cannot even find a common phrase to express what unlawful acts with damaging potential truly are. English law uses the word tort to describe these unlawful, illegal acts and omissions. Therefore the rest of the world use torts as a commonly accepted term for those civil wrongs which unfairly cause someone else to suffer loss or harm resulting in legal liability for the person who commits the tortious act, called a tortfeasor. Legal liability or civil liability has a very close connection to the law of torts. Civil liability is very far from the guilt concept of criminal law. As criminal law wants to make an impact on the defendant with finding the right punishment his act deserves, guilt in criminal law must take into account all the specific attributes, skills, abilities, mental state and, in general, the entire personality of the defendant. We cannot extend the guilt concept to the law of torts as our purpose is to provide compensation to the plaintiff, the claimant, who suffered loss here. It must not be the question of who the actual tortfeasor is or what his skills, abilities, social status and capacities are; we focus on restoring the original idealistic state. This is why the concept and the meaning of fault are very different in private law. The interpretation of negligence is one important difference in the two cores of law. Even if we stay in the world of private law, no legal systems are alike when it comes to determine and interpret the institutions of tort liability. Social, cultural significances and economy of the examined country and legal system strongly put a remarkable influence on how tort law evolved and interpreted there. Our goal here is to get a good view on the most important differences that exist in the area of torts in various legal systems, both in Europe and elsewhere. However, we would like to emphasize that the core concept described above and many of the important tort preconditions are the same in every modern private law models throughout the world. This text book collected cases (both real and hypothetical) to demonstrate the important concepts of torts and tortious liability, while trying to show what the European Union achieved in the area to harmonize, approximate tort laws in its Member States. We also try to unveil what political, legal, economic and social motivations lie beyond some significant changes in tort models. A well-known distinction between civil law and common law legal systems is the way they handle the core concept of law in general. While common law legal systems heavily rely on judge made law, civil law legal systems advertise the supremacy of statute law over judicial judgments. Although we do not want to argue with these views, in the area of torts even civil law legal systems develop concepts and theories through judicial cases and their reasoning in judgments. Tort law is a very dynamically evolving area of private law and in many European Union Members States, beyond the relatively constant nature of civil codes, new cases, technological development and questions arisen from new social connections provoke new 5

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approaches and certain reinterpretation of well know statute law principles. This is why this text book cites many important judgments. We want to prove how temporary and constantly changing the rules and practice of tort law are.

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I. C ATEGORIES OF T ORT L AW I N DIFFERENT J URISDICTIONS 1. Functions of Civil Liability and Tort Law Systems Every legal institution, especially in civil law legal systems, where statute law has supremacy, shall have a well-defined political agenda or concept behind it. We call it the function of the specific legal institution. Through a legal institution the legislator and its servants, the courts would like to achieve a certain effect in society. Law-abiding behavior from the society can only successful and realistic if most norms constituting the legal institution is commonly understood and agreed. Tort law has clear functions in modern private laws. A. Full compensation In general, tort law only cares about the claimant, the aggrieved person. This party suffers some loss, either monetary or non-pecuniary. Especially in monetary damages cases private law has one instrument to compensate damages and that is to make the tortfeasor pay the exact same amount of money what his act caused as loss in the plaintiff’s property. Full compensation entitles the aggrieved party to claim the total sum of damages he suffered in connection with the wrongful act of the defendant. Not only direct damages are subject to compensation but all loss of earnings and lost profits are eligible for indemnification. The instrument of tort law, however, is not a tool to earn money for the plaintiff. The aggrieved party is only entitled to damages in the scope of loss he actually suffered, assuming he can prove the existence of such damages and the amount of it. Therefore tort law puts a cap on the amount of damages and non-provable, fictive loss cannot be recovered. The tortfeasor shall only cover damages if those are in connection with his wrongful act or omission and the aggrieved party successfully proved the existence, nature and amount of loss. Full compensation theory requires certain attitude from the legislator. The obligation to pay damages to the aggrieved party shall not be subject of equity or discretion of judicial practice. It is a very strict obligation and a necessary outcome of causing damages to another person. This is why in many special liability forms of private law, we find that the tortfeasor, who actually caused the damage is not the one who must recover damages to the plaintiff. In these cases the wrongdoer cannot be held liable for what he has done, so in order to achieve full compensation goals, legal systems find somebody to recover damages instead of the actual person, who provoked them. The main function of tort law is to provide restoration and compensation to everybody, who suffered damages arisen from the act or omission of somebody else, other than the aggrieved party himself or anybody under his control. The old Roman law principle of casus nocet domino (the owner of the damaged property shall bear his own damages in case there is nobody who can liable for it) is only applicable if even statute law or judicial practice cannot find the liable person or this person could successfully exonerate himself under liability. The principle of full compensation is often regarded as one of the fundamentals of modern tort law systems. In a well-recognized formulation and definition provided by the excellent Lord Blackburn: “Tort seeks to put the victim in the position he was in before the tort”. From a more general perspective the sole purpose of tort law is to place the victim to a situation where he does not suffer any harm at all. It means after all that even the negligent wrongdoer must compensate any damages he inflicted on the victim, and a non-negligent injurer is not 7

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liable for the damage suffered by the victim. This means there is another perspective of how to evaluate the principle “the position the aggrieved party was in before the tort”. To understand this different approach, we must clarify the behavior of a potential wrongdoer, the tortfeasor. An increase of care by a potential injurer will generally lead to a reduction in the probability of an accident and the reduction in the size of harm in the case of the accident. This means the legislators often wish to reduce the probability of an accident (tortious situation) to the minimum. If we made all injurers to recover the damages their behavior caused, independently from their standard of care, it would not have a real preventive effect. Let’s assume we are living in a society, where everybody is liable (in the sense of civil liability) for all damages occurred as a result of his behavior, and these damages must be compensated, nobody would find this rule as a preventive body of law, since full compensation would be the case in non-negligent, negligent and intentional tort cases as well. Private law does not want to be unreasonable in this regard, so full compensation should not exist without some other, additional function or core of tort law. This additional function is prevention. B. Prevention Prevention is a necessary function of criminal law. Penal law wants to make an impact on potential wrongdoers with threatening them by the sanctions criminal codes normally have. Tort law must also take into consideration the preventive effect as the legislator wants to minimize the number and potential of those situations that might cause some injury or loss to future plaintiffs. Social interactions and connections require a certain respect to the other individual. Based on this general principle, tort law is one of the instruments to make people do so. If one has any knowledge on what the generally expected behavior is socially in an actual situation, he or she may adjust the behavior to fit or not fit under these frames. Anyway, there is an option to avoid the consequence of liability, you have an option to follow the norms, perform lawful behavior and let tort law remain silent. The threat of having tort instruments fully compensate damages arisen from a behavior not fit into social and legal (maybe moral) duties and standards, is enough in many cases to hold potential tortfeasors back from causing any harm or loss to the other person. Prevention is an important element and function of tort law and this concept led to the birth of the main principle, the fault based civil liability system. Normally we would not be in a situation to draw a line between the functions of criminal law and tort law, if prevention was based on the same measurements and standards. We must see that full compensation – that is entirely missing from criminal law – is still the prime function of tort law. In order to give meaning to his difference, we shall not interpret fault the same way we do in criminal cases. While criminal law always takes into account special skills, situational attributes and circumstances of the defendant, tort law normally enacts a general standard for the duty of care. This standard is expected from every reasonable human being and even legal entities, and should not be merely subjective based on the special subjective significances of the actual tortfeasor. Once we know how a reasonable person would react to a situation in order to avoid causing damages, this behavior is expected from everybody, disregarding the fact whether the actual wrongdoer could have identified this lawful interaction or not. C. Alternative approaches of full compensation

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The principle of ‘full’ compensation is said to restore the victim of an accident to the position he was in before the tort. Different interpretations of the ‘pre-tort’ position of the victim have led to the emergence of two compensation criteria. In the conventional modeling of the rule of negligence, the ‘pre-tort position’ of the victim is taken to be the one in which he bears no accident losses at all. An implication of such an interpretation is that a negligent injurer is required to compensate his victim fully. That is, a negligent injurer bears all the losses and the victim none. Van Wijck and Winters (2001) have reinterpreted the ‘pre-tort position’ of the victim in English law and proposed an ‘alternative’ specification of liability. They consider the victim’s pre-tort position to be the one in which the expected loss suffered by him is just equal to the expected loss that will result when the injurer’s care level is just equal to the due care level. To make the things explicit, consider the following example. An injurer can decide whether or not to take care. Let the cost of care be 1. If the injurer takes care, probability of an accident is 1/3, and probability is 2/3 if he does not take care. The actual loss in the event of an accident is 12. Thus, when the injurer takes care, the expected loss is (1/3) × 12 = 4; while, if he doesn’t take care, the expected loss is (2/3) × 12 = 8. In such a scenario, economic efficiency requires the injurer to spend 1 on care. Under standard modeling of the rule of negligence, the court will find the injurer negligent if and only if he does not take care. Moreover, liability of the negligent injurer is the entire loss, i.e., 12. Compensation equal to 12 will restore the victim to his pre-tort ex ante position, i.e., to a position he will be in if there were no activity and hence no accident on the part of the injurer. Therefore, under the standard compensation criterion (SCC) based rule of negligence, for the purpose of compensation, the ’pre-tort’ position of the victim is taken to be the one in which he bears no losses at all. As a result, the negligent injurer’s expected liability is (2/3) × 12 = 8. But, note that an accident with probability 1/3 can take place even when the injurer takes care. Thus, the injurer’s negligence increases the expected loss only by 4, i.e., 12 × (2/3−1/3), and not by 8, as the expected loss of 4 would be there even when the injurer was not negligent. Van Wijck and Winters consider the victim’s pre-tort position to be the one in which he suffers the expected loss of 4, the expected loss when the injurer is just non-negligent. Therefore, under the ‘alternative’ compensation criterion (ACC) based rule of negligence, a negligent injurer’s expected liability is equal to 8 − 4 = 4, the expected loss caused by his negligence. Compensation of 4 will restore the victim to his pre-tort ex ante position, i.e., to a position he will be in if the injurer took due care. This alternative specification of liability is what we call ‘causation’ liability, and forms the focus of the paper. The alternative specification of liability has implications not only economic but also from the legal point of view. This liability assignment is interesting from economic point of view for at least the following two reasons. Very few analyses have formally dealt with such specification of liability. The seminal work by Van Wijck and Winters examine the efficiency implications of such specification of liability. The central message of these analyses is as follows: The injurer takes efficient care under the rule of negligence when the liability assignment is causation consistent. These studies, however, have two drawbacks: (1) only the rule of negligence is considered, and (2) accidents are restricted to the unilateral-care case. On the first count, a liability rule may specify the due care only for the victim, or may specify the due care for both. The rule of strict liability with the defense of contributory negligence, for example, specifies the due care for only the victim. The rules of negligence with the defense of contributory negligence, comparative negligence, and strict liability with the dual defense of contributory negligence specify the due care standards for both the parties. For such rules, the causation doctrine can be extended to the negligence of the victim. On the second count, it 9

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should be noted that most of accidents involve bilateral-care. This paper, in contrast to the above-mentioned works, studies the entire class of liability rules, and considers the bilateral care accidents. We show that ‘causation consistent’ liability provides a basis for an efficiency characterization of the entire class of liability rules. Moreover, it remains a basis for an efficiency classification even when the risk is bilateral. The legal relevance of the ACC is borne out of the following fact. In standard modeling of liability rules the proportion of accident loss a party is required to bear, generally, does not depend upon the extent to which negligence on the part of the party contributed to the loss. For example, under the rule of negligence if the care level of an injurer was just below the due level of care, he is held liable for the entire loss in the event of an accident, even when the victim took no care at all. Similarly, under the rule of strict liability with the defense of contributory negligence, if the victim’s care level fell just short of the due level, he is held liable for the entire loss irrespective of the level of care taken by the injurer. As a matter of legal doctrine, this specification of liability rules is said to be incorrect. One basic feature of the legal systems is that, the claim goes, a negligent party is held liable for the loss of which the party’s negligence was a necessary and proximate cause – ‘the causation requirement’ Kahan (1989) writes: “Rather, in most models, liability turns solely upon an injurer’s negligence: if the injurer was not negligent, he is not liable; but if he was negligent he is liable for any accident that arises including, if only by implication, those accidents that would have happened even if he had employed due care. This characterization of liability is incorrect....” It has been claimed that under a liability rule, say the rule of negligence, the doctrinal notion of ‘causation liability’ has two requirements: (i) an injurer is liable only if he was negligent, and (ii) a negligent injurer is liable for only that loss which can be attributed to his negligence. That is, while determining the liability of a negligent injurer the reference point is his nonnegligent (rightful) act. The comparison is, as generally is the case with the standard modeling of the rule of negligence, not with the situation in which he does not act at all. The economic analysis of liability rules has been undertaken by Brown (1973), Polinsky (1989), Landes and Posner (1987), Shavell (1987), Miceli (1997), Cooter and Ulen (1998), Jain and Singh (2002), and Singh (2003) among others. These works show that if negligent injurers are made liable for the entire loss suffered by the non-negligent victims, then injurers will be induced to take efficient care. We will show that liability for the entire loss is more than what is needed for efficiency; causation-consistent liability is sufficient. As our example shows, other factors remaining the same, the choice of care level by a party is likely to have different implications for the actual loss (that will materialize in the event of an accident) and the expected loss. One important question that arises is, ‘Should an injurer be considered as the ‘cause’ of the actual loss or the expected loss when both can be attributed to his act?’ Calabresi (1970), Landes and Posner (1983, 87), Shavell (1987), Miceli (1996, 97), among others, have addressed this question. The basic proposition emerging from this work is that a party’s action can raise or reduce the risk of harm, and therefore it is a cause of the expected harm. Depending upon the context, that is, the nature of the expected loss function, the expected accident loss that can be attributed to an injurer’s negligence can be greater than, equal to, or less than his contribution to the actual loss. Without imposing any significant restriction on the expected loss function, we think that a necessary condition for any liability rule to be efficient is to make a solely negligent injurer bear at least that fraction of the expected accident loss which can be attributed to his negligence. 10

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A condition called ‘causation liability’ is consistent with the above-mentioned causation requirements. The condition of causation liability requires that a liability rule be as follows: When the victim is non-negligent, if the injurer chooses to be negligent rather than nonnegligent, his expected liability will be more than his expected liability if he were just nonnegligent, by an amount that is at least the entire increase in the expected accident loss caused by his negligence. Similar rule applies for the victim.

2. Scope of Legislation in Tort Law We saw that functions of tort law could be dramatically different in actual situations. No situations look alike and technological, social and economic developments also serve as engines for constant reinterpretation of tort law concepts. Tort law is divided into multiple cores based on many arguments. Even if we can identify full compensation and prevention in most tort cases, certain activities or professions require different liability concepts. For example the extremely dangerous activities, such as using nuclear power, operating automobiles, airplanes, cannot fit under the general fault-based liability standard. It would simply not be fair to let the operator of this dangerous machine simply exonerate on the sole base that he was not even negligent and he practiced the general duty of care when the damage occurred. These activities, these machines have a special nature: the potential to cause extraordinary harms to individuals. This damaging potential cannot be avoided in many situations. In order to let full compensation to live and serve the interests of the aggrieved parties, we must specify some liability forms that are independent from the tortfeasor’s negligence, fault. In case of dangerous activities, flight cancellations, denied boarding or delays, also in product liability cases, the legislator simply does not want to provide an easy exoneration to these tortfeasors as the full compensation perspective is a lot stronger and the legislator decides to stand by the side of aggrieved persons. Another inner difference of tort law is how judicial practice handles and interprets the meaning of duty of care in various professions. It is clear that in medical malpractice cases the medical doctor is not an ordinary individual. The patient places full trust in the doctor’s hands, hoping that the medical professional will use the expertise the patient does not have in order to cure him and make him healthy again. If we wish to reply to the question, what is generally expected from somebody under the given circumstances, we cannot measure the doctor’s duty of care to the duty of care standard of other non-medical professionals. This duty of care must be on a higher level and must be of what is expected from a really good doctor under the given circumstances. We may continue the list and extend this concept to other professionals, such as lawyers, auditors, investment advisors, etc. The common thing in all these professions is that society expects very high professionalism from these people and treats them different from the rest of the ordinary society. However these scattered duty-ofcare concepts did not come from legislative norms in most European legal systems. For example, in Hungary medical doctors had a decent protection in tort law in the 1990s and although statute law remained unchanged, the 2000s brought a brand new perspective on how their duty of care should be treated. These changes are generated by the society, by the new expectations and moralities that are necessary attributes of social, technological changes. Judges are the ones who get in touch with new social and moral expectations and they have the option and opportunity to enact different interpretations of the very same tort concept for various situations. In common law legal systems these changes are more visible and clear, as the core of law is coming from the stare decisis doctrine. In common law legal systems, a precedent or authority is a principle or rule established in a previous legal case that is either 11

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binding on or persuasive for a court or other tribunal when deciding subsequent cases with similar issues or facts. The general principle in common law legal systems is that similar cases should be decided so as to give similar and predictable outcomes, and the principle of precedent is the mechanism by which that goal is attained. Stare decisis is a legal principle by which judges are obliged to respect the precedent established by prior decisions. The words originate from the phrasing of the principle in the Latin maxim Stare decisis et non quieta movere: "to stand by decisions and not disturb the undisturbed." In a legal context, this is understood to mean that courts should generally abide by precedent and not disturb settled matters. In the civil law legal systems, these changes are less obvious and normally take a lot more time to be clear to society as well. No precedents in civil law legal systems and no binding effect for outsiders of judicial reasoning. In order to provide a detailed example on how torts are evolving through the hands of judges, we should take a look at changes of civil liability in Europe. We are not talking about the European Union and its very scattered and puzzle-like tort law, but the tort laws of the EU Member States that made significant approximation in the past decade without binding EU obligations in this regard. A. Harmonizing Tort Law in the European Union The European Union never meant to intervene with private law issues in the Member States. Most of the early history of the European Union focused on destroying all legislative obstacles in the way of a single European market. However, it soon became clear that no economic integration and single market exist without some kind of unified business law. Even if the most significant and visible obstacles, like the existence of customs, mandatory registration, almost completely disappeared by the end of the 1960s, the surprisingly diverse contract law, company law, tort law issues still functioned as serious barriers that blocked the operation of a smooth and unified European business sphere. The European Commission faced the difficulties arisen from the non-harmonized business law rules in the Member States and initiated a massive attack on the private law freedom of states with drafting many directives to destroy these serious obstacles and provide smooth operation for the single market. At the beginning, the original competences and powers provided to the European Communities in the Roman Treaty did not allow intervention in the private law legislation of the Member States, and in the Council and the European Parliament the representatives and political members from the states still blocked most of the new legislative attempts. Finally, in 1989 the European Parliament adopted a decision 1 that specifically addressed a new duty to the Commission to work on the potential approximation of mainly contract law rules in the Member States. By that time the amended Roman Treaty established so-called flexible clauses in order to create new competences in legislation for the European Union, and the European Court of Justice also broadened the legislative scope and power for the EU institutions and legislators. Back those days private law approximation focused mainly on classic contract law issues, like formation of a contract, performance and breach. It is easy to understand how tort law and liability in general became an important and central element in this private law harmonization process, mainly because breach of an obligation – regardless of its contractual or non-contractual nature – normally constitutes liability on the side of the tortfeasor. In the infamous Bergaderm 2 decision, the European Court of Justice also established the liability of 1

Resolution on Action to Bring into Life the Private Law of the Member States, 26 May 1989 (OJEC No. C 158/401) 2 Bergaderm C-352/98

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EU institutions to cover damages suffered by the European citizens. The Francovich 3 decision went even further with establishing a direct liability of the Member States to its citizens when committing a breach or violation against EU norms. We may think of these changes as starting points on the way to establish some kind of unification in tort and civil liability in national laws in the European Union, although this approximation goes a lot deeper. Independently from the achievements and harmonization activities of the European Union, the national courts often consider foreign judgments and their reasoning when deciding in a crossborder business conflict or an international tort debate. This is an understandable necessity that comes from the globalization and Europeanization, since especially in the sector of real business law; actors of the business sphere do not favor closed national judgments and national laws in general. Lex mercatoria and the need for a sector specific usus based supra-law should not seem to be a new phenomenon in modern day business life. Many factors, like the constantly growing migration from regular national courts to the direction of international arbitration committees forced and are forcing both national legislators and courts to consider business law and tort law as truly international areas of law. Without the intention to ruin the effectiveness of the European Union, we must say this European approximation of national civil liability laws is more a result of a voluntary, organic process than a result of EU legislation. So far, only very specific areas gained legislative interest in the EU, such as products liability 4, liability issues in connection with consumer protection (e.g. unfair commercial practices, consumer rights, etc.). Although an ambitious project was delivered in 2003 on the Principles of European Tort Law (PETL) 5, this proposed European tort code was never accepted as a binding law, either in the form of a directive or regulation. As we mentioned above, there is a dynamic trend to harmonize national laws in Europe. This is particularly true for contract law, but also counts for specific areas of tort law, e.g. product liability. However, there has not been an attempt until the drafting of PETL to harmonize tort law by the European Union or the Council of Europe. Everyone who is a little aware of the development of tort law in various European countries will have noticed that the foundations of tort law in these legal systems differ considerably. There is not only the traditional boundary between the common law and the continental civil law countries. Also, legal systems on the continent e.g. France and Belgium, take a dramatically different approach than e.g. Germany. These differences in tort law today explain why there has, until now, not been an attempt to harmonize the entire field of tort law in a consistent manner. While this statement is still true regarding the core concepts of fault, causation or even the calculation of damages, most EU Member States still show some organic progression towards a more globalized, Europeanized approach of tort law when it comes to judicial practice. The trend, some interpretation methods courts use in order to evaluate civil liability in an actual case, as well as new challenges and reactions to these challenges definitely show a truly harmonized action in practice. I only have time to highlight some particularly interesting areas of tort law and civil liability in general in which national courts seem to find some kind of consent over the past years. B. Dichotomy of Contractual and Tort Liability – Widening the Gap

3

Francovich v Italy C-6/90 Council Directive 85/374/EEC on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products 5 European Group on Tort Law, Principles of European Tort Law: Text and Commentary, Springer, 2005. 4

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In the European civil liability traditions there have always been common cores for tort liability and liability for breach of a contract. Especially the Civil Codes of the newly joined Central and Eastern European countries brought a tradition that relied on firm bridges between the liability regimes. In the third trimester of the 20th century, some Western European countries changed directions in the handling of tort and contractual liability problems. Contract law became more like a professional field of law that primary has to provide rules for businesses and not individuals. Contract law became part of business law instead of an important leg of private law in general. This process was sped up by the rapid development of consumer protection law and the involvement of the European Union in constituting consumer protection law in Europe. Consumer protection law rules created a different territory for mainly contractual rules requiring strict information duty of sellers and businesses to consumers. As more and more consumer protection law directives and some regulations were adopted in a European level, contract law started to focus on business to business (B2B) relations, instead of business to consumer (B2C) relations. 6 A professional contract law had to face with different needs of business society than the needs of the old consumer-business or individual to individual approach. This new contract law got more independent from the original fault-based tort law rules and gave birth to a modern business liability for breach of a contract. Although the European Union never had enough power to succeed in unifying contract law or its separate fields (most importantly the questions of breach and its legal consequences), the European consumer protection law oriented national legislators toward the direction of a business contract liability regime. 7 As we take a closer look at the recent civil codification processes in some EU Member States, we can easily identify this voluntary change of paradigms in Italy, Romania, the Czech Republic and Hungary. Contractual liability is no longer a little sister of tort liability, heavily relying on the core concepts and legal institutions created for the latter, but a separate column of civil liability with its own institutions and interpretation needs. What might be the most significant differences between the two liability regimes? First of all, the fault-based liability system of tort law is no longer accepted in business contractual relations. Liability of a contracting party who committed a breach is a lot closer to strict liability than ever before. Fault is generally not an issue and the restorative purposes dictates liability for damages the breach caused to the other party. However, limitations still exist, while not with the evaluation and precondition of fault, but the limitation of full compensation, the amount of damages to be compensated. Clauses like foreseeability seemed to be a causation issue for centuries in the European continent. These days foreseeability is the core element and most important defense a contractual party can get if he wishes to narrow the scope of liability for breach of a contract. Foreseeability also serves as an important manifestation of the old cooperation duty between contractual parties (culpa in contrahendo). In order to be entitled to the maximum compensation in case of a breach situation, parties are forced to inform each other deeply about their interests in the contract. If the buyer of raw materials does not express the background motivation behind the deadline in the contract, she may face with a limited compensation once the seller (manufacturer of the raw materials) delivers the goods with a significant delay. Even if she proves the existence of a default penalty in her other contract formed with the seller of the finished product, the raw 6

AUGENHOFER, Susanne, A European Civil Law – for Whom and What Should it Include? Reflections on the Scope of Application of a Future European Legal Instrument, European Review of Contract Law, with a special focus on consumer and competition law, Volume 7, Issue 2, 2011. 198. 7 See LEGRAND, Pierre, Against a European Civil Code, The Modern Law Review, MLR 60:1 January, 1997. 4463.

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part manufacturer will not be liable for these damages unless she informed him about it at the time they formed the contract. Some authors think of foreseeability as a self-regulative method of business life and the enforcer of fair business. 8 In our case, we see the interpretation of foreseeability in the practice of the national courts in Europe more like an explicit limitation of the old tort law theory of full compensation. C. Interpretation of Fault In the European civil liability traditions, going back to the ancient Roman law cores, there were always four important preconditions, lemmas of civil liability in tort law: damage, wrongfulness, causation and fault. However, during the centuries, the European Union Member States developed very scattered interpretation of these preconditions. Fault seemed to be the most diverse of all in the practice of national courts across Europe. In order to simplify things, we can divide the European fault concepts into two major categories: some of the states in the EU follow the old intentional-negligent tort concept that heavily relies on the level of fault on the side of the tortfeasor. The second category does not make a difference between intentional and negligent torts, neither the scope of liability, nor the amounts of damages depend on the levels of fault. States following this second concept developed a single measure of all human acts: all individuals must exercise utmost care that is expected from a reasonably thinking, ideal person of the society. This almost objective measure treats all tortfeasors equal with the intent to reach the somewhat idealistic goal of full compensation. In a tort case, the only goal is to make the plaintiff whole again with providing her full compensation paid by the tortfeasor, who is liable for the damages he caused. In this concept, judges do not care about the actual knowledge, psychological condition, and social status of the tortfeasor – who is in the defendant position – but apply a general standard, a general approach of duty of care that is expected from all members of the society. The comparison is about an idealistic person, who probably does not exist in reality, only in the mind of society. However, this almost objective requirement in everyday life is not entirely independent from the significances of the actual case. According to the rule of imputation only those tortfeasors shall compensate the damages they caused, who did not act with what is expected generally in such situation. 9 The actual situation can concretize the case and may ease this very high expectation from the society. The two fault models and interpretations seemed to be very far from each other for centuries. In the past two decades, judges started to adopt the objective measure of an idealistic person in professional malpractice cases, constituting an almost strict liability of professionals who caused damages to a plaintiff, although there is no general definition of professionals, either at European, or at national level. Judges across Europe use this term for all running activities that require specific qualification, knowledge or skills. The starting point and justification for this rigorous approach is that a person who makes business with a professional is usually a lay person without the knowledge, qualification and skills. She entirely relies on that professional, who – therefore – infringes not only a personal but a public trust with the malpractice. Medical doctors, accountants, investment advisors, transport companies are all considered professionals and faced with the almost strict liability in both tort and contractual liability cases.

8

See REICH, Norbert, A European Contract Law: Ghost or Host for Integration? Wisconsin International Law Journal, Volume 24., 2006. 425-470. 9 This rules is the general rule in the Act 1954 of IV on the Hungarian Civil Code Art. 4. §

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We might have made an impression above that these changes were generated fully by judges serving in various jurisdictions. The truth is that the expectation of consumers, businesses and the people in general became a lot higher to professionals than it ever was in the past decades. It is not a change of mind in the society, more like a conscious process that starts forming the citizens of the European Union into a lot more litigious society than it was before. The economic crisis also helped speeding this process with making the hire of a professional a lot more painful economically, financially than ever before. D. Damages for Non-pecuniary Losses The question of general damages or immaterial damages as these are called in some jurisdiction provides the most diverse picture when it comes to the examination of civil liability in the Member States of the European Union. We cannot even find two countries that follow the same interpretation when it comes to awarding general damages. 10 Non-personal injuries as results of infringements of reputation, privacy, personal data, etc. are the most problematic ones when one needs to find common cores in European civil liability laws. Categorizing the Member States on this question is not an easy and certainly not a sane task. Awarding damages for non-pecuniary losses wear undeniable marks of social, cultural and in some cases economical significances and heritage of a Member State. Globalization and Europeanization led to many international debates, and claims in which plaintiffs and defendants were from different jurisdictions. While private international law of noncontractual obligations is harmonized in the European Union, even the general rule of lex loci damni (the law of the country where the damage arose is applicable) 11 does not provide real helping hand to judges. In most cases the damage, the non-monetary loss can only be measured in the soul and mind of the injured person and there is no way to give evidence to the existence or the amount, seriousness of it. There has always been a gap between Western and Eastern Europe on the evaluation of damages for non-pecuniary loss. Due to the long Soviet dominance in the Eastern hemisphere, personality rights are still very private and have less value, so judges tend to price them low. It is not a debate anymore that anyone has a right to protect her personality, however the exact value, the damages judges award vary significantly across Europe. In the 21st century European societies expect more protection of their personality rights than before. It is not only a new money making instrument for plaintiffs but a new approach of self-estimation. Statistics show dramatic rise of claims in this field. Not only the number of these claims but the damages plaintiffs claim show significant increase everywhere in the EU. Although there is a slight restraint in the amounts judges award these days as an effect of the economic crisis, both plaintiffs and judges feel the need to give more freedom to personal sphere and space than ever before. The right to privacy gets more and more attention and in contrary to legislative trends in some states, judges still explore new territories of human personality. 12 Another exciting trend in the judicial evaluation of damages for non-pecuniary losses is the acceptance and interpretation of loss of chance as damage. Mainly in medical malpractice cases, national courts accepted the existence of loss of chance as proof for existing damage. 10

FÉZER, Tamás, A nem vagyoni kártérítés megítélése a külföldi jogalkotásban és jogalkalmazásban, Studia Iurisprudentiae Doctorandorum Miskolciensium, Tomus 5/1, 2004. 163-186. 11 NAGY, Csongor István, Nemzetközi magánjog, HVG Orac, Budapest, 2011. 118. 12 ROGERS, Horton W. V., Damages for Non-Pecuniary Loss in a Comparative Perspective, Springer, Wien/New York, 2001. 292-293.

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The starting point was a pretty rigorous approach of burden of proof. Traditionally, mainly in the civil law legal systems of the continent civil liability traditionally required doubtless evidence from the plaintiff to prove both the existence and the amount of the damage she suffered. In cases when medical institutions did not exercised outmost care and misdiagnosed patients, the lack of doubtless evidence for better survival or healing options excluded claims for damages. The change in the attitude of judges evolved sometime around 2006, when medical malpractice cases became more frequent in the practice of national courts. The main reason for the increase of medical malpractice cases was the change of state policy in financing the health care sector in many Member States. Before the economic crisis started to show its real face, countries changed the original welfare state model to a more economic approach. The welfare state models provided almost free – or in certain Member States totally free – health care for citizens financed by the state budget. With the implementation of copayments and other increasing dividends in the system, people started to feel themselves real customers and initiated more medical malpractice claims than ever before. As we touched the issue of professional liability as an almost constantly evolving concept of strict liability, courts revaluated their approach to damages suffered in connection with damages for medical malpractice. E. Conclusions It seems to be a very strange way of evolution when it comes to the question and development of civil liability law in Europe. Although the European Union still has not succeeded with the adoption of truly efficient legislative instruments in order to approximate tort and contract liability in the laws of the Member States, national courts established many new and harmonized aspects and interpretation of classic tort and contract law institutions. Some authors see a systematic and well planned order in this process. They think the non-binding documents stuck in the level of academic debates, like the Principles of European Contract Law 13 or the Draft Common Frame of References (DCFR) 14 silently made impact on national laws without declaring themselves as binding, legislative instruments. We strongly argue with this view. If PETL and DCFR had been the engines of changes in liability law described above, mainly the national legislator would have adopted new laws. In reality, judicial practice took the old interpretation of tort law and contract law elements apart and built up a new interpretation to serve society more efficiently. This is a rare phenomenon when Member States harmonize their new approaches and trends without the existence of any binding implementation duty. Tort law and contract law are especially good excuses for such harmonization, since both classic private law territories live through real cases. The development of tort and contract law institutions requires undeniable judicial freedom in order to evaluate all important significances of each case.

13

LANDO, Ole (ed.), Principles of European Contract Law, Kluwer, 2003. VON BAR, Christian – CLIVE, Eric (eds.), Principles, Definitions, and Model Rules of European Private Law: Draft Common Frame of Reference (DCFR), Oxford University Press, 2010.

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II. P RECONDITIONS OF A SUCCESSFUL T ORT C LAIM Since the ancient Roman law, tort claims and the law of compensation generally required some preconditions in order to establish liability. The lack of such preconditions excludes liability. In modern days’ tort law there seem to be a common understanding about these preconditions: loss, wrongful act, causation and fault. Despite the fact these preconditions or so-called liability lemmas enjoy mutual acceptance in many modern legal systems, the interpretation and meaning behind each lemma may vary significantly. In most cases not only legislative products order a different interpretation or specific evaluation to the preconditions but judicial practice develops and applies these lemmas so lively. In the following few pages, we will explore the most important differences and the various theoretical approaches to the lemmas of civil liability and, in general, tort liability.

1. The interpretation and different meanings of fault The European continent experienced two very different way of development in tort law. While in England the lack of urbanization and the popularity of scattered, rural areas separated people from each other and led to the construction of a very strict liability in case of trespasses to a person or property, the rest of the old continent followed fault based liability from the very beginning of national laws. By now, fault remains an important factor in determining whether the tortfeasor is liable for the damages he caused, and, according to the general principle in all modern tort systems, no civil liability exists without fault. A. The common law approach The common law legal systems still apply a significant distinction between the two major degrees of fault: intention and negligence. This model has its roots from the early strict liability concept, when specific torts got acknowledgment step by step, evaluating the malicious conduct of the tortfeasor. Intentional torts are still listed as specific behaviors. The purest form of this theory can still be found in the U.S. tort system. According to the Restatement of Law Third, there are four important intentional torts causing harm to the person that constitutes liability. 1. Battery (intentional touching of a person) 2. Assault (the threat and conduct to touch a person) 3. False imprisonment 4. Intentional infliction of emotional distress Intentional harms to property interests are trespass to land and chattels and conversion. The key concept behind intentional torts is that physical damage is not needed to be entitled to compensation. If the assault – that really is just a threat – does not cause any material, physically provable damage to the person, the law of tort still makes the tortfeasor pay damages. The gross fault that is intention is prohibited in the above mentioned cases. This concept also requires a very subjective approach, since punitive elements can easily be identified behind the whole intentional tort concept. Without real harm, this obligation of the tortfeasor is arisen from the socially destructive conduct, an intention that must constitute some inner harm to the aggrieved party. In order to examine intention as a level of faulty 18

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behavior, judges take into consideration many special factors. It is obvious that only a person, who can entirely understand the consequences of his act, can be liable for intentional torts. Intention is not proved in cases when the defendant has no sane mental capacity to understand what his acts would result. This subjective concept of intention (fault) is very different from the duty of care doctrine. In case of search for intention the court must state whether avoiding the behavior was expected from the actual defendant or not. General expectance is not relevant here, only the personal skills and abilities, knowledge and mental capacity of the tortfeasor. The negligence tort concept has a close connection to duty of care. Duty of care is an obligation established for everybody. Duty of care requires the care that is generally accepted from a reasonable person in the given circumstances. It is a lot more objective than the concept of intentional torts. Negligence cannot arise exclusively from the personal skills and abilities of the defendant. This measurement shall be something of what an ideal and diligent, reasonable person would do, the way he would act under those circumstances. In the common law sense, the degree of fault truly matters and it decides whether somebody is liable for some unlawful behavior, or we also need some damages to exist in order to provide compensation to the injured, aggrieved party. B. The civil law approach In the civil law legal systems, the concept of fault is more like an imputation concept, without the real inner distinction between intention and negligence. In the French Civil Code the general rule of torts can vividly express this concept: “Any act of a person which causes damage to another makes him by whose fault the damage occurred liable to make reparation for the damage.” 15 The quoted provision of the Civil Code is an excellent example why the degree of fault is irrelevant. Civil law legal systems think of tort law as an instrument of compensation, reparation and not a legal institution with punitive character. The key concept here is whether the plaintiff suffered any damages or not. If there is no loss or damage provable, even the most malicious conduct will not constitute tort liability in civil law legal systems. Damage is an essential part of torts, and as a result it is almost totally irrelevant what type of faulty behavior caused it. It might be just a little bit negligent, grossly negligent, intentional, etc. All these degrees of fault fall into the same category during the evaluation and adjudication of damages. The duty of care principle is general in these cases and compares the defendant’s behavior, act or omission to what is generally expected from a reasonable person under the given circumstances. The skills and abilities of the defendant basically do not make any impact on the grounds of liability. The only notable exception is when the defendant’s mental capacity is so low that fault cannot be established against him (for example underage tortfeasors cannot be liable for the damage they cause). C. Fault in Business Relations As we will discuss if later, business relations require a somewhat different approach in civil liability. The duty of care principle is very different against an ordinary person and a professional. The most notable example to this doctrine is the civil liability of company 15

French Code Civil Art. 1382.

