1. Economic Theory

Different tests are used in different parts of the world to determine when the breach element of the action in negligence is satisfied. According to conventional wisdom, the test that is used in the many jurisdictions in the United States is that propounded in United States v. Carroll Towing Co.Footnote ³⁸ American law students are usually taught that in this famous case, Judge Learned Hand laid down an algebraic formula for ascertaining whether the defendant had breached his duty of care. According to this formula, the breach element is determined by reference to the probability of damage to the plaintiff materializing (“P”), the burden of taking precautions (“B”), and the loss that the defendant's conduct caused to the plaintiff (“L”). If PL is greater than B, the defendant is adjudged to have breached his duty.

Although the Hand formula has been enshrined in the Restatement (Third) of Torts: Liability for Physical and Emotional HarmFootnote ³⁹ and is accepted by many American treatise writers as representing the law,Footnote ⁴⁰ we acknowledge that some scholars consider it to have at best a shaky foothold in American tort law.Footnote ⁴¹ Carroll Towing is not even a tort case (it is an admiralty case), and in it Judge Learned Hand was dealing with the plaintiff's fault rather than the defendant's. However, for the purposes of this analysis, we proceed on the basis that the conventional understanding is correct, namely, that the Hand formula specifies when the breach element will be satisfied in the United States.

The Hand formula is presented by Posner as powerful evidence in support of his theory of tort law.Footnote ⁴² Indeed, it is probably fair to say that the Hand formula is the main jewel in the crown of that theory. Posner claims that the Hand formula is used not just in the United States but also in the United Kingdom, even if it is not on the lips of English judges.Footnote ⁴³ He writes, “I do not know how many English judges have heard of the Hand formula. But I think that if it were explained to them they would accept it as a fair description of the modern English law of negligence.”Footnote ⁴⁴ The relevant problem for Posner is that the Hand formula is simply not used outside the United States. It has been stressed by the courts in several jurisdictions that the breach element is not determined in a mathematical way or by a calculus.Footnote ⁴⁵ Furthermore, factors other than those referred to in the formula are often considered. As Justice McHugh said in the decision of the New South Wales Court of Appeal in Western Suburbs Hospital v. Currie: “Negligence is not an economic cost/benefit equation. Immeasurable ‘soft’ values such as community concepts of justice, health, life and freedom of conduct have to be taken into account.”Footnote ⁴⁶ Equivalent statements have been made in other jurisdictions.Footnote ⁴⁷ While textbook writers in Commonwealth countries often refer to the Hand formula in passing, they do not suggest that it constitutes the law in the jurisdiction with which they are concerned.Footnote ⁴⁸ For these reasons, Posner's account suffers from significant difficulty when applied outside the United States.

It might be thought that this conclusion has been reached too hastily since Posner never actually claimed that the Hand formula is employed anywhere with mathematical precision. It might also be argued that the Hand formula is broad enough to allow for all costs and benefits to be weighed, and not merely those that are explicitly economic in nature. On this basis, the Hand formula could be seen as capable of accommodating the “soft” values referred to by Justice McHugh. Such values are, it might be said, simply certain nominate factors that are relevant to a cost-benefit analysis. Despite some ostensible appeal, this line of argument is ultimately unpersuasive. To begin with, the various “soft” values of liberty, justice, and life are not easily cashed out in economic terms. This is important because judicial consideration of factors that are not reducible to economic values is flatly inconsistent with Posner's purely economic theory of tort law. Furthermore, we doubt whether Commonwealth courts (or at least those in Australia) just balance all costs and benefits for the simple reason that “life, liberty, and justice” are incommensurable values. They cannot be compared according to any common metric. This, too, is highly significant since Posner's economic model is predicated on relevant considerations being susceptible to being weighed.