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managers, chief executive officers (CEO) of a company. Especially common law systems developed a separate concept for duty of care in case of company professionals. They call it the business judgment rule and loyalty principle. According to this concept, CEOs must act in the best interest of the shareholders and all the decisions they make on behalf of the company should meet the general interest of the shareholders. In case a decision by the management proves to be wrong, causing loss to the company, basically to the shareholders indirectly, the managers may only get exoneration under liability if they can successfully prove they acted in the best interest of the shareholders and their acts were reasonable and professional under those circumstances. The business judgment rule expresses this reasonableness. Good conduct or bona fide does not count here. Courts tend to examine the same information, evidence, market analysis the managers had access to back that time when they acted. If there act does not meet the reasonably justified business judgment rule, they will be liable for the damage the decision caused to the company. We will see many examples for such higher duty of care expectations in our last chapter on special forms of tort liability, in the professional liability topic.

2. Wrongful act and omission Another precondition or tort lemma is that the behavior (act or omission) that led to causing damage to the plaintiff must be wrongful, unlawful. Contrary to criminal law, civil liability does not provide an exhaustive list of all prohibited, unlawful behaviors, acts and omissions. In general, all behaviors causing damage to another person shall constitute civil liability and the obligation to pay damages to the aggrieved party. Wrongfulness is almost a presumption in tort law that only requires evidence theoretically. Since all damaging behaviors constitute liability, courts tend to think about unlawfulness as a general presumption that might get disproved if the defendant wants to disprove it. We call it a reversed concept of evidence, as the defendant should refer to special circumstances that exclude the wrongfulness of his act or omission. We call these defenses waivers of tort or excused torts, justification principles of the behavior. The most notable and generally accepted defenses are consent and privileges and immunities. A. Consent If the person gives consent to the tortfeasor before the damaging act, this consent exonerates the tortfeasor under tort liability. However, consent must be interpreted very restrictively. Theoretically the aggrieved party may only give consent to a wrongful damaging behavior if he is well aware of the consequences of it. A great example to this doctrine is the informed consent problem in medical care. Medical doctors infringe physical integrity of the patient, causing him bodily injury when performing an open surgery on him. Not the better cause but the patient’s consent will be the justification of this damaging act, the surgery itself. Unless the consent is given after providing detailed information to the patient, tort liability exists for negative consequences. The detailed and personalized information is essential before the surgery in order to get consent from the patient. Volenti non fit injuria (to a willing person, injury is not done) is an old Roman law principle. It is basically a voluntary assumption of risk (volenti). In English tort law, volenti is a full defense, as it fully exonerates the defendant who succeeds in proving it. The defense has two main elements:

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• •

The claimant was fully aware of all the risks involved, including both the nature and the extent of the risk; and The claimant expressly (by his statement) or impliedly (by his actions) consented to waive all claims for damages. His knowledge of the risk is not sufficient: sciens non est volens (knowing is not volunteering). His consent must be free and voluntary, so not brought about by duress. If the relationship between the claimant and defendant is such that there is doubt as to whether the consent was truly voluntary, such as the relationship between workers and employers, the courts are unlikely to find volenti.

It is not easy for a defendant to show both elements and therefore comparative negligence usually constitutes a better defense in many cases. Note however that comparative negligence is a partial defense, i.e. it usually leads to a reduction of payable damages rather than a full exclusion of liability. Also, the person consenting to an act may not always be negligent: a bungee jumper may take the greatest possible care not to be injured, and if he is, the defense available to the organizer of the event will be volenti, not comparative negligence. The famous Titchner v. British Railways Board case 16 demonstrates this doctrine in action. Miss Titchener, a 15 year old girl, climbed through a gap in a fence onto a railway line owned by the British Railways Board. She was hit by a train. She sued the board under the Occupiers' Liability (Scotland) Act 1960 for failing in their common duty of care to keep the premises reasonably safe for visitors. The Inner House of the Court of Session held that the pursuer had taken a chance, fully aware of the risks involved and that the Board had no responsibility to maintain the fence any more than they had. The House of Lords dismissed the claimant's final appeal, holding that she was not owed any duty under the Occupiers' Liability (Scotland) Act 1960 on the grounds that she had voluntarily decided to run the risk of walking on the railway line. As such, the defender had no duty, at least in relation to the pursuer, to maintain the fence any better than they had, based on the principle of volenti non fit injuria. B. Privileges and Immunities In statutory law special privileges and immunities are granted to the tortfeasor. These privileges and immunities are commonly the following: • • • •

Protection of self and others (self-defense, emergency); Protection of property interest; Parental discipline (unless it causes bodily injury); Protection of public interests (for example, eminent domain and expropriation cases);

In case of self-defense and emergency situations the tortfeasor acts in order to prevent a threatening attack delivered by another person. Lawful self-defense and emergency acts must be proportionate; must not cause bigger harms to the attacker (the aggrieved party in this regard) than what they intended to prevent. Self-defense is normally applied exclusively to the intentional tort of assault, and battery, but can also be used in false imprisonment cases. This defense is used by a defendant to justify his actions. When a person is attacked or threatened he has the right to cause harm to the attacker in order to protect himself under certain conditions. Although a person reserves the right to protect himself, once the threat of danger 16

Titchner v. British Railways Board [1983] 1 WLR 1427

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is removed, the privilege of self-defense is also removed. A person cannot attack another to exact revenge or for any other reason besides the threat of immediate harm. This concept is usually familiar to the average person: if you are being attacked you have the personal right to exert approximately the same amount of force to protect yourself from injury. Eminent domain is exercising state power to take private property for public use. Eminent domain privilege relies exclusively on statutory law even in the common law legal systems. In almost every jurisdiction some kind of compensation is required, however it is a different kind of compensation as no unlawful act happened, so some elements of damages are not recoverable in every legal system (such as lost profit, praetium affectionis, etc.).

3. Causation Theories – Limits on Liability Causal link is essential to connect the wrongful act to the damage done. Only damage that is a result of the unlawful act is compensable under tort principles in civil law legal systems (we do not take punitive damages of common law systems into consideration in this chapter as these have a very different motivation than compensation). Causal link can be a problem in different situations, especially when the plaintiff claims indirect damages, pure economic loss or loss of profit in connection with a tortious behavior. Many theories exist in order to base causation between the unlawful act, omission and the damage suffered by the plaintiff, the aggrieved party. A. But-for test and substantial causes The basic test for establishing causation is the "but-for" test in which the defendant will be liable only if the claimant’s damage would not have occurred "but for" his negligence. Alternatively, the defendant will not be liable if the damage would, or could on the balance of probabilities; have occurred anyway, regardless of his or her negligence. To understand this, a distinction has to be made between cause and a precondition for the events. The South Australia Asset Management Corp v York Montague Ltd case 17 gave an excellent example to this. "A mountaineer about to undertake a difficult climb is concerned about the fitness of his knee. He goes to a doctor who negligently makes a superficial examination and pronounces the knee fit. The climber goes on the expedition, which he would not have undertaken if the doctor had told him the true state of his knee. He suffers an injury which is an entirely foreseeable consequence of mountaineering but has nothing to do with his knee." The doctor's negligence does result in the mountaineer running a risk which he otherwise would not have done, but this is insufficient to incur liability. The purpose of the doctor's duty to take care is to protect the mountaineer against injuries caused by the failure of the knee, not rock falls. Even though the injury might be reasonably foreseeable, the doctor is not liable. In The Empire Jamaica case 18, the owners sent their ship to sea without properly licensed officers. The pilot fell asleep, and a collision occurred. Though the pilot was negligent at the time, he was generally competent. Thus the question for the courts was: were the owners liable for the collision because they sent their ship to sea without properly licensed officers? Or was the factual precondition superseded by the question as to the competence of the pilot? 17 18

South Australia Asset Management Corp v York Montague Ltd case (SAAMCO) [1997] AC 191, 214 The Empire Jamaica (1955) 1 AER 452

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There is no question that sending the ship to sea is "a cause" of the collision. The legal question is whether it is "the cause". This is a question that the courts treat as objective, addressed by evidence and argument. The process for establishing legal causation as constructing a parallel series of events (counterfactual situation), and comment: "the parallel series is constructed by asking what the course of events would have been had the defendant acted lawfully." 19 Thus, the owners were not liable. Although they sent the ship to sea without licensed officers (what actually transpired) rather than with licensed officers (the lawful course), the cause of collision was failing to navigate a safe passage. As to the pilot, his lack of license did not bear on his general competence. The significant factor was the pilot's negligence at the time, and the pilot's lack of license made no difference there. Had the pilot been licensed, he would have been no less likely to sleep. The license would not have awoken him. The owners were, therefore, exonerated on grounds that whether or not the pilot held a license made no difference to the real cause, which was not the pilot's general level of competence, but rather his negligence at the time. In the Pickford v Imperial Chemical Industries case 20 the House of Lords were asked to determine the cause of repetitive strain injury in a typist. Court posed the question, "That immediately raises the point that there must be an explanation for the fact that she contracted PDA4. What was the cause of her PDA4? There really was no alternative on the evidence to concluding that this condition was caused by Miss Pickford's typing work." But alternative explanations are that typing might aggravate an inherent condition or generally be an unsuitable occupation for someone with a predisposition to that condition, and neither proves the legal cause. In all cases, the burden of proof is on the claimant to prove the cause as pleaded. There is no burden on the defendant to prove an alternative explanation of the cause of any loss or damage, but a failure to do so may be a factor in deciding whether the claimant's explanation of the cause should be accepted. This test works well in straightforward situations, but it proves less successful in establishing causation in more complex situations where a number of actual or potential causes operate either consecutively or concurrently. B. Multiple Causes If one’s injury is caused by the combined negligence of multiple tortfeasors, liability will be determined according to one of several tests.

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Substantial Factor Test. In cases where the negligent actions of each tortfeasor alone would have caused the entire injury by itself and the harm is indivisible so that damages cannot be apportioned among tortfeasors, each is liable for causing the entire harm. To be liable, a defendant’s negligence must have played a substantial part in causing the harm.

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Multiple Negligence. In cases where the negligent actions of each defendant would not have caused the injury alone, each is liable for the damage each defendant actually caused.

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Alternative Causes. If it cannot be determined which of the two negligent actors caused the injury, both are liable unless one can prove his innocence.

HARt, H. L. A. – HONORE, A. M., Causation in the Law, Clarendon Press, Oxford, 1985. 156. Pickford v Imperial Chemical Industries (1998) 1 WLR 1189

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Enterprise Liability Theory. Each member of an enterprise is liable for damages caused by the enterprise as a whole when there has been close cooperation among the different members and damages cannot be apportioned.

C. Third Party Acts Whether the acts of a third party break the chain of causation depends on whether the intervention was foreseeable. The general rule is that the original defendant will be held responsible for harm caused by a third party as a direct result of his or her negligence, provided it was a highly likely consequence. So, for example, where the defendant has control over the third party, or where the third party is faced with a dilemma created by the defendant, the chain of causation is unlikely to be broken and the defendant will normally be liable to the claimant for the damage caused: Home Office v. Dorset Yacht Co Ltd. 21 The continuity of liability is not imposed merely because the original negligence makes damage by the third party foreseeable, but where the defendant’s negligence makes it very likely that the third party will cause damage to the claimant: Lamb v. Camden LBC 22. In practice, however, the requirement that the third party intervention will usually break the chain and, at the very least, the liability to pay compensation representing the totality of the loss or damage will be apportioned between the two or more tortfeasors. So, for example, if A injures V, it is foreseeable that an ambulance will be called, that paramedics will lift and carry V, and that there will be a journey back to the hospital. This cycle of intervention is continued in the hospital. None of this activity affecting V would arise "but for" the original negligence so A will remain liable unless and until either an unforeseeable B intervenes (e.g. negligently drives his car and collides with the ambulance), or a paramedic or member of the hospital staff is so seriously negligent that it becomes a new cause of action.

4. Damages in Different Jurisdictions There is an important difference between the civil legal systems and the common law systems when it comes to the types of damages. However, the existence of some kind of damage is only essential in civil law legal systems, as in case of intentional torts, common law systems may find somebody tortiously liable even if the malicious act did not result in damage for the plaintiff. A. Classification of Damages in Civil Law Civil law legal systems have a very easy distinction between monetary damage and nonpecuniary loss. The former has three elements: • •

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The actual damage is the damage someone sufferers in his property in case of a malicious act. It can easily be a loss of market value of the actual property or anything else that is immediately recognizable for the aggrieved party as a loss in his property. Lost profit is more problematic. Lost profit is about future losses in connection with the tort. However these losses are not obvious and further evidence may be required. Only those lost profits are recoverable that the plaintiff would have been absolutely entitled to, if the tort had not been committed.

Home Office v. Dorset Yacht Co Ltd. [1970] AC 1004 Lamb v. Camden LBC [1981] QB 625

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Costs to mitigate the consequence of the tort. In order to minimize the negative consequences, the damage of a tort, the aggrieved party often has to invest. A smashed car must be towed away or the broken door may need a lock replacement.

B. Damage in Common Law Legal Systems English common law has multiple types of damages. • •

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•

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General damages are non-pecuniary losses suffered in connection with personal or non-personal injuries, infringements against personality rights. Courts evaluate these damages and calculate it freely as the consequences are hard to prove (inner harms). Special damages are for recovering all monetary loss the plaintiff suffered. They are asked for in addition to general damages. These two types are classified as compensatory damages and are both designed to return persons to the position they were in prior to the alleged injury. For example, if a person was injured in an automobile accident, the victim could seek damages that would cover medical expenses, damage to the motor vehicle, and the loss of earnings now and in the future. Each of these would be classified as special damages. If the victim sought a money award for pain and suffering, mental anguish, and loss of consortium, these would be classified as general damages. Thus, special damages are based on measurable dollar amounts of actual loss, while general damages are for intangible losses that can be inferred from special damages as well as other facts surrounding the case. In this description special damages are damages that are reduced to a "sum certain" before trial. Torts actionable per se are interesting instruments to make the tortfeasor pay damages in case of damages that cannot be proven, however the wrongful act or omission was available to hurt some personality right of the plaintiff. No obvious damage is proven here, so this type of damages is more like an ideal compensation. Contemptuous damages. A very small sum of damages awarded when, although the claimant is technically entitled to succeed, the court thinks that the action should not have been brought. Contemptuous damages are sometimes awarded in actions for defamation where harm to reputation is deemed minimum.23 Exemplary of punitive damages. Punitive damages or exemplary damages are damages intended to reform or deter the defendant and others from engaging in conduct similar to that which formed the basis of the lawsuit. Although the purpose of punitive damages is not to compensate the plaintiff, the plaintiff will receive all or some portion of the punitive damage award. Punitive damages are often awarded where compensatory damages are deemed an inadequate remedy. The court may impose them to prevent under-compensation of plaintiffs, to allow redress for undetectable torts and taking some strain away from the criminal justice system.

5. Case-law Case #1 Mohr v. Williams 104 NW 12 (Minnesota 1905)

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Grobbelaar v News Group Newspapers Ltd [2002] UK UL 40

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The first case we examine is a U.S. case of informed consent. In order to prove there was no wrongfulness in the act of the tortfeasor, the defendant, proving consent from the plaintiff, the aggrieved party is essential. It is a crucial point in medical informed consent cases, when – technically – the medical doctors cause bodily injury to the plaintiff with cutting him open in order to perform a surgery. This is why informed consent declarations are mandatory. The problem with such declarations is that they might not specify the information to the actual case. Uniformed formulas are not sufficient to prove the plaintiff understood all circumstances, potential dangers and risks that come with the operation, the surgery. Defendant is a physician and surgeon of standing and character, making disorders of the ear a specialty, and having extensive practice in the city of St. Paul, Minnesota. He was consulted by plaintiff, who complained to him of trouble with her right ear, and per her request, made an examination of that organ for the purpose of ascertaining its condition. He also at the same time examined her left ear, but, owing the foreign substances therein, was unable to make a full and complete diagnosis at that initial consultation. The examination of her right ear disclosed a large perforation in the lower portion of the drum membrane, and a large polyp in the middle ear, which indicated that some of the bones of the middle ear (ossicles) were probably diseased. He informed the plaintiff of the result of his initial consultation, and advised an operation for the purpose of removing the polyp and the diseased ossicles. After consultation with her family physician, Dr. Davis, and one or two further consultations with defendant, the plaintiff decided to submit to the proposed operation. She was not informed that her left ear was in any way diseased, and understood that the necessity for the operation applied to her right ear only. She repaired to the hospital and was placed under the influence of anesthetics; and, after being made unconscious; the defendant made a thorough examination of her left ear and found it in a more serious condition than her right one. A small perforation was discovered high up in the drum membrane, hooded, and with granulated edges, and the bone of the inner wall of the middle ear was diseased and dead. He called this discovery to the attention of Dr. Davis – plaintiff’s family physician who attended the operation at her request – who also examined the ear and confirmed the defendant’s diagnosis. The defendant also further examined the right ear, and found its condition less serious than he had expected, and finally concluded that the left, instead of the right, should be operated upon; devoting to the right ear other treatment. He then performed the operation of an ossiculectomy on plaintiff’s left ear; removing a portion of the drum membrane, and scrapping away the diseased portion of the inner wall of the ear. The operation was in every way successful and skillfully performed. Plaintiff does not claim defendant was in any way negligent; indeed his performance of the operation was impeccable. Nevertheless, it is claimed by plaintiff that the operation greatly impaired her hearing, seriously injured her person and having not been consented by her, constituted an assault and battery, and she brought this action to recover damages therefore. The trial in the court below resulted in a verdict for the plaintiff in the amount of $34,322.50. The defendant appealed. The Court first refused to overturn the jury’s finding of no emergency. He then held that the plaintiff’s consent to the operation could not be otherwise implied in law, and said in part: “The last contention of defendant is that the act complained of did not amount to an assault and battery. This is based up the theory that, the plaintiff’s left ear was in fact diseased, in a 26

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condition dangerous and threatening to her health, the operation was necessary, and, having been skillfully performed at a time when plaintiff had requested a like operation of the other ear, the charge of assault and battery cannot be sustained; that in view of these conditions and the claim that there was no negligence on the part of the defendant, and an entire absence of any evidence tending to show an evil or malicious intent, the court should say as a matter of law that no assault and battery was committed, even though the plaintiff did not consent to the operation. In other words, the defendant contends that the absence of showing the defendant was actuated by any wrongful intent or intent to harm should relieve the act of defendant from the charge of an assault and battery. We are unable to reach that conclusion. It seems clear from what has been said on the other features of the case that the act of defendant amounted at least a technical assault and battery. If the operation was performed without plaintiff’s consent, and the circumstances were not such as to amount to an emergency, the operation was wrongful and torturous. Under the past cases in Minnesota, every person has the right to complete immunity of his person from intentional physical interference by others without his consent. An exception is created for contacts that may be necessary during an emergency. Otherwise, any unauthorized intentional touching of a person by another, except to be in the spirit of pleasantry, constitutes an assault and battery. In this case as we have already seen, the question whether the defendant’s act in performing the operation upon the plaintiff was consented to and hence authorized was a question for the jury to determine, and the jury found no consent. If defendant’s touching of her left ear was unauthorized, then it was, in light of what we have ruled, a violent assault, not a mere pleasantry; and even though no negligence is shown, it was torturous. The case is unlike a criminal prosecution for assault and battery, in which an intent to harm must be shown. But that rule does not apply to a tort action, to maintain which it is sufficient to show that the contact complained of was intended by the defendant.” The beneficial nature of the operation and the unquestioned good faith of the defendant are matters that should be taken into consideration by the jury in its assessment of damages. Judgment for plaintiff affirmed. Now virtually all medical procedures in the United States, except in emergencies, are preceded by the plaintiff signing a written consent form. One paragraph of the written consent form usually states the following: “I consent to the performance of operations and procedures in addition to or different from those now contemplated, whether or not arising from presently unforeseen conditions, which the above named doctor or his associates or assistants may consider necessary or advisable in the course of the operation.” Written consent forms in the United States are typically lengthy. They describe the risks of the recommended treatments, alternative treatments, and the risks arising from those alternatives, and the risk arising from no treatment.

Case #2 Palmateer v. Ross 27

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The second case is another U.S. case to show how intentional torts are handled on court. This case is particularly interesting as it analyzes the civil liability consequences of an act that constitutes a crime as well. The plaintiff Dorothy Palmateer, executrix of the estate of her deceased husband Arthur Palmateer, brought this action against the defendant Norman Ross, seeking to recover damages for wrongful death. The trial judge rendered judgment for the plaintiff, the defendant has appealed. We find no error in the trial judges handling of the case and hence affirm the judgment. On the afternoon of November 20, 1976, the defendant and his two-month old daughter visited the home of Arthur Palmateer, his father–in-law. Palmateer lived with his wife Dorothy, the plaintiff, and their eleven-year old son, Robert. During the early evening Robert noticed a disturbance in the living room where he saw the defendant Ross astride Palmateer on a couch beating him on the head with a beer bottle. Robert heard his father, Arthur Palmateer exclaim as he was being struck “Norm you’re killing me” and Robert ran to get help. Thereafter, the defendant went into Palmateer’s bedroom where he took a box of 30/30 caliber ammunition from the bottom drawer of the dresser and a 30/30 caliber Winchester rifle from the closet. He then returned to the living room and shot Palmateer twice, causing his death. About five hours later, the defendant was found sitting on a stump in a wooded area approximately one half mile away from the Palmateer home. The defendant was naked and his two-month old daughter was in his arms wrapped in his clothes and was crying. Blood was found on his clothes, and he had with him the Winchester rifle, later determined to be the murder weapon. The defendant was taken to a local hospital. The defendant was charged with the crime of murder pursuant to Connecticut’s criminal statutes, but was found not guilty by reason of insanity. Doctor Walter Borden, a psychiatrist, testified at both the criminal and this tort proceeding regarding the defendant’s sanity. In the present civil case Borden testified that, at the time of the homicide, the defendant was suffering from a severe case of paranoid schizophrenia that involved delusions of prosecution and also involved auditory hallucinations. He concluded that the defendant was legally insane and could not form a rational choice but that he could make a schizophrenic or crazy choice. He was not in the fugue state. The trial court in the tort case found that at the time of the homicide the defendant was insane. After a trial to the court without a jury, the court found for the plaintiff and awarded compensatory damages of 1.1 million dollars. On appeal, the defendant claims that the trial court erred in failing to apply the following two-pronged analysis to his claim: first whether the defendant intended the contact that produced the injury; and second whether the defendant intended the resulting injury. The first prong is whether the defendant intended the contact that produced the injury. Past decisions in our state have held that “a muscular movement which is purely reflexive or the convulsive movements of an epileptic cannot give rise to an intentional tort. So to, movements of the body during sleep or while the will is otherwise in advance cannot give rise to an intentional tort. An external manifestation of the will is necessary to constitute an act, and an act is necessary to make one liable for battery. “The defendant argues that if his “activities were the external manifestation of irrational and uncontrollable thought disorders, these activities cannot be acts which, when coupled with intent to contact, will establish liability for assault and battery.” We disagree.

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We note that we have not been referred to any evidence indicating that the defendant’s acts were reflexive, convulsive or epileptic. Although the trial court found that the defendant could not form a rational choice, it did find that he could make a schizophrenic or crazy choice. Moreover, a rational choice is not required because, under our cases, “an insane person may have intent to invade the interests of another, even though his reasons and motives for forming that intention may be entirely irrational.” The case of McGuire v. Almy illustrates the point: “If a person who is insane believes that he is Napolean Bonaparte and that his nurse who confines him in his room is an agent of the Duke of Wellington endeavoring to prevent his arrival on the field of Waterloo in time to win the battle, the insane person nevertheless commits a battery when he breaks off the leg of a chair, attacks the nurse with it, and fractures her skull.” The explanations given by the defendant for striking and shooting Palmateer are similar to the irrational reasons and motives discussed in McGuire v. Almy. He stated he wanted to make his father-in-law suffer for his bad habits so he would realize the wrong that he had done. He also told the police officer that he was a supreme being and had the power to rule the destiny of the world and could make his bed fly out of the window. When interviewed by Dr. Borden, the defendant stated that he believed his father-in-law was a spy for the red Chinese and that he believed his father-in-law was not only going to kill him but going to harm his infant child. Hence, he claimed to have killed his father-in-law in self-defense. The second prong of the defendant’s claim is that the trial court erred in failing to determine whether the defendant intended the resulting injury to Palmateer. The defendant argues in his brief that the trial court must find the defendant acted for the purpose of causing or with the desire to cause the resulting injury. This argument ignores the difference between criminal law and tort law. To be guilty of murder in the criminal law, the person must intend to cause the death of another person but to be liable a battery in tort law, a person need only intend to cause harmful or offensive contact. It is not essential that the precise injury which resulted be the injury intended; indeed the defendant need not intend any injury. It is not necessary for a defendant’s reasons and motives for forming his reason and intentions to contact another to be rational in order for him to have the requisite intent. Considering defendant’s statement to the police and to Borden that he intended to punish Palmateer, we are persuaded that when the defendant struck and shot Palmateer, he intended to inflict a harmful or offensive contact upon him. There being no error in the trial judges handling of the case, the judgment is affirmed. Notes: Most intentional tort cases in the United States are brought against large organizations or professionals. This is partly because liability insurance policies typically exclude coverage for liability arising from the harms their insurers intentionally inflict; thereby limiting the available money plaintiffs can collect. Nevertheless, there are enough wealthy individuals, like Ross or like Dr. Williams, to yield some intentional tort suits each year. Tort judgments are collected just like any other bill is collected. Tort judgments arising from intentional torts cannot be discharged by defendants filing bankruptcy. Nevertheless, some states have prodebtor laws which make the collection of tort judgments such as these costly and difficult. Florida, for example, has such pro-debtor laws that the famous football player O.J. Simpson, a Florida resident, has been able to avoid paying almost all of the $30 million dollar tort judgment against him for killing Ronald Goldman in 1994. 29

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CASE #3 Vaughan v. Menlove 132 ENG. REP. 490 (1837) There are two categories of torts in the Anglo-Saxon legal systems: intentional and negligent torts. Unintentional or negligent torts are much more diverse than their intentional counterparts. The reason for this is that in practice it has a lot more reality than for intentional torts. For example, a patient may be harmed if a doctor makes a mistake in diagnosing an illness, or in the way in which he performs surgery. Someone shopping in the store may slip or fall if a store employee cleans a floor in a way that makes it extremely slippery. There are many more cases requiring courts to sort out the consequences of unintentional injuries than of intentional ones. In the most unintentional injuries, the injured plaintiff seeking to recover must show the defendant was negligent (that is, breached the duty of ordinary care), and that such negligence caused the plaintiff’s injury. The U.S. test for negligence sounds somewhat similar to the one in almost every EU Member States’ civil law. These all require for liability that the defendant failed to act as generally expected under the circumstances. Another name for the “breach of ordinary care” standard is “the reasonable person” standard. The cases below illustrate what courts and jurors are to consider in deciding whether the defendant has breached the ordinary care standard and has thus been negligent. The defendant built a hay rick near his neighbor’s land. The hay rick caught fire due to spontaneous combustion, and the fire spread to the cottages on the plaintiff’s neighbor’s land and destroyed them. The plaintiff’s neighbor sought damages, alleging that the defendant had built the hay rick badly (i.e. negligently) in a way that facilitated the combustion. The trial court instructed the jury that the defendant was required to have acted with ordinary care under the circumstances. Following a verdict for the plaintiff the defendant won a new trial on the grounds that the jury should have been directed to consider, not whether the defendant had been guilty of negligence with reference to the standard of ordinary care, a standard “ too uncertain to afford any criterion, but whether defendant had acted bona fide to the best of his judgment; if he had, the defendant ought not to be responsible for the misfortune of not possessing the highest order of intelligence and thus not knowing how to build the hay rick so it would be reasonably safe”. Reviewing that grant of a new trial, the court of common pleas stated: It is contended that the question ought to have been whether the defendant had acted honestly and bona fide to the best of his own judgment. That, however, would leave so vague a line as to afford no rule at all, the degree of judgment belonging to each individual being infinitely various. And though it has been urged that the care which a prudent person would take is not an intelligible proposition as a rule of law, yet such has always been the rule adopted in this country. The care taken by a prudent man has always been the rule laid down; and as to the supposed difficulty of applying it, a jury has always been able to say, whether, taking that rule as their guide, there has been negligence on the occasion in question. Instead, therefore, of saying that the liability for negligence should be co-extensive with the judgment of each individual, which would be as variable as the length of the foot of each individual, we ought rather to adhere to the rule which requires in all cases a regard to caution 30

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such as a man of ordinary care would observe. That was in substance the criterion presented to the jury in this case, and therefore the judgment below for plaintiff must be affirmed. CASE #4 United States v. Carroll Towing Co. 159 F2D 169 (2d. Cir. 1947) A barge, the Anna C, was sunk in New York Harbor on January 4, 1944. The sinking was due to the negligence of the tugboat company, the Carroll Towing, Co., which carelessly unmoored Anna C from her berth. The Carroll Towing Co. (defendant), seeks to reduce its damages by showing that the bargee of the Anna C was contributory negligent in being absent from the barge during the busy daytime hours in which the barge was unmoored. Had the bargee of the Anna C been on board, the defendant contends, he would have seen that the hull of the Anna C had been penetrated when it collided with another vessel and would have called for help in time to keep the barge from sinking. Under U.S. Admiralty law – and now under the law of all the states – contributory negligence by the plaintiff, if shown, will reduce the defendant’s damages proportionately. For this reason the question arises whether the bargee was negligent in being absent during the working hours of daylight, during this busy January during wartime. It appears from the foregoing review that there is no general rule to determine when the absence of a bargee or other attendant will make the owner of the barge liable when the barge breaks away from her moorings. It becomes apparent why there can be no such general rule, when we consider the grounds for such liability. Since there are occasions when every vessel will break from her moorings, and since, if she does, she becomes a menace to herself and to those about her, the owner’s duty of care, as in other similar situations, is a function of three variables: 1. The probability that she will break away; 2. the gravity of the resulting injury if she does; 3. the burden of adequate precautions. Possibly it serves to bring this notion into relief to state it in algebraic terms: if the probability be called P; the injury, L; and the burden, B; liability depends upon whether B < P x L: i.e., whether B is less than PL. Applied to the situation at bar, the likelihood that a barge will break from her fast and the damage she will do varies with place and time; for example, if a storm threatens, the danger is greater; so it is, if she is in a crowded harbor where moored barges are constantly being shifted about. On the other hand, the barge must not be the bargee’s prison, because even though he lives aboard, he must go ashore at times. We need not say whether even in such crowded waters as New York harbor, a bargee must be aboard at night at all. We merely hold that it is not in all cases a sufficient answer to the bargee’s absence without excuse, during working hours, that he has properly made fast his barge to a peer when he leaves her. In the case at bar, the bargee left at 5:00 in the afternoon of January 3rd, and the barge was unmoored at about 2:00 in the afternoon of the following day, 21 hours afterwards. The bargee had been away all that time, and we hold that his fabricated story was affirmative evidence that he had no excuse for his absence. At the locus in quo – especially during the short January days and in the full tide of war activity - barges were constantly being drilled in and out. Certainly it was not beyond the bargee’s expectation that with the inevitable haste and bustle the work might not be done perfectly. In such circumstances we hold – and it is all 31

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that we do hold – that it was a fair requirement that the owners of the Anna C should have a bargee aboard (unless he had an excuse for his absence), during the working hours of daylight during wartime.

CASE # 5 McCarty v. Pheasant Run, Inc. 826 F2D 1554 (7th Cir. 1987)

Dulah McCarty, a guest at the Pheasant Run Lodge in St. Charles, Illinois, was assaulted by an intruder in her room, and brought suit against the owner of the resort. The suit charges negligence, and bases federal jurisdiction on diversity of citizenship. The parties agree that Illinois law governs. The jury brought in a verdict for the defendant and Mrs. McCarty appeals. In 1981, Mrs. McCarty, then 58 years old and a merchandise manager for Sears Roebuck, checked into Pheasant Run – a large resort hotel on 160 acres outside of Chicago. In one wall of her 2nd floor room was a sliding glass door equipped with a lock and a safety chain. The glass door opens onto a walkway that has stairs leading to a lighted courtyard to which there is public access. The drapes were drawn and the door covered by them. The door is routinely locked when a guest departs, and there is no evidence this procedure was not followed here. After checking in and apparently unlocking the sliding glass door, Mrs. McCarty left the room for dinner and a meeting. When she returned, she undressed and got ready for bed. As she was coming out of the bathroom, she was attacked by a man with a stocking mask. He beat and threatened to rape her. She fought him off, and he fled. He has never been caught. Although Mrs. McCarty’s physical injuries were not serious, she also claims that the incident caused prolonged emotional distress. Investigation of the incident by the police revealed that the sliding glass door had been closed but not locked when Mrs. McCarty earlier left the room. The investigation also showed the sliding glass door had been pried open from the outside, and the security chain had been broken. The intruder must have entered Mrs. McCarty’s room by opening the door to the extent permitted by the chain, breaking the chain, and sliding the door open the rest of the way. Then he concealed himself somewhere in the room until she returned and entered the bathroom. Mrs. McCarty argues that the judge should have granted her a motion for judgment notwithstanding the jury’s verdict for the defendant. She claims the evidence of negligence by the defendant was so overwhelming that no sensible jury could find the defendant was not negligent and thus the court should have directed a verdict in her favor with the only issue for the jury being the amount of her damages. In denying the motion for judgment notwithstanding the verdict, the District Court correctly pointed out that the case was not so one-sided in the plaintiff’s favor on the issue of negligence. Her theories of negligence are that the defendant should have warned her to keep the sliding glass door locked; should have equipped the door with a better lock; should have had more security guards (only two were on duty, and the motel has more than 500 rooms), should have made the walkway in which the door opened inaccessible from ground level; 32

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should have adopted better procedures for preventing unauthorized persons from getting a hold of keys to guests rooms; or should have done a combination of these things. The suggestion that the defendant should have had better procedures for keeping keys away from unauthorized persons is irrelevant, for it is extremely unlikely that the intruder entered the room through the front door. The other theories were for the jury to accept or reject and its rejection of them were not unreasonable. There are various ways in which courts formulate the standard for negligence. The analytically most precise is that it involves determining whether the burden of precaution is less than the magnitude of the accident, if it occurs, multiplied by the probability of occurrence (the product of this multiplication or “discounting” is what economists call an expected accident cost). If the burden is less, the precaution should be taken. This is the famous “Hand Formula” announced in United States v. Carroll Towing Co., an admiralty case, and since applied in a variety of cases not limited to admiralty. It is not authorized to change the common law of Illinois, however, and Illinois courts do not cite the Hand Formula but instead define negligence as a failure to use ordinary care, a term left undefined. But as this is a distinction without a substantive difference, we have not hesitated to use the Hand Formula in cases governed by Illinois law. The formula translates into economic terms the conventional legal test for negligence. This can be seen by considering the factors that the Illinois courts take into account in negligence cases: the same factors, and in the same relation, as in the Hand Formula. Unreasonable conduct is merely the failure to take precautions that would generate greater benefits in avoiding accidents than the precautions would cost. Ordinarily, and here, the parties do not give the jury the information required to quantify the variables that the Hand Formula picks out as relevant. For many years to come jurors may be forced to make rough judgments of reasonableness, intuiting rather than measuring the factors in the Hand Formula; and so long as their judgment is reasonable, the trial judge has no right to set it aside, let alone substitute his own judgment. Having failed to make much effort to show the mishap could have been prevented by precautions of reasonable cost and efficacy, Mrs. McCarty is in a weak position to complain about the jury verdict. No effort was made to inform the jury what it would cost to equip every room in the Pheasant Run Lodge with a new lock, and whether the lock would have been jimmy-proof. And since the door to Mrs. McCarty’s room was unlocked at the time of the assailant’s entry, what good would a better lock have done? No effort was made, either, to specify an optimal security force for a resort the size of Pleasant Run. Nobody considered the fire or other hazards that a second floor walkway not accessible from ground level would create. A notice in every room telling guests to lock all doors would be cheap, but since most people know better than to leave the door to a hotel room unlocked when they leave the room – and a sliding glass door gave on a walkway, not a balcony – the jury might have thought that the incremental benefits from the notice would be slight. Judgment for defendant affirmed.