2. Corrective Justice

For the other theorists with whom we are concerned, the converse problem exists. That is, they are unable to explain the fact that the Hand formula is used in the United States. This is properly conceded by Weinrib. He admits that his theory cannot accommodate the Hand formula because that formula takes cognizance of the burden on the defendant of taking precautions.Footnote ⁴⁹ Pursuant to his theory, a factor that is relevant to liability must be bilateral in the sense that it is concerned with the relationship between the parties.Footnote ⁵⁰ However, the cost to the defendant of taking precautions is not something that connects the parties to each other. It is a unilateral consideration that is concerned solely with the defendant. Although Weinrib admits, therefore, that his corrective justice theory does not accommodate the law regarding the breach element of the action in negligence in the United States (surely a major concession), he claims that his theory fares much better when attention is turned to other jurisdictions. He says that “the English and Commonwealth approach to reasonable care ignores [the burden on the defendant of avoiding the risk] almost completely.”Footnote ⁵¹

Weinrib is badly mistaken here about the state of the law. Although it is true that the cost to the defendant is not always as explicitly and directly factored into the determination of the breach issue by Commonwealth courts as it is by the Hand formula, the suggestion that the cost to the defendant of taking precautions is irrelevant or nearly irrelevant is manifestly false. Weinrib's analysis of the law on this pointFootnote ⁵² relies heavily on the landmark Australian case of Wyong Shire Council v. Shirt.Footnote ⁵³ There, in one of the most celebrated opinions in Australian tort law, Justice Mason said that the cost of taking precautions is a factor to consider in determining whether the defendant breached her duty. His Honor wrote: “The perception of the reasonable man's response calls for a consideration of the magnitude of the risk and the degree of the probability of its occurrence, along with the expense, difficulty and inconvenience of taking alleviating action and any other conflicting responsibilities which the defendant may have.”Footnote ⁵⁴ Shirt, therefore, far from supporting Weinrib's theory, actually undermines it.

Weinrib also cites the famous English decision in Bolton v. StoneFootnote ⁵⁵ in support of his claim that in Commonwealth jurisdictions the burden on the defendant of avoiding the risk in question is “ignor[ed] . . . almost completely.”Footnote ⁵⁶ In this case the plaintiff was injured when she was struck by a cricket ball that had been hit out of the cricket ground. It is true that Lord Reid's opinion contains some remarks that are in tune with Weinrib's position. For example, his Lordship said, “I do not think that it would be right to take into account the difficulty of remedial measures. If cricket cannot be played on a ground without creating a substantial risk, then it should not be played at all.”Footnote ⁵⁷ However, it is very doubtful whether Lord Reid really meant to say that the practicability of taking precautions is irrelevant, given that in two subsequent cases he indicated that the cost of precautions should be taken into account.Footnote ⁵⁸ Furthermore, even if he did hold that view when he delivered his speech in Bolton, it is doubtful whether that section of his speech forms part of the ratio decidendi of the case. The Appellate Committee that heard the appeal in Bolton comprised five Law Lords. The committee unanimously upheld the finding of the trial judge that there was no breach of duty, and all five Law Lords delivered speeches. Only Lord Reid can be read as suggesting that the cost of taking precautions could be disregarded in that case, a fact that Weinrib omits to mention.

Many English judgesFootnote ⁵⁹ as well as judges elsewhere in the CommonwealthFootnote ⁶⁰ have said that the cost of taking precautions is relevant (though by no means central) to the issue of breach of duty. It is thus unsurprising that commentators have noted that the cost to the defendant of taking precautions is a salient factor in determining whether the breach element of negligence is satisfied. John Fleming, for example, summarizing the gist of the authorities, wrote: “That the cost [to the defendant of avoiding the risk of injury] . . . is a relevant factor cannot be doubted.”Footnote ⁶¹ Because the cost of implementing risk-prevention measures is a factor to consider in deciding whether there has been a breach in all Commonwealth jurisdictions as well as in the United States, Weinrib's theory suffers from a significant problem of fit. It does not admit of universal application.

3. Rights Theory

Stevens rightly acknowledges that his theory faces a significant problem whenever cost to the defendant is taken into account by tort law.Footnote ⁶² The problem arises because this consideration has nothing to do with the plaintiff's rights.Footnote ⁶³ Because cost to the defendant is relevant to determining whether there is a breach of duty (a fact that Stevens notes)Footnote ⁶⁴ in all of the jurisdictions with which we are concerned, Stevens's theory suffers from a major problem of fit. In an attempt to mitigate this difficulty, Stevens seeks to discredit Posner's economic account of tort law,Footnote ⁶⁵ which champions the consideration of cost to the defendant. However, this attempt to rescue his theory rests on a logical error.Footnote ⁶⁶ This is because even if Stevens's criticisms of Posner's theory are convincing, that would not support Stevens's own theory. The fact that one theory is inadequate does not thereby make a rival theory acceptable. Stevens's move, repeatedly made throughout his Torts and Rights,Footnote ⁶⁷ is akin to stating that the heliocentric theory of the universe (the theory that the sun is at the center of the universe) provides the best explanation of the position of objects in the universe simply because the geocentric theory (the theory that Earth is at the center of the universe) is flawed. It is a classic example of what philosophers call the fallacy of the excluded middle. The difficulty Stevens's account suffers from in relation to the breach element in negligence actions therefore remains, and it means that his theory cannot claim universal truth.

1. The Law

All of the jurisdictions with which we are concerned adopt different approaches to the recognition of a duty of care in respect of negligently inflicted pure economic loss. In Australia, the question in each case is whether the “salient features” of the proceedings call for a duty to be recognized.Footnote ⁶⁸ Salient features include the plaintiff's vulnerability,Footnote ⁶⁹ the risk of imposing indeterminate liability,Footnote ⁷⁰ the control enjoyed by the defendant over the circumstances that led to the plaintiff suffering injury,Footnote ⁷¹ the defendant's knowledge,Footnote ⁷² and the need to protect individual autonomy.Footnote ⁷³ In Canada, the Anns test is used to determine when a duty of care arises,Footnote ⁷⁴ including in cases involving negligently inflicted pure economic loss.Footnote ⁷⁵ According to the Anns test, the issue of whether a duty of care is owed is resolved in two stages. The first stage involves enquiring whether there is sufficient “proximity” between the parties. If the necessary proximity exists, the second stage becomes relevant, where it is asked whether there are any policy considerations that limit or exclude a duty.

The position in the United Kingdom contrasts starkly with that in Australia and Canada. In the United Kingdom, a distinction is drawn between three types of case: (1) those involving an assumed responsibility; (2) those involving what is often referred to as “relational economic loss” (that is, pure economic loss caused to the plaintiff by virtue of the knock-on effect of the defendant having negligently harmed the property or person of a third party in which or in whom the plaintiff had an economic interest); and (3) those in which the plaintiff has purchased property that is inherently (but not obviously) defective and therefore not worth what the plaintiff paid for it. In relation to cases that fall within either the second or third of these categories, the courts have steadfastly refused to impose a duty of care.Footnote ⁷⁶ By contrast, a duty of care may arise in the first type of case.Footnote ⁷⁷ The courts generally employ two tests in this regard, the relationship between which is unclear:Footnote ⁷⁸ the Caparo testFootnote ⁷⁹ and an assumption of responsibility test.Footnote ⁸⁰ The Caparo test asks whether the injury to the plaintiff was a foreseeable consequence of negligence on the part of the defendant, if the parties were in a relationship of proximity, and whether it would be fair, just, and reasonable to recognize a duty of care. The assumption of responsibility test enquires as to whether the defendant assumed responsibility for the plaintiff's interests and whether the plaintiff in turn relied upon the defendant.

In the United States, a duty of care may arise in respect of pure economic loss in cases resulting from a negligent misstatement made by a person where that person intends the statement to guide the plaintiff or a group of which the plaintiff is a member and the plaintiff relied upon that statement.Footnote ⁸¹ A similar rule applies in relation to negligent provision of services.Footnote ⁸² The position is complicated, however, as regards other types of case in which pure economic loss is negligently inflicted because of a diversity of views taken in different states. That said, most states for other types of pure economic loss cases have tended to adopt a robust exclusionary rule, which is often referred to interchangeably as the “economic loss doctrine” or the “economic loss rule.”Footnote ⁸³ That exclusionary rule was endorsed by §766C of the Restatement (Second) of Torts.Footnote ⁸⁴ The foregoing means that speaking very broadly, the handling of negligently inflicted pure economic loss cases is the same in the United States as in the United Kingdom. A duty of care can sometimes arise where responsibility is assumed in relation to the provision of statements and services, but in other types of case a duty is denied.