Let’s take a closer look at unintentional torts and how civil law legal systems handle them!

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BH 2005 No. 53 (Supreme Court of Hungary) Liability for Damages in Swimming Pool Accident Brief summary of the facts The plaintiff, a young and talented swimmer, suffered damage at the age of 13 when someone jumped at him in a swimming pool. He claimed for material and immaterial damages against the operator of the swimming pool because his skull fractured and his tympanic membrane was broken in the accident. It was not clear how the accident actually happened. Judgment of the court The court rejected the claim on the grounds that the plaintiff proved only that he suffered harm while he was in the swimming pool but he failed to prove the act or omission of the defendant or the defendant’s employees which could establish liability. Commentary The plaintiff not being able to recover under Act IV of 1959 §339 could only recover by showing that the swimming pool was an extremely hazardous activity under §345 of the Hungarian Civil Code which governs extremely hazardous activities. If a court was persuaded to see this as an extremely hazardous activity, the defendant, as the operator of the swimming pool, could have exempted itself from the liability only by proving that the cause of the harm had fallen outside of the scope of its activity and had been unavoidable.

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CASE #7 BH 2010 No. 8 (Supreme Court of Hungary) Medical Malpractice and Causation Brief summary of the facts The plaintiff’s daughter was born in the defendant’s hospital with a teratological deficiency. The defendant’s doctors conducted ultrasound examinations three times during the pregnancy. At the third examination in the 32nd week of pregnancy, it was discovered for the first time that the fetus suffered deficiencies due to genetic deformation. As an abortion was not suggested at this late stage of pregnancy, the plaintiff needed to give birth to the child who was born with cleft spine and hydrocephaly. The plaintiff claimed non-pecuniary damages of approximately 15,000 euros as compensation for losing the opportunity to have an abortion earlier due to the failure of the defendant’s doctors to identify earlier the expected deficiencies of her baby. The defendant pleaded that the teratological deficiencies of the fetus were not necessarily recognizable earlier and that the doctors otherwise acted according to the applicable standards and protocols. As the doctors acted according to the required standard of conduct, in the absence of fault, the liability of the defendant for its doctors could not be established. Judgment of the court The courts of first and second instances rejected the claim and the Supreme Court upheld their decisions. Expert testimony confirmed that the ultrasound and other examinations were performed in due time, according to the applicable protocols. Because those tests revealed no suspicion of a teratological deficiency, the doctors of the defendant could not be required to suggest or perform further tests. Thus, the defendant doctor’s failure to send the plaintiff to a more technologically advanced hospital after the first and second ultrasound examinations did not render them at fault. Commentary In the past decades the tendency has been observed in Hungarian court practice towards strict liability and away from requiring a finding of fault. This decision does not fit into this trend as it clearly required a finding of fault on the part of the defendant and rejected plaintiff’s claim because of the absence of evidence of fault.

PROVING NEGLIGENCE The conventional way to prove negligence in the U.S. is for plaintiff to point to some untaken precaution by the defendant, like the bailee being on board in the Carrol Towing case above, and to argue that the precaution would have been cost-justified. But the courts do not require plaintiff to establish an untaken cost-justified precaution in every case. U.S. and U.K. courts have long recognized that sometimes the circumstances of the accident itself suggest that it was more likely than not due to the defendant’s negligence. In these cases the court may impose liability for negligence (i.e., in the US uphold a jury’s finding of negligence) without knowing the specific respect in which the defendant was negligent. Here is a famous case from the U.K. illustrating this method of proving negligence which is known as “res ipsa 35

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loquitor”. It is followed by the summary of a Hungarian case involving somewhat similar facts.

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CASE #8 Byrne v. Boadle 159 Eng. Rep. 299 (EX. 1863) Plaintiff was passing along the highway in front of the defendant’s premises when he was struck and badly hurt by a barrel of flour being lowered from a window on defendant’s premises, defendant being a dealer in flour. Several witnesses saw the barrel fall and hit the plaintiff. The defendant claimed “there was no evidence of negligence for the jury.” The trial court agreed and dismissed plaintiff’s case after the jury returned a verdict for plaintiff. On appeal in the Court of Exchequer, the plaintiff argued that the evidence was sufficient to support a verdict in his favor. In response, the defendant’s lawyer argued that it was consistent with the evidence that some purchaser of the flour or some complete stranger was lowering the barrel of flour and that the barrel’s fall was not attributable in any way to the defendant or his servants. Chief Baron Pollock held that “the presumption is that the defendant’s servants were engaged in removing the defendant’s flour. If they were not, it was competent to the defendant to prove that.” The defendant’s attorney replied that “surmise ought not to be substituted for strict proof when it is thought to fix the defendant with negligence and thus serious liability. The plaintiff must be required to establish his case by affirmative evidence. The plaintiff was bound to give affirmative proof of evidence and to identify the respect in which the defendant had been negligent. But there was not a scintilla of evidence unless the occurrence is of itself evidence of negligence.“ Baron Pollock replied “there are certain cases in which it may be said res ipsa loquitor and this seems one of them. In some cases the court has held that the mere fact of the accident having occurred is sufficient evidence of negligence, as, for instance, in the case of railway collisions. Defendant’s counsel was quite right in saying that there are many accidents for which no presumption of negligence can arise, but I think it would be wrong to lie down as a rule that in no case whatsoever can a presumption of negligence arise from the fact of an accident. It is the duty of persons who keep barrels in a warehouse to take care that they do not roll out, and I think that the rolling out of the barrel would, beyond all doubt, afford prima facie evidence of negligence. So in the building or repairing of a house, or putting pots on the chimneys, if a person passing along the road is injured by something falling upon him, I think the accident alone would be prima facie evidence of negligence. I think it apparent that the barrel was in the custody of the defendant who occupied the premises and who is of course responsible for the acts of his servants. The plaintiff who was injured should not be bound to show that the barrel could not have rolled out without any negligence. But if there are any facts inconsistent with the defendant’s negligence, the defendant must certainly be afforded an opportunity to prove them. Here defendant not having presented any such evidence but having relied entirely on the lack of further evidence presented by the plaintiff has forfeited his opportunity to rebut the presumption of negligence. Judgment for the plaintiff.

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Case #9 BH 2010 No. 7 (Hungary) Liability of Motorway Operators Brief Summary of Facts On January 26, 2003, the plaintiff was driving his car on the M3 Motorway from Budapest when he hit a roe crossing the road. As a result of the collision, the plaintiff’s car was seriously damaged. The plaintiff claimed damages of approximately 5,200 euros to his car. The plaintiff argued that the defendant, as the operator of the motorway, failed to maintain the wild defense fence installed along the motorway, to prevent wild animals from going onto the road. The defendant motorway operator company pleaded that, as it controlled the condition of the fence several times per day regularly and acted immediately after the presence of the roe had been reported; it is without fault and hence should not be liable. The defendant also pleaded that as the plaintiff could not prove that the defense was defective on the critical section of the motorway or that the defendant had failed to repair the damaged fence even if it had been defective, the defendant’s fault and liability could not be established. The defendant also pleaded that the roe might have gotten onto the motorway by means of a slip road so the alleged defect in the fence might not have been the only way of game getting onto the motorway. Judgment of the Court The Courts of First and Second Instances decided for the plaintiff. The Supreme Court confirmed those judgments. The fact that the condition of the fence was good at the time of construction as well as at the time of the examination of it by the judicial expert was considered irrelevant by the Court. The defendant could not exclude the possibility that the game had entered the motorway by means of some defect in the fence, and the game had actually gotten onto the motorway, according to the Court, it is clear that the defendant failed to comply with their statutory duty to prevent wild animals from getting onto the motorway. Thus, the causal link between the defendant’s behavior and the plaintiff’s damage was established. The Court rejected the defendant’s argument that such a judgment would establish strict liability under the fault based liability regime. The Court argued that if it is required for the defendant to prove that they used all possible and suitable tools in order to keep game off the road for it to be relieved of liability, this still corresponds to a fault based liability and does not result in strict liability. Commentary The Courts concluded that the defendant’s behavior was wrongful from the mere fact that a wild animal got onto the motorway. In addition, the defendant was not able to prove that this could not have been the result of its fault. By requiring defendant to prove the opposite (i.e. excluding the causal link between the failure of the defendant and the occurrence of loss), the reversal of the burden of proof within the Hungarian fault based liability regime led to a result which is very close to strict liability from the defendant’s point of view. Perhaps the statutory requirement that the defendant maintain the motorway could be interpreted to impose strict liability, rather than merely imposing a duty on the defendant’s part to use ordinary care to maintain the motorway.

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In addition, the court ignored the possibility that the roe might have jumped over even the best fence. It also ignored the possibility that the roe might have gotten onto the motorway through a slip road which the defendant did not have any duty to fence.

Case #10 Consider the two cases summarized below, Larson and Connolly. Why is the logical inference of the hotel’s negligent supervision of their guest stronger in Connolly? Larson v. St. Francis Hotel, 188 p2d 513 (Cal. App. 1948), involved a plaintiff who was walking along the sidewalk next to a famous hotel and was hit by a chair that was apparently thrown out of one of the hotel’s windows as “the result of the efflorescence and celebration of San Franciscans in their exuberance of joy on VJ day, August 14, 1945.” The court refused to apply res ipsa loquitor: “Under our cases res ipsa loquitor only applies when ‘the accident was such that in the ordinary course of events it would not have happened had the defendant used ordinary care’. On the contrary this mishap would quite as likely be due to the fault of a guest or guests of a guest as to that of the defendants. The most logical inference is that the chair was thrown by some such person from a window. This occurrence is not such as ordinarily does not happen without the negligence of the hotel but rather is one that ordinarily might happen, despite the fact that the hotel used reasonable care in supervising guests and was totally free from negligence. To keep guests and visitors from throwing furniture out windows would require a guard to be placed in every room of the hotel, and no one would contend that it is cost justified to require a hotel to do that.”

Case #11 In Conelly v. Nicollet Hotel, 95 NW 2d 657 (Minn. 1959), the defendant’s hotel was “taken over” by Junior Chamber of Commerce’s National Convention, whose antics gave the management ample notice of drinking, rivalry, and hooliganism on the premises. Plaintiff was injured when struck by some unidentified falling object. In the opinion upholding the jury’s $300,000.00 verdict for the plaintiff, the court said “we have said many times that the law does not require every fact and circumstances which make up a case of negligence to be proved by direct and positive evidence or by the testimony of eye witnesses. Circumstantial evidence alone may authorize a finding of negligence. Negligence may be inferred from all the facts and surrounding circumstances of the accident and worthy evidence of such facts and circumstances is such as to take the case out of the realm of conjuncture and into the field of legitimate inference of negligence from established facts, a prima facie case is made.” CAUSATION Common Law makes a sharp distinction between what is called cause-in-fact and proximate cause. Cause-in-fact is what most other countries simply call simply causation. The test for cause-in-fact is whether more likely than not, but for defendant’s negligence or abnormally dangerous activity, plaintiff’s injury would have occurred. This test takes advantage of hindsight and asks what would have happened if defendant had not been negligent or had not 39

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engaged in his abnormally dangerous activity. In contrast, proximate cause, which in the U.S. is sometimes called “proximate cause/duty” is a policy issue which will be discussed later. Consider matters a practical attorney might investigate in an attempt to prove or disprove cause-in-fact in the following famous case. CASE #12 Grimstead v. New York Central Railroad 264 F. 334 (2d Cir. 1920) Alfrieda Grimstead on behalf of herself and her deceased husband Angell Grimstead sues the New York Central Railroad Company for negligently causing the death of Angell. Judgment for plaintiff at the trial court. Defendant appeals. While Worker’s Compensation governs the overwhelming percentage of workplace injuries in the U.S., federal and maritime employees are still allowed to sue their employers in federal court when they suffer injuries during their employment. Because Angell Grimstead was a maritime employee, federal courts have jurisdiction over this dispute. In federal law, injured workers must establish negligence on the part of the employer in order to recover. Hence, the plaintiffs can only recover here if they show the defendant, Angell’s employer, was negligent and that his negligence was a cause-in-fact of the plaintiff’s death. The charge of negligence here is defendant’s failure to equip the barge on which plaintiff worked with proper life buoys, for want of which the decedent, having fallen into the water, was drowned. Defendant’s barge was lined on the port side of the steamer Santa Clara on the North side of Pier 2, in Brooklyn, loaded with sugar in transit from Havana to New Brunswick. The tug Mary M, entering the slip between peers 1 and 2, bumped against the barge. The decedent’s wife, feeling the shock, came out from the cabin, looked on one side of the barge, and saw nothing. She then went across the deck to the other side of the barge and discovered her husband in the water about 10 ft. from the barge holding up his hands out of the water. He did not know how to swim. She immediately ran back into the cabin for a small line, and when she returned with it he had disappeared. The jury found as a fact that the defendant was negligent in not equipping the barge with life buoys. The issue on cause-in-fact then becomes whether the life buoy would have saved the decedent from drowning. We do not believe the plaintiff produced sufficient evidence to enable the plaintiff to reach the jury on that issue. On the issue of cause-in-fact, we think the jury was left in pure conjecture and speculation. A jury might well conclude that a light near an open hatch on the side of a vessel’s deck would have prevented a person’s falling into the hatch or into the water in the dark, as our previous cases have held. But there was nothing whatsoever to show that if there had been a life buoy onboard, the decedent’s wife would have got to it in time, that is, sooner than she got to the small line, or if she had, that she would have thrown it so that her husband could have seized it in time, or, if she did, that he would have seized it in time, or that if he did, whether it would have prevented him from drowning. The trial court erred in denying the defendant’s motion to dismiss the complaint on the ground of insufficient evidence of cause-in-fact. Judgment reversed. It is ordered plaintiff take nothing. How could plaintiff’s attorney in the following case distinguish Grimstead? 40

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In Kirincich v. Standard Dredging Co., 112 F. 2d 163 (3d Cir. 1940), the deceased fell off a dredge close to shore and was carried away by the falling tide. His shipmates tried to save him by throwing him “an inch heaving line.” They managed to throw the line within 2 ft. of him. The deceased reached out but was unable to grasp the ropelike line. The jury found the defendant (Dredging, Co.), the decedent’s employer, negligent for failure to have the statutory required life buoy, a circular buoy, resembling a donut in shape. Why does the Plaintiff here have a better chance of reaching the jury on cause-in-fact than in Grimstead? What is the law on cause-in-fact in Hungary and how would you compare it to U.S. law?

CASE #13 BH210 No. 64 (Supreme Court) Relevance of Multiple Contributing Causes Brief Summary of Facts The plaintiff suffered serious losses when extremely heavy rain flooded the cellars of their houses damaging much of the property stored there. The plaintiff claims for damages in compensation from the defendant local municipality. The plaintiff argued that if the water canals in the city had been constructed, cleaned and maintained properly, they could have drained off the rain water and plaintiff’s damages would not have occurred. As maintaining the water canals is the defendant’s statutory obligation under §8 of Act No. 45 of 1990 on Local Municipalities, the omission of the defendant was the relevant cause of the damage. The defendant pleaded that as the damage was the result of extreme weather and as the defendant charged the local water management association with the task of maintaining the canals, the defendant cannot be held for these losses. Judgment of the Court The Court of First Instance established that the damage suffered by the plaintiffs was the result of an extreme weather condition and the omission of the Local Water Management Association in maintaining the water canals properly, as multiple causes. Thus, the defendant cannot solely be liable to compensate the losses caused by the flood. The court established that the defendant shall be liable to 1/3 of the damages as it contributed to the losses to this extent, together with the weather conditions and the local Water Management Association. The Supreme Court held that the defendant cannot be held liable for the part of the damage caused by the weather and the defective planning of the water canal system. The Supreme Court held that it could not establish the proper ratio of the defendant’s liability and for this reason the court returned the case back to the Court of First Instance. Commentary Problems of natural causation are attracting much attention in Hungarian court practice and this case clearly seems to reinforce the doctrine – established by labor courts in personal injury cases so far – of partial causation. According to this approach, if the defendant contributed to the plaintiff’s damage but was not the sole cause of the loss, the defendant shall 41

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be liable only according to the ratio it contributed to the causal link resulting in the relevant compensable loss. Although the courts consequently avoid considering or even speaking of probability, this doctrine, in its result, seems to imply that in certain cases increasing the probability of the occurrence of damage may establish a causal link as a contributing cause and the liability of the tortfeasor shall be limited to the ratio it contributed to the loss. PROPORTIONAL CAUSATION When plaintiffs cannot satisfy the “but-for” test, U.S. plaintiffs may try to persuade the court to employ the concept of “proportional causation.” Herskovits v. Group Health Cooperative is the leading U.S. case to embrace proportional causation. There it was stipulated that the defendant doctor negligently failed to diagnose Herskovits’ cancer on his first visit. Had the cancer been diagnosed at that time, Herskovits would still have had a 61% probability of dying within 5 years from the cancer. But the defendant’s failure to diagnose the cancer increased the likelihood that Herskovits would die within 5 years to 75%. For the cancer was not then diagnosed for an additional 8 months. Of course, by the time of trial, the plaintiff had died. Defendant claimed that because the “but-for” test was not established more likely than not, cause-in-fact was not shown and the defendant should prevail without his case reaching the jury. Plaintiff asked the court to award the defendant at least a small percentage of his damages because the defendant’s negligence increased the chances of plaintiff’s death. First, the court accepted the proportional causation concept and ruled that the plaintiff could recover a percentage of his total damages. Then the court held that such a recovery was only possible if the defendant’s negligence had significantly increased the chance of plaintiff’s death. As the court found the increase in the plaintiff’s chance of death from 51% to 75% to be significant, the court ruled the plaintiff might collect some percent of his damages. Even courts that have embraced the proportional causation approach in medical malpractice cases recognize that the number of cases in which the approach can be applied must be severely limited or the “but-for” test will be effectively overruled. Can you guess what limit the U.S. courts have intended to embrace?

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III. SPECIAL C HARACTER OF DAMAGES FOR NON-PECUNIARY L OSS How should loss, which cannot be expressed in money, be compensated? How should pain be financially assessed? These questions are increasingly gaining significance. In our age it is general that human rights and personality rights are codified in the Constitutions of almost every nation 24. Legal systems have special instruments to protect personality against the injury of another person. Usually there are two opportunities to reply to the injury (injuria) with the language of law: enforcing the penal right of state there are sanctions from the perspective of criminal law and we can find special protections in the area of civil law. The most significant difference between the two legal fields is the aim of their functions. Criminal law punishes the aggressor, but does not give any compensation to the victim. The proposal of the sanction suits to the personality of the wrongdoer. Civil law has its function to give amend to the injured party of the obligation 25. The problem is that damages for non-pecuniary loss cannot be examined from the traditional view of liability. To solve a problem in connection with compensation the judge has to analyze four essential lemmas: damage, wrongfulness, causality and imputation 26. If any of the conditions mentioned previously is missing, there is no chance to adjudge damages to the plaintiff during a legal procedure. Damages for nonpecuniary loss are special cases where the most important lemma – damage – is uncertain. In case of a personal injury, a physical stress or an infringement of reputation there are no manifested disadvantages. Only the injured person can feel the strength and heaviness of the injury. In the continental legal systems legislators do not want to give the power to the hand of a judge to calculate and adjudicate amounts without strict regulations. This approach is because of the old theory of checks and balances of power. It is obvious that solving a personal injury problem from a pure compensatory law aspect means the fall of the constitutional aim: to protect individuality and personality with every possible legal instrument. It is almost impossible to categorize how countries in the world treat damages for nonpecuniary losses. If we try to find the most notable solutions for the problem, we may mention the following models: 1. Tariff system of Denmark has a starting point of not providing too much freedom for judges. The Danish legislator agrees this legal problem is merely subjective if we fully rely on judges to award damages for immaterial harms. This is why for personal injury cases there are limited amounts ordered to a long list of bodily harms and diseases. These tariffs have minimum and maximum awards and the judge only enjoys freedom in moving just between the two edges. The obvious disadvantage of such concept is that it denies how different human personality is. Everyone is an individual with different profession, feelings, family background, etc. Even the same bodily harm effects human personality differently. A very extreme example is the case of the one-eyed man. Losing an eye means a different damage to

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In this study, author distinguishes human rights and personality rights. According to this distinction, personality rights are a special field of human rights that can be found in international treaties. Most of the European countries use general rules for protecting these rights in the Constitution, and special instruments of protection are mentioned in details in criminal and civil law acts. 25 This amend can reveal through objective and subjective sanctions. The aim of the objective ones is to forbid the aggressor to continue the invasion. Subjective sanction is the compensation itself, which can be pain award, damages for non-pecuniary loss or solatium up to the legal system of a country. 26 These lemmas are well known from the Roman age. To say in Europe it is the only fundamental base of compensatory law.

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the person, who still has another functioning eye that to someone, who was already one-eyed. The same applies to many cases as well. 2. The other model acknowledges the existence of judicial freedom in damages for nonpecuniary loss cases; however the legislator provides a list of personality rights that are eligible for such damages. The German Civil Code (BGB) originally listed only a few out of the thousand personality rights of a human being that were recoverable when suffering any losses. The right to live, physical health and bodily integrity were obvious rights, so when someone infringes these rights, the injured person is entitled to collect damages for the pain and suffering and all the loss he suffered in connection with the harm. Slander and libel cases got admittance early in German civil law as well, as the right to dignity has some aspects that involve the right to good reputation of a human being. Sanctity of private homes guarantees that no one may enter into a home without a permit or stay there longer than the owner wants. Sexual autonomy was another listed right that granted protection with the instrument of damages for non-pecuniary loss in German law. Out of these rights, German courts had to extend the scope of legislation with acknowledging other, non-nominated personality rights. In modern days, German civil law gave up this concept and opened the possibility to ask for compensation in case of virtually any personality rights if infringed. The core concept of the former legislation was that most personality rights are invisible and the harm of such rights remains invisible as well. The German legislator did not want to allow citizens to go to court with petty claims. Judges might have been unprotected against such claims as there was no solid evidence available to prove the existence of harms. 3. Some countries gave up the connection between the law of compensation and the law of non-pecuniary losses. They name this legal institution pain award or solatium to describe how far these losses are from material damages. As material damages are always calculable and easy to prove, non-material harms remain invisible in most of the cases (unless bodily injury occurs). This is why the Netherlands and from mid-2014 Hungary introduced pain award in its legal system that is a pure protective instrument in case of infringements of personality rights. No loss shall be proven in order the claim pain award in these legal systems. The sole fact of proving the wrongful act of the tortfeasor is sufficient enough to get monetary compensation for the wrongfulness itself. If you can successfully prove that you actually suffered some inner damages as well (e.g. in bodily injury cases) the sums will reflect that these cases are more serious than the ones without visible and provable harms. 4. Finding the hidden inner harm in the soul of the individual is often problematic in judicial practice. This is why some jurisdictions offer tricky fact finding processes and theories for judges. In the Anglo-Saxon legal system it is very common to deduct from the level of fault on the side of the tortfeasor to the actual existence of the inner harm in the soul of the aggrieved party. For example, under U.S. tort law, the infliction of emotional distress tort is only applicable if the tortfeasor acted with intention. Negligence does not count here and does not constitute rights to claim damages for emotional distress. In Hungary it was a most mentioned dilemma because of the re-codification of the Civil Code. The first draft of re-codification contained two institutions in connection with protecting personality: one is among the regulations of compensatory law, and the second one is pain award in the chapter for personality rights. In the year 2003 the Committee Responsible for the Civil Law Codification published their new solution: pain award. Pain award (solatium) is a sanction for violation of privacy without proving manifested harms or 44

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damages. 27 There is no need to demonstrate any loss or damage to claim damages from the aggressor, the only important lemma is the personal injury itself. Attributes of pain award are similar to the rules of compensatory law and damages. This theory is well known in European civil law. The only fear of pain award is the lack of strict regulations. A judge will not find any further guidelines in the Civil Code how to calculate the concrete amount or what kind of features he has to discover during a legal procedure. Because of the fact that the Hungarian recodification of civil law uses some achievements of the young Dutch Civil Code 28, I try to describe the working of damages for non-pecuniary loss and pain award in the legislation and jurisdiction of the Netherlands. As I mentioned above this legal institution has to be analyzed through not only statutory law but the living and developing work of courts.

1. General Rules of the Dutch Civil Code The private law in the Netherlands has its roots from the Roman law. The first codification of civil law, dated from 1809, came into being by the order of King Louis Napoleon. The life of this act was extremely short because of the incorporation of the Netherlands into the French Empire in 1811. The result was that the Dutch had to adopt the legal masterpiece of Napoleon, the Code Civil. This historical event determined the development of compensatory law in the Netherlands. Although the Dutch achieved their independent Civil Code in 1838, it wore remarkable effect from Code Civil. By the middle of the 20th century many regulations of the Civil Code became outdated, and despite the trial of the legislator, the regulations in connection with obligatory law were neglected to adapt to the needs of modern society. The strengthening judge made law replaced this ensuing gap. In the field of tort law it resulted that not only a violation of a right or an act violating a statutory duty constituted an “unlawful act” but also any act or omission, violating a rule of unwritten law pertaining to proper social conduct. With this interpretation judge had the opportunity to sanction every imaginable kind of torts independently whether it is written in any act or not. The situation was very similar to the French development, where there was only one general rule for compensatory law and jurisdiction defined the personality rights from case to case. In the Netherlands time had come to incorporate the achievements of judge made law into a new Civil Code. In 1947 Professor Meijers of Leiden University got a mandatory to start the codification process. After so many years, Book 6 (General Law of Obligations) of the new Civil Code came into force in 1992. 29 The huge act contains almost all the parts of civil law except for the law of intellectual and industrial property. The aim of this process was to combine and incorporate judge made achievements into a unified code to strengthen the traditional continental law theory: rights are in statutory law not in the hand of courts. One of the most important factors took effect to the new Code was the unifying European tort law. 30 The Dutch Civil Code (from now on: BW) contains the rules pertaining to damages in the general rules of obligations 31. These rules deal with statutory obligations to pay damages. In every case a legal base has to be found in any of the statutory rules to claim for compensation. 27

VÉKÁS Lajos, Az új Polgári Törvénykönyv koncepciója és tematikája [Conception and topics of the new Hungarian Civil Code]; Magyar Közlöny 2003/II. 28 Burgerlijk Wetboek, BW 29 Book 1 (Law of Persons and Family) came into force in 1970; Book 2 (Legal persons including companies, associations and foundations) came into force in 1976; Book 8 (Law of Transport) came into force in 1991; Book 3 (Patrimonial Law), Book 5 (Real Rights) and some parts of Book 7 (Special Contracts) also came into force in 1992; Book 4 (Law of Succession) came into force in 1998. 30 MAGNUS, Ulrich (ed.), Unification of Tort Law: Damages; Springer Verlag, New York/Wien 2001. 89. 31 Book 6, art. 95-110

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It means that there is no power for the judge to enlarge or restrict certain cases. Similar to the valid Hungarian Civil Code damages for breach of a contract and damages for tortious liability and strict liability have the same rules. BW contains those cases when damages for non-pecuniary loss can be claimed: - in case of physical personal injury (death, scars, pain and suffering, loss of enjoyment of life, etc.), - if the liable party had the intention to inflict non-pecuniary harm, - if the damage is the infringement of one’s reputation whether he or she is living or deceased, - in case of harm to a person in any other way. 32 The last category entails several injuries such as infringement of intellectual property and copyright, invasion of privacy, unlawful interference with freedom of movement. There are several other cases when non-pecuniary loss can be claimed in other statutory provisions outside the rules of tort and contract law: - unlawful detention in the Code of Criminal Procedure 33, - unlawful registration of personal data 34, - in case of unlawful seizure of the driving license, identity card by an authority 35, - breach of a collective bargaining agreement 36. Non-pecuniary loss is in tight connection with a special and subsidiary legal institution: equity 37. It is very important to construct the rules of damages for immaterial loss flexible in healthy frames. During a legal procedure relevant factors are: the nature, seriousness and the permanency of the harm; the extent and duration of necessary medical treatment; the extent to which the claimant will able to adjust to the new circumstances, the ground for liability and the degree of fault on the part of the liable party. We can find considerations from the aspect of the harm, the injured person and the liable party. The most essential considerations are those in connection with the harm itself. These rules and relevant factors can help the judge a lot when the damage is caused by a personal injury, where usually there are scars, wounds or other manifested hurts. The other helping hand is the rule, which allows the court to look at the similar cases in the practice of other Dutch courts to determinate the amount to be awarded. There is a legal possibility to examine the decisions of similar cases from foreign courts, but there are lots of bound to live with this opportunity in the civil procedure. 38 The Dutch legal experts 39 often argue about a reform to encourage the Dutch courts analyzing to decisions from foreign countries. To increase the amount of the examined foreign cases the Supreme Court 40 has to create decisions, which authorize lower courts to take into consideration some significant decisions of foreign colleagues. This development has its reason for the existence (raison d’étre) because of the harmonization and standardization of European legal systems. By the help of using the unified money – Euro – in most of the

32

art. 6:106 BW art. 89 et seq. 34 art. 9 Wet Persoonsregistraties (Act of Registering Personal Data) 35 art. 164 Wegenverkeerswet (Act of Transport) 36 art. 16 Wet op de CAO (Act of Collective Bargaining Agreements) 37 art. 6:106 BW 38 HR 8.7.1992, [1992] NJ, 714 (Decision of Dutch Supreme Court from 1992) 39 e.g. M. H. WISSINK and W. H. VAN BOOM (mentioned in Ministry of Justice in the Netherlands: The Court System in the Netherlands; (http://www.justitie.nl/english/Images/23_35613.pdf) 9.) [October 10th 2013] 40 Hoge Raad (HR). Decisions of Hoge Raad appeared in periodical Nederlande Jurisprudentie can be marked with the number NJ. 33

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European countries, it is not an added burden for a judge to compare the amount to a foreign decision. Reviewing the regulations of BW it is clear that the statutory basis of damages for nonpecuniary loss is really flexible and the legislator confides in courts. Enumerating some typical cases of personal injury, BW oriented the judge but leaves the door open to appreciate other injuries too. Only two serious limits can be found in the Dutch Civil Code: factors that play important role during the probation and a very slight flavor of precedent law, i.e. the possibility to consider other decisions in similar cases. Tort law according to the Dutch Supreme Court is not a matter of drawing lines, but of a delicate balancing of interests on a case to case basis. 41

2. Personal Injures: Statutory Law and Jurisdiction The Dutch Civil Code allows damages for non-pecuniary loss in case of personal injuries. 42 It is written in the explicit statutory law that personal injuries are the main bases for these kinds of damages. There are no further restrictions how to calculate the concrete amount for each injury. An equitable amount is required which suits the exact situation, the importance of the injury itself. Although no official thresholds exist in the Civil Code, there are several bounds for the jurisdiction. It is often argued that personal injuries with a superficial nature do not exist in any claim for compensation and satisfaction. Interpretation of statutory law shows that these superficial injuries are outside the obligation to adjudge the situation from an equitable perspective. It means that the text of the Civil Code gives the right to make a distinct between injuries whether they are serious enough or not to award. How to know if the injury is serious or not? The Civil Code does not contain provisions and guidelines how to answer this question. It is a decent way of regulation, because any written distinction can kill the original nature of this strange institution called damages for non-pecuniary loss. The legislator trusts in courts that they are capable to find healthy thresholds during their work and push out every groundless claim. An interesting provision can be found in the Civil Code, which is used for mental traumas. It is no matter if mental trauma results from physical injury or from an independent source. In the latter case, the trauma is usually referred to as being the result of psychical harm or injury to the person. Whenever a claim based on mental trauma is made without connection with a physical injury, a special legal threshold can be found: seriousness requirement. 43 The trauma must be serious enough to be awarded with damages for non-pecuniary loss. It is an obvious question under what circumstances we can say that the trauma may qualify as mental injury. Without a strict statutory basis we can examine only the case law of Supreme Court. It is a unified opinion in legal practice that simple annoyance and distress is not enough for a substantiated claim. These feelings are insufficient in this respect. For example in a case where an employee suffered severe indignation from the fact that his employer had not stated his reasons for dismissal, the Supreme Court of the Netherlands found that this did not qualify as harm or injury to the person. If we take a closer look at other decisions we can find that the situation is not as strict as it seems. Lower courts often follow a little bit liberal approach to this question. It is a significant easement if the trauma is recognizable as a psychiatric illness. 41

BARENDRECHT, J. M., Pure economic loss in the Netherlands (www.library.uu.nl/publarchief/ jb/congres/01809180/15/b7.pdf) 116. [November 3rd 2013] 42 art 6:95 BW and 6:106 (1) BW 43 art. 6:106 BW

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This circumstance can be helpful, but not decisive in the meaning of the Civil Code. In a case happened in 1977 a young married couple claimed damages from a bank that financed their new enterprise. Due to the unlawful – but not malicious – termination of the credit facilities supplied by the bank, the new enterprise and business collapsed. Plaintiffs suffered not only usual financial loss, but this happening allegedly devastated their common life. According to their account, they are unable to recuperate again and they placed themselves under medical treatment. Supreme Court awarded non-pecuniary damages for the reason that medical treatment can verify the seriousness of the trauma caused by the bank. So, it is stated that medical treatment makes apparent the non-pecuniary loss and helps deciding if the mental injury is serious enough. It is important to say that this kind of interpretation is not included in the Code, so it is not decisive for courts. The evaluation of damages for non-pecuniary loss feeds from two different approaches: compensation and satisfaction. These purposes of the legal institution are not strange in Europe. First of all, these considerations appeared in the German case law of the Federal High Court 44 in 1955. Compensation is absolutely impossible, because non-pecuniary loss cannot be expressed in money, so the principle of full compensation – which is the base of compensatory law – cannot be applied. Satisfaction is a problematic purpose because of its criminal roots. In civil law, satisfaction seems to refer to an ethical rather than a legal requirement of ‘seeing justice to be done’. 45 Satisfaction is not applicable when the injured person dies in connection with the injury. In this case he cannot experience the jurisdiction, which ends with adjudging damages to the relatives. The purpose of satisfaction is often used in sexual abuse and harassment cases. Although non-pecuniary losses cannot be compensated with monetary instrument, money – like it is often said – better than nothing. It enables the injured party to embark on activities that might somehow compensate the loss of enjoyment of life. We can say that damages for non-pecuniary loss are serving necessary function in the Dutch legal system, as well as in most of the European countries. If there is a right codified in the Civil Code, due to the requirement of constitutionalism, it is necessary to have its guarantee to succeed. Full compensation is applicable to personal injures too. The injured party is not supposed to be compensated twice for the same damage. The plaintiff has to choose in those cases when pecuniary and non-pecuniary damages exist from the same injury. In an ideal situation the plaintiff has the right to claim a sum in pecuniary damages for reasonable expenses (e.g. cosmetic surgery) or a sum for non-pecuniary loss resulting from not making these reasonable expenses (e.g. loss of enjoyment of life as a result of facial scarring). In principle, the injured party is free to choose between these opportunities and find the suitable alternative. It is a particular interpretation of full compensation. Theoretically I have misgiving if this approach serves the aim of damages for non-pecuniary loss: protection personality with the instruments of civil law. If we decide to judge these losses from a compensatory view, I do not think that it means that pecuniary losses can extinguish the claim for non-pecuniary damages or contrary. Both claims have their own legal ground on their own rights. I feel this interpretation is the most neuralgic point of the Dutch compensatory law.