2. Rights Theory

Stevens starts his discussion of negligently inflicted pure economic loss from the premise that the common law recognizes no general right to economic well-being.Footnote ⁸⁵ Given his belief that tort law is about the infringement of rights, he goes on to assert that, “[since] the infliction of economic loss does not per se infringe any right of the plaintiff . . . [it] is not therefore prima facie recoverable.”Footnote ⁸⁶ In making such claims, Stevens encounters significant difficulty in relation to the law in both Australia and Canada, for in both of those jurisdictions such losses may sometimes be recovered. In Australia, as noted above, a plaintiff may be able to obtain damages in respect of negligently inflicted pure economic loss according to the salient features test, whereas in Canada such losses may sometimes be recovered under the Anns test. Stevens rightly admits this clash with his theory.Footnote ⁸⁷ In an attempt to overcome the problem, Stevens criticizes the law in Australia and Canada. So, although he asserts the superiority of the English approach (according to which damages for relational economic loss are irrecoverable on grounds that chime with his rights theory), he denounces two of the leading Australian cases on the recoverability of damages for negligently caused pure economic loss which conflict with his theory—namely, Caltex Oil (Australia) Pty v. The Dredge “Willemstad”Footnote ⁸⁸ and Perre v. Apand Pty Ltd.Footnote ⁸⁹ —on the basis that they comprise instances of judicial “radicalism.” This “radicalism,” he believes, inheres in the fact that the courts permit recovery in them without “articulat[ing] any right [that was] violated.”Footnote ⁹⁰

In relation to Canadian law, Stevens's criticism can only be inferred. While he does not directly discuss the relevant Canadian cases, he maintains that “the greatest 20th century judicial disaster in the law of torts was the decision of the House of Lords in Anns v. Merton London Borough Council.”Footnote ⁹¹ And, of course, as noted above, it is the Anns test that is still used in Canada (thereby providing the means by which claims for negligently inflicted pure economic loss may succeed in that country).

Thus, in relation to both Australia and Canada, Stevens's message is clear: the courts in both of these jurisdictions have erred in their treatment of negligently inflicted pure economic loss. The inference is that he thinks that the law in both countries ought to be changed. Stevens's analysis, however, does nothing to rescue his theory. This is because his argument is a prescriptive one. Such arguments, we believe, do nothing to keep the promise made by Stevens to provide an explanation of the law as it exists.Footnote ⁹² If someone offers an explanatory theory, as Stevens does, then the self-imposed task that they must perform is to account for the law as we find it. In saying this we do not, of course, mean to suggest that scholars should never engage in prescriptive analysis of tort law. Our point is simply that it is self-evidently impossible to show that a given rule fits a purportedly explanatory theory by contending that the rule should be altered in order that it conform to the theory.

Stevens's treatment of assumed responsibility cases is also suspect. In his view, the assumption of responsibility cases in which damages in respect of pure economic loss have been recovered are unproblematic because in such cases a right to economic welfare does exist. On his account, the defendant's objective manifestation of willingness to undertake a responsibility toward the plaintiff is a right-generating act by analogy with the rights created by gratuitous bailment and by virtue of estoppels and express trusts.Footnote ⁹³ In all such cases, according to Stevens, the fact that the defendant has voluntarily assumed a responsibility toward the plaintiff confers upon the plaintiff a right that the plaintiff would not otherwise have. On this basis, he suggests, the assumed responsibility cases in tort law are consistent with his theory: the plaintiff possesses a right the infringement of which enables her to sue the defendant. A major problem with this explanation, however, is that Stevens offers no reason at all as to why the law in relation to bailment, estoppel, or express trusts should be thought to provide a better guide to the way in which tort law should be understood as handling voluntary assumptions of responsibility than, for example, the law of contract, where, of course, gratuitous undertakings are not prima facie binding and hence do not invest the promisee with a right that he would not otherwise possess. Stevens's explanation is simply question-begging.