3. Statutory Law and Case Law Concerning Special Personal Injuries

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Bürgerliches Gericthshof (BGH) W. V. Horton ROGERS (ed.), Damages for non-pecuniary loss in a comparative perspective, Springer Wien/New York, 2001. 158.

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In this chapter I would like to show some typical cases from the Dutch jurisdiction concerning with personal injuries. The most common approach of this question is the pre-death fear and pain. It means that a claim for non-pecuniary loss resulting from a fear or pain of impending death is possible, but the seriousness test is a requirement as well, just as in case of mental traumas. A weird regulation can be found among the provisions of BW. 46 A person who suffers non-pecuniary loss before dying is in principle entitled to claim damages. This claim is strictly personal and cannot be conveyed. The only exception to the rule is when the claim can be passed on to the heirs, but only if the injured party has informed the liable party that he will claim for non-pecuniary loss. If the injured person dies before this revelation, the right to claim evaporates. Instant death ceases every claim for non-pecuniary damages by the estate. I think there is no need to explain how unfair this regulation is. First, it is unknown for a layman that he has to inform his aggressor to give the right to his heirs, secondly, because a personal injury remains without sanction of civil law. The meaning of this approach is the strictly personality view of personality rights. Personal injuries are no special kinds of the heir’s income; these are exclusive right to the injured person. We can find such interesting provisions in connection with third parties infra. Relatives have no claim for non-pecuniary loss in their own right. To demonstrate the incapability of this rule in practice let’s see a hypothetical air crash. Even passengers with legal education would not contemplate on calling the captain and informing him of their intention to claim for non-pecuniary loss. And what is more, if they did it, there is no proof that this statement would survive. Leaving aside this weird rule of BW, we can state that in a pre-death fear situation it is unimportant whether this fear rises before or after the personal injury or death follows this injury or not. This situation is similar to the judge of mental trauma; the most important thing is to demonstrate that the fear was serious and established enough. Another interesting situation is the problem of comatose plaintiffs. Exact case does not exist, but in legal doctrine it is a most-mentioned debate. The first question is whether a comatose person can suffer any non-pecuniary loss. Is it a real personal injury if the nurse, e.g. kick him or hit him? Most of the Dutch authors found that there is no legal base to these kinds of claims. The first reason is that a comatose plaintiff cannot suffer any kind of non-pecuniary loss because he is incapable to feel them. The second reason is in connection with the purpose of non-pecuniary damages, i.e. there is no use for the money and therefore he cannot experience satisfaction either. It can be another interesting approach because it is general that all persons have personality rights in their lives and sometimes after death (see infringement of the reputation of a deceased person). The root of the problem is the same again: Dutch law does not want to give the right to the relatives to claim for non-pecuniary damages.

4. Non-personal Injuries As we have seen previously, the Dutch Civil Code enumerates some exact injuries, which evoke claim for non-pecuniary damages. Most of these injuries were in tight connection with personal injuries, attacks. Non-personal injuries are a little bit more complicated. Although it is general in the Dutch legislation and jurisdiction that personality rights contain several angles of the private sphere, it is impossible to define all the bunch of rights, which is the component part of individuality. There is only one non-personal injury is mentioned in the Dutch Civil Code: infringement of reputation. This is the most common case that happens almost every day. The award for non46

art 6:106 (2) BW

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pecuniary loss is based on the moral damage to the self-esteem from one hand, and the moral loss to the self-esteem of the plaintiff in the eyes of others. This means that there is no need to commit the unlawful act in front of a big crowd or in the society of other people, because if the assertion is suitable for hurting personality, damages for non-pecuniary loss are required. The assertion can be in connection with the social, cultural level of the plaintiff, or it can apply to his profession. The intention is not required on the part of the defendant. The other case of infringement of the reputation is when the injurious statement concerns to a deceased person. BW allows a claim to certain close relatives of this person, if, the infringement would have amounted to impair the reputation of him, he had still been alive. In all other cases the Dutch Civil Code does not contain certain provisions. Courts have to adjudge these non-personal injuries using the flexible rule: a case of harm to the person in any other way 47. Interference of liberty or unlawful discrimination and any other constitutional rights are also recurrent cases. The most important circumstance during a legal procedure is the nature of the right involved. There is a special manifestation of the seriousness test, because all injuries against these rights must be sufficiently serious to claim damages for nonpecuniary loss. Other relevant infringements of lawful rights are invasion of privacy, assault and sexual misconduct. In the latter case it is usual that assault and sexual misconduct accompany mental traumas and physical injuries, but these criterions are not decisive. Any physical injury can only help to demonstrate the seriousness of the unlawful act, and usually it can be seen in the higher amounts of compensation. Use of a person’s image, portrait without permission in an unlawful way may constitute a sufficiently serious infringement of his personality. Infringement of copyright is against the moral rights of the author and can be more serious in the case when it is the first product of the author. Courts usually examine all the circumstances of the unlawful act, and without any statutory bounds they can make their decisions. Tangible property is an interesting situation in this field. Interference with, damage to or loss of tangible property as such does not entitle the injured party to recover any non-pecuniary loss suffered as a consequence thereof. To claim damages for non-pecuniary loss other conditions are required. For example, if there was a special emotionally contact between the owner and his property, and the defendant had to know about it or this connection was the reason itself of the injury, a claim can be established. The unlawful seizure of property on behalf of a creditor may amount to harm to the person, as the Dutch Supreme Court has recognized it. 48 This predilection value of a property is a most argued problem in continental legal systems. This is one of those problematic cases, which warn legislators to leave too much freedom for the courts adjudging non-pecuniary losses. Predilection value is an absolutely subjective circumstance, which is up only to the owner’s mentality. That is why when this is taken into consideration in the Netherlands as well jurisdiction is very thorough. It is difficult to adjudge which infringement of a right can cause greater loss to the plaintiff. We can say that in case of non-personal injuries the award for damages is generally based on the severity or extent of the infringement itself. It means that the greater the infringement of the right, the greater the loss suffered that should be compensated for. Although the full compensation is absolutely impossible in these cases, but the compensation for monetary damages are still available to any injured person. The problem is that in some decisions courts 47 48

art. 6:106 (1) (b) BW HR 26.6.1998, [1998] NJ, 778.

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were looking for manifested damages, which are no pre-conditions to the claim for damages for non-pecuniary loss. The most problematic area is discrimination of an employee. In several cases judges have been reluctant to award amount for non-pecuniary harm, because they did not find any loss. In my opinion infringement of any of the personality rights is a serious loss to the injured person. If we tried to examine the exact loss, it will result that there is no other accepted claim than personal injuries, closely bodily harms. It cannot be denied that there are situations when non-pecuniary loss involves the prospect of monetary loss as well (e.g. infringement of reputation or copyright, invasion of privacy, sexual abuse, etc.), because these harms can be harmful to the injured party’s earning capacity, but these are loss of income and no pre-conditions of non-pecuniary losses. If we take a closer look at the amounts the courts adjudge, it is seen that there is a clear distinction between the private non-personal injuries and those using the mass media. Infringement of reputation in smaller cases was awarded between 450 and 5,000 Euros, in serious cases 9,000 and 25,000 Euros. In a case when a country-wide daily paper published a defamatory article on a well known actor, the court took into account that the publisher’s intent was to increase circulation and damage to the performer’s goodwill, and awarded 15,750 Euros. 49 One of the highest recorded amounts was 55,000 Euros when two mass media (press and television) had published a story about a city alderman, accusing him of having received bribes. Later it came to light that the statement was false. The court took into account the extraordinary media attention and the intent of the defendant to make extra profit. 50 We can see that intention is relevant, but not decisive to adjudge non-pecuniary damages. The way of the injury and the intention are always examined circumstances during a legal procedure. These elements can be found as punitive features in compensatory law. I think it is necessary to appreciate these circumstances, because these are inseparable of the injury itself, and help to find out how much loss was created to the injured party. The courts recognize that the availability of other sanctions may influence the award of damages in non-pecuniary loss cases. Cases in which other remedies influence the award for non-pecuniary loss seem to be only exceptions rather than general unwritten rules. The most problematic point of taking into consideration alternative sanctions is the criminal verdict. In some cases courts found rectification a sufficient remedy for infringement of reputation, because in the criminal procedure the defendant was found guilty and got a kind of punishment. It is clear that rectification can only serve the function of satisfaction, which can be less than using compensation and satisfaction together. In the Netherlands it is a general rule that a judge can consider evidences free, without any statutory obligation. The sentence in a criminal process can only be one of the evidences, but not as stressed to change the way of the civil law sanction from damages for non-pecuniary loss to rectification. To summarize the jurisdiction of non-personal injuries we can say that there are not many differences between them and the personal injuries. The flexible statutory base allows the courts to consider those injuries which worthy of award. The sums are not too high and not too low, and the furthest points are explained with decent reasons, such as the intention to make profit, using mass media to commit the injury.

5. Problem with the Position of ‘Third Parties’ 49 50

Rb. (District Court) Haarlem, 12.4.1983, [1987] NJ, 339. Hof Amsterdam, 13.9.1990, [1991] Mediaforum, B1.

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Although we have seen that both statutory law and judicial practice are working in a coherent system in the Netherlands, but there are some problems, which have not been solved yet. One of the most interesting anomalies is the position of what can be called ‘secondary victims’ or ‘third parties’. Dutch Civil Code limits the possibility of ‘third parties’ to claim damages for non-pecuniary loss as a result of the injury or death of another person. 51 In typical cases the plaintiff would like to claim compensation because he suffered mental illness from witnessing the death of another person, namely a relative. This claim is not awarded by Dutch courts because of the prohibition of Civil Code, but the interpretation of the mentioned provision lives restrictively in jurisdiction. We can find two situations when the claim of third parties can be awarded. First of all, the claimant can only claim for damages, caused by a mental trauma because of being witness of an injury against another person, if he can establish that the aggressor (defendant) also committed an unlawful act vis-à-vis the claimant himself, which resulted in the trauma. It is really difficult to be demonstrated because of the causation required by BW. The process to verify that the aggressor, who committed an unlawful act against another person, causes the trauma is almost impossible in some cases. The second chance of the secondary victim to claim for compensation is if he verifies that the trauma amounts to physical or non-physical injury. If this is the case, the claimant can get compensation of his pecuniary loss (such as cost of medical treatment) and non-pecuniary loss on the basis of his non-physical personal injury. 52 To see how these rules work in practice, I would like to show three cases 53 from the case law of the Supreme Court of the Netherlands. An 8-year old boy lost his parents in a terrible car accident caused by a culpable person. His grandparents decided to raise him up and take him into their house. The grandparents did not only claim the costs of raising a child, but they also filed a claim for the time and effort they spent with upbringing him. The Supreme Court denied the claim because according to Dutch law, an act is – in principle – only regarded tortuous towards the victim himself. Third parties and secondary victims only have a claim if they can find a specific ground in the Dutch Civil Code, or when they successfully argue that the act was, under the specific circumstances, also tortuous towards them. This means that the grandparents had to demonstrate they were primary victims of the injury. In case of death, the Dutch law and legal practice grants a right to compensation of loss of financial or non-pecuniary support only to certain relatives. It is interesting but certain relatives do not contain parents of the deceased person, unless the deceased used to provide their costs of living. In this case the child had the opportunity to claim for the extra efforts of his grandparents. To perform the other side of the story, there is another situation, where pecuniary (financial) damages are in the center of the case but from the view of third parties. The second case is in connection with an 11-year old girl, who had a duty in school. She had to serve coffee and tea to her teachers. To discharge her obligation she had the right to leave the classroom 10 51

BW art. 6:107-108 In Hungary there are no exact rules and provisions for the non-pecuniary damages of third parties, but since a decision of the Hungarian Supreme Court in 1987, these claims can be accepted not only if a close relative died in connection with the injury, but in every situation when verified disadvantages can be demonstrated. 53 These cases are mentioned in the presentation of Siewert D. LINDENBERGH at POPIL Conference Roma, 2425th May 2002.: A Comparison of European Redress Systems: Common ground and differences (http://www.aci.it/studiericerche/monografie/Convegno_24_25maggio2002/lindenbergh.pdf) [December 2nd 2013] 52

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minutes earlier than her classmates. Once her T-shirt caught on fire she suffered severe burning. Her parents spent much time visiting her in the hospital and they also spent a lot of time taking care of her wounds at home. In this situation the parents claimed in the name of their daughter, so the Supreme Court decided that the girl indeed had a right to compensation for the time spent by her parents on her nursing, because if they had not, she could have claimed for the costs of professional nursing. It is a pecuniary loss. The Court dismissed the other part of the claim, compensation for the visiting in the hospital, because there is no professional equivalent for ‘visiting’. The last selected case is a famous one in Dutch case law, called ‘Taxi bus case’. A 5-year old little girl was riding her bike close to her home, when a taxi bus overruns her. The bus actually rides over the girl’s head. The mother was immediately warned by one of the neighbors and found her daughter with her face turned to the ground. First, the mother called the ambulance hoping that the girl was still alive. When the mother tried to turn her daughter’s head to look her in the face, she experienced that her hand disappeared into the skull of the girl. The mother noticed that the substance next to her girl’s head was not; as she considered, her vomit, but appeared to be the girl’s brain. The mother suffered severe mental illness because of the shock of this sight and the realization. Dutch law is consequent in the question that there is no claim for non-pecuniary damages subsequent to death of a relative. Taxi bus case was the first when Dutch Supreme Court awarded the right to compensation of non-pecuniary damages to somebody who lost his relative. The decision contained that the act committed towards the child, must also be regarded as tortuous towards the mother. The Court emphasized that there was a distinction between the consequences of the child’s death, for which no non-pecuniary damages may be awarded, and the consequences of the confrontation with the accident, for which damages may indeed be awarded. The mother received 14,000 Euros for non-pecuniary damages. This case shows that although in principle the plaintiff has a right to claim compensation for the exact damages he suffered, the courts are free to assess the damage in a more abstract way, if that corresponds better to its nature. 54 Examining these cases it is obvious that extra conditions are demanded to claim for nonpecuniary damages because of the loss of a relative. Only the fact of losing a close relative is not enough for a successful action. There have to be special circumstances, which demonstrate that the unlawful act made a direct effect to the plaintiff, who became the primary victim. Legislators are presently working on a proposal that grant certain relatives a fixed amount of non-pecuniary damages of at about 10,000 Euros without any further condition. 55 It means that in the ‘Taxi bus case’ the mother could have received 10,000 Euros for her girl’s death and another 14,000 Euros for the mental illness and psychical shock she had to suffer because of the specially cruel circumstances (such as she could see her girl just after the injury, she had to experience the death and the brutality of the accident).

6. Intention and Financial Resources of the Parties: the Right to Reduce Damages for non-pecuniary loss are independent from the conduct or fault of the liable party. The traditional lemmas of compensatory law have changed in this point. To increase the 54

HARTKAMP, S. Arthur, Judicial discretion under the New Civil Code of the Netherlands; (w3.uniroma1.it/idc/centro/publications/04hartkamp.pdf) 13. [December 2nd 2013] 55 This is a living rule in art. 1382 of the Belgian Civil Code. The difference is that in Belgium it is impossible to receive extra amount because of non-pecuniary damages. 10,000 Euro is a standard amount for losing a close relative.

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effectiveness of protecting the personality against external injuries, it is necessary to exempt the plaintiff from demonstrating the intention of the defendant. Of course the intention or the lack of it may influence the amount of the compensation, but it is not in the center of the questions. If there is a personal or non-personal injury which makes harm to another person, and this is not allowed by statutory law (e.g. extreme necessity), the defendant has to pay damages for non-pecuniary loss unless the loss is not suitable for the requirement of seriousness test (in case of psychical or mental traumas). The negligence of intention during the examination of the injury makes it certain that this civil law institution is free from punitive effects. The financial resources of the plaintiff do not play a significant role in the assessment of damages, but sometimes they might, particularly when the victim’s financial strength throws the resources of the liable party into the shade. It may result the reduction of the adjudged amount. The Dutch Civil Code gives the right to the courts to reduce the amount of damages when the nature of liability, the respective financial resources of the parties or the legal relationship between the plaintiff and the defendant account for it. BW says that this right to reduce is particularly expedient when full compensation may cause unacceptable results. 56 This provision is used seldom, because the judge has to explain the cause of reducing the amount with these non-defined unacceptable results. Another bound of reducing is that the reduced amount may not exceed the amount for which the debtor has covered his liability by insurance or was obliged to maintain such a cover.

7. Sums Although there are theories in connection with the function of damages for non-pecuniary loss, courts decide cases with using the provision of the Civil Code: awarding equitable amounts to the injured person. We cannot say that amounts are too high or too low compared to other European nations. It is felt that amounts are quite modest as compared to certain – firstly common law based - legal systems. Over the last decades these amounts have been increasing. The highest amount recorded until now is 135,000 Euros in the case when a middle-aged man attracted AIDS because a nurse in the hospital accidentally used a HIVcontaminated syringe. 57 In legal doctrine it is a heated argument for abolition of damages for non-pecuniary loss. It is true that higher sums can help avoiding aggressors and estimating personality, but there is a lot of fear from this abolition. Most of the writers are by the side of modifying the amounts. They are afraid of the reaction of insurance companies. It is a living fear that higher awards might even lead to the withdrawal of insurance companies from certain areas of liability insurance, e. g. medical insurances. I don’t think that a judge has to consider the weight of his decision to an insurance company. In Hungary and in most of the European countries it can be seen that whenever an insurance company is on the side of the defendant, judges are more confident in calculating the exact amounts. It is an understandable reaction, because examining the productivity of the defendant is on the plaintiff’s behalf. Adjudged amounts can be high if there can be no chance to recover. In Dutch law we cannot find any damage chart based on medical classification like in France. In the decisions of the Dutch Supreme Court no exact limits have appeared. Supreme Court only tries to describe those circumstances, which can influence the concrete sums in similar cases. The circumstances are in the first place: the nature, the seriousness and permanency of 56 57

art. 6:109 BW HR 8.7.1992, [1992] NJ, 714.

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the harm; the extent and duration of necessary medical treatment; the extent to which the claimant will be able to adjust the new circumstances; the ground for liability and the degree of fault on the part of the defendant. The evidence of good working system is the difference between bottom and upper amounts in typical cases. The difference shows that not only the end result (the type of the harm) influences the adjudged amounts but several other circumstances. Statutory law on the basis of equity and the obligation of considering every relevant circumstance permits these differences.

8. The Hungarian Approach Time stepped over the rules of damages for non-pecuniary loss in the Hungarian legislation and judicature. Although this is a tendency all over the world that modern private law has its goal to protect personality and personality rights in a really effective way. Human personality has been revalorized in the past two decades after the change of the regime. The Hungarian instrument to protect personality rights is not capable to match up to these new expectations from the society. As we take a closer look at the judicature achievements over the years we can experience the chopped and not unified practice in legal cases concerning to damages for moral loss. The principles laid down by the Hungarian Constitutional Court did not have a wide acceptance neither for courts and legislator. Admitting the necessity and need for moral compensation is no doubt in our modern society and legal system. Although measuring moral damages with the instrument of pecuniary compensation is widely accepted in Europe but different methods exist and we can hardly find any similarity or common root in these models. It seems to be an unsolved paradox to give monetary compensation for loss that cannot be expressed in money. This starting point leads us to several theoretical and practical questions and problems. During the Hungarian re-codifying process of the new Civil Code a change of paradigms can be experienced in a very short period of time. Originally the conception planned to establish two legal institutions to deal with moral damages: one could have been applied in case of verified damages, the other one was for cases in which no verified damages exist. The valid draft contains only one institution to alternate damages for non-pecuniary loss: this is pain award. The brand new institution will be moved from tort law to the law of persons and without verifying any damage the entitled party can claim it in case of infringement against personality rights. The inner contradict of the old and new protective instrument can be seen in two fields. On the one hand this is a problem for the judge how to deal with the legal ground of the claim. Is there any personally right that was harmed? Can we find a personality right to subsume the actual case under? List of personality rights cannot be exhaustive in any civil code. As human personality and its content vary from person to person, private law can give only an exemplificative list of the well-known rights. A general clause can help to gather the remaining ones. Analyzing the recent approach in Hungarian legal practice we can see that proving certain damage is a need to have a successful claim on the side of the injured party. Harm against most of the personality rights do not cause a manifested damage and result only inner damages in the soul of the injured party. If we free the legal institution of proving certain damages we have to face with the petty cases in which no real legal ground exists to claim compensation.

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On the other hand the problem of this legal institution can be seen in the stage of calculating damages. As personality rights have different value but without any commercial or trade value this seems to be an impossible mission to find how much money can compensate the actual harm. Most of the principles in the Hungarian tort law are established for monetary damages (full compensation, reparation, no profit in case of damages, residue, etc.). These are totally not applicable for moral damages. If no objective criteria exist how to calculate damages the whole legal institution can easily turn into a penal sanction that is strange body in the system of private law. At the beginning of the historical development of moral damages there was no compensation for non-pecuniary loss, only a punishment existed. In the 19th century the first civil codes discovered the compensational character of this legal institution in Europe. The unique Hungarian development in the second half of the 20th Century established several confusing rules and theories about how to treat these damages in practice. This remarkable sign on our conception about damages for non-pecuniary loss can be examined. In order to understand this very specific model, we must analyze five important problems. First of all we should analyze the historical development of moral loss to find the common cores in the European legal history. This question proves how the ancient penal point of view changed over the centuries and found its place in private law. Using the German, French, Swiss and Hungarian history of law this linear development can be traced. The second problem is about the most important theoretical questions can be read about moral damages. Finding the function of the legal institution and try to place it in the civil codes and the whole private law bring several difficulties to the surface. In this part of the analysis all major thoughts about moral compensation are considered and we try to build our definite conception to function as a starting point for the future Hungarian pain award model. The third part of the analysis of damages for non-pecuniary loss from the perspective of tort law lemmas: damage, wrongfulness, causation, fault (imputation). As we can state generally that moral compensation cannot exist without the rules of tort law the discussion focuses on all the significances about moral damages. The next topic examines specific questions from the practice of moral damages: secondary victims, comatose plaintiffs, infringements against reputation. This chapter tries to show how diverse the cases are and how difficult to create applicable and non-discriminative rules in civil codes. The closing part deals with the new legal institution in the Hungarian re-codification process and the adopted Civil Code: pain award. Systematic propositions and suggested principles, rules are listed here. The most important questions arisen from the Hungarian model and in general the application and codification of damages for non-pecuniary losses are the following: • • •

What is the purpose of compensating moral rights in the system of private law (function analysis)? Where can we place this legal institution in the civil codes? Is it acceptable to give a penal character for moral damages? 56

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• • • • • •

How can we find the exact personality right in an actual case? Is there a connection between monetary damages and non-pecuniary damages? Shall we apply the rules of monetary damages? How can we state the legal ground of moral damages, how can we find the actual loss or harm to be compensated? Is there a constitutional solution in creating a filter for petty claims? How can we deal with the claim of relatives or secondary victims? What are the main criteria to calculate the amount of moral damages?

A. History and function Examining the historical development of moral damages we can say that the ancient penal character was changed only in the 19th century in Europe. Different paths of the legal solutions show the diversity and problematic nature of how to adjudge infringements against personality rights. By the second half of the 20th century it is not a question that to ensure an effective personality protection in the field of civil law every legal system has to admit the monetary compensation of moral damages in any form. Penal character can be discovered recently in several legal systems. One of the basic reasons of why the recent models are different is the diversity in finding a function for the legal institution. None of the examined legislations give an exact function for moral damages and the judicature does not deal with the question. We can find three different explanations for the function of damages for non-pecuniary loss: compensation, satisfaction (penal character) and substitution for the loss of joy and amenities. Germany, Italy, Denmark, Greece and Hungary give a compensation character for moral damages. The valid Hungarian Civil Code regulates moral damages as part of the law of compensation and places it among the rules of monetary damages. Compensation theory remains only an idea in some cases, especially when the human personality dissolves because of the injury. The theory of satisfaction can be seen in the English law, the law of the United States of America and the French law. Admitting the impossibility to compensate moral damages the goal is to give satisfaction for the injured party with giving him or her some money and try to appease the carving for revenge. Satisfaction theory admits penal elements in the field of moral damages. The third theory is about substitution for the loss of joy and amenities. As it is the situation in Austria and California law focuses on giving a substitution for the injured person to find another occupation or hobby after the injury. Admitting that compensation is not applicable in case of personality injuries the main character of pain award is to help the plaintiff in replacing his or her loss with other activities. The new Hungarian Civil Code plans to establish pain award. To get pain award proving certain damage will not be a precondition anymore. Although we agree with this new idea but we do not want to give a penal character to this new legal institution. The main goal of compensation and substitution for loss of joy and amenities has to be the first purpose and without examining any damage in the actual situation we think that focusing on the wrongful act of the tortfeasor can give us better results to avoid penal function.

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Moral damages are in the border of two private law fields: personality protection and law of compensation. In our opinion the most important character of moral damages, damages for non-pecuniary loss or pain award is to ensure an effect protection of personality. Rules about law of compensation (monetary damages) can be used only as a method in adjudging these unique damages. That is why we think that rename the recent Hungarian damages for nonpecuniary loss and place it to the Book about the Law of Persons serves the function of pain award better. B. Preconditions of claiming pain award under the new Civil Code Although we place pain award to the Book about the Law of Persons several rules of law of compensation have to be applied when adjudging pain award to the injured person. As damages are a basic sanction of private law, the whole private law liability system is based upon this institution and its rules. That is why the new Code has to order the application of rules from the tort law chapter of the Act but we think that a general reference is not enough to perform its duty. As we proved that several rules of monetary damages cannot be applied for moral damages, the Code has to explain that the rules of tort law can be used with the natural exceptions, such as full compensation, proving damages, prohibition of benefiting from a loss, etc. Without the obligation to prove exact damages when claiming pain award an important lemma is missing from the law of torts: damages. As the rules of tort law can be applied in case of pain award, we have to substitute this precondition with something else. In our opinion to fill the gap we have to focus on the wrongful act instead of damages. As the only provable lemma is the wrongful act itself, from this fact we can establish conclusions for the loss itself. When concrete loss does not exist as a result of the injury, to find the moral loss wrongful act can help us. Liberalize pain award from proving damages brings another problem to the surface: petty claims. Only the fact that somebody hurt one’s personality rights cannot be a good reason for claiming pain award. Petty injuries without concrete and inner harms are not entitled for compensation. That is why we need a filter to stop these kinds of claims. Examining several solutions in the dissertation, we find that the Dutch “seriousness requirement” can be a good filter to throw out petty claims from the system. This method gives a duty for the judge to examine the wrongful act of the injurer from two perspectives. The objective criteria mean that a wrongful act is serious if according to general social experiences it was able to cause serious harm to the plaintiff. The subjective filter means that from the injured person’s point of view it was able to cause a serious harm. If the wrongful act was simply an infringement against personality rights but it was too bland according to these criteria there is no need for compensation. We do not agree with that solution that gives nominal damages for the plaintiff only on the ground of the wrongful act. This is a symbolic punishment, disapproval from the society. In our opinion nominal damages are outside of the continental approach of moral damages. The most important questions when adjudging the wrongful act is whether any personality right existed what the tortfeasor infringed. Pain award is a general protective instrument that reacts to infringements against personality rights. As an exhaustive list of personality rights is impossible in Europe this question has a major significance in the Hungarian cases. In Vietnam the civil code collected a long list of personality rights to give judges a helping hand 58

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in evaluation the situation. If the injured right is not among the listed ones no claim for compensation exist. The draft of the new Hungarian Civil Code reserves the exemplificative list of personality rights. A general clause protecting every personality right helps to establish a full protection. After examining several decisions in connection with damages for non-pecuniary loss, we can say that judges especially on lower courts are not leaders in the invention of new personality right. That is why a general personality right can be useful to give a helping hand for the judge in cases when no listed personality right was hurt. In the valid Hungarian Civil Code human dignity serves this function. Following the European standards the new Code would like to establish the right to privacy as a mother right of all personality rights. In our opinion beside of the wide perspective of this right this can be a great solution to encourage courts in admitting new claims about previously not protected personality rights. But using the Dutch clause of seriousness has to be a careful filter to prevent petty claims. In case of breach of a contract it is not excluded to claim for moral damages. In Hungary as there are no major differences between the rules of liability for breach of a contract or torts theoretically there is a chance to get moral damages in case of violation of a contract. The judicature does not admit these claims as only financial interest can be found in contractual relations. In our opinion several contracts exist when special circumstances, motivations give a non-pecuniary perspective to the contract. In case of contract for travel services there is no doubt that moral damages can occur from if the travel agency performs a major breach. We think that placing a direct reference for the possibility of claiming pain award in case of breaching a travel contract can help judges to create a full protection of moral interest in the field of contract law such as it is working great in the USA and England. In particular the Anglo-Saxon legal systems protect interest such as personality right. Damages for non-pecuniary loss can be claimed not only for injuries against personality rights but for infringements against interest (anger, annoyance, loss of time, etc.). As there is no accepted definition of these interests (except the ones admitted by the law) this is a huge uncertainty of what interests are protected by the law. In these cases moral damages have a pure penal function and not a compensative one. In our opinion injury against interest cannot be a good base to create a claim for pain award. C. Secondary victims There is no legal definition for the claim of the estates, relatives, secondary victims in the Hungarian Civil Code and the new draft does not plan to establish one. But judicial practice formed the claim of relatives in case of death and other serious injuries against the direct “victim”. These are sui generic claims and do not mean succession. The Hungarian theory is not enough to protect these rights. Only relatives can claim moral damages. Only in case they can prove a significant damage as a result of the injury against their relative. We suggest introducing the English secondary victim method to the Hungarian law on both levels: as a written rule in the Code and a living institution in judicial practice. The most impressive advantage of the English secondary victim conception is to give the right for moral damages to everybody that can prove a close emotional link to the directly injured person. This means that not only relatives but good friends, neighbors, custodians can claim pain award. This method eliminates those relatives that had no real relation with the directly injured person. This can be a new link in the causational process to find the link between the wrongful act against another person and the claim (moral damages) of our plaintiff. 59

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D. Calculating non-pecuniary loss Calculating the exact amount of moral damages is another difficult problem of the legal institution. We truly believe that giving exact criteria in a Civil Code will never serve the function of pain award as cases cannot be categorized. Whenever a Code undertook to build criteria it failed. This was the situation with the Hungarian Civil Code before the 34/1992 decision of the Constitutional Court. Despite of the fact that Hungary belongs to the continental family of law that denies judge made law, in connection with moral damages and pain award it is inevitable to give relatively free hand for the judge. The role of the higher courts is even more important. To ensure a unified judicial practice in the country this is their responsibility to create criteria in typical decisions. In our opinion the German Supreme Court found a very interesting and useful way to build criteria for lower courts. These criteria concern not to private law questions but more like to create requirements of how to make a logical, well justified sentence. We saw the Danish tariff solution about the limitation of moral damages. As the nature of these damages cannot be measured in money this is a useless and non-constitutional solution to give maximum amounts or formula on calculating damages. That is why we think that foreseeability as a limitation of the amount of damages in the new Hungarian Civil Code is a bad solution. Foreseeability can be used in the field of contract law as parties know each other they can calculate the other party’s loss. But in case of the classic moral damages situations the meeting of the parties are occasional. Without a limitation of when foreseeability cannot be used the new Code drafts to give this instrument to the hand of the wrongdoer in case of willful infringement. In our opinion adequate causality can serve the function of limitation in tort law without any other rules. There are two options for the method of compensation: a lump sum or allowance. The first conception of the new Hungarian Civil Code wanted to focus on the penal character of pain award and excluded the possibility of allowance. In the new conception there is no such restriction. In our opinion allowance is an important instrument in the hand of the court to ensure the compensational character of pain award and individualize the decisions. E. Criticism of pain award The new name of the Hungarian institution contains a reference for injury that relates to damages. If we place the legal institution to the “law of persons” part of the Code, it has to be better to focus on not only effective harms but inner damages. That is why we suggest pain award as the new name of this personality protection instrument. As most of the European countries have their own model for protecting personality rights, we think that an effective judicature in connection with pain award can be developed only with using every good solution from the European legal culture. That is why we encourage courts to take a look at some foreign sentences and decisions. A general conclusion is that common law systems can handle the problem more flexibly than their civil law colleagues. This is not surprising if we take into consideration that the legal institution of moral damages results in various real situations and cases during a legal procedure. The judge in the continental system has to temporarily dismiss the strict application of written rules in the civil codes, and he must form the exact rules of damages for 60

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non-pecuniary loss in the actual situation. Without choosing between the two methods, one general opinion can be stated: the legislation can help the judge with accepting the existence of this legal institution and stating only basic rules for orientation.

9. Conclusions Damages for non-pecuniary loss in Dutch legislation and jurisdiction show a very sympathetic way of the evaluation of this legal institution. The new Civil Code uses the achievements and experiences of the jurisdiction during a long period in the 20th century. Civil Code contains a general clause awarding non-pecuniary losses and only defines some typical injuries permitting courts to find other situations worthy for damages. There are no explicit thresholds how to calculate sums in concrete cases and the judicial practice has the ability to form this institution in healthy frames. In case of personal and non-personal injuries not only the manifested or medically recognizable situations are awarded but mental traumas and psychical injures are granted too. To filter out bagatelle injuries there is a special requirement: seriousness test. The ambition to disbar punitive elements from passing of judgment is successful and judges are partners in realizing this aim. The only strange approach can be found in connection with third parties or secondary victims. Dutch law approaches personality rights as absolutely private rights, which are not hereditary to close relatives. There are endeavors in legal doctrines and jurisdiction as well to reduce this strict provision. Jurisdiction described several circumstances that help turning the third party status into primary victim situation, and legal doctrine is working on a solution which is working in other foreign countries: exact amount when losing a close relative.