3. Corrective Justice

The idea that torts are infringements of rights also plays an important role in Weinrib's corrective justice theory, although it does not have quite the same prominence in his account as it does in Stevens's (where rights occupy center stage). Weinrib writes: “A right immediately signifies the existence of a correlative duty; harm or loss does not. Neither the harm as something suffered by the plaintiff nor the process of suffering it at the defendant's hand establishes a link between the parties that is at once correlative and juridically normative.”Footnote ⁹⁴ The fact that Weinrib embraces these propositions exposes his theory to essentially the same difficulty as that which afflicts Stevens's when it comes to the law governing negligently inflicted pure economic loss. Frequently, courts across the common law world take into account factors beyond whether the defendant has infringed the plaintiff's rights (if they take that consideration into account at all) in deciding whether to impose a duty of care in respect of pure economic loss. The focus is often on the fact that the plaintiff has suffered pure economic loss and on how to delimit the circumstances in which damages for such loss can be recovered.

A regularly discussed consideration in this connection, and perhaps the most noteworthy for present purposes, is the prospect that recognizing a duty of care will impose indeterminate liability on the defendant.Footnote ⁹⁵ This is widely acknowledged as a reason for excluding a duty of care in respect of pure economic loss. That judges take this consideration into account is highly problematic for Weinrib because judicial anxiety about exposing the defendant to indeterminate liability has nothing to do with the rights of the plaintiff. It is a unilateral consideration that concerns only the defendant. The fact that the specter of indeterminate liability is a reason for excluding a duty in all of the jurisdictions with which we are concerned cannot be explained by Weinrib's theory. This is properly conceded by Weinrib.Footnote ⁹⁶

4. Economic Theory

Posner contends that efficiency demands the denial of recovery in cases of negligently inflicted pure economic loss. In his view, such cases involve only private costs and no social costs. (On Posner's definition, “a social cost is a diminution in the total value of society's economic goods; a private cost is a loss to one person that produces an equal gain to another.”)Footnote ⁹⁷ Because only social costs matter from his economic perspective—where there is no diminution in aggregate social wealth there is no behavior that needs to be deterredFootnote ⁹⁸ —claims in respect of negligently inflicted pure economic loss should be rejected. While the point about private costs and social costs is Posner's main reason for taking this position, he also marshals several subsidiary arguments. Prime among these are the related contentions that plaintiffs in pure economic loss cases are better able than defendants to quantify their loss ex ante Footnote ⁹⁹ and that the risk of indeterminate liability presented by such cases is a serious impediment to the prospect of efficient precaution-taking by defendants.Footnote ¹⁰⁰ We will assume that Posner is correct in saying that efficiency coincides with the law allowing losses to lie where they fall in pure economic loss cases. Yet if this is what efficiency entails, Posner's theory encounters substantial problems.

In all of the jurisdictions with which we are concerned, tort law permits damages to be recovered in pure economic loss cases involving an assumption of responsibility in certain circumstances. Posner admits the difficulty that this poses for his theory in the course of discussing the decision of the House of Lords in White v. Jones.Footnote ¹⁰¹ In this case, a testator instructed his attorney to amend his will to include his two daughters as beneficiaries of his estate. The attorney carelessly failed to follow these instructions, with the result that the daughters inherited nothing. Property that the father intended them to receive instead devolved to other individuals. The daughters successfully sued the attorney for negligence. Because the daughters’ loss was a gain to the beneficiaries of the estate, it was a merely private loss. Accordingly, says Posner, in such a case, we can expect the courts to “let the loss lie where it has fallen.”Footnote ¹⁰² But this is not what happened. Like claims have succeeded in all of the other jurisdictions with which we are concerned.Footnote ¹⁰³ And, of course, the difficulty for Posner is not confined to disappointed beneficiary cases but extends to all assumption of responsibility cases.

What is the situation with respect to other negligently inflicted pure economic loss cases? As noted already, in the United Kingdom and the United States a strong exclusionary rule prevents damages from being recovered (unless responsibility has been assumed). This rule is consistent with Posner's analysis. However, the law is very different in Australia and Canada. We observe above that in those jurisdictions pure economic loss claims are sometimes permitted even in the absence of an assumed responsibility. This result is, by Posner's reckoning, inefficient. The clash with his theory is considerable.

1. The Law

The availability of punitive damages varies considerably throughout the common law world. In some Australian jurisdictions, the circumstances in which they may be awarded have been severely confined by legislation. This legislation either abolishes them entirelyFootnote ¹⁰⁴ or eliminates them in certain contexts, such as in claims in respect of personal injuries caused by negligence.Footnote ¹⁰⁵ In other parts of Australia, the availability of punitive damages is determined by the common law. At common law, punitive damages are awarded in order “to punish the defendant for conduct showing a conscious and contumelious disregard for the plaintiff's rights and to deter him from committing like conduct again.”Footnote ¹⁰⁶ The law governing punitive damages in Canada is broadly similar to the Australian common law. The rule in Canada is that punitive damages “may be awarded in situations where the defendant's misconduct is so malicious, oppressive and high-handed that it offends the court's sense of decency.”Footnote ¹⁰⁷

The test for the award of punitive damages in the United Kingdom is much more stringent than in both Australia and Canada. The House of Lords in Rookes v. BarnardFootnote ¹⁰⁸ famously confined punitive damages to just three types of case. These are (1) cases involving oppressive, arbitrary, or unconstitutional conduct on the defendant's part; (2) cases in which the defendant acted with the intention of making a profit; and (3) cases in which an award of punitive damages is authorized by statute. In the United States, most jurisdictions permit punitive damages to be awarded, typically where the defendant's conduct “constitutes an extreme departure from lawful conduct.”Footnote ¹⁰⁹ In many states, legislative caps on the quantum of punitive damages have been enacted and provision has been made for a proportion of any punitive damages awarded to be redirected to a government agency. In a few states, punitive damages can be awarded only when legislation authorizes their award.Footnote ¹¹⁰ The general picture that emerges from this melee is that punitive damages are available in all of the jurisdictions with which we are concerned but that their availability differs considerably from one part of the world to another.

2. Corrective Justice

The situation in relation to punitive damages poses an insurmountable challenge for Weinrib's theory. Corrective justice, Weinrib tells us, involves placing “the defendant under the obligation to restore the plaintiff, so far as possible, to the position the plaintiff would have been in had the wrong not been committed.”Footnote ¹¹¹ It follows that punitive damages, which are not reparative in nature, do not effect corrective justice. This is rightly conceded by Weinrib. He writes, “under corrective justice damages are compensatory, not punitive.”Footnote ¹¹² The challenge that punitive damages present to Weinrib's theory is more acute in some parts of the world than in others. The problem is probably most pronounced in the case of the United States, where punitive damages are generally awarded more freely than anywhere else.

Weinrib attempts to mitigate the problem from which his theory suffers in this regard by suggesting that in at least some situations, punitive damages are properly understood as restitutionary damages. He points out that under the second category identified in Rookes, punitive damages can be awarded where the defendant has sought to make a gain. In Weinrib's words, “In Cassell & Co. v. Broome, [1972] App. Cas. 1027 (H.L.), Lord Diplock explained this second category in terms of unjust enrichment. This explanation would make this category, at least, consistent with corrective justice's treatment of illegitimate gains.”Footnote ¹¹³ Two things need to be noted here. First, this analysis does nothing to explain away the first and third categories identified in Rookes or the fact that punitive damages are available in other jurisdictions in cases that fall outside the second category in that case.Footnote ¹¹⁴ Second, and more fundamentally, it is abundantly clear that punitive damages are not restitutionary.Footnote ¹¹⁵ Punitive damages may be awarded under the second category in Rookes even if the defendant has not in fact made any gain (a mere intention to make a gain can be sufficient to bring a case within that category).Footnote ¹¹⁶ The test, as laid down by Lord Devlin in Rookes, is whether the defendant “with a cynical disregard for a plaintiff's rights has calculated that the money to be made out of his wrongdoing will probably exceed the damages at risk.”Footnote ¹¹⁷ The crucial issue according to Lord Devlin's formula is the defendant's motivation, not the result.Footnote ¹¹⁸