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IV. DIFFERENCES BETWEEN DELICTUAL LIABILITY AND CONTRACTUAL LIABILITY Tort law is always about recovering damages arisen from non-contractual relations. Tort law is based upon the concept of causing damages to another person, with whom no contractual relationship exists. This delictual nature of tort law ensures that every single damaging situation has liability consequences in civil law, disregarding whether the affected parties had any prior relationship to each other. Tort law constitutes an obligation between the tortfeasor and the aggrieved party. This obligation has the very same nature as what we experience in case of contractual relations. Obligations generally establish liability to perform either monetary obligations or to administer a certain act, or to refrain from some behavior. On the other hand, from the aspect of the entitled party, obligations establish a right to claim for performance. From this perspective, especially in the continental civil law systems, torts constitute obligations. This theory has some other foundations as well. All obligations mean an absolute obligation to perform the duty prescribed by either a contract or other situations (such as torts). Once the obligation became valid, the obliged party must perform its duties under the obligation. Torts normally do not provide a choice to the tortfeasor whether he wants to recover the damages or not. It is a binding obligation prescribed by the law, disregarding the fact if it is enacted by a contract, bill, ordinance or other forms of law. However, there are many differences between contractual and delictual obligations. 1. The most notable difference between the two forms of obligations is the base of the obligation itself. In case of contracts, in most of the situations, the parties voluntarily undertake some duties and enter into contractual relation with each other. This voluntary perspective provides an almost unlimited freedom to the parties when drafting the contract, gathering the most important obligations and clauses, and they can also derogate the model rules of law for contracts (unless it is strictly prohibited and against a specific legal requirement or prohibition). Theoretically they can also exclude liability to recover damages arisen from a breach situation (although notable exceptions exist in every legal system). However in tort situations there is a general obligation prescribed by the law for the tortfeasor to pay damages to the aggrieved party. Since there is no contractual relationship between the parties and they do not have a chance to set up different rules regarding their obligations, voluntary decisions do not have relevance in case of tortious liability. Tort liability is an absolute liability that may provide only specific defenses to the tortfeasor and the scope and list of such defenses cannot be extended. 2. Another important distinction between the two obligation types is the relation between the parties, before the breach or the tort happens. In case of a contract parties know each other and they have a chance to inform each other about any specific interests under the given contract. Both or all parties have a chance to provide detailed information to the others – i.e. the opposite party or parties – about the personal needs and requirements the contract should satisfy. Motivations, needs, expectations and all possible negative outcomes in case of breach might be included in the contract or the other party can be notified about such circumstances. This pre-contractual relationship gives a wonderful opportunity to the parties to prepare for what they are undertaking in the contract and how or why they should perform the obligations. If one of them fails to perform correctly, he can easily calculate the consequences and the scope and extent of damages that occur at the other party. Calculability is a very important factor in case of contractual relations, therefore there is more space for information. 62

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In tort situations we can easily identify most of these wrongful acts as accidents, especially in the field of negligent torts. These accidents are sudden and the aggrieved party might not even expect their coming. And in many cases the tortfeasor does not know any specific information about the injured person, the aggrieved party, so damages his behavior might cause will normally be a surprise to him. One thing, however, is common in both liability regimes. Both contractual and noncontractual (delictual) liability systems would like to make the aggrieved person whole again and aim for full compensation, unless the contract between the parties ordered otherwise. This full compensation perspective makes most of the tort law institutions applicable in contractual cases as well. The rules of calculating damages, the forms of damages, limitations periods, due dates may be the same in both liability forms. However, many legal systems in the world would like to separate the two liability forms from each other in order to serve different purposes in very different liability situations.

1. Parallel Application of Liability Rules Some legal systems have a starting point that acknowledges the fact how similar the two liability forms really are. Building on this otherwise decent theory, these systems do not make a harsh or obvious distinction between contractual and delictual liability situations. In such cases, delictual liability and tort law in general has very detailed rules in the civil code and aims to regulate the area fully, leaving almost no freedom to judges on finding who is liable for causing damages with a tortious behavior. This is why in the contractual counterpart there is usually one rule that links contractual liability to delictual liability and establishes a somewhat identical form of liability in both cases. Some exceptions may be provided by the law. These exceptions are about the inapplicability of some rules from the delictual liability provisions. Most of these prohibit the limitation of liability in breach of contract situations. Otherwise, there is almost one unified liability regime in civil law that is applied in all cases leading to damages. The theoretical background of this concept is very easy to understand. As the general purpose of the legislator is to recover all damages and prevent all behaviors that lead to damage situations, there is no relevance what behavior, what type of act or omission established liability, full compensation and prevention always remain flagship purposes. It does not matter if the malicious act was battery, assault, false imprisonment or a delay, default in performance the result will be the same: occurring damages for the aggrieved party. We discussed earlier how there is a necessity in private law to restore the broken status quo. The parallel application of liability rules expresses this principle of private law. A model example of this approach was the old Hungarian Civil Code that was applicable until March 15th 2014. Act IV of 1959 on the Civil Code of Hungary had only one provision in the contract chapter (Art. 318.) that stated the following: (1) The provisions of liability for damages independent of contract shall be applied to liability for breach of contract and to the extent of indemnification, with the difference that such indemnification may not be reduced, unless otherwise prescribed by legal regulation. (2) The enforcement of claims based on a breach of contract is compulsory if the consideration stipulated in the contract is performed in part or in whole from the central 63

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budget. Unless otherwise provided by legal regulation, an obligee shall be entitled to forebear enforcement of a claim, if he has made certain on the basis of available information that the breach of contract is the consequence of conditions for which the obligor is not liable, or if the breach of contract has no significance in terms of the national economy and cooperation between the parties. (3) If the enforcement of claims based on a breach of contract is compulsory and the obligee fails to perform this obligation without good reason, a monetary claim (indemnification, default penalty, price reduction) can be enforced on behalf of the state by the financial institution making the payments from the central budget. Despite of this linking rule, even the Hungarian system treated contracts with international dimension differently. In case of international contractual relations, these rules were not applicable as the Hungarian legislator adopted the liability system of the United Nations Vienne Convention on the International Sale of Goods. That convention places the question in a whole new perspective and separates contractual and delictual liability obviously. We must remark, that the new Hungarian Civil Code (Act V of 2013) effective from March 15th 2014 will put the Hungarian model to the second category of legal systems, as it gives up this parallel application of liability rules in delictual and contractual relations.

2. Separation of liability concepts for contractual and delictual situations The vast majority of legal systems belong to the second category. This concept makes a significant and obvious difference between the two situations, delictual and contractual, and draws a very clear dividing line between the two. The starting point for this concept is that contracts have a different motivation, and therefore they require a different treatment by the law. As contractual parties are well aware of their obligations and they know what they are undertaking in a contract, they can calculate if they can perform the undertaking until the given deadline, in the given quality and quantity, etc. This calculability makes contracts easier to deal with and the voluntary nature of contracts also support the concept of selfdetermination and freedom. Self-determination means that parties can decide whether they wish to form a contract, who might be the contractual party, what should be the content of the contract, etc. The free will perspective counts on reasonable business partners, so if one forms a contract and undertakes this contractual obligation, he formed a binding obligation that does not tolerate swings and derogations. Therefore, the contract constitutes law between the parties and makes them perform everything exactly the way they have undertaken and as it was written in the contract. This is why these legal systems eliminate fault as an old principle and precondition of delictual liability, so the defaulting party should be liable for the consequences of his breach, disregarding the fact whether he acted with intent, negligence or any forms of fault in general. This theory has its roots in the strict liability regimes that were originally designed for unreasonably dangerous activities (as it is described in the special liability forms chapter of this study book). Strict liability is a handy tool for the legislator in order to emphasize the full compensation principle. Understanding that the contractual parties have a vital interest in the conventional performance of contractual duties and obligations, the legislator would like to support this interest with prescribing strict liability in case of a breach happens.

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This strict liability theory makes exoneration very limited. Available defenses normally limit to some insurmountable circumstances (like vis major) that were not foreseeable, nor avoidable. Usually another factor for successful exoneration is to prove that even when this vis major occurred, the contractual party, the obliged party made all possible and reasonable care in order to eliminate the negative consequences of this. A brand new element here is the introduction of strict liability with a very limited available defense method for exoneration under liability and the consequence of recovering damages. As with any strict liability situations, legislators tend to guarantee some limitation on the amount recoverable in order to provide some favorable provisions to the obliged party as well. This limitation is about foreseeability. No full compensation is applicable in such cases, as the aggrieved contractual party is entitled to the damages the breach directly caused in the subject of performance (loss of value). Loss of profit, ceased benefits are only recoverable if the aggrieved party can prove that the violator who is responsible for the breach could reasonably foresee such damages at the time the contract has been established between them. Foreseeability is an important limitation on the scope of liability and makes contractual situations much more calculable than the ones under tort rules.

3. The foreseeability principle It is hard to determine when foreseeability first became a general rule in contractual liability, however most authors find this as an old English clause that arose from a famous precedent case of Hadley v. Baxendale in 1854. 58 The claimants, Mr. Hadley and another, were millers and mill-men working together in a partnership as proprietors of the City Steam-Mills in Gloucester. They cleaned grain, ground it into meal and dressed it into flour, sharps, and bran. A crankshaft of a steam engine at the mill had broken and Hadley arranged to have a new one made by W. Joyce & Co. in Greenwich. Before the new crankshaft was made, W. Joyce & Co. required that the broken crankshaft be sent to them in order to ensure that the new crankshaft would fit together properly with the other parts of the steam engine. Hadley contracted with defendants Baxendale and Ors, who were operating together as common carriers under the name Pickford & Co., to deliver the crankshaft to engineers for repair by a certain date at a cost of £2 sterling and 4 shillings. Baxendale failed to deliver on the date in question, causing Hadley to lose business. Hadley sued for the profits he lost due to Baxendale's late delivery, and the jury awarded Hadley damages of £25. Baxendale appealed, contending that he did not know that Hadley would suffer any particular damage by reason of the late delivery. The question raised by the appeal in this case was whether a defendant in a breach of contract case could be held liable for damages that the defendant was not aware would be incurred from a breach of the contract. The Court of Exchequer Chamber, led by Baron Sir Edward Hall Alderson, declined to allow Hadley to recover lost profits in this case, holding that Baxendale could only be held liable for losses that were generally foreseeable, or if Hadley had mentioned his special circumstances in advance. The mere fact that a party is sending something to be repaired does not indicate that they would lose profits if it were not delivered on time. The court suggested various other circumstances under which Hadley could have entered into this contract that would not have presented such dire circumstances, and noted that where special circumstances exist, provisions can be made in the contract voluntarily entered into by the parties to impose extra damages for a breach. Alderson B said the following: 58

Hadley v. Baxendale (1854) 156 ER 145, 9 ExCh 341

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“Now we think the proper rule in such a case as the present is this: Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract. For, had the special circumstances been known, the parties might have specially provided for the breach of contract by special terms as to the damages in that case, and of this advantage it would be very unjust to deprive them. Now the above principles are those by which we think the jury ought to be guided in estimating the damages arising out of any breach of contract. […] But it is obvious that, in the great multitude of cases of millers sending off broken shafts to third persons by a carrier under ordinary circumstances, such consequences would not, in all probability, have occurred, and these special circumstances were here never communicated by the plaintiffs to the defendants. It follows, therefore, that the loss of profits here cannot reasonably be considered such a consequence of the breach of contract as could have been fairly and reasonably contemplated by both the parties when they made this contract.” In 1894, the U.S. Supreme Court recognized the influence of Hadley upon American law as well: In Hadley v. Baxendale (1854) 9 Exch. 345, ever since considered a leading case on both sides of the Atlantic, and approved and followed by this court in Telegraph Co. v. Hall, above cited, and in Howard v. Manufacturing Co. 59; Baron Alderson laid down the principles by which the jury ought to be guided in estimating the damages arising out of any breach of contract. The Hadley holding was later incorporated into Section 351 of the Restatement (Second) of Contracts in the United States of America. In Satef-Huttenes Albertus SpA v Paloma Tercera Shipping Co SA (The Pegase) 60, the excellent Judge Robert Goff stated: "Although the principle stated in Hadley v Baxendale remains the fons et origo of the modern law, the principle itself has been analyzed and developed, and its application broadened, in the 20th century. The general result of the two cases is that the principle in Hadley v Baxendale is now no longer stated in terms of two rules, but rather in terms of a single principle – though it is recognized that the application of the principle may depend on the degree of relevant knowledge held by the defendant at the time of the contract in the particular case. This approach accords very much to what actually happens in practice; the courts have not been over-ready to pigeon-hole the cases under one or other of the so-called rules in Hadley v

59 60

139 U.S. 199, 206 , 207 S., 11 Sup. Ct. 500 Satef-Huttenes Albertus SpA v Paloma Tercera Shipping Co SA (The Pegase) [1981] 1 Lloyd’s Rep 175

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Baxendale, but rather to decide each case on the basis of the relevant knowledge of the defendant." To summarize what we know about foreseeability is we must see that there are two situations, in which foreseeability gains significance in contractual liability cases: 1. Foreseeability serves a condition for a successful defense under the otherwise strict liability theory. If the party, who is responsible for the breach, can successfully prove that he could not foresee that particular circumstance or obstacle that prevented him to fulfill his obligations under the contract, he might have a successful case and get exoneration under the strict liability principle 2. On the other, hand strict liability plays an important role in calculating the damages and the extent of liability. Unless the aggrieved party can successfully prove that the violator could reasonably foresee those losses of profit, losses of earning the other party suffered in connection with the breach, only direct damages (damnum emergens) are eligible for compensation and all other elements of loss are out of the scope of contractual liability. In both cases a reasonably thinking individual is the measurement and his knowledge and expectations. If we put this question into a pure business perspective, we should examine how another entity would react and act under such circumstances and what the violator did in order to minimize or avoid the breach were sufficient to this pattern or not. In order to find out what reasonability means in a given situation, courts have to explore the information and possibilities the violator had at the time of forming the contract and later, when the breach actually occurred. We have to emphasize, however, that during such examination the objective liability standard should not be given up, so the outcome of the research must support the original intention of the legislator: to provide satisfaction and compensation to the aggrieved party against the violator, who did not fulfill his obligations. It needs to be mentioned that the possibility of imputing knowledge and foreseeability has led some judges and commentators to argue, no doubt in the interests of uniformity, that certain types of knowledge can generally be imputed and certain types of losses can generally be regarded as foreseeable. For example, one court stated that where commercial goods are sold to a merchant, a resale can always be assumed without any further indications. 61 Changes in market conditions have also been regarded as part of the knowledge which can generally be imputed. 62 It has also been suggested that the violator, the breaching party should reckon with the fact that after the breach, the injured party will incur expenses in the attempt to bring about a state of affairs that would have existed had the contract been properly performed. The following types of loss have also been said to be generally foreseeable: liability to customers or costs of taking the goods back where the goods are sold to a commercial buyer; compensation for missed uses of the goods to be delivered; additional costs for transportation, storage and insurance; the loss of clients resulting from the defect in the goods. 63 Although the instruments' foreseeability rule allows that the extent of the breaching party's liability be determined by knowledge and foreseeability this party is presumed to have had, 61

Case No 10 Ob 518/95 Supreme Court (Austria) 6 February 1996 (Propane case) Case No 2 U 30/77 Appellate Court Hamm (Germany) 23 March 1978 (Brass poles case) 63 SAIDOV, Djakhongir, The Law of Damages in International Sales: The CISG and other International Instrument, Hart Publishing, London, 2008. 113. 62

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this should not mean that we should ‘de-personalize' the rule entirely. The goals of certainty and uniformity that the described approach aims to achieve must be balanced against the rationale underlying the foreseeability rule. As shown, the rule pursues the purpose of allocating the risk in a fair and reasonable manner and considering the multiplicity of circumstances in which the breaching parties may find themselves, it seems grossly unfair to presume, from the mere fact that breaching parties are businesspersons, that they automatically find themselves in a position to foresee the losses referred to above. Such a sweeping presumption would negate the very purpose of the foreseeability rule by altogether ignoring the breaching parties' particular circumstances. Surely, a more balanced approach is to rely on presumed knowledge and foreseeability but only insofar as they can be reasonably inferred from the party's particular circumstances. This does not mean, however, that we should refrain from identifying factors and patterns which may lead judges and arbitrators to imputing certain types of knowledge. Without being 'set in stone', such factors and patterns can help parties develop reasonable expectations as to how the instruments' foreseeability rule is likely to work in a particular case. In general, a businessperson will be presumed to know of the facts and matters which will enable it to foresee the consequences of the breach if such knowledge can be expected of it taking into consideration its commercial experience. 64 Where traders are involved, it will often be reasonable to expect the breaching party to know that prices for the goods, particularly those in volatile markets, will fluctuate and that the injured party will suffer losses as a result. In one case 65 the buyer's refusal to perform put the seller in the position where it had to purchase the goods from the supplier but was unable to find any use for the goods until the time when the price dropped considerably. The court ruled that the seller's loss was foreseeable: The buyer is a businessperson. Furthermore, the brass material that the seller purchased to perform its contract with the buyer is an article which depends on the market. Consequently, considerable fluctuations in price are to be expected. That includes a sudden drop in prices to the depths the seller uses to calculate its losses. In another case 66 the delivery of a defective packaging system caused the buyer, amongst other things, to incur additional costs relating to the maintenance of its production facility. The court held that because this loss would be foreseeable 'to any company dealing in implements of manufacture’; this loss was foreseeable to the breaching seller as the latter itself was a manufacturer. It may also be the case that the buyer's delay in payment causes the seller to procure credit and in one case, the cost of doing so was held to have been foreseeable by the buyer. In several cases, besides relying on the breaching party's business experience, courts and tribunals have also taken into account some other factors in deciding as to whether it was appropriate to impute knowledge and foreseeability. One such factor was knowledge of the innocent party's business. In one case under the CISG 67 the seller knew that the buyer was a car dealer and when its delivery of a non-conforming car made the buyer liable to its customer, the court ordered the seller to compensate the buyer for those damages as they were, in the court's opinion, “foreseeable”. Where the seller sells a large quantity of the goods 64

KNAPP, Arts 74-77 CISG, In BIANCA and BONELL (eds), Commentary on the International Sales Law: The 1980 Vienna Sales Convention, Giuffré, Milan, 1987. 542. 65 Appellate Court Hamm, 23 March 1978 66 TeeVee Tunes, Inc et al v Gerhard Schubert GmbH WL 2463537 (SDNY) 67 Case No 22 U 4/96 Appellate Court Köln (Germany) 21 May 1996 (Used car case)

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and knows that it sells the goods to a wholesaler in a sensitive market, it is likely to be found to be in the position to foresee that the buyer will lose custom, profits, and that its reputation and goodwill will be damaged. In some cases, the seller may be held liable for loss of custom and profits even if the breach was trivial so long as the seller knew that the buyer was a middleman operating in a market which is saturated with the type of product delivered by the seller. In a case 68 the Dutch seller who delivered cheese, only 3 per cent of which was found to be defective, was held to be in a position to foresee loss of custom and profits because “at the time of contract formation both seller and buyer knew that the cheese market in Germany was saturated with Dutch imports so that the threat existed that purchasers such as buyer's customers might change suppliers even for trivially unsatisfactory deliveries other than the defects complained of by buyer”. In a similar vein, where the seller is aware that it sells the goods to be used in the buyer's manufacturing process, it is expected to foresee that nondelivery or non-conforming delivery is likely to cause the buyer to lose profits from selling the final product. Where, however, the buyer demands damages for lost profits on its sub-sale contracts, they were held not to be foreseeable to the seller who had made a non-conforming delivery, where the buyer permitted a wrongful rejection of the goods by its sub-buyers. 69 It may also be the case that where the parties have had a long-standing business relationship, the breaching seller can be safely presumed to have been aware of the purpose for which the buyer bought the goods. If, in such a case, the buyer bought the goods for resale, the seller may be presumed to have foreseen that delay in delivering the goods (or non-delivery, for that matter) would make the buyer liable to its sub-buyers. However, where the nature of the buyer's liability to third parties is unusual, excessive, or unjustified, losses flowing therefrom are unlikely to be foreseeable. In one case 70 the buyer bought materials for use in the construction project it had been commissioned to carry out. As a result of the seller's delay in delivering the goods, the buyer had to pay a contractual penalty to its sub-contractor. The court held that while such penalty clauses “can be expected to be included in construction contracts”, the penalty paid in that particular case was not foreseeable by the seller because of the clause being too disadvantageous to the buyer by requiring to pay the full amount of the penalty (which, presumably, was deemed to be excessive in the circumstances) within a short period, considering the large scale of the project. The court, relying on the “assumption of risk” rationale of the foreseeability rule, stated that the risk that had materialized in that case did not conform to the risk assumed by the seller because the seller “did not have to reckon with the fact that [the buyer] would forfeit the full contractual penalty with a delay in delivery of two weeks”. Where the breaching seller had no reason to be aware at the time of concluding the contract that the buyer acted as an agent, it is highly unlikely that the buyer's loss of its agency commission would be regarded as a foreseeable loss. Another factor that has been relied upon, along with knowledge of the aggrieved party's business, is knowledge of the nature of the goods. In one case 71, the tribunal held that the breaching seller should have known that the buyer was a clothing retailer and that the goods were seasonal in nature. Therefore, the seller ought to have known and foreseen that “late delivery would mean that the goods could only be sold at reduced price once they were out of season and therefore profits would be lost”. This overview demonstrates that while it is possible to discern a set of factors which may influence the court's or tribunal's decision in respect of whether to impute certain types of knowledge and foreseeability, the question of 68

Case No VIII ZR 210/78 Supreme Court (Germany) 24 October 1979 (Cheese case) Siskiyou Evergreen, Inc Debtor Case No 602-66975-fra11 70 Case No 419 O 48/01 District Court Hamburg (Germany) 21 December 2001 (Stones case) 71 ICC Arbitration Case No 8786 of January 1997 (Clothing case) 69

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whether a particular loss was foreseeable must be resolved on a case-by-case basis. This overview also appears to support the view that the foreseeability rule “would bear upon the different cases with varying degrees of rigor” 72. Another question to be addressed is whether it is reasonable to presume that the breaching party will always expect the injured party to mitigate its loss and therefore, the foreseeable loss is only that which cannot be reasonably avoided or reduced. For example, suppose that the seller refuses to deliver the goods at the contract price of €60,000. The buyer intended to resell the goods to its sub-buyer for €90,000 and it is possible for the buyer to purchase replacement goods at the current price of €70,000. Assuming that the foreseeability rule refers not only to the type of loss but also to its extent, is it the €30,000 or the €10,000 that is within the seller's foreseeability range? In other words, should the foreseeability rule take into account a reasonably available opportunity to mitigate the loss? It can be argued that it is justifiable to interpret the foreseeability rule in such a way not only because the mitigation rule is a method of limiting damages but also because taking measures of mitigating loss is what reasonable parties often do in protecting their own interest. It is submitted, however, that this approach will introduce an unnecessary degree of complexity to the foreseeability rule and will also undermine the existence of the mitigation rule as a separate method of limiting damages since its function will be then performed by the foreseeability rule. This approach will also place an additional burden on the injured party by making it bear the burden of proof of both foreseeability and mitigation. The burden of proving foreseeability is borne by the injured party while the burden of proving mitigation is generally borne by the breaching party.

4. The Relevant Time of Foreseeability The most detailed practice regarding the foreseeability principle is attached to the application to the Vienna Convention on the International Sale of Goods (CISG). However, many questions arise from the subjectivity and difficulty on how to determine the relevant time of foreseeability under the Convention. It seems to be clear that the relevant time can be examined only at the time parties formed a contract to each other. Most contractual relations, especially in international contracting and cross-border business and commercial relationships constitute long-time cooperation and obligation between the parties. A sale of goods contract might be attached to a distributing agreement, so sale of goods are multiple under the frame agreement. In long time business cooperation we cannot say that informational position and foreseeability can only be compared to the stage when the parties entered into contractual relations to each other. In the long time cooperation many acts, declarations and information are happening between the parties. New circumstances and problem may come to the surface. We cannot exclude these late causes and late information from evaluation when trying to find whether the violator had enough knowledge to foresee the extent of damages the aggrieved party would suffer in case of breach. This is why judicial practice, even in case before national courts, adds all these information to the foreseeability standard.

72

BRIDGE, The Sale of Goods, Oxford University Press, Oxford, 1997. 543.

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V. SPECIAL L IABILITY F ORMS 1. Strict Liability Forms The principle of full compensation requires primacy on preventive goals. In many areas of social connections it is almost necessary to the legislator to create special liability forms in order to maintain restorative purposes of tort law and strengthen social trust in certain business activities, machines or forms of transportation. Strict liability forms have the origin in old English law. In the Middle Ages English territories were sparsely populated and people lived quite far from each other. Before the massive urbanization social interactions and everyday connections were very rare between English people, and therefore English common law principles started to establish tort law as a strict liability form in civil law. In those very rare occasions when people had any interaction to each other everybody must have be refrained from causing any harm or damages to the other party. Sanctity of personal property and assets were of a high standard of legal principles in English law, and no trespass was allowed to any individuals unless holding a decree from the King. This special social structure of old English society required a very different approach to civil liability than what once was the root of tort law in the old continent, in the rest of the European territories. English law started torts as nominated civil wrongs with a dedicated action to help legal enforcement easier and better against trespasses. Trespass against property and trespass against the person were strictly described tort forms with actual prohibited behavior, such as battery, assault, false imprisonment, etc. None of the original English torts required the plaintiff, the aggrieved party to prove negligence or intention on the side of the tortfeasor. All that was needed to succeed with the specific tort action was to provide evidence to your loss (material harm) and that this loss was caused by a tortious behavior of the defendant. Exoneration was almost nonexistent, and only the permit from the King and the crown (as administration) granted a free pass to the tortfeasor. Strict liability was the first and original liability form in England when the legal institution was born and the phrase tort was given to this specific action in the 13th century. Strict liability always had full compensation principles and did not really care for preventive purposes. English courts gave up strict liability as a general principle of civil liability in the infamous Scott v. Shepherd case in 1773. This case is also known as “The famous Squib Case”. Shepherd tossed a lit squib into a crowded market in the town of Milborne Port in Somerset, where it landed on the table of a gingerbread merchant named Yates. Willis, a bystander, grabbed the squib and threw it across the market to protect him and the gingerbread. Unfortunately, the squib landed in the goods of another merchant named Ryal. Ryal immediately grabbed the squib and tossed it away, accidentally hitting Scott in the face just as the squib exploded. The explosion put out one of Scott's eyes. The majority held Shepherd was fully liable, because, said De Gray Court Justice, "I do not consider (the intermediaries) as free agents in the present case, but acting under a compulsive necessity for their own safety and self-preservation." Judge Nares – member of the judicial panel in the case – wrote the following: „I am of opinion that trespass would well lie in the present case. The natural and probable consequence of the act done by the defendant was injury to somebody, and, therefore, the act was illegal at common law. The throwing of squibs has... been since made a nuisance. Being, 71

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therefore, unlawful, the defendant was liable to answer for the consequences, be the injury mediate or immediate. Old English law expresses that malus animus is not necessary to constitute a trespass. The principle I go on is what is laid down in Reynolds v. Clark that if the act in the first instance is unlawful, trespass will lie. Wherever, therefore, an act is unlawful at first, trespass will lie for the consequences of it. So, generally trespass lay for stopping a sewer with earth so as to overflow the plaintiff's land. According to the original principle, for going on the plaintiff's land to take the boughs off which had fallen thereon in lopping, I do not think it necessary, to maintain trespass, that the defendant should personally touch the plaintiff; if he does it by a mean it is sufficient. He is the person who, in the present case, gave the mischievous faculty to the squib. That mischievous faculty remained in it until the explosion. No new power of doing mischief was communicated to it by Willis or Ryal. It is like the case of a mad ox turned loose in a crowd. The person who turns him loose is answerable in trespass for whatever mischief he may do. The intermediate acts of Willis and Ryal will not purge the original tort in the defendant. But he who does the first wrong is answerable for all the consequential damages.” The judgment Scott v. Shepherd was as follows: „This case is one of those wherein the line drawn by the law between actions on the case and actions of trespass is very nice and delicate. Trespass is an injury accompanied with force, for which an action of trespass vi et armis lies against the person from whom it is received. The question here is whether the injury received by the plaintiff arises from the force of the original act of the defendant, or from a new force by a third person. We agree with Judge Blackstone as to the principles he has laid down but not in his application of those principles to the present case. The real question certainly does not turn on the lawfulness or unlawfulness of the original act; for actions of trespass will lie for legal acts when they become trespasses by accident, as in the cases cited of cutting thorns, lopping of a tree, shooting at a mark, defending oneself by a stick which strikes another behind, etc. They may also not lie for the consequences even of illegal acts, as that of casting a log in the highway, etc. But the true question is whether the injury is the direct and immediate act of the defendant; and I am of opinion that in this case it is. The throwing the squib was an act unlawful and tending to affright the bystanders. So far, mischief was originally intended; not any particular mischief, but mischief indiscriminate and wanton. Whatever mischief, therefore, follows he is the author of it; egreditur personam, as the phrase is in criminal cases. And though criminal cases are no rule for civil ones, yet in trespass I think that there is an analogy. Everyone who does an unlawful act is considered as the doer of all that follows; if done with a deliberate intent, the consequence may amount to murder; if incautiously, to manslaughter. So, too, in a case, a person breaking a horse in Lincoln's Inn Fields hurt a man; held, that trespass lay: and, 2 LEV 172 that it need not be laid scienter. I look on all that was done subsequent to the original throwing as a continuation of the first force and first act which will continue until the squib was spent by bursting. I think that any innocent person removing the danger from him to another is justifiable; the blame lights on the first thrower. The new direction and new force flow out of the first force, and are not a new trespass. The writ in the register for trespass in maliciously cutting down a head of water which thereupon flowed down to and overwhelmed another's pond shows that the immediate act need not be instantaneous, but that a chain of effects connected together will be sufficient. It has been urged that the intervention of a free agent will make a difference; but I do not consider Willis and Ryal as free agents in the present case, but acting under a compulsive necessity for their own safety and self-preservation. On these reasons we concur with Judges Gould and Nares, that the present action is maintainable.” 72

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The adoption of the novus actus interveniens (new act intervening, or the “breaking the (causational) chain” principle) also meant that not only the negative outcome, the existence of loss and causal connection that constitute liability. However, strict liability always remained an exception under the general fault-based tort liability form in even modern days’ civil law. Strict liability forms are multiple in every legal system, however – in contrary to the general fault-based liability system – all conditions when strict liability is applicable are precisely defined. Strict liability no longer means that there is no exoneration possible if fault is not an important factor to evaluate. There is always at least one special circumstance that constitutes exonerations under tortious liability for the tortfeasor. The main difference between strict liability defenses and the general defense in fault-based liability systems is that the latter is so general that many circumstances might be under it, while the former one is fully circumscribed and specific, restricting exoneration to a very limited number of cases. In the following, we try to gather some of the most typical strict liability forms in tort law, mainly in the European continent. During our short detour from the mainstream of fault based liability, we will take a closer look on what the European Union achieved in the past in order to create a somewhat unified tort system in special areas of civil liability. As these specific strict liability forms are attached to new activities and brand new political directions of the legislator, the European Union legislation had more territory to act and more ways to harmonize laws in the Member States than just simply lay down principles to the good old fault based liability systems. The latter systems have rock hard principles and centuries old judicial practice in most Member States. This is why approximation of fault based liability laws is always much slower than coming up with a brand new liability form. In two areas of civil liability the European Union was the first to establish strict liability in the laws of the Member States. One is the area of product liability that was almost completely unknown, at least in a general concept, in European tort law. The other one is a very modern area of strict liability, the liability of air carriers and carriers of other transportation methods for passengers in case of delay, cancellation and denied boarding. As we see, these areas are relatively new directions in global legislation and most Member States never had a chance to react to these brand new challenges first. The European Union got the consumer protection approach and regulated these areas of tort liability from a full compensation perspective, eliminating the examination of fault almost completely. A. Products Liability Products liability always had a close connection to consumer protection law. The special liability rules in defective product cases emerged at the beginning of the 20th century in the United States of America. In the famous MacPherson v. Buick Motor Co. case 73 in 1916 the New York Court of Appeal and its judge, Benjamin N. Cardozo delivered the first precedent on product liability claims. The plaintiff, Donald C. MacPherson, a stonecutter, was injured when one of the wooden wheels of his 1909 "Buick Runabout" collapsed. The defendant, Buick Motor Company, had manufactured the vehicle, but not the wheel, which had been manufactured by another party but installed by defendant. It was conceded that the defective wheel could have been discovered upon inspection. The defendant denied liability because the plaintiff had purchased the automobile from a dealer, not directly from the defendant. Beside the privity doctrine established for contractual relations, the court faced with the problem of fault based liability system as well. The case brought two important questions to the court. 73

MacPherson v. Buick Motor Co., 217 N.Y. 382, 111 N.E. 1050 (1916)

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First, is it possible to sue the manufacturer of the defective product if the aggrieved person is not in contractual relationship with it? With other words, is it necessary to form a contract on the sale of goods in order to successfully sue the manufacture because of the defectiveness of the product? The second question was whether it is fair to make the consumer prove negligence of the manufacturer in order to collect damages he suffered in connection with the defective product. The court ruled for the plaintiff and basically denied both old tort concepts to be applicable in these product liability cases. Privity is not necessary in order to provide efficient protection for consumers, so it does not have any relevance who bought the product, since the manufacturer’s liability for defectiveness is against everybody, who can possible use the product. The more important question was inapplicability of the old fault based liability theory. Cardozo found that it would be overly unfair for the consumer to make him prove negligence of the manufacturer. All evidences are in the hand of the manufacturer and he can easily exonerate himself with proving that he exercised outmost care (keeping all laws, safety regulations, general and periodical inspection, etc.). The court constituted strict liability in cases when a defective product causes damages to the consumer. These damages evolve either in the consumer’s life, health, physical integrity (basically personal injuries) or in other property of the consumer. After the MacPherson decision product liability claims became very popular. The American courts had a chance to interpret what defectiveness really means in a given situation. There are three forms of defectiveness under American law: 1. Manufacturing defect: manufacturing defect occurs when a product became faulty during its production and it is not intentional by the manufacturer. Especially in the age of mass production, despite of the highest care, a few products might be faulty at the end of the day. Manufacturing defects are obviously in the risk area of the manufacturer and he must be liable for the damages the faulty product causes, as he must bear the costs and risks of misproduction. 2. Design defect. Design defects are more sophisticated as these are intentional faults in the manufacturing process. Every single piece, product of a product line has that defectiveness as the intentional design was not sufficient enough to avoid damages. For example, if a furniture manufacturer produces chairs with no fulcrum under the back rest area in order to make it look more stylish, it is part of the design. However, if the manufacturer did not pay attention to the weight limit of such structure and in the testing phase he did not check the weight capacity of the chair, it is a design defect that might cause damages to consumers, who are a bit heavier than the average. In this case, provoking damages are not intentional, obviously, while there is some kind of negligence as the manufacturer did not exercise outmost care during the designing process. 3. Inadequate warnings and instructions. The most problematic and somehow the most dangerous cases are the product liability claims, emerging from inadequate warnings and instructions. If the manufacturer neglects to inform consumers about a potential risk, danger in connection with the product, or neglects to provide them information on how to operate the product safely, all damages arisen from this negligence are recoverable under the product liability principle. The massive tobacco litigation in the 1970s and 1980s proved that such negligence could be fatal to the manufacturer. In the tobacco litigation cases medical reports started to draw connection between death, lung cancer and smoking only decades after the tobacco business became big in the U.S. Consumers, who became aware of these new medical results, sued the cigarette companies as they failed to inform consumers about this potential danger in using the product. The defense from the manufacturers was that they could not know about this connection between smoking and lung cancer, and right after the new 74