Furthermore, even where a defendant has made a gain as a result of her tort, the award of punitive damages is calibrated according to the need to punish the defendant rather than the size of the gain made. Calibration of the award by reference to the quantum of the gain is what is required if Weinrib is to succeed in his attempt to accommodate the second category in Rookes within his theory. Hence, at least since Broome v. Cassell & Co. Ltd.,Footnote ¹¹⁹ it has been clear that punitive damages awarded under the second category in Rookes will often need to exceed the defendant's gain so that the purpose of awarding damages in category 2 cases, namely, “to teach a wrongdoer that tort does not pay,”Footnote ¹²⁰ will be achieved. Andrew Burrows notes that this “crucial additional point [shows] that damages under [the] second category are not concerned merely to reverse the defendant's unjust enrichment.”Footnote ¹²¹ For these reasons, Weinrib's restitutionary analysis fails to explain away, even in part, the significant problem of fit that punitive damages present for his theory.

Weinrib also seeks to insulate his theory from the existence of punitive damages on the twin grounds that such damages are awarded only exceptionally and that their very existence is contentious.Footnote ¹²² He writes that punitive damages are “encased in controversy”Footnote ¹²³ and claims further that the House of Lords in Rookes “unequivocally repudiate[ed]” them as “anomalous” and “restricted their scope to the minimum allowed by precedent.”Footnote ¹²⁴ Weinrib also notes that punitive damages are unavailable in civil law jurisdictions.Footnote ¹²⁵ The apparent intention of this discussion is to portray punitive damages as a de minimis problem of fit for his theory. We do not dispute the accuracy of any of the observations that Weinrib makes in this connection. However, we doubt whether they deal convincingly with the problem that punitive damages pose for his theory. It is true that awards of punitive damages are relatively rare in the United Kingdom.Footnote ¹²⁶ But this point does little to insulate Weinrib from the present critique, given that his theory extends to all of the jurisdictions with which we are concerned, and outside the United Kingdom the award of punitive damages is much less confined.Footnote ¹²⁷ In the context of a universal theory, it is illegitimate to cherry-pick the law of just one jurisdiction in order to defend one's theory, especially when the law of the jurisdiction concerned differs markedly from that elsewhere.

3. Rights Theory

The fact that punitive damages are generally available throughout the common law world is highly problematic for Stevens's theory. Stevens is alive to the challenge that they present. He acknowledges, “it may be objected that punitive damages are. . . inconsistent with a rights-based model of the law. If the courts are concerned to punish the defendant for his wrongdoing, it can be argued that this goes beyond mere vindication of the plaintiff's rights.”Footnote ¹²⁸ Stevens responds to this challenge by contending that punitive damages—like compensatory damages—are substitutive for the right that is infringed.Footnote ¹²⁹ The idea is that “[t]he more outrageous the defendant's conduct, the greater the infringement of the right and the greater the substitutive award.”Footnote ¹³⁰ Stevens then draws his readers’ attention to aspects of the law on punitive damages that are consistent with this way of understanding them. Good illustrations (Stevens's, not ours)Footnote ¹³¹ include the fact that punitive damages are paid to the victim (in most jurisdictions) rather than to, for example, the stateFootnote ¹³² and the fact that the procedural and evidential protections conferred upon defendants that are found in criminal law proceedings are not generally given to tort defendants who are sued for punitive damages. These rules make sense if the focus of tort law is on the violation of the plaintiff's right.

However, as Stevens concedes,Footnote ¹³³ there are other rules governing the award of punitive damages that stand in the way of this interpretation of them. When these other rules are considered cumulatively, they show that punitive damages are not a species of substitutive damages. We note some of these rules here, not all of which are acknowledged by Stevens.