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medical reports got publicity, they immediately put labels on the products. We call it the development risk problem, when a manufacturer produces some brand new product, and dangers and risks are not obvious until technology and research improve further and unveil the problem. The American courts ruled for the plaintiffs, as manufacturers shall bear the development risks of a product. They gain significant profit from creating and distributing something brand new regarding technology, so they should be the ones to face the negative consequences of a state of the art product as well. We see this problem coming back in the U.S. with the asbestos litigation, obesity cases and the first generation birth control pill cases. In Europe, a common standard of strict liability in product liability cases has been introduced with the EU directive 85/374. Before the EU adopted the directive, most of the ten Member States had no special law for product liability problems. In general, Member States applied the basic fault based liability rules for product liability cases as well. Fault based liability enabled the producer to excuse himself with proving a reasonable conduct under the given circumstances. We could find a few exceptions before 1985. In Germany statutory law introduced strict liability in drugs injury law. This was not a general rule for all product liability cases, just a special legislation for drugs and the manufacturers. Another notable exception was France, where despite of the fact that legislation did not adopt special rules on product liability, courts found solution both in contract and in tort law to impose strict liability in many cases of product liability. These initiatives were partial and only existed in a few Member States. By the middle of the 1980s in the USA, product liability became a welldeveloped area of tort law. Although the European Union made every effort to build up the common market, product liability was one of the neglected areas of EU legislation. However, it was obvious that a modern common market needs more efficient rules to protect consumers. The basis of the European product liability conception was the US model. In the USA the attention for the victims of product accidents had led to the introduction of a strict liability system in the sixties and later a continuous extension of product safety regulations. In the USA a crisis arose thanks to the product liability system in the 1980s. It seemed that product liability rules were in conflict with market efficiency. Sudden increase of insurance fees and the fear of a slower development in technology in the USA had made the EU cautious when created a strict liability régime for Europe. The EU did not want to put high liability burden to the firms as it could easily lead to a stop short in the market. On the other hand firms and companies were interested in creating uniformed rules of product liability in Europe, as they felt the potential risk of national legislations and judicature to start following the strict US court decisions. And this was a real threat for companies. Many of the member states started to deal with the problem and in some member states special committees started to create national rules for product liability. Companies and firms were interested in adopting a European directive on product liability rules and probably this was one of the reasons why the EU directive followed the maximal harmonization method. Maximal harmonization not only introduced strict liability in cases of product liability but stated a rule that a single member state could not overcome by implementing more favorable legislation for injured victims. On one hand the directive established a strict liability régime, and on the other hand the maximal harmonization rule gave a protection to companies and manufacturers. As far as the majority of the member states were and are following the civil law legal traditions, judicial decisions cannot overwrite statutory law. Having a national law on product liability generated by an EU directive meant a certain protection for companies against individual court interpretations. Beside the fact that the EU directive established a strict liability régime of product liability in Europe, the most substantial innovation was the inversion of the burden of proof. In a fault 75

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based system the injured person had to prove not only the general circumstances of damages but the manufacturer’s negligent. The EU directive gave a certain consumer protection perspective to the lawsuits and stated that the injured person has to prove only the harm, the defect of the product and causal link between the injury and the defect. Manufacturer can no longer excuse himself with the original defense of reasonable conduct under the given circumstances. While fault based liability focused on the conduct of the producer, the new strict liability model focuses on product characteristic. Proving a causal link between the injury and the defect can easily be burdensome for the injured person. Generally asymmetric information between the consumer and producer does not let the consumer to have enough information on proving that the injury is actually due to the product. That is why recent reconsiderations of the Directive are thinking about introducing a presumption about the causal link. In Germany court decision follow this practice but on a European level the European Commission only published a green paper on some future reforms waiting for approval. The Directive introduced maximum harmonization in Europe. As we talked about it, while establishing strict liability it also pointed the thresholds of this liability. Only some topics and provisions of the directive are subject to derogation. When the directive entered into force it originally let the member states to introduce exclusions of agricultural products and games, foods not being processed. This seemed to be an unclear logic. The directive originally had a presumption that consumers are well informed on risks associated with the consumption of conserved, hormone enriched foods. That is why the exclusion was possible. Later when big food scandals, like the mad cow disease happened in Europe, the directive was modified in 1999 and the strict liability system of the directive was extended to these products as well. Another possible derogation is the implementation of state of the art defense. Later we will talk about this defense more, but here we have to remark that state of the art can be seen as a weakening of the strict liability conception the directive aimed to introduce. On the other hand, state of the art defense is a natural protective element for the market to prevent the slowdown of technology development just because of the threat of strict liability. Another possible derogation is the development risk extension. Some member states, like Finland and Luxembourg hold the producer liable also in cases of development risk. While other countries limited this kind of liability to special product sectors: usually member states introduced development risk liability for food and drugs. But the fact is that development risk cases on courts are hardly known. The directive also contains a threshold limit (500 Euros) that excludes from compensation a lot of consumers that suffer minor damages from product defects. This limit could provide incentives to risk sharing between consumers and companies in order to avoid moral hazard problems. As we’ll see it later, in case of damages caused in an item of property but not in human health and life, member states had to introduce this threshold. If the damage in property is under 500 Euros, the strict liability rules cannot be applicable, and the injured person has to seek for compensation under the general fault based liability system. Difficult to understand what was the original reason behind the provision. The fact is that this threshold resulted serious modification in some newly joined member states of the EU. For example in Hungary the original 40 Euros threshold increased to 500 after the accession. Threshold in the directive also has another negative effect. While some of the member states, like Finland and Sweden provide low cost tribunals for dealing with product liability claims, many other member states simply do not deal with the problem just because of the 500 Euros threshold 76

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limit, and leave the claims in the hand of the ordinary courts that have slower, more expensive procedures. And finally we do not have to forget about the fact that the directive only deals with substantive law and not procedural questions. It introduced the strict liability regime in product liability cases but did not deal with legal enforcement, cheap and effective procedures to collect damages. The definition of a product in the directive is a broad definition. All movables even if incorporated into another movable or immovable are considered to be a product. The directive also extends the definition to electricity. The original exclusion of food product and games no longer exist since the 1999 modification. The broad definition of product gives a wide protection for consumers as no matter how cheap, small the product is or what nature the product has, strict liability rules are applicable in case of injuries and damages suffered due to its defect. The interpretation of a product was never a problem in Europe and the European Court of Justice never got a preliminary ruling from a national court to interpret the definition of a product. National courts also take this broad definition seriously. The definition of defect is more problematic then the definition of the product. The general rule of the directive states that a product is defective if it does not provide the safety which a person is entitled to expect, taking all consideration into account. The merely subjective definition is completed with some exemplificative aspects. When examining a defect the courts have to take into consideration the presentation of the product, the use to which it could reasonably be expected that the product would be put, and finally the time when the product was put into circulation. These guidelines make the interpretation certainly easier. Misuse by the consumer and scientific, technological knowledge at the time the product was put into circulation do matter. The sole reason that a better product is put into circulation later does not mean that the older product is defective. Harms in the directive are divided into two categories. The distinction is remarkable as in case of property damages a minimum limit exists, while personal injuries are compensated even if the injured party suffered minor damages. The first category is about damage caused by death or by personal injuries. An optional provision in the directive is a limit on total liability for damage resulting from death or personal injury caused by identical items with the same defect. If this option is adopted, the directive establishes a minimum liability limit of 70 million Euros. Spain, Portugal, Germany and Greece adopted total liability limits. The other type of damages is damage to or destruction of any item of property other than the defective product itself, with a lower threshold of 500 Euros, provided that the item of property is a type ordinarily intended for private use or consumption, and was used by the injured person mainly for his own private use or consumption. The latter restriction defend companies from paying compensation for damages of special properties, properties do not belong to private use or consumption. This provision strengthens the consumer perspective of the directive as for example if the defective product causes damages in a laboratory or in storage of a business entity; product liability rules are not applicable. The injured person has to be a consumer, who bought the product for his private use and consumption and the ordinary environment of the usage is his household. Strict liability does not mean that no defense exists. The notable difference between fault based and strict liability systems is the existence of a general defense. In a fault based liability 77

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régime a general defense rule can be applied for many conducts and act. In a strict liability system only certain defenses exist and these defenses usually do not allow broad interpretation. The EU directive on product liability contains six defenses. 1. The producer shall not be liable if he proves that he did not put the product into circulation. This is an obvious defense as product liability rules are part of the consumer protection law and aims to protect consumers from damages caused by a defective product they bought and got in a commercial transaction. National courts interpret this defense strict as product samples are considered to be put into circulation even if these samples are free for consumers before the product is available for the public. 2. The second defense is if the producer proves that, having regard to the circumstances, it is probable that the defect which caused the damage did not exist at the time when the product was put into circulation by him or that this defect came into being afterwards. The latter defense means that if the consumer’s misuse caused the defect and the damage, the producer shall not be liable. 3. The third defense is when the product was neither manufactured by the producer for sale or any form of distribution for economic purpose, nor manufactured or distributed by him in the course of business. This defense clause is about products for internal use. 4. The fourth defense is that the defect is due to compliance of the product with mandatory regulations issued by public authorities. National and international standards and other mandatory regulations for producing a product have to be kept by the producer. If the standard or regulation was the sole cause of the defect, this is not the producer’s liability but damages caused by the legislator, the state. 5. The fifth defense is when the state of scientific and technical knowledge at the time when the producer put the product into circulation was not such as to enable the existence of the defect to be discovered. The state of the art defense is the only defense that is not mandatory for member states. The directive allows member states to leave this defense from their national statutes and hold the producer liable even if the scientific and technical knowledge was not such to enable the existence of the defect to be discovered. 6. And finally, the producer shall not be liable in case a manufacturer of a component, where the defect is attributable to the design of the product in which the component has been fitted or to the instructions given by the manufacturer of the product. This defense is about the relationship between the manufacturer of a component and the producer of the final product. From the perspective of the consumer he can still sue the producer but the defense exonerates the manufacturer of the component from responsibility. State of the art defense needs further explanation. This is the only defense based on subjective interpretation. All other defenses cover strict areas with not doubt in interpretation. Implementing state of the art in the national legal systems may decrease the effectiveness of strict liability because the general uncertainty of the definition. But on the other hand state of the art can be justified in order not to weaken the incentive of firms to introduce new products because of the unpredictable liability consequences. There are different interests on both sides. Consumers need clear and unambiguous provisions while loopholes are welcome by the firms. 78

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The European Court of Justice gave an interpretation to the state of the art doctrine. The European Commission versus United Kingdom case the ECJ held that in order to be exonerated from liability the producer must prove that the objective state of scientific and technical knowledge, including the most advanced level of such knowledge, at the time when the product in question was put into circulation was not such as to enable the existence of the defect to be discovered. Furthermore, that knowledge must have been accessible at the time when the product in question was put into circulation. This means that under the ECJ interpretation, the state of the art defense is much narrower than under national laws. The test concerning knowledge is objective, and the only subjective element lies on the issue of accessibility. As we examined the basic definitions of the directive, now we can focus on the product liability claim, the methods of enforcement. The directive burdens the producer with strict liability. The producer is liable for damage caused by a defect in his product. It’s vital question for the consumer how to identify the producer. The rules of consumer protection in Europe require a label on every product put into circulation. The producer has to place a label on the product or the packaging with basic information: name of the product, origin of the product and the name and contact information of the producer or the supplier. If the producer fails to fulfill this obligation, the supplier has to correct this deficiency. The label has to contain the name and contact information on either the producer or the supplier. To help consumers identify the producer the directive on product liability introduced a presumption. Where the producer of the product cannot be identified, each supplier of the product shall be treated as its producer unless he informs the injured person of the identity of the producer within a reasonable time. This presumption allows consumers to sue the supplier if they find only the supplier’s information on the label. If the supplier fails to identify the producer within a reasonable time, the strict liability burdens him. National laws could determine the reasonable time when implemented the directive. Many of the civil law legal system countries introduced an objective time limit, usually 30 days for the supplier to identify the producer. This is extremely important that this supplementary and special liability of the supplier not a general rule. If the producer is known, can be identified, the producer shall be liable. There was a misinterpretation in some member states and the ECJ held in a preliminary ruling decision that the directive did not establish a joint and several liability of the supplier. The supplier’s liability does not exist if the producer can be identified. An obvious question is how to identify the producer. Who is the producer? The directive contains a list. Producer means the manufacturer of a finished product, the producer of any raw material, or the manufacturer of a component part, and any person who, by putting his name, trademark or other distinguishing feature on the product presents himself as its producer. Furthermore any person, who imports into the European Union a product for sale, hire, leasing or any form of distribution in the course of his business shall be deemed to be a producer within the meaning of the directive and shall be responsible as a producer. As you can see the directive defines three categories of the producer. Besides the obvious factual situation, the manufacturer, anybody who puts a mark on the product is considered to be a producer. In the famous Skov v. Bilka case 74 the European Court of Justice held that the list of producers in the directive is exhaustive. Neither member state legislators nor courts can expand this definition. This is the goal of the maximum harmonization conception. In this 74

Skov v. Bilka (C-402/03)

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case claimants were contracted salmonella as a result of eating contaminated eggs purchased from the shop Bilka. They commenced proceedings against Bilka under the Danish Law implementing the directive and Bilka joined Skov, the producer of the eggs, into the proceedings. Applying Danish law, the Danish court found Bilka liable to the claimant as an ‘intermediary’ but held that it could, in turn, seek damages from Skov as the producer of the eggs containing the salmonella virus. Bilka and Skov both appealed the decision, maintaining that the Danish law was incompatible with the directive. The ECJ ruled that the directive achieved complete harmonization of the laws, regulations and administrative provisions of member states in relation to the system of product liability regulated by the directive. That is why the list of persons liable under the directive is exhaustive. And the supplier was liable only where he had failed to identify the producer/ his supplier. As the Danish law sought to extend liability to suppliers of products in all cases, it was incompatible with the requirements of the Directive. The directive established statute of limitations for enforcement. The subjective period is three years. This limitation period shall begin to run from the day on which the plaintiff became aware, or should reasonably have become aware, of the damage, the defect and the identity of the producer. As this subjective limitation period begins to run in an undefined time, the directive introduced a longstop period that dismisses all rights to claim damages caused by a defective product. After 10 years from the date on which the producer puts into circulation the actual product which caused the damage, the rights to claim damages is extinguished, unless the injured person has in the meantime instituted proceedings against the producer. The term ‘circulation’ is an important criterion in the directive. To decide whether the product is defective or not, the judge has to take into account the information and knowledge available at the time of circulation. But a far more important application of this term can be found in connection with the ten-year long period for extinguishing rights. Especially in the latter case the relevance of an objective interpretation of circulation is essential. In general, circulation means the time, when the product becomes available in the market, reaches the consumers. In O’Byrne v. Aventis Pasteur case 75 the European Court of Justice gave and interpretation of circulation. The case concerned the application of the Directive to complex manufacturing and distribution arrangements within an international group of companies. Mr. O’Byrne claimed that he had sustained serious injuries as a result of receiving a defective batch of vaccine. The vaccine was manufactured in France by Aventis Pasteur, shortly ASPA. The vaccine was purchased in fully finished packaged form by Aventis Pasteur MSD (“APMSD”), the UK distributor of the product and holder of the marketing authorization. The UK distributor was a wholly owned subsidiary of APSA. APMSD supplied the product to the Department of Health which supplied it to a doctor, who gave the vaccine to Mr. O’Byrne. Proceedings were commenced against the UK distributor on November 2nd, 2000. The Claimant was informed by the distributor that APSA, the French company was the producer of the vaccine and he commenced a separate set of proceedings against it on October 7th 2002. The French producer, ASPA argued that those proceedings were time barred because the vaccine was put into circulation by its delivery of the vaccine to the UK distributor, APMSD on September 18th 1992. The Claimant subsequently applied to substitute APSA for APMSD in the first set of proceedings. The English Court made a preliminary reference to the ECJ asking for guidance on when, in these circumstances, a product is put into circulation and in what circumstances the English Court was permitted to substitute a Defendant. In its 75

O’Byrne v. Aventis Pasteur (C-127/04)

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decision delivered the ECJ ruled that a product is put into circulation when it is taken out of the manufacturing process operated by the producer and enters a marketing process in the form in which it is offered to the public for sale or consumption. The Court declined to follow the Advocate General’s opinion, which proposed that in the case of a group of companies a product was only put into circulation when it left the control of the group. However, the ECJ recognized that where entities in the chain of distribution are closely connected to the producer, it is for the national courts to examine the factual situation and determine whether, in reality, the related entity is involved in the manufacturing process. This is a question of fact and takes no account of whether the related entity has an independent legal personality, or whether the products have been purchased by it and property in the products has passed. The focus of the assessment should be whether the related entity carries out an activity that is properly to be treated as a production activity or, in contrast, is simply acting as a distributor of a product manufactured by its parent company. The ECJ’s decision suggests that subsidiary companies which are responsible for packaging or repackaging finished goods are engaged in manufacturing processes and the supply of unfinished products to those companies under intra-group manufacturing arrangements would not amount to ‘putting the product into circulation’. This means that in every case courts have to examine whether the intra group company is just a distributor or manufacturer. The last important subject of the directive is the provisions on cumulating claims. Claims based on product liability rules can be combined with other protective claims under the national law. Usually other protective claims are warranty rights, claiming damages under the fault based liability rules or initiating state authority proceedings. But because of the general conception on prohibition of benefiting from a loss, the maximum amount of damages cannot exceed the actual damages. Now we have to examine the economic effect of the directive on the European market and the operation of the rules in practice. In Europe the welfare state model on compensation is common. Although non-economic damages are not recognized by the directive but this does not mean that member states cannot maintain or introduce rules in connection with damages for non-pecuniary loss. Physical injuries are compensated through the national health care and social security system. In the U.S. welfare state provisions are much more restricted than in Europe. In Europe the social security system is the main mechanism for providing compensation to injured parties. In many countries compensation by the social security system does not exclude the right to appeal to civil law. Because of this model the social security authorities, who bear the financial burden of compensation, are entitled to take recourse against the producer of the defective product. A well-known criticism of the welfare state conception is that it has no deterrence function if public institutions do not file claims against the producers. But this form of compensation works better from the distributive point of view. Even if the amount of compensation can vary in the member states, every injured victim automatically receives free health care, public pension. That is why in Europe the amount of damages in product liability cases are much lower than in the U.S. In many cases the plaintiff is not able to recover non-monetary damages, like damages for pain and suffering and punitive damages. The dark side of the product liability regime in Europe is the costly access to justice. As class action is not common in Europe, the injured person has to sue the producer individually, bearing the costs of starting a legal procedure. The only chance to avoid the high costs of a judicial proceeding is the European version of class action, the so-called ‘popularis actio’. Only certain state authorities (consumer protection authorities, prosecutors) can initiate a 81

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lawsuit against the producer in the name of all injured consumers. The problem with ‘popularis actio’ is that initiating a lawsuit is a discretional right of the authorities. If they think that a case is serious enough and has an impact on a large number of consumers, authorities can start the legal procedure, but no strict rules exist when a case is serious enough. Another burden for the injured person is that contingent attorney fees are less popular than in the U.S. and in some member states contingent fees are considered to be unethical. Attorneys represent clients for fixed tariffs even if they lose the case. Civil procedures are infamously long in Europe. Because of the lack of depositions outside the courtroom, the trial, a civil procedure can take for 1 or even 5 years. And finally alternative dispute resolutions are not common to solve product liability claims. Low-cost tribunes can be found only in a couple of member states, such as Finland and Sweden. After the implementation period of the product liability directive, the number of product liability claims in Europe did not change. Between 1988 and 1995 only 3 lawsuits were reported in the member states. Insurance rates have slightly increased but a lot lower than expected. Austria can be the only good example to measure the economic effect of the directive as Austria was the only member state, where nearly all cases were solved on the sole basis of the directive. In Austria insurance policies increased with a hundred percent in 4 years. One might think that these facts prove the inefficiency of the directive. But before we make a rash verdict, we have to take into consideration some indirect factors of the directive. Let’s have a look at the number of product liability claims in some European Union Member States between 1995-2001. COUNTRY Ireland Italy UK Belgium Germany Portugal Austria

NUMBER OF CLAIMS 1 2 3 3 30 19 25

It can easily be seen that product liability lawsuits are very rare. Germany and Austria seem to be the leaders in the number of product liability claims, but 25 or 30 claims in 6 years are almost irrelevant, especially if we compare these to their American counterparts in the judicial practice of the United States of America. We cannot say that the small number of claims is because of the inefficiency of the directive. Many studies, articles and statistics show that other factors outside the direct effect of the directive have a remarkable impact on product liability cases. One of the most significant changes since the EU adopted the directive is the increased media interest in defective product accidents. As every member state has product liability rules based on the directive, injuries caused by a defective product became the center of the media attention. This new-come publicity of the cases results costly loss of reputation of a firm or company. Companies are afraid of being in the cross-fire of the media and it results in the abiding by the law, the observation of product safety rules and information requirements. Difficult to measure how many out-of-court settlement agreements was established in the last twenty years. Some academics say that companies rather offer a settlement agreement to the injured party than

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start a legal procedure. And finally if we take a closer look at the liability insurance offers of the insurance companies, more and more product liability insurances can be found. Product liability and product safety rules are in close connection with each other. The EU adopted many product safety regulations that created mandatory quality standard systems. Another successful method of forcing companies to keep safety regulations is the so-called voluntary certifying mechanisms. The International Standardization Institute (ISO) introduced international management standards. Being an ISO certified producer means certain advantage in the market. The adoption of a system of quality control can help firms reduce their exposure to product liability to the extent that product safety is increased and any defective product can be easily withdrawn and recalled without any impact on reputation. And finally product safety regulations result increasing and more powerful law enforcement of the state authorities. The European Union is continuously monitoring the work of state authorities responsible for consumer protection and force member states to increase the amount of penalties and the number of inspections. The directive contains a couple of questions that require further interpretation. The ECJ still has not delivered a unified opinion on what information may be taken into account in assessing whether a product is defective. There is a debate whether this definition includes those information and warnings supplied to intermediaries or not. The other question waiting for interpretation is the scope of the development risk defense and its application to cases involving manufacturer defects. But again, these questions are more theoretic than practical. Because of the low number of product liability claims on court, almost merely academics are interested in these interpretations. Just like the national courts, ECJ didn’t have many opportunities to interpret the terms and phrases of the directive. Due to the fact that product liability claims are not common on courts, the European Commission is working on future reforms of the directive. A conception for the future is to change the maximum harmonization idea to minimum harmonization. Minimum harmonization could allow member states to adopt more favorable rules for consumers while keeping the minimum standards in the directive. On the other side a certain advantage for the firms that the Commission plans to introduce a mandatory maximum threshold of damages, probably 70 million Euros. And finally the European Union is working on a solution to establish alternative dispute resolution panels in the member states, low-cost tribunals to handle product liability cases more efficient and less expensive as ordinary courts. The EU directive on product liability has not led to an expansion of product liability cases. Neither the product nor the insurance market has been dislocated. But beside the statistics many out of law factors indicate that the introduction of product liability rules and certain minimums in every member state of the European Union was not a useless effort. The next challenge for the EU will be to give up the original maximum harmonization conception of the directive that was originally a protective element for the firms and companies. B. Liability of Air Carriers In Case of Delay, Cancellation and Denied Boarding In our globalized world several international treaties and legislative products of the European Union regulate travel law as an important area of law. People travel more and more and an undeniably popular form of travel is air travel. In the past decade passenger traffic increased significantly, newer, inexpensive services became also available, and remote or isolated destinations got a lot closer than they were before. 83

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In aviation law we may distinguish two types of damages in case of delay of a flight, according to the European Court of Justice. One type of damages has the same impact on all passengers when placing them in a situation to spend a longer period of time at the airport than originally planned. Airports are often located far from the city and prices for most vital services – meals, shops, etc. – are significantly more. This problem should and can be solved with some immediate services, supports as listed in the regulation of the European Parliament and Council under 261/2004/EC Regulation establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay flights. This regulation pays particular attention to serve the interest of passengers, the customers. The other type of damages is an individual damage suffered in connection with the purpose of travel. Compensating this category of damages may only happen in an individual proceeding that belongs to the territory of tort law. 76 The Montreal Convention aims to regulate these damages. 77 The Convention defines the conditions for air carrier liability, defenses, substantive law and some procedural rules about the tort claim such as limitation periods and jurisdiction. During an air travel, passengers get into the most vulnerable situations when their flight is delayed, cancelled or they face denied boarding. These anomalies place passengers into a special situation comparing to passengers using other forms of transportation (e.g. trains, buses, etc.). 78 This specialty justifies the increased need for regulating such problems with providing a high standard of protection for customers. In order to fulfill the above mentioned goals, common liability rules are being applied for delays, cancellations and denied boarding situations in the European Union since 1991. The valid Regulation 261/2004/EC commonly establishes protection for all victims (passengers) of the three malfunctions of air travel. Passengers mainly face delays, cancellations and denied boarding situations when they are already at the airport waiting for check-in and/or boarding. The vulnerable situation comes from the fact that these passengers are forced to spend hours – in some cases days – at the airport that is often only an intermediary airport in their itinerary. It is not surprising passengers suffer various damages: the pre-booked hotel reservation might only be changed for a hefty penalty; the long awaited important business contract vanishes due to the missed appointment, etc. Delay According to the European Court of Justice (ECJ) delay is when a flight is operated as it is scheduled but its original departure time is postponed. If the airline expects a flight to be delayed 79, it has to provide certain services depending on the length of the delay. First of all 76

C-344/04 IATA and ELFAA case Convention for the Unification of Certain Rules for International Carriage by Air – Montreal, 28 May 1999, Chapter III 78 C-344/04 IATA and ELFAA case 79 Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, Article 6. 77

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passengers are entitled to refreshments and meals. Additionally, if the flight is expected to depart on the day after the originally scheduled departure time, the airline has to provide accommodation for the passengers. If a flight is delayed by five hours, passengers are additionally entitled to abandon their journey and receive a refund for all unused tickets, a refund on tickets used already if the flight no longer serves any purpose in relation to their original travel plan, and, if relevant, a flight back to their original point of departure at the earliest opportunity. Right to compensation in the Regulation 80 In case of cancellation and denied boarding passengers are also entitled to get fair compensation that is not a negotiable but a fixed amount listed in the Regulation. The amounts vary between €250-600 on the actual length of the flight in kilometers. If the flight route is shorter than 1500 kilometers passenger are entitled for €250, between 1500 and 3500 kilometers the compensation is €400, over 3500 kilometers the amount is €600. This compensation might get reduced with 50% if the airline offers rebooking for passengers and the rebooked flight lands after the original flight’s scheduled arrival time. This 50% reduction may be applied if there is a 2 hour long delay in case of route shorter than 1500 km, 3 hours if it is between 1500-3500 km and 4 hours over 3500 km. In a decision ruled in 2009 the ECJ 81 found that passengers may also be entitled for the above listed compensation amounts if the flight is delayed 3 or more hours. In this decision the ECJ extended the scope of compensation in the Regulation for not only cancellations and denied boarding but delays as well. Right to care 82 The air carrier must provide sufficient care (services) for passenger effected by delay, cancellation and denied boarding. These services include • meals and refreshments in a reasonable relation to the waiting time; • free of charge two phone calls, telex or fax messages, and emails; • hotel accommodation in cases o where a stay of one or more nights is necessary, or o where a stay additional to what had been intended by the passenger becomes necessary. • transport between the airport and place of accommodation. The Regulation also contains special care as an obligation of the airline provided for passengers with reduced mobility, disability and unaccompanied minors. Scope of the Regulation 83 80

Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, Article 7. 81 C-402/07. and C-432/07. Christopher Sturgeon and others v. Condor Flugdienst Gmbh and Stefan Böck and Cornelia Lepuschitz v. Air France SA joined cases. 82 Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, Article 9.

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Although some might think this special and strict EU Regulation of passenger rights is only applicable for flights operated inside EU territory, the scope of the Regulation is a lot wider than this geographical limitation. Regarding the scope of the Regulation, it shall apply to passengers departing from an airport located in the territory of an EU Member State, and to passengers departing from an airport located in a third country to an airport situated in the territory of a Member State if the operating air carrier of the flight concerned is a Community carrier. The term Community carrier means the airline has to be registered in the European Union. For example in a case when British Airways operate a flight originating from Miami with the destination of London, the Regulation is applicable. While American Airlines is exempted under the Regulation rules if it flies in the EU. American shall also apply these rules if its flight originates from an EU airport. Regarding code share flights, the Regulation is clear enough to burden the operating carrier in every case. It does not matter if a passenger booked his or her flight under a non-Community carrier code, in case the operating carrier is a Community based one, the EU rules shall apply. Warsaw and Montreal Conventions The Warsaw Convention adopted in 1929 regulates international carriage by air, both cargo and passenger traffic. The Montreal Convention amended 84 the Warsaw Treaty in 1999 and the two conventions serve as the most important sources of law for air traffic in the international community. The text provides basic definitions and the liability of air carriers. However there are significant differences in the approach and content of rights in the international treaties and the EU Regulation. While the EU Regulation provides a fix objective compensation system that may be labeled as a form of strict liability of air carriers, the Warsaw and Montreal Conventions deal with individual claims and only provide a cap on damages in individual tort cases. This is why the EU Regulation is the most detailed and strict in the international aviation law and does not interfere with the Warsaw and Montreal Conventions, since the scope of the two laws is significantly different. However we cannot say there are no common points in them, since the objective EU compensation amounts may have an impact in the amount of damages in an individual tort proceeding, according to the obligation the plaintiff has to deduct the already provided surrogatum from the amount of damages. In the Montreal Convention this cap on individual damages is 4150SDR in case of delay, 100,000SDR in case of personal injury and death and 1000SDR in case of lost and damaged baggage. The Montreal Convention aims to limit the monetary liability of air carriers if passengers suffer actual (general and special) damages in connection with air travel 85, while the EU Regulation mainly achieves to ease the negative consequences of immediate and mostly general damages suffered by delays, cancellations and denied boarding. In the former case passengers shall initiate individual tort proceedings in order to get damages from the airline and providing evidence on the actual amount of damages is an essential and crucial point in these processes. While according to EU law the fixed objective compensation amounts and care services are independent from any individual claim or justification of damages. As average and immediate damage cover assistances, the air carrier cannot redeem 83

Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, Article 3. 84 BATRA, J. C., Modernization of the Warsaw System – Montreal 1999, Journal of Air Law & Commerce Overview 65. 1999-2000., 429-444. 85 Balfour, John, The Montreal Convention 1999 – A Solution to the Limitations of the Warsaw Convention?, International Travel Law Journal, 1999., 112-118.

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these amounts and the price of care services back even if the actual damage of the passenger is a way under the regulated compensation amounts. The Montreal Convention seems to be a favorable regulation for air carriers in terms of the caps on individual passenger damages. However these caps are not exclusive and mandatory but minimum standards. Any air carrier may oblige itself in its general terms and conditions for unlimited damages and compensation not regarding the caps in the Convention (e.g. Japan Airlines is famous providing no limit compensation for its passengers, independently from the caps regulated in the Montreal Convention). Defenses for Air Carriers in European Aviation Law An operating air carrier shall not be obliged to pay compensation in accordance with Regulation, if it can prove that the cancellation is caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken. 86 Such circumstances may, in particular, occur in cases of political instability, meteorological conditions incompatible with the operation of the flight concerned, security risks, unexpected flight safety shortcomings and strikes that affect the operation of an operating air carrier. Extraordinary circumstances should be deemed to exist where the impact of an air traffic management decision in relation to a particular aircraft on a particular day gives rise to a long delay, an overnight delay, or the cancellation of one or more flights by that aircraft, even though all reasonable measures had been taken by the air carrier concerned to avoid the delays or cancellations. Defenses under liability of air carriers still remain an uncertain and most crucial topic when it comes to the interpretation of the Regulation. Although the Regulation does not directly and explicitly list the potential defenses in its text, its preamble gives some possible circumstances listed above. The European Court of Justice found this list an exhaustive one, neglecting the fact that the preamble is usually not binding in most sources of law. Air carriers usually try to widen the scope of each of the six circumstances in order to successfully exonerate under the strict liability the EU aimed to establish when having adopted the Regulation. The ECJ carried the interpretation of these defenses far in some aspects, while leaving doubtful questions and uncertainties in others. The presentation is about to discuss the content of the listed defenses, illustrating them with real cases in which national courts requested the interpretation of the ECJ in a preliminary ruling procedure. Having firm definitions for these defenses would be crucial if we tried to determine how air carriers might operate in the future and what risks one is taking when stepping up as a new player in this complicated market. Political instability Political instability does not have a commonly accepted definition either in the text of the regulation, or in the practice of the European Court of Justice since any case ever reached the ECJ to scrutinize this problem. In order to get closer to the definition of political instability, we should take into consideration constitutional and public international law institutions as well. According to these, political instability is the governing of a country without a stable and well powered government. In this case, an opposition party or militia aspire to the acquisition or alteration of the governing political power. Such circumstances may be military operations, military coups, civil wars, revolutions, rebellions.

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261/2004/EC Regulation Article 5:(3).

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Although political instability seems to be an objective defense for the air carriers, still in every situation we must examine whether the air carrier could have avoided the influence of such circumstance with taking necessary and reasonable measures and care. Another criterion for a successful exoneration under the strict liability rule is that political instability should qualify as force major, independent under the influence of the air carrier. In a case a British Airways flight was forced to stay on the ground by the activity of military groups in Kuwait, 87 the English court had to decide whether this situation is qualified as one out of the air carrier’s influence. 88 The court applied the rules of the Montreal Convention 89 in this case. The trial judge came to the conclusion that military group activities didn’t belong to the influence of the air carrier so it could not have been foreseeable and avoidable even if the air carrier had had a knowledge that military operations were going on in the country. This interpretation might be applicable in cases under the scope of the EU regulation. Meteorological conditions incompatible with the operation of the flight concerned Weather is always a common issue when it comes to flying. In most countries of the world bad weather should not constitute liability of the air carrier, since weather is a great example of force major. It is true that the air carrier does not have influence on this extraordinary circumstance, the weather. Although science and technology are well developed and highstandard these days, it is a generally accepted fact that airplanes cannot take off in a snowstorm, T-storm or in thick fog. 90 The first case dealing with weather as a potential defense for the carrier was brought to the European Court of Justice when volcano Eyjafjallajökull in Iceland erupted and authorities ordered many plans to the ground for almost a week. Some airlines interpreted the rules of the regulation as an absolute, unconditional reason to exonerate under strict liability. They thought they were not obliged to provide any service or compensation to costumers at all. Even the necessary care (food, accommodation, communication, etc.) was not relevant. In the Denise McDonagh v Ryanair Ltd case 91 the plaintiff claimed Ryanair still owes an obligation to take care of its passengers stuck on the ground. The plaintiff claimed €1129 to cover meal expenses, accommodation and transportation. The European Court of Justice ruled for the plaintiff on January 31 2013 and stated that the duty to provide reasonable care for passengers in case of delays or cancellations are absolute liability rules that cannot be neglected on the sole reason a force major evolved. Providing meals, accommodation and transportation to passengers is a liability of air carriers without proper defenses, according to the interpretation of the ECJ. Regarding the amount spent on these expenses, the court examined whether the given care was adequate and reasonable. The evaluation of the exact amount belongs to the jurisdiction of national courts, according to the ECJ. Security risks Security risks are not defined in the regulation and no ECJ case law exists in this field. If boarding is completed and doors are closed, however the final check before take-off reveals extra bags on the plane traveling without passengers, may qualify as a security risk that prevents the airline to operate the flight according to schedule. Another typical security risk 87

Panalpina International Transport v. Densil Underwear Ltd. [1981] 1 Lloyd’s Rep 187 JONES, Owain, When is a Late Flight not a Delayed Flight? The Warsaw Rules Relating to Delay, Travel Law Journal, 1996. 134-135. 89 Convention for the Unification of Certain Rules for International Carriage by Air – Montreal, May 28th 1999. 90 ARNOLD, Kinga, Application of Regulation (EC) No 261/2004 on Denied Boarding, Cancellation and Long Delay of Flights, Air and Space Law, 2007/2. 105. 91 C-12/11 Denise McDonagh v Ryanair Ltd case. 88

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may be when more passengers boarded the plane that it is shown on the check-in list. In these cases it is not relevant whether this situation is a result of the airline’s negligence or the intentional conduct of passengers, since these security risks must be clarified before take-off in order to provide safe service to customers. Especially after 9/11 the European Union and air carriers value security measures a lot more than before. Unexpected flight safety shortcomings Before we interpret unexpected flight safety shortcomings as easy defenses for the air carrier, we must state that all safety issues must fall outside the influence of the airline in order to provide successful exoneration under the duties given by the regulation. This is why the ECJ only accepts safety shortcomings with many restrictions. In only three cases, unexpected safety shortcomings can qualify as circumstances outside the interest of the carrier. Manufacturing defect is one of those cases, when the airline has no influence on the risk. The other two cases are terrorist attacks or sabotage. In the two latter cases, terrorists or saboteurs are responsible for mechanical failures of the plane. Anything else other than the three cases mentioned above could be prevented with exercising the necessary maintenance duties. 92 Since not all extraordinary circumstances confer exemption, the onus is on the party seeking to rely on them to establish, in addition, that they could not in any view have been avoided by measures appropriate to the situation, that is to say by measures which, at the time those extraordinary circumstances arise, meet, inter alia, conditions which are technically and economically viable for the air carrier concerned. The reason for this strict and narrow interpretation of the Regulation is the fact that consumers need a high level of consumer protection in the EU. 93,94 Worker strikes In case of either a lawful or wrongful strike of employees, the air carrier is exempted under liability. 95 The reason why there is no difference between a lawful or wrongful strike is that both are outside the influence of the employer, the air carrier. Even if the airline later gets a decision from the national court that evaluate the strike as an unlawful one, the employer had no reasons to believe so and more importantly had no lawful instruments to intervene without a binding court decision. However, the European Court of Justice drew the attention that the carrier’s exempt is only valid for the passengers of the actual flight concerned in the strike. All other flights must operate according to schedule and the carrier cannot extend this defense generally to more flights. 96

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C-549/07. Friederike Wallentin-Hermann v. Alitalia – Linee Aeree Italiane SpA case C-344/04. IATA and ELFAA case, Article 43-47. 94 These authors criticize the C-549/07. Friederike Wallentin-Hermann v. Alitalia – Linee Aeree Italiane SpA case and the rules of the Regulation: ARNOLD, Kinga – LEON, Pablo Mendes de, Regulation (EC) 261/2004 in the Light of the Recent Decisions of the European Court of Justice: Time for a Change?, Air and Space Law, 2010/2. 91-112.; BALFOUR, John, The “Extraordinary Circumstances” Defense, in EC Regulation 261/2004 after Wallentin-Hermann v. Alitalia, German Journal of Air and Space Law (ZLW), 2009. 224-231.; CROON, Jochem, Placing Wallentin-Hermann in line with Continuing Airworthiness – A Possible Guide for Enforcers of EC Regulation 261/2004, Air and Space Law, 2011/1. 1-6.; CROON, Jochem, “Wallentin-Hermann” and a Safe Flight. In Aviation there are No Minimum Rules on Maintenance, German Journal of Air and Space Law (ZLW), 2012/4. 609-617. 95 See judgment no. 368 of the ILO. 96 C-22/11 Finnair Oyj v. Timy Lassooy case. 93

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Air traffic management decision According to the Preamble, extraordinary circumstances should be deemed to exist where the impact of an air traffic management decision in relation to a particular aircraft on a particular day gives rise to a long delay, an overnight delay, or the cancellation of one or more flights by that aircraft, even though all reasonable measures had been taken by the air carrier concerned to avoid the delays or cancellations. Extraordinary circumstances should be deemed to exist where the impact of an air traffic management decision in relation to a particular aircraft on a particular day gives rise to a long delay, an overnight delay, or the cancellation of one or more flights by that aircraft, even though all reasonable measures had been taken by the air carrier concerned to avoid the delays or cancellations. However the air carriers cannot rely on extraordinary circumstances as general defenses that lead to their exoneration. The moment the extraordinary obstacle diminishes, the airline has to continue the service as planned. In a case passengers were boarded the plane, waiting for takeoff, when a sudden black out prevented them in doing so. When the power had come back, the plane still could not take-off and the airline cancelled the flight. Later, passengers learned that the real reason of cancellation was not the black-out that is an extraordinary circumstance, but that the flight attendants’ time shift expired. The European Court of Justice ruled for the passengers claiming damages for the cancellation. The court stated that an air carrier must plan ahead and think of such extraordinary measures that differ from force majors. Since these extraordinary circumstances may happen at any time, the carrier must plan accordingly and take reasonable care in order to minimize the consequences of them. This is why all flight schedules are planned with some gaps. If the airline does not fulfill this obligation, it cannot refer to the defense of extraordinary circumstances successfully. While the EU Regulation is pretty clear and certain regarding care services and the amount of compensation for passengers, some uncertainty can be seen in the interpretation of what qualifies as a delay, cancellation or sufficient and reasonable care. The Regulation uses these terms without clear definitions and airlines liberally mix and restrict the scope of them. Especially the thin border line between delay and cancellation lead to different interpretations in the practice of air carriers and certainly in the mind of passengers. The European Court of Justice had an opportunity to provide helping hand in interpretation through individual decisions. The standpoint of the ECJ in these cases truly divides public opinion. Some passenger rights are not explicitly mentioned in the text of the EU Regulation, only the ECJ widened the scope, almost contra legem in these situations. Think about the fact compensation should be provided for passengers even in delay situations according to the ECJ, while compensation is only regulated in EU law for cancellation and denied boarding cases. This problem leads to the interpretation of the role of ECJ in the European integration. Some authors even think the ECJ is no longer a supreme court of the European Union but a legislative body that clearly mix the traditional civil law interpretation function of courts with judge-made-law principles from Anglo-American legal systems. However we must add that in the above mentioned actual ECJ preliminary ruling cases 97 flights departing to the USA were delayed with more than 25 hours and the airline identified this problem as a form of delay and followed the legal consequences of delays as written in the EU Regulation. From a consumer protection angle the ruling of the ECJ is not a real over interpretation of the actual rules in the

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Regulation but a clarification and separation of the terms of what qualifies as a delay and cancellation. Another important question is what qualifies as sufficient and reasonable care – most importantly the definition of a decent meal – when passengers stuck at the airport for longer than planned. Airlines try to minimize the amount they provide for passengers in the form of vouchers to spend on meals and refreshments. A common practice is that airlines do not pay attention to the actual price level of the airport and give out meal vouchers in the same amount everywhere. The ECJ never had an opportunity – at least until now – to interpret and evaluate this practice. Only ordinary court decisions in the member states dealt with this question. In a famous class action case in Hungary, the Hungarian court rejected the defense from Wizzair, a Community based discount airline in a case when Wizzair provided food vouchers in smaller amount as described in its general terms and conditions. 98 Wizzair’s defense was that it adjusted the amount to the length of delay, while the court ruled for the passengers and made them entitled for the full amount listed in the general terms of air carrier. Since the Regulation does not clarify the liability of air carriers, whether there are defenses for them or not, it is still not certain if airline liability for providing the above mentioned services and fix compensation amounts are strict or fault based. Although the practice of most national courts and the ECJ itself undeniably point to the direction of strict liability, it is not clearly coming from the text of the Regulation. The problem gets more serious when parallel application of the EU Regulation and the international treaties (Warsaw and Montreal Conventions) occur, since these treaties often provide a chance for exoneration on successful defenses. As under the Montreal Convention, obligations on operating air carriers should be limited or excluded in cases where an event has been caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken. Such circumstances may, in particular, occur in cases of political instability, meteorological conditions incompatible with the operation of the flight concerned, security risks, unexpected flight safety shortcomings and strikes that affect the operation of an operating air carrier. Extraordinary circumstances should be deemed to exist where the impact of an air traffic management decision in relation to a particular aircraft on a particular day gives rise to a long delay, an overnight delay, or the cancellation of one or more flights by that aircraft, even though all reasonable measures had been taken by the air carrier concerned to avoid the delays or cancellations. Although these defenses are mentioned in the preamble of the EU Council Regulation as well, a preamble usually never enacts binding rules in the actual topic. Preambles are meant to list preliminary problem and situation that made legislation necessary in that field. This is why courts in the member states and the ECJ itself do not pay attention to these defenses in actual cases if the Regulation is applicable and claim is not under the scope of the Montreal Convention. An interesting practice of the ECJ is – again in a judge made law sense - that defenses are scrutinized and adjudged in every single case by the court itself, taking into consideration all circumstances of the situation and interpreting the meaning of these defense cases by itself. This practice leads to a precedent approach in EU law and the ECJ may interpret these otherwise very wide and uncertain defense cases with the outmost freedom. National courts give chance for defenses for airlines only if the Montreal Convention is applicable in the actual case, e.g. an individual claim is in process for gathering individual damages suffered by a passenger. This is not surprising, taking into consideration that the 98

P.M. 1420/2009/2-I.

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Convention established a fault based liability system, while the EU Regulation follows strict liability character. In a case before an English court, a British Airways flight stuck in the runway for hours because of the act of a military group. 99 In an individual tort process that applied the rules of the Montreal Convention, this resulted a successful defense for the airline, because this action did not have any reasonable and foreseeable connection to air carriage. Even the fact the airline was aware on random military actions in the region; the actual situation was still not foreseeable, according to the English court. The EU Council Regulation is undeniably the most detailed and consumer friendly regulation in the international legislation of air carriage. Even if certain terms are not clearly defined and practices of some airlines try to deteriorate the scope and application of the Regulation, national courts and the ECJ seem to be committed in providing a very high consumer protection for air passengers in the heavy air carriage competition in the 21st century aviation market. Defenses in the regulation of air carrier liability are limited not only by the text of the regulation but the practice of the European Court of Justice. Disregarding the present economic crisis and the financial difficulties airlines are facing these days, strict liability is not only strict because of the general rule but the clearly narrow opportunities for exemptions. However some defenses still have not made it to the ECJ, therefore we cannot exactly give interpretation to all, the general approach and interpretation of the rules in the regulation is very favorable to customers and takes air carriers as true professionals, who owe high duty to their passengers. C. Case-law Although in the past majority of instances of unintentional injuries, U.S. courts require the plaintiff to prove his injury was caused by defendant’s negligence, there are a few cases where plaintiff can recover despite the defendant being free of negligence. To recover in strict liability the plaintiff must show that defendant’s activity which injured him was “abnormally dangerous.” This test is to be interpreted so as to impose strict liability or many more activities than would be subject to strict liability in the United States. CASE #1 Hammontree v. Jenner 97 Cal. Rptr. 739 (Cal. App. 1971) Plaintiffs Maxine Hammontree and her husband sue defendants for personal injury and property damage arising out of an automobile accident. The cause was tried to a jury. Plaintiffs appeal from the judgment entered on a jury verdict returned in favor of the defendant. The evidence shows that on the afternoon of April 25, 1967, the defendant was driving his 1959 Chevrolet home from work; at the same time plaintiff Maxine Hammontree was working in a bicycle shop owned and operated by her and her husband; without warning, defendant’s car crashed through the wall of the shop, struck Maxine and caused personal injuries and damage to the shop. 99

Jones, OWAIN, When is a Late Flight not a Delayed Flight? The Warsaw Rules Relating to Delay, Travel Law Journal, 1996. 134-136.

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The defendant claimed he became unconscious during an epileptic seizure, losing control of his car. He did not recall the accident, but his last recollection before the accident was leaving the stoplight after his last stop and his first recollection after the accident was being taken out of his car in the plaintiffs’ shop. The defendant testified he had a medical history of epilepsy and knows of no other reason for his loss of consciousness except an epileptic seizure. When the trial court required the plaintiff to produce evidence of the defendant’s negligence, the plaintiffs withdrew their negligent count. Nevertheless the trial judge instructed the jury on negligence and on proving it through the doctrine of res ipsa loquitor. With these instructions, the jury found for the defendant. The plaintiff then appealed the refusal of the trial judge to grant summary judgment in their favor by failing to give an instruction on strict liability. Plaintiff’s proposed instructions read as follows: “When the evidence shows that a driver of a motor vehicle on a public street loses his ability to control safely such vehicle because of a seizure, that driver is legally liable for all injuries and property damage which an innocent person may suffer as a proximate result of the defendant’s inability to so control his motor vehicle. This is true even if you find that the defendant driver had no warning of any such impending seizure.” Under the appellate authorities in California, the trial court properly refused the instruction. The foregoing cases generally hold that the liability of a driver, suddenly stricken by an illness rendering him unconscious, for injury resulting from an accident occurring during that time rests on principles of negligence. Maxine Hammontree seeks to have this court override the established law of this state as outmoded in today’s social and economic structure, particularly in the light of the now recognized principles imposing strict liability for defective products. These principles impose liability upon the manufacturer, retailer, and all distributive and vending elements and activities which bring the product to the consumer to his injury. For twenty years now, the courts in California have recognized strict liability for injuries caused by defective products. Drawing a parallel with these products liability cases, Hammontree argues, with some degree of logic, that only the driver affected by a physical condition which could suddenly render him unconscious and is who aware of that condition can anticipate the hazards and foresee the dangers involved in his operation of a motor vehicle. Hence, the liability of those who by reason of seizure lose the ability to safely operate and control a motor vehicle should be predicated on strict liability. We decline to impose the strict liability of product liability cases upon drivers under the circumstances here. Sellers of products can sometimes pass the cost of injuries from their relatively few defective products onto future consumers. But this policy hardly applies to Mr. Jenner. Moreover, driving cars is extremely common and an activity that greatly benefits a wide variety of individuals. Making all drivers liable for all accidents would dramatically raise liability insurance premiums for drivers. Only the legislature, if it deems wise to do so, can change such a well-entrenched part of U.S. common law. The instruction tendered by Hammontree was properly refused for still another reason. Even assuming the merit of her position under the facts of this case in which defendant knew he had a history of epilepsy, previously had suffered seizures, and at the time of the accident was attempting to control his condition by medication, the instruction does not exempt from its ambit the driver who suddenly is stricken by an illness or a physical condition which he had 93

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no reason whatsoever to anticipate and of which he had no prior knowledge. The law is clear that such a first-timer should only be liable if proven negligent. Judgment for defendant affirmed.

CASE #2 BH 2005 No. 54 (Hungary) Strict Liability When a Vehicle which Had Been Parked Started Moving Brief Summary of the Facts Defendant 1 had parked the truck owned by defendant 2 on the shoulder of the road. He shut off the engine and left the vehicle in 1st gear without putting on the hand brake. The vehicle ran into the plaintiff’s building and damaged it. Defendant 3 was the liability insurer of defendant 2. The plaintiff claimed damages on the basis of §345 of the Hungarian Civil Code (Act IV of 1959) arguing that the fact that the engine had been stopped and the vehicle had been parked did not change the extremely hazardous character of the vehicle running so defendant (1) shall be liable on the fault based norm of liability, defendant (2) on the basis of strict liability for extremely hazardous activities, and defendant (3) on the basis of liability insurance which covers all the damage occurring while operating the vehicle. Judgment of the Court The court held the case is covered by §345 of the Civil Code on strict liability for extremely dangerous activities. The court argued that the fact the engine of the vehicle had been shut off did not cease the dangerous character of that vehicle operation because the vehicle had been parked on the roadside only for a limited and relatively short time and remained part of the traffic. On this ground the court declared the obligation of defendant (3) as liability insurer of defendant (2) to compensate the damage of the plaintiff. Commentary Motor vehicle operation is a typical case of strict liability for extremely dangerous activities under both civil law legal systems and Anglo-Saxon legal systems. The dangerous character of vehicle operation most clearly arises when the vehicle is being driven but there are some cases where a vehicle equipped with an engine causes damage when the engine is switched off (even the operation of items not equipped with an engine such as a glider or a sailing ship have been characterized as extremely dangerous activities). These are difficult cases and courts sometimes use sophisticated arguments to draw the line between fault based and strict liability.

Case #3 Joined Cases C-402/07 and C-432/07 Christopher Sturgeon and Others v. Condor Flugdienst GmbH and Stefan Böck and Cornelia Lepuschitz versus Air France SA The disputes in the main proceedings and the questions referred for a preliminary ruling The facts of the case C-402/07 94

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The Sturgeons booked return tickets with Condor from Frankfurt am Main (Germany) to Toronto (Canada). The return flight from Toronto to Frankfurt was due to depart at 16.20 on 9 July 2005. Following check-in, passengers on that flight were informed that the flight was cancelled, as was indicated on the airport departures board. Their luggage was returned to them and they were then driven to a hotel where they spent the night. The following day, the passengers were checked in at another airline’s counter for a flight with the same number as that on their booking. Condor did not schedule another flight with the same number for the day concerned. The passengers were given different seats from those they had been allocated on the previous day. The booking was not converted into a booking for a flight scheduled by another airline. The flight concerned arrived in Frankfurt at around 07.00 on 11 July 2005, some 25 hours after its scheduled arrival time. The Sturgeons took the view that, in light of all the above mentioned circumstances, in particular the delay of more than 25 hours, the flight had been not delayed but cancelled. The Sturgeons claiming compensation of EUR 600 per person plus damages, since, in their view, the damage sustained was the result not of a flight delay but of a cancellation. Condor contended that the action as framed should be dismissed on the ground that the flight in question was delayed and not cancelled. Prior to the proceedings before the national court, Condor claimed that the flight had been delayed as the result of a hurricane in the Caribbean but during the proceedings it attributed the delay to technical faults on the plane and illness among the crew. The Appellate Court decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: Is it decisive for the interpretation of the term “cancellation” whether the original flight planning is abandoned, with the result that a delay, regardless of how long, does not constitute a cancellation if the air carrier does not actually abandon the planning for the original flight? If Question 1 is answered in the negative: in what circumstances is a delay of the planned flight no longer to be regarded as a delay but as a cancellation? Is the answer to this question dependent on the length of the delay?’ The facts of the case C-432/07 Mr. Böck and Ms. Lepuschitz booked return tickets with Air France from Vienna (Austria) to Mexico City (Mexico) via Paris (France). The Mexico City-Paris flight which Mr. Böck and Ms. Lepuschitz were due to take was scheduled to depart at 21.30 on 7 March 2005. When they came to check in, they were immediately informed, without the check-in taking place, that their flight was cancelled. The cancellation resulted from a change in the flight planning between Mexico City and Paris, which arose because of a technical breakdown on the aircraft due to fly from Paris to Mexico City and on account of the need to observe the rest period prescribed by law for the crew. In order to get back earlier, Mr. Böck and Ms. Lepuschitz accepted Air France’s offer of seats on a flight operated by Continental Airlines, which was scheduled to leave the following day, 8 March 2005, at 12.20. Their tickets were first cancelled and then new tickets were issued to them at the Continental Airlines counter.

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The other passengers on the Mexico City-Paris flight, who did not take the Continental Airlines flight, left Mexico City, with a number of additional passengers, on 8 March 2005 at 19.35. That flight, whose original number was followed by the letter ‘A’, was operated in addition to the regular flight scheduled by Air France on the same day. Mr. Böck and Ms. Lepuschitz arrived in Vienna almost 22 hours after the scheduled arrival time. Mr. Böck and Ms. Lepuschitz brought an action against Air France claiming EUR 600 compensation per person for cancellation of their flight, on the basis of Articles 5 and 7(1)(c) of Regulation No 261/2004. That court dismissed their claim on the ground that, despite the evident flight delay, Regulation No 261/2004 did not support the conclusion that there was a flight cancellation. Mr. Böck and Ms. Lepuschitz appealed against that decision to the appellate court. In those circumstances, the appellate court decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: Need Article 5, read in conjunction with Articles 2(l) and 6, of Regulation No 261/2004 to be interpreted as meaning that a 22-hour delay in the time of departure constitutes a “delay” within the meaning of Article 6? Need Article 2(l) of Regulation No 261/2004 to be interpreted as meaning that instances in which passengers are transported significantly later (22 hours later) on a flight operating under a longer flight number (original flight number supplemented by an “A”) and carrying only an – albeit large – proportion of the passengers booked on the initial flight, but also additional passengers not booked on the initial flight, constitute “cancellations” rather than “delays”? If Question 2 is to be answered in the affirmative: Need Article 5(3) of Regulation No 261/2004 to be interpreted as a meaning that technical problems with a plane and the resulting changes to the flight schedule represent extraordinary circumstances (which could not have been avoided even if all reasonable measures had been taken)?’ According to the European Court of Justice the judgments are the following: Articles 2(l), 5 and 6 of Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) No 295/91, must be interpreted as meaning that a flight which is delayed, irrespective of the duration of the delay, even if it is long, cannot be regarded as cancelled where the flight is operated in accordance with the air carrier’s original planning. Articles 5, 6 and 7 of Regulation No 261/2004 must be interpreted as meaning that passengers whose flights are delayed may be treated, for the purposes of the application of the right to compensation, as passengers whose flights are cancelled and they may thus rely on the right to compensation laid down in Article 7 of the regulation where they suffer, on account of a flight delay, a loss of time equal to or in excess of three hours, that is, where they reach their final destination three hours or more after the arrival time originally scheduled by the air carrier. Such a delay does not, however, entitle passengers to compensation if the air carrier can prove that the long delay was caused by extraordinary circumstances which could not 96

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have been avoided even if all reasonable measures had been taken, namely circumstances beyond the actual control of the air carrier. Article 5(3) of Regulation No 261/2004 must be interpreted as meaning that a technical problem in an aircraft which leads to the cancellation or delay of a flight is not covered by the concept of ‘extraordinary circumstances’ within the meaning of that provision, unless that problem stems from events which, by their nature or origin, are not inherent in the normal exercise of the activity of the air carrier concerned and are beyond its actual control.

Case #4 Case C-549/07 Friederike Wallentin-Hermann v. Alitalia – Linee Aeree Italiane SpA The dispute in the main proceedings and the questions referred for a preliminary ruling It is apparent from the order for reference that Mrs. Wallentin-Hermann booked three seats on a flight with Alitalia from Vienna (Austria) to Brindisi (Italy) via Rome (Italy) for herself, her husband and her daughter. The flight was scheduled to depart from Vienna on 28 June 2005 at 6.45 a.m. and to arrive at Brindisi on the same day at 10.35 a.m. After checking in, the three passengers were informed, five minutes before the scheduled departure time that their flight had been cancelled. They were subsequently transferred to an Austrian Airlines flight to Rome, where they arrived at 9.40 a.m. that is 20 minutes after the time of departure of their connecting flight to Brindisi, which they therefore missed. Mrs. Wallentin-Hermann and her family arrived at Brindisi at 2.15 p.m. The cancellation of the Alitalia flight from Vienna resulted from a complex engine defect in the turbine which had been discovered the day before during a check. Alitalia had been informed of the defect during the night preceding that flight, at 1.00 a.m. The repair of the aircraft, which necessitated the dispatch of spare parts and engineers, was completed on 8 July 2005. Mrs. Wallentin-Hermann requested that Alitalia pay her EUR 250 compensation pursuant to Articles 5(1)(c) and 7(1) of Regulation No 261/2004 due to the cancellation of her flight and also EUR 10 for telephone charges. Alitalia rejected that request. In the judicial proceedings that Mrs. Wallentin-Hermann then brought, the District Commercial Court upheld her application for compensation, in particular on the ground that the technical defects which affected the aircraft concerned were not covered by the ‘extraordinary circumstances’ provided for in Article 5(3) of Regulation No 261/2004 which exempt from the obligation to pay compensation. Alitalia lodged an appeal against that decision before the Commercial Court, which decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: 1. Are there extraordinary circumstances within the meaning of Article 5(3) of Regulation No 261/2004, having regard to recital 14 in the preamble to the regulation, if a technical defect in the airplane, in particular damage to the engine, results in the cancellation of the flight, and must the grounds of excuse under Article 5(3) of [that] regulation be interpreted in accordance with the provisions of Article 19 of the Montreal Convention? 97

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2. If the answer to the first question is in the affirmative, are there extraordinary circumstances within the meaning of Article 5(3) of Regulation [No 261/2004] where air carriers cite technical defects as a reason for flight cancellations with above average frequency, solely on the basis of their frequency? 3. If the answer to the first question is in the affirmative, has an air carrier taken all “reasonable measures” in accordance with Article 5(3) of Regulation [No 261/2004] if it establishes that the minimum legal requirements with regard to maintenance work on the airplane have been met and is that sufficient to relieve the air carrier of the obligation to pay compensation provided for by Article 5 in conjunction with Article 7 of [that] regulation? 4. If the answer to the first question is in the negative, are extraordinary circumstances within the meaning of Article 5(3) of Regulation [No 261/2004] cases of force majeure or natural disasters, which were not due to a technical defect and are thus unconnected with the air carrier?’ On the grounds, the European Court of Justice hereby rules: Article 5(3) of Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) No 295/91, must be interpreted as meaning that a technical problem in an aircraft which leads to the cancellation of a flight is not covered by the concept of ‘extraordinary circumstances’ within the meaning of that provision, unless that problem stems from events which, by their nature or origin, are not inherent in the normal exercise of the activity of the air carrier concerned and are beyond its actual control. The Convention for the Unification of Certain Rules for International Carriage by Air, concluded in Montreal on 28 May 1999, is not decisive for the interpretation of the grounds of exemption under Article 5(3) of Regulation No 261/2004. The frequency of the technical problems experienced by an air carrier is not in itself a factor from which the presence or absence of ‘extraordinary circumstances’ within the meaning of Article 5(3) of Regulation No 261/2004 can be concluded. The fact that an air carrier has complied with the minimum rules on maintenance of an aircraft cannot in itself suffice to establish that that carrier has taken ‘all reasonable measures’ within the meaning of Article 5(3) of Regulation No 261/2004 and, therefore, to relieve that carrier of its obligation to pay compensation provided for by Articles 5(1)(c) and 7(1) of that regulation.

Case #5 Case C-12/11. Denise McDonagh v. Ryanair Ltd. The dispute in the main proceedings and the questions referred for a preliminary ruling On 11 February 2010, Ms. McDonagh booked a flight with Ryanair from Faro (Portugal) to Dublin (Ireland) scheduled for 17 April 2010, for EUR 98. On 20 March 2010, the Eyjafjallajökull volcano in Iceland began to erupt. On 14 April 2010, it entered an explosive phase, casting a cloud of volcanic ash into the skies over Europe. On 15 April 2010, the 98

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competent air traffic authorities closed the airspace over a number of Member States because of the risks to aircraft. On 17 April 2010, Ms. McDonagh’s flight was cancelled following the closure of Irish airspace. Ryanair flights between continental Europe and Ireland resumed on 22 April 2010 and Ms. McDonagh was not able to return to Dublin until 24 April 2010. During the period between 17 and 24 April 2010, Ryanair did not provide Ms. McDonagh with care in accordance with the detailed rules laid down in Article 9 of Regulation No 261/2004. Ms. McDonagh brought an action against Ryanair before the referring court for compensation in the amount of EUR 1129,41 corresponding to the costs which she had incurred during that period on meals, refreshments, accommodation and transport. Ryanair claims that the closure of part of European airspace following the eruption of the Eyjafjallajökull volcano does not constitute ‘extraordinary circumstances’ within the meaning of Regulation No 261/2004 but ‘super extraordinary circumstances’, releasing it not only from its obligation to pay compensation but also from its obligations to provide care under Articles 5 and 9 of that regulation. In light of its doubts as to whether the obligation to provide that care may be subject to limitations in circumstances such as those at issue in the main proceedings and taking the view that the Court of Justice has not yet ruled on that matter, the Dublin Metropolitan District Court decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling: 1. Do circumstances such as the closures of European airspace as a result of the eruption of the Eyjafjallajökull volcano in Iceland, which caused widespread and prolonged disruption to air travel, go beyond “extraordinary circumstances” within the meaning of Regulation No 261/2004? 2. If the answer to Question 1 is yes, is liability for the duty to provide care excluded under Articles 5 and 9 [of Regulation No 261/2004] in such circumstances? 3. If the answer to Question 2 is no, are Articles 5 and 9 [of Regulation No 261/2004] invalid in so far as they violate the principles of proportionality and non-discrimination, the principle of an “equitable balance of interests” enshrined in the Montreal Convention, and Articles 16 and 17 of the Charter of Fundamental Rights of the European Union [“the Charter”]? 4. Is the obligation in Articles 5 and 9 [of Regulation No 261/2004] to be interpreted as containing an implied limitation, such as a temporal and/or a monetary limit, to provide care in cases where cancellation is caused by “extraordinary circumstances”? 5. If the answer to Question 4 is no, are Articles 5 and 9 [of Regulation No 261/2004] invalid in so far as they violate the principles of proportionality and non-discrimination, the principle of an “equitable balance of interests” enshrined in the Montreal Convention, and Articles 16 and 17 of the [Charter]?’ The judgment was the following: 99

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Article 5 of Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) No 295/91, must be interpreted as meaning that circumstances such as the closure of part of European airspace as a result of the eruption of the Eyjafjallajökull volcano constitute ‘extraordinary circumstances’ within the meaning of that regulation which do not release air carriers from their obligation laid down in Articles 5(1)(b) and 9 of the regulation to provide care. Articles 5(1)(b) and 9 of Regulation No 261/2004 must be interpreted as meaning that, in the event of cancellation of a flight due to ‘extraordinary circumstances’ of a duration such as that in the main proceedings, the obligation to provide care to air passengers laid down in those provisions must be complied with, and the validity of those provisions is not affected. However, an air passenger may only obtain, by way of compensation for the failure of the air carrier to comply with its obligation referred to in Articles 5(1)(b) and 9 of Regulation No 261/2004 to provide care, reimbursement of the amounts which, in the light of the specific circumstances of each case, proved necessary, appropriate and reasonable to make up for the shortcomings of the air carrier in the provision of care to that passenger, a matter which is for the national court to assess.

Case #6 Case C-22/11 Finnair Oyj. v. Timy Lassooy The dispute in the main proceedings and the questions referred for a preliminary ruling Following a strike by staff at Barcelona Airport on 28 July 2006, the scheduled 11.40 flight from Barcelona to Helsinki operated by Finnair had to be cancelled. In order that the passengers on that flight should not have too long waiting time, Finnair decided to reschedule subsequent flights. Accordingly, those passengers from the flight in question were taken to Helsinki on the 11.40 flight the following day, 29 July 2006, and also on a specially arranged flight departing later that day at 21.40. The consequence of rescheduling was that some of the passengers who had bought their tickets for the 11.40 flight on 29 July 2006 had to wait until 30 July 2006 to go to Helsinki on the scheduled 11.40 flight and on a 21.40 flight specially arranged for the occasion. Similarly, some passengers, like Mr. Lassooy, who had bought their tickets for the 11.40 flight on 30 July 2006 and who had duly presented themselves for boarding, went to Helsinki on the special 21.40 flight later that day. Taking the view that Finnair had for no valid reason denied him boarding, within the meaning of Article 4 of Regulation No 261/2004, Mr. Lassooy brought an action before the Helsinki District Court for an order against Finnair to pay him the compensation provided for in Article 7(1)(b) of that regulation. By decision of 19 December 2008, the court dismissed Mr. Lassooy’s application for compensation on the ground that the regulation only concerned compensation where boarding is denied as a result of overbooking for economic reasons. That court held that Article 4 of Regulation No 261/2004 did not apply in this case, since the airline company had rescheduled its flights as a result of a strike at Barcelona airport and that 100

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strike amounted to an extraordinary circumstance in respect of which Finnair had taken all the measures that could be required of it. By a judgment of 31 August 2009, the Helsinki Court of Appeal set aside the judgment of the court and ordered Finnair to pay Mr. Lassooy the sum of EUR 400. To that effect, the Helsingin hovioikeus held that Regulation No 261/2004 applies not only to overbooking but also in some instances to operational reasons for denying boarding, and thus prevents an air carrier from being exempted, for reasons connected with a strike, from its obligation to pay compensation. In the context of Finnair’s appeal to the Supreme Court, that court relates its doubts concerning the scope of the obligation to compensate passengers who have been ‘denied boarding’, as referred to in Article 4 of Regulation No 261/2004, the grounds that may justify ‘denied boarding’ within the meaning of Article 2(j) of that regulation, and whether an air carrier may rely on the extraordinary circumstances referred to in Article 5(3) of that same regulation, with respect to flights after the flight which was cancelled because of those circumstances. In that context, the Supreme Court decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling: 1. Is Regulation No 261/2004 and in particular Article 4 thereof to be interpreted as meaning that its application is limited only to cases where boarding is denied because of overbooking by [an] air carrier for economic reasons, or is [that] regulation applicable also to situations in which boarding is denied for other reasons, such as operational reasons? 2. Is Article 2(j) of [Regulation No 261/2004] to be interpreted as meaning that the reasonable grounds laid down therein are limited only to factors relating to passengers, or may a denial of boarding be reasonable on other grounds? If the regulation is to be interpreted as meaning that a denial of boarding may be reasonable on grounds other than those relating to passengers, is it to be interpreted as meaning that such a denial may also be reasonable on the grounds of the rescheduling of flights as a result of the extraordinary circumstances mentioned in recitals 14 and 15? 3. Is [Regulation No 261/2004] to be interpreted as meaning that an air carrier may be exempted from liability under Article 5(3) in extraordinary circumstances not only with respect to a flight which it cancelled, but also with respect to passengers on later flights, on the ground that by its actions it attempts to spread the negative effects of the extraordinary circumstances it encounters in its operations, such as a strike, among a wider class of passengers than the cancelled flight’s passengers by rescheduling its later flights so that no passenger’s journey was unreasonably delayed? In other words, may an air carrier rely on extraordinary circumstances also with respect to a passenger on a later flight whose journey was not directly affected by that factor? Does it make a significant difference whether the passenger’s situation and right to compensation are assessed in accordance with Article 4 of the regulation, which concerns denied boarding, or with Article 5, which relates to flight cancellation?’ The decision of the European Court of Justice

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The concept of ‘denied boarding’, within the meaning of Articles 2(j) and 4 of Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) No 295/91, must be interpreted as relating not only to cases where boarding is denied because of overbooking but also to those where boarding is denied on other grounds, such as operational reasons. Articles 2(j) and 4(3) of Regulation No 261/2004 must be interpreted as meaning that the occurrence of ‘extraordinary circumstances’ resulting in an air carrier rescheduling flights after those circumstances arose cannot give grounds for denying boarding on those later flights or for exempting that carrier from its obligation, under Article 4(3) of that regulation, to compensate a passenger to whom it denies boarding on such a flight.

Case #7 Case C-294/10. Andrejs Eglītis and Edvards Ratnieks v. Air Baltic Corporation AS The dispute in the main proceedings and the questions referred for a preliminary ruling On 14 July 2006, Swedish air space in the Malmö region was closed from 20.30 as a result of failures in the power supply leading to a breakdown in radars and air navigation systems. On the same day, the departure of a Copenhagen-Riga flight, chartered by Air Baltic, was scheduled for 20.35. The passengers boarded the airplane and remained there, awaiting departure, for a little over 2 hours, that is, until approximately 22.45. At 22.45 the passengers were informed that the flight was cancelled and were therefore asked to leave the airplane. Considering that they were entitled, following the cancellation of their flight, to obtain compensation from Air Baltic, two passengers, Mr. Eglītis and Mr. Ratnieks, brought a claim before the Consumer Protection Office. The Office refused their claim. That decision was confirmed by a decision of 22 March 2007 of the Department of the Economy for the Republic of Latvia. The appellants in the main proceedings brought an action against the decision of the Department of Economy, first before the District Administrative Court, then before the Administrative Court of Appeal. As their action was dismissed, they appealed in cassation to the referring court. The Office, the Department of the Economy and the administrative courts of first instance and appeal concluded that Air Baltic was not obliged to pay compensation to the appellants under Article 5(3) of Regulation No 261/2004 since cancellation of the flight had to be regarded as having occurred in extraordinary circumstances, beyond the airline’s control. The appellants in the main proceedings submit that the reason for the cancellation of the flight was not the closure of Swedish air space but rather the expiry of the permitted working hours for the crew of that flight. They do not dispute that the closure of Swedish air space, following failures in the power supply, qualifies as ‘extraordinary circumstances’ beyond the airline’s 102

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control. In their opinion, that event explains only the initial flight delay, namely between 20.35 and 22.45. The decision to cancel the flight was made at 22.45 because the permitted working hours of the crew were insufficient to complete the flight in its entirety. The national court considers that it is possible to take the view that, at 20.35, the time for which departure was scheduled there were extraordinary circumstances, namely, in this instance, the closure of Malmö air space, which were circumstances that the operator could not avoid. However, it adds that air carriers do not, in general, usually cancel flights each time it is not possible to depart exactly on time. In its view, taking account of the specific features of air transport, resulting from the fact that passengers cannot easily find another means of transport or alternative routes and flights and that air carriers cannot easily reorganize their resources, particularly at foreign airports, both the carrier and the airport usually strive to ensure that, where possible, a programmed flight is operated. Accordingly, the national court asks whether the fact that departure is impossible at exactly the scheduled time is an adequate reason for taking a decision to cancel a flight. In particular, it asks whether, where departure at the scheduled time is, owing to extraordinary circumstances, impossible for a short time, those circumstances can be grounds for cancelling the flight. The national court therefore asks, when it provides that air carriers are released from the obligation to pay compensation to travelers provided that all reasonable measures have been taken to avoid any extraordinary circumstances, whether Article 5(3) of Regulation No 261/2004 includes among those measures an obligation for those carriers to organize their resources, including their crew, in such a way that flights can be operated over a certain period of time should such circumstances occur. In relation to the definition of that ‘period of time’, the appellants in the main proceedings submit that sufficient resources must be set aside to ensure that a flight can be operated at least during a two-hour period following the time originally scheduled for its departure. In this respect, their submission before the national court is based upon the provisions of Regulation No 261/2004 which lay down the obligations of air carriers in the event of delay. According to Article 6(1)(a) of Regulation No 261/2004, when an operating air carrier reasonably expects a flight to be delayed beyond its scheduled time of departure for two hours or more, in the case of flights of 1.500 kilometers or less, passengers are to be offered the assistance provided for in that regulation. They conclude that a two-hour delay, in the present case, is ‘normal’, that is to say, the fact that it is impossible to operate a flight during a two-hour period is not, in itself, a circumstance that justifies cancellation of that flight. The national court considers that the primary objective of Article 6(1) of Regulation No 261/2004 is not to regulate those issues in the way in which the appellants in the main proceedings propose but that it cannot be excluded that the provision may have a role to play in the systemic interpretation of Article 5(3) of the regulation. It was in those circumstances that the Supreme Court decided to stay proceedings and to refer the following questions to the Court for a preliminary ruling: 1. Is Article 5(3) of [Regulation No 261/2004] to be interpreted as meaning that an air carrier is required, in order to be found to have taken all reasonable measures to avoid extraordinary circumstances, to organize its resources in good time so that it is possible to operate a 103

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programmed flight once the unforeseen extraordinary circumstances have ceased to obtain, that is to say, during a certain period following the scheduled departure time? 2. If the first question is to be answered in the affirmative, does Article 6(1) of Regulation [No 261/2004] apply for the purpose of determining the minimum “reserve time” which the air carrier, when organizing its resources at the appropriate time, must provide for as a possible foreseeable delay in the event that extraordinary circumstances arise?’ The decision of the European Court of Justice Article 5(3) of Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) No 295/91 must be interpreted as meaning that an air carrier, since it is obliged to implement all reasonable measures to avoid extraordinary circumstances, must reasonably, at the stage of organizing the flight, take account of the risk of delay connected to the possible occurrence of such circumstances. It must, consequently, provide for a certain reserve time to allow it, if possible, to operate the flight in its entirety once the extraordinary circumstances have come to an end. However, that provision cannot be interpreted as requiring, as a ‘reasonable measure’, provision to be made, generally and without distinction, for a minimum reserve time applicable in the same way to all air carriers in all situations when extraordinary circumstances arise. The assessment of the ability of the air carrier to operate the programmed flight in its entirety in the new conditions resulting from the occurrence of those circumstances must be carried out in such a way as to ensure that the length of the required reserve time does not result in the air carrier being led to make intolerable sacrifices in the light of the capacities of its undertaking at the relevant time. Article 6(1) of that regulation is not applicable in the context of such an assessment.

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2. Vicarious Liability Vicarious liability is a form of strict, secondary liability that arises under the common law doctrine of agency, the responsibility of the superior for the acts of their subordinate, or, in a broader sense, the responsibility of any third party that had the right, ability or duty to control the activities of a violator. It can be distinguished from contributory liability, another form of secondary liability, which is rooted in the tort theory of enterprise liability. Vicarious liability has multiple forms. It shows the obvious desire from the legislator to have somebody, who will recover the loss even if he is not directly responsible in causing it. Vicarious liability is a crucial legal institution in the question of who bears the loss arisen from an accident. To answer to this question, we should find that many accident situations exist in reality: 1. If there is a person, who committed a wrongful act and he can be imputable in person (his fault can be determined and no exclusions exist, such as underage, mental incapacity, etc.), this tortfeasor must bear the loss and recover the damages the aggrieved person suffered. 2. In cases, where nobody acted with fault and damage still occurred, strict liability forms may help to find a person, who is obliged to recover damages. In the case of carrying dangerous activities, product liability and in other nominated situations, the legislator puts the burden of compensation to someone, who has any interest in carrying out that activity. In most of these cases, there are insurance policies in the background, so not even the interested party should pay the damages but the insurance company (think about motorcar accidents and the mandatory liability insurance of the car operators). 3. In other situations, when we know the tortfeasor, however he cannot be sued due to certain limitations (such as the lack of legal capacity), the law constitutes vicarious liability, liability for others on another person, who might have had any influence on the damaging situation. 4. If none of the above mentioned formulas help to identify an obliged person, the tortfeasor, the aggrieved party must bear his own damages according to the old Roman law principle, casus nocet domino. A. Employers’ liability Employers’ liability is a typical form of liability for others. If their employee acts with negligence in the course of employment, the employer is vicariously liable for the damage the employee caused to another person. The most important factors here are the followings: 1. There must be an employer-employee relationship between the vicariously liable person and the tortfeasor himself. This relationship is a labor relation. Under this relation, the employee acts in the name of the employer. Disregarding whether his act or omission is in the legal frames of the labor relation, he exercises power and administering activities under the labor relation, the labor contract. The employer acts as the supervisor in these situations, so he should be the one, who must control and supervise what the employee is doing in order to carry out his duties under the labor contract. In real life, no one cares about whether the employer had any chance to supervise and control the employee in the actual damaging 105

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situation, the sole theory of supervising obligation constitutes the ground of vicarious liability for the employer. 2. All conditions of liability shall be proven in the side of the employee. If it is a fault-based liability problem, the aggrieved party must prove that the employee acted with either intention or negligence (or imputation in some countries). Unless fault cannot be based for the employee, the employer can also not be vicariously liable for the damage the employee caused with his no-faulty act or omission. The biggest problem for judicial practice is to interpret what “under the course of employment” really means in a given situation. For instance, an employer will be held liable if it is shown that the employee had gone on a mere detour in carrying out their duties, whereas an employee acting in his or her own right rather than on the employer's business is undertaking a "frolic" and will not subject the employer to liability. Under common law in England, generally, an employer will not be held liable for assault or battery committed by employees, unless the use of force was part of their employment (such as police officers), or they were in a field likely to create friction with persons they encountered (such as car re-possessors). However, the employer of an independent contractor is not held vicariously liable for the tortious acts of the contractor, unless the contractor injures someone to whom the employer owes a non-delegable duty of care, as when the employer is a school authority and the injured party a pupil. Employers are also liable under the common law principle represented in the Latin phrase, "qui facit per alium facit per se" (one who acts through another acts in one's own interests). That is a parallel concept to vicarious liability and strict liability, in which one person is held liable in criminal law or tort for the acts or omissions of another. In civil law legal systems the scope of vicarious liability of the employer is probably much wider than in the common law systems. Independently of the actual act or omission if the employee even just mimicked that he acted under the course of employment, the employer is vicariously liable for the damage the employee caused to third persons. For example, even crimes do not count when we would like to find exonerations under vicarious liability. Obviously lawful labor relations shall not entitle employees to commit crimes, so this might be seen as something totally out of the course of employment. However, if the employee commits a crime, while acting as an employee of the employer, the employer is fully liable for the damages the employee caused to others. If the insurance company’s agent cheats money from the clients, pretending that he is lawfully collecting insurance fees for the employer (the insurance company), the insurance company is vicariously liable even if the tortfeasor carried the fraud out outside his office and over his work time. B. Liability for people without legal capacity Legal capacity entitles a person to do multiple things and carry out many activities on his own, voluntarily. Legal capacity is determined by mental capacity and reasonableness. The most common factor that has an impact on legal capacity is the age of a person. If full legal capacity is missing, the person not only faces with many obstacles in his voluntary procedures, losing the capacity to decide in his own business, he also cannot be held liable in many legal systems for the damage he caused. The lack of such capacity limits the denunciation of the person. In the United States of America this special liability form is also known as the liability of parents. Parents are vicariously liable for the damages their children 106

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are causing, since the supervision obligations bear on their hands. In this case, parents are liable for their own negligent act, as they neglect to exercise sufficient supervision over their children in the damaging situation. This also means that if parents – or virtually everybody else, who has an obligation to exercise supervision over the child – can successfully prove they acted without negligence and did whatever a reasonable and diligent parent could, may win exoneration under vicarious liability. In the vicarious liability question it is often a problem to identify who the actual supervisor over the incapable person was during the damaging situation. In civil law legal systems, this is the reason why the parents are not the prime addressees of this vicarious liability form. The caretaker should assume vicarious liability for the damage the incapable person caused. To decide who the caretaker is, courts in civil law legal systems generally follow a two-step rule: 1. Caretaking responsibility arises from the obligation to educate and raise a child and to orient him or her to find the right and healthy moral standards he or she can follow for the rest of the life. In case of children we cannot deny that parents have this remarkable responsibility, so even if they could not supervise the child in the given situation, they fail too, when the child causes damage. 2. A caretaker can also be someone else, who temporarily takes supervision duties and substitutes parents. If the child is at school or at the nursery, the school or the nursery and their teachers, nursery governesses are responsible for the child’s acts and omissions. Since joint and several liability burdens multiple tortfeasors, it is not rare in continental European judicial practice to find both the parents and the actual caretaker vicariously liable for what the child done at the same time. C. Principle’s Liability Under an agent contract, the agent is entitled to represent the principle and act on behalf of him. This is why agent contracts should also form some close connection between the parties. The principle is still the governing party under the contract, as his interest, motivations and needs are fulfilled with the contractual performance of the agent. In case the agent causes damages in a tortious situation to a third party, in the course of the contract, the principle should also be liable to recover these damages. A notable difference between the employer’s liability and the principle’s liability is, however, that the agent is a lot more independent under the contract than the employee under the labor relation. The agent actually has free will and free decisions as he serves as a professional to substitute all the knowledge, skills and abilities that are missing at the principle’s side. The owner of an automobile can be held vicariously liable for negligence committed by a person to whom the car has been loaned, as if the owner was a principal and the driver was his or her agent, if the driver is using the car primarily for the purpose of performing a task for the owner. Courts have been reluctant to extend this liability to the owners of other kinds of chattel. For example, the owner of a plane will not be vicariously liable for the actions of a pilot to whom he or she has lent it to perform the owner's purpose. In the United States, vicarious liability for automobiles has since been outlawed with respect to car leasing and rental in all 50 states.

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One example is in the case of a bank, finance company or other lienholder performing a repossession of an automobile from the registered owner for non-payment, the lienholder has a non-transferable duty not to cause a breach of the peace in performing the repossession, or it will be liable for damages even if the repossession is performed by an agent. This requirement means that whether repossession is performed by the lienholder or by an agent, the repossessor must not cause a breach of the peace or the lienholder will be held responsible. This requirement not to breach the peace is held upon the lienholder even if the breach is caused by, say, the debtor objecting to the repossession or resists the repossession. In the court case of MBank El Paso v. Sanchez, where a hired repossessor towed away a car even after the registered owner locked herself in it, the court decided that this was an unlawful breach of the peace and declared the repossession invalid. The debtor was also awarded USD 1,200,000 in damages from the bank. In civil law legal systems it is very common to place liability to the agent and the principle at the same time, using the joint and several liability concept. As we can see it in the German, Austrian, French and Hungarian civil codes, the principle and the agent are jointly and severally liable for the injured, aggrieved person, if the damage occurred when the agent acted in course of performing the agent contract. However, the principle also has a chance to exonerate himself under this vicarious liability, leaving only the agent behind in the obligation, if he can successfully prove that he was reasonable and diligent when selecting, supervising and instructing the agent.

3. Professional Liability, Medical Malpractice Tort liability is also divided inside regarding the interpretation of fault or even causation. Especially in case of professionals, courts in the European Union tend to interpret the meaning of fault differently if the tortfeasor is not an ordinary individual but a professional and the aggrieved party suffered damage in connection with the professional’s behavior. As most lay persons show significant trust to a professional when forming a contract with them to buy services. Judicial practice in the European Union Member States show a real step forward to a more restrictive interpretation of the fault principle in case of professional liability situations. The general interpretation of fault is not exercising the care that is generally expected from a reasonable person in the given situation. Against professionals, this interpretation gets a different meaning. Fault is not exercising the care that is expected from a professional, who owns the full knowledge of his profession. Although we may see this development of doctrine in case of lawyers, accountants, the most significant and most common cases to serve basis for this doctrine are the medical malpractice cases. In most European Union countries health care is a public task which to a large extent is performed by publicly organized service providers. Nevertheless, liability for personal injuries which medically treated persons sustain through the treatment is adjudicated according to the rules of civil liability. However, the well-known and traditional distinction between contract and tort liability plays an ever less important role here. Liability for medical malpractice is a particular example of a kind of liability, which combines features of both branches of law mainly with the aim of securing adequate protection and safety of patients. It may be simplified not too much to state that the duties in a physician-patient relationship are those, which a valid and adequate contract between both sides would contain. On the other hand a violation of one of these duties is dealt with like a tort with all consequences of 108

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tortious liability. For most requirements of liability for medical malpractice the distinction between contract and tort can therefore be neglected. The following comparison treats liability for medical malpractice for this reason as one single set of rules for which it is mainly unnecessary to distinguish between contract and tort situations. The specifics of contract law appear to remain relevant only for the few cases where a physician has taken over the obligation to achieve a certain result (for example dentistry). Absent an express agreement of the parties the compared systems, however, do not presume such an obligation. Moreover, a physician-patient relationship with its implied duties comes into existence in most of the countries by the mere fact that a patient requests or needs treatment on the one side and is, or should have been, accepted for treatment by the medical health care service provider on the other. This purely factual situation suffices to establish a physician-patient relationship. Though a private contract is still rather frequently concluded between the parties at the beginning of the treatment it is no necessary basis for a physician-patient-relationship and the specific obligations arising from this relationship. As in particular Italian law but also the English, German and US law show it is the factual situation or the social contact that someone in need for medical treatment is, or must be, accepted for treatment which brings about a physician-patient-relationship. The main reasons behind this concept of far-reaching and binding obligations which normally arise only from a valid contract seem to be several: that the patient nearly entirely depends on the medical service provider’s skill; that it is the patient’s most valuable and vulnerable interests (life, health) which are at stake; that the service provider holds him- or herself out to possess the necessary skills; that often a high risk of aggravation of illness or independent injury is involved. It is the more or less unanimous conviction of the EU countries that the obligations originating from the physician-patient relationship extend only to the persons directly involved in the physician-patient relationship. Thus normally the patient alone is protected and can rely on the specific duties, which the physician/hospital has to comply with when medically treating a patient. Only if there is the danger that the patient may infect near family members, in particular the spouse, a duty of information or protection toward this third person may arise. A. Vicarious Liability Generally the physician or hospital is vicariously liable for employees. With the exception of Germany, all other EU countries’ legal systems agree that a provider of health care services is liable for acts by which his or her employees injure patients as long as the employees act within the course of their employment. The service provider is not exempted from liability if s/he proves careful selection and control of the employee. This rule is applied irrespective whether liability is based on contract or tort. In Germany, if liability is based on tort – as in case of hospital treatment without valid contract – the hospital is exempted from liability if it proves careful selection and control of the doctor or other staff person who has medically treated, and thereby injured, the patient. B. Standard of care Bodily injury includes regularly material and immaterial harm. All EU countries provide further for claims of dependents in case of the death of a patient.

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Liability for medical malpractice requires fault on the part of the physician. Fault means at least negligence. This is the unanimously accepted general rule. The EU countries do neither provide for strict liability nor do they generally presume a doctors fault. However, concerning proof and evidence there is a widespread use of rules, which in certain cases lead to a presumption of negligence. The central aspect of liability for medical malpractice is the definition of duties which the medical service provider owes to the patient as well as the degree of care with which the provider is obliged to act. A physician or other medical service provider must generally act with such reasonable skill and care which an ordinarily careful specialist of the same profession under same circumstances would be expected and required to exercise. Though a high degree of care is generally required the countries under review regard it generally as sufficient if the level of skill and care of the average specialist in the same field is met. Only Sweden appears to request in certain cases (difficult diagnosis) that even the standard of an exceptionally careful specialist must be observed. And only few countries – for instance some US states – deny negligence when the physician admits an “honest error” which even sometimes happens to an average specialist. The other countries do not accept it as an excuse that the physician made an error which might be understandable in the circumstances but still remains a violation of the average standard of care. A number of further specific duties must be generally observed. The first one is the obligation to inform the patient on all relevant aspects of the illness and the treatment in a reasonable way and to get his or her – informed – consent to the treatment. In some countries – Italy, USA, Sweden – central importance is placed on this duty, which also relates to constitutional aspects of personality rights and of the right of self-determination. A further duty extends to a reasonable supervision and control of technical or other equipment and appliances, which are used in the course of the medical treatment. A physician is therefore liable if he or she did not inspect and care for safe instruments in a reasonable way. However, the service provider is not strictly liable for defects of instruments, which could not be discovered with that degree of care, which is expected of a careful physician. The possible liability of the manufacturer of the instruments remains unaltered. A still further duty is not uniformly accepted but recognized in few countries only – namely in France and Germany: a duty to document all relevant steps of medical treatment. In particular in Germany it is presumed that measures which have not been documented have not been taken and vice versa. The exclusion of liability for personal injury is generally viewed with disfavor if agreed upon in advance since it may encourage a physician to act with carelessness. Most of the EU countries therefore disallow exclusion clauses at least in standard forms. For the EU countries the EC directive 93/13/EEC on unfair terms has already settled this point. C. Causation and Proof Most EU countries agree that liability for medical malpractice requires causation between the patient’s injury and the physician’s negligence. But the general concepts, which the EU Member States apply with respect to causation, vary to some degree but less so the final results when the question of causal nexus between negligence and injury has to be answered. Remoteness (Great Britain), adequacy (Germany), proximity (US states), directness (France) or similar concepts are often not finally conclusive since it is rather frequent and typical for medical malpractice cases that it remains uncertain how the patient’s condition would have developed had the physician acted in a proper way. Even then the illness could have deteriorated and led to the same consequences. Therefore rather often the burden of proof or certain presumptions become decisive. 110

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In practice the burden of proof plays an important role in medical malpractice cases. Though most legal systems in the world regularly place the burden of proof of all essential elements of liability on the patient all these systems except Sweden allow for some alleviation of this burden. In certain cases these countries accept a presumption either of negligence or of causation and then the defendant physician is under the duty to rebut this presumption. By these presumptions in certain cases the general fault principle is smoothened in the interest of the injured patient who otherwise might fail in proving the physicians liability. Partly negligence is presumed when lack of informed consent is invoked (France) or when the performance of the medical treatment was easy (Italy) or where the medical treatment resulted in consequences which were typically the outcome of negligence and for which no other explanation was given (Great Britain, US states – res ipsa loquitur). On the other hand partly causation is presumed where it is established that a grave fault in medical treatment occurred (Germany) or where the damage is of such a kind that the defendant physician must explain its existence and prove other causes (Spain) or that the result of medical treatment is the typical outcome of an (established) failure of treatment (Great Britain, US states – res ipsa loquitur). D. Compensation The injured patient is under most legal systems entitled to full compensation of his or her pecuniary and non-pecuniary loss. The pecuniary loss includes all reasonable costs of healing and rehabilitation and lost income; non-pecuniary loss normally comprises an indemnification for pain and suffering, for lasting impairments and loss of quality of life. The prevailing view seems to be that even mere emotional distress can be recovered. A few countries – some US states – limit the maximum amounts (by caps or ceilings), which can be recovered. In effect, also the Swedish Patients’ Insurance, which is the normal and regular way to deal with medical malpractice cases in Sweden, knows of limits up to which compensation can be claimed under this scheme. Further differences concern the compensation of mere emotional distress of near relatives of patient who died due to the negligence of the medical service provider. The clear majority of the EU countries acknowledges that compensation of such damage can be claimed (in particular France, Great Britain, Italy, Sweden) while Germany still denies such a claim. E. Contributory Negligence Contributory negligence plays a minor role in medical malpractice cases. The compared legal systems constitute a ‘duty’ of the patient to protect the own interest and not to impede the success of medical measures by unreasonable behavior. If the patient’s injury or illness is aggravated by a failure to comply with the directions of the physician the patients’ claim for any damages can be reduced proportionately. But cases of this kind are rare and it is no contributory negligence if the patient trusted an – even evidently – wrong advice of the physician. Swedish law is the one, which generally disregards contributory negligence in cases of personal injuries as long as the injured person does not act with intent or gross negligence. F. Limitation Period The limitation periods vary considerably. There are countries which define a common standard for tort and contract law, like Germany (3 years), the UK (3 years) and Sweden (6 111

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years) and Sweden (10 years), others define different limitation periods with regard to contract and tort law, like France (2 years in contract law, 10 years in tort law), Italy (10 years in contract law, 5 years in tort law), Spain (15 years in contract law, 1 year in tort law) and the US (1 to 3 years in contract law, generally shorter in tort law). Moreover, the point of time when the period of limitation starts running varies as well being either the date when the damage occurred or when the injured person became aware of the damage and the identity of the tortfeasor.

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G. Case-law In the following, here are some representative cases to prove how different the interpretation of fault in medical malpractice cases from those cases when non-professionals commit torts. In order to make the contrast and comparison more exciting, I selected landmark decisions from two very distinct legal systems, Hungary and the Unites States of America. As Hungarian legal system belongs to civil law legal systems, it follows very delicate standards and statute provisions. However, under the Health Care Act, Act CLIV of 1997, doctors and medical personnel in general owe to exercise outmost care that is of higher standard than the general interpretation of imputation or fault. While in the United States medical malpractice cases fall into the negligent tort category, and therefore U.S. medical malpractice law heavily relies on fault and has a wider scope of interpreting it than in general tort cases. A very articulated direction is that Hungary is moving towards strict liability of doctors when their patients suffer injury. One part of this pro-plaintiff movement in Hungary is that plaintiffs are not required to show that the doctor deviated from the professional standards or protocols of the medical profession. In the U.S., plaintiffs must establish such deviation and doing so typically requires expert testimony by someone who can show familiarity with the professional standards and protocols governing the defendant doctor’s treatment of the plaintiff. Finding such an expert may be difficult in the U.S. and paying such an expert is extremely expensive. Unlike in Hungary, where courts often appoint experts (whoever lose, should pay the cost of experts at the end of the procedure), in the U.S. the private parties must identify the experts who will testify for them, subject those experts to a lengthy deposition at the convenience of the opposing parties attorneys, require the experts to submit written reports before they testify and then testify. The following three cases illustrate the different approaches.

Case #1 BH 2007 No. 47 (Supreme Court of Hungary) Brief summary of the facts The plaintiff, being pregnant, had been diagnosed with having hypertension edema and her fetus had shown abnormal values for heart rhythm in utero. She had to stay in the defendant’s hospital in order to monitor the final phase of pregnancy until child birth. She went through the examinations ordered by the generally excepted protocols and normal professional knowledge but no imminent danger to the fetus was discovered. Seven days before the expected date of child birth, the heart of the fetus stopped and the plaintiff gave birth to her baby who was stillborn. The cause of death of the fetus in utero was that its umbilical cord had been wound five times around its neck, thus putting the umbilical cord under pressure. This prevented an adequate oxygen supply to the fetus, which was strangled. It was clear that an ultrasound diagnosis could have shown the condition of the umbilical cord and the danger of the fetus being strangled. But the plaintiff did not undergo an ultrasound test while staying in the defendant’s hospital. 113

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The plaintiff claimed pecuniary and non-pecuniary damages from the defendant doctor and the defendant hospital. She alleged that an ultrasound test could have prevented the death of the fetus and as the defendant doctors failed to administer this test, they caused the death of her fetus and her loss from giving birth to a dead fetus. She claimed that the defendant doctors should be liable for the failure in diagnosis and the defendant hospital should be liable for the failure of its doctors. The defendants pleaded that the plaintiff went through all the tests which are in general professionally accepted as those necessary in such cases and neither the medical protocols nor the professional literature (textbooks and professional articles) suggest making ultrasound tests in such cases. This allegation was strengthened by the professional experts ordered by the court. The defendants argued that the court could not establish that they did not act according to the generally expected requirements if, according to professional expertise, they did not make a mistake. Judgment of the court The Court decided for the plaintiff and established the defendant’s liability for pecuniary and non-pecuniary damages. The Court did not accept the argument that the fact the defendant doctors fulfilled all of their duties provided by the professional protocols should necessarily prevent courts from establishing their fault and liability. The Court declared that fault shall be deemed as a legal concept and courts shall not be prevented from establishing fault even if the tortfeasor did everything according to general professional standards. Commentary The concept of objective fault in Hungary is very wide open to judicial risk allocation. In medical tort cases it is not yet clear what kind of role professional protocol should play in establishing or denying fault. This decision here makes it clear that compliance with professional protocols in itself does not prevent the courts from establishing the fault of the tortfeasor and consequently its liability.

Case #2 Osborn v. Irwin Memorial Blood Bank 7 Cal. Rptr. 2d 101 (Ct. App. Cal. 1992) In February of 1983 at the age of three weeks, Michael Osborn contracted the AIDS virus from a blood transfusion in the course of surgery on his heart at the University of California Medical Center. The blood used in the operation was supplied by the Irwin Memorial Blood Bank. Michael and his parents sued Irwin and the University for damages. The main issue on appeal is whether Irwin was entitled to judgment notwithstanding the verdict on the issue of negligence. Qualified experts opined for plaintiffs that Irwin’s blood testing and donor screening practices prior to Michael’s surgery were negligent in light of concerns about AIDs at the time, because they did not include anti-HBc tests. On matters such as this outside common knowledge, expert opinion is ordinarily sufficient to create a prima facie case. Here however, there was un-contradicted evidence that Irwin was doing as much if not more in the areas of testing and screening than any other blood bank in the country, and 114

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there is no question that it followed accepted practices within the profession. Therefore, we hold that Irwin cannot be found negligent in these circumstances. The fatal defect in plaintiff’s case is that plaintiff’s experts did not couch their opinions in terms of the standard of care for blood banks in early 1983. They simply said what Irwin “should” have done or what a “reasonable person” would have done in light of what was known about AIDS at the time. But as a healthcare provider, Irwin must be shown to have deviated from the professional standard of care in order to be deemed negligent. California law does not permit an expert to second guess an entire profession. In cases like ours where experts are needed to show negligence, their testimony sets the standard of care and is said to be conclusive. The basic reason why professionals are usually held only to a standard of custom and practice in their profession is that their informed approach to matters outside common knowledge should not be evaluated by the ad hoc judgments of a lay judge or lay jurors aided by hindsight. In the words of leading authority “when it can be said that the collective wisdom of a profession is that a particular course of action is a desirable course, then it would seem that collective wisdom should be followed by the courts.” Our precedents universally hold that professional prudence is defined by actual or accepted practice within a profession, rather than by theories about what “should” have been done. The issue is whether the physicians were conducting their practice in accordance with accepted or actual standards. This is implicit in the definition of the standard of care as skill or knowledge “ordinarily possessed and exercised” in a profession. It follows that Irwin cannot be found negligent for failing to perform tests that no other blood bank in the nation was performing. Judgment notwithstanding the verdict was properly granted to Irwin on the issue of anti-HBc testing because there was no substantial evidence of negligence and failure to conduct the test was not accepted practice for blood banks in January and February of 1983.

Case #3 Melville v. Southward 791 P.2d 383 (Colo. 1990) Plaintiff won $156,000 judgment against a podiatrist for malpractice resulting in a permanent foot injury that interfered with plaintiff’s ability to walk and balance herself. She had consulted the defendant in 1980 about an ingrown toenail. The defendant removed the toenail but also suggested that the plaintiff should have a metatarcil osteotomy (cutting and shortening the metatarcil bone of the toe) to relieve discomfort. The podiatrist performed the surgery a month later in his office. He made a small incision at the top of plaintiff’s foot, used a drill to fracture the metatarcil bone and a dental burr to remove bone fragments, wrapped the foot in a bandage soaked in antibiotics, placed the foot in a half shoe, and instructed her to soak her foot in vinegar and water. The surgery site became badly infected and the plaintiff was ultimately referred to an orthopedic surgeon, Dr. Barnard. Plaintiff’s counsel asked Dr. Barnard during the trial whether he had an opinion to a reasonable medical probability on whether the metatarcil osteotomy was performed below the standard of care for such a surgical procedure. The defendant objected to this line of questioning on the basis that no foundation had been laid regarding Barnard’s knowledge of the standard of care applicable to podiatry. The trial court overruled the objection and 115

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permitted Barnard to testify. Barnard testified the osteotomy performed by the defendant was below the standard of care for two reasons: First, the surgery was unnecessary because none of the pre-surgical x-rays indicated a deformity in the metatarcil; and second, even assuming the surgery was necessary, the osteotomy was performed in an unsterile office environment and thereby subjected the bone to an undue risk of infection. Barnard acknowledged in his testimony that he was unfamiliar with the standards applicable to podiatric foot surgery, was not familiar with podiatric literature, had never received any instruction on podiatry and had never performed the procedure involved in this case. In a medical malpractice case the plaintiff must establish that the defendant failed to conform to the standard of care ordinarily possessed and exercised by members of the same school of medicine practiced by the defendant. The standard of care in the medical malpractice action is measured by whether a reasonably careful physician of the same school of medicine as the defendant would have acted in the same manner as did the defendant in treating and caring for the plaintiff. The plaintiff must establish the controlling standard of care, as well as the defendant’s failure to adhere to that standard, by expert opinion testimony. The reason for the requirement of expert testimony in medical malpractice cases is obvious: matters relating to medical diagnosis and treatment ordinarily involve a level of technical knowledge and skill beyond the realm of lay knowledge and experience. Without expert opinion testimony in such cases, the trier fact would be left with no standard at all against which to evaluate the defendant’s conduct. The evidentiary standard for determining whether a member of one school of medicine may offer an opinion concerning the standard of care applicable to another school has been articulated by several Appellate Courts. One line of cases places emphasis on whether the expert witness is sufficiently knowledgeable of and familiar with the standard of care governing the defendant’s specialty to offer an informed opinion on that issue. Another line of cases focuses primarily on whether the standard of diagnosis and treatment applicable to the expert witness’s specialty is substantially identical to the standard for the defendant’s practice. If a proper foundation establishes either of these evidentiary predicates for admissibility, the witness should be permitted to offer an expert opinion on the standard of care applicable to the defendant’s specialty and on whether the defendant breached that standard of care. Orthopedic surgery is a medical subspecialty that involves utilization of medical, surgical, and physical methods in treating the extremities, spine, and associated structures. As such, it not only includes foot surgery encompassed by the practice of podiatry but also other treatments and medical practices not within podiatric practices. The fact that practicing podiatrists and orthopedic surgeons are authorized to perform surgical procedures on a patient’s foot is not to say the standard of care applicable to each discipline is necessarily the same. A patient seeking podiatric treatment is entitled to receive treatment in accordance with the principles and practices in podiatry, rather than some other school of medicine, and a podiatrist rendering treatment to a patient is entitled to be judged by the standard of reasonably careful podiatric practice exercised by members of that specialty, and not by some other school of medicine. In this case, Dr. Barnard, and orthopedic surgeon testified that in his opinion, the metatarcil osteotomy performed by the defendant did not conform to the standard of care applicable for such a standard procedure. In deciding to admit this testimony, the trial court ruled that because an orthopedic surgeon receives more training and education than the podiatrist, Dr. 116

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Barnard was qualified to render an opinion on the standard of care exercised by the defendant in performing the metatarcil osteotomy. The Court of Appeals disagreed with the trial court’s ruling and held that Barnard’s opinion testimony was nothing more than an expression of opinion that the general practice of podiatry did not meet the standard of care observed by an orthopedic surgeon in performing foot surgery. We agree with the Court of Appeals that the trial court erred in permitting Dr. Barnard’s testimony. The plaintiff failed to establish an evidentiary foundation that Dr. Barnard by reason of his knowledge, skill, training, or education was as substantially familiar with the standard of care for podiatric surgery as to render his testimony as well informed as that of a podiatrist. On the contrary, Barnard acknowledged that he was not familiar either with podiatric foot care or with the standard of care applicable to a podiatrist. Hence, there was no evidentiary basis to accept Barnard as an expert witness on the standard of care applicable to the surgical procedure performed by the defendant. Barnard should not have been allowed to express his opinion that the plaintiff failed to exercise reasonable care in operating on the plaintiff. Nor did the plaintiff establish by way of evidentiary predicate that the standard of care for metatarcil osteotomy was substantially identical for both the practice of orthopedic surgery and the practice of podiatry. The Court of Appeals, and therefore, correctly concluded that the testimony of Dr. Barnard should not have been admitted. The judgment for plaintiff at the trial level is reversed. Even though the U.S. medical malpractice law is more favorable to doctors and hospitals than Hungarian law, most political leaders in the U.S. feel that tort law is still unduly hostile to the medical profession. There is a widespread view that the cost of liability insurance for doctors and hospitals is unduly high. Although the amount of liability varies greatly between the states in the U.S., doctors in several states feel obliged to carry about $3,000,000.00 worth of liability insurance, for which they pay a yearly premium of about $100,000. Large hospitals carry as much as $25,000,000.00 in liability insurance. These large limits make sense when one notes that the average court judgment when plaintiffs prevail against a doctor or hospital is now over $2,000,000.00. In the Hungarian system, liability payments come mainly from the hospital’s budget, as the hospital’s liability insurance is very limited. The medical liability insurance market in Hungary is unfortunately under-regulated. It means the lack of minimum content and requirements of a medical liability insurance contract. Free market and free competition however did not bring much competition in this regard, so only a few insurance companies provide decent insurance plans for larger hospitals. Basically as most hospitals are state hospitals, the cost of medical liability puts a significant burden of the state budget. In the U.S. the threat of liability seems to terrify doctors, leading doctors to leave the high liability states for lower liability states. Hungarian doctors do not have direct liability as the hospital is vicariously liable for the damage medical malpractice causes to patients. In this context vicarious liability protects doctors from direct tort trials, however criminal liability still burdens them personally, although the latter is very limited in Hungarian court practice.

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