1. (1) It is well established that the defendant's wealth is a material factor to consider in determining the quantum of punitive damages.Footnote ¹³⁴ This fact contradicts Stevens's explanation of punitive damages. It shows that punitive damages are not driven by a concern to vindicate the plaintiff's right. The economic wealth of the defendant has nothing to do with the plaintiff's rights.

2. (2) The courts in awarding punitive damages take account of the need to deter the defendant and others from engaging in the conduct in question.Footnote ¹³⁵ This principle cannot be explained by a rights-based account of tort law. This is because it is aimed at incentivizing the defendant and third parties to act in particular ways rather than ensuring that punitive damages vindicate a right enjoyed by the plaintiff.

3. (3) The fact that in the United Kingdom, punitive damages are available only if the case falls within one of the three categories identified in Rookes Footnote ¹³⁶ is a problem for Stevens's account of punitive damages. If, as he claims, they are awarded to vindicate the plaintiff's right that was infringed by the defendant, why are they available only in the three situations recognized in Rookes? Those are plainly not the only situations in which, if tort law is about the vindication of rights, a plaintiff's right might be egregiously infringed.

4. (4) In all jurisdictions, the courts must exercise restraint both in deciding to award punitive damages (they are “a remedy of last resort”)Footnote ¹³⁷ and, if the decision is made to award them, in determining their quantum.Footnote ¹³⁸ The existence of this constraint is inexplicable from a rights-based approach. If egregious violations of rights require a larger award of damages than would be provided by compensatory damages in order to vindicate the right, punitive damages should be available as of right whenever there is such a violation.

5. (5) Stevens's explanation cannot account for the fact that where the defendant has been punished by the criminal law (or by other means) in respect of the conduct about which the plaintiff complains, an award of punitive damages might be reduced or precluded for that reason.Footnote ¹³⁹ If the concern is with the vindication of the plaintiff's rights, the fact that the defendant has already been punished ought to be irrelevant.

6. (6) Stevens cannot explain the rules that apply where there are multiple plaintiffs who are deserving of an award of punitive damages. The law here is that the court should divide the punitive damages award equally between the plaintiffs.Footnote ¹⁴⁰ This is inconsistent with Stevens's rights-based explanation of punitive damages. It means that only by chance will the quantum of the punitive award reflect the gravity of the violation of any given plaintiff's right.

As noted, Stevens concedes that the evidence in favor of his explanation of punitive damages is not “all one way.”Footnote ¹⁴¹ There are some aspects of the law on punitive damages that he can explain. However, there is a great deal more for which he cannot account. The clash between what the law is and his theory is significant. The simple truth is that unless the foregoing features of the law of punitive damages (several of which are not mentioned by Stevens) are disregarded, punitive damages cannot be brought within the scope of his rights theory. Allan Beever summed up the insurmountable obstacles that rights theorists face as a result of punitive damages when he said: “in awarding punitive damages, a court cannot be taken to be concerned with the rights of the plaintiff. The court is expressing condemnation of the defendant, but condemnation of the defendant does not imply vindication of the plaintiff.”Footnote ¹⁴² We agree.

4. Economic Theory

Posner explains punitive damages as promoting optimal deterrence. He writes, “Tort . . . price[s] conduct that [it] wishes to discourage or at least regulate. The optimal price will sometimes exceed the harm to the victim.”Footnote ¹⁴³ Posner gives various illustrations of situations where he believes an award of punitive damages is required. He suggests, for instance, that punitive damages should be awarded where they are necessary to strip a defendant of a profit that she made as a result of the tort (that is, where the compensatory award is insufficient to eliminate the profit). He also argues that punitive damages are needed where the tort is “concealed” (Posner gives the example of a hit-and-run accident) and the probability of detection is consequently low. Where the probability of detection is low, he contends that punitive damages (or some other form of punishment, such as a criminal law sanction) ensure that the law sufficiently deters.

There are overwhelming difficulties with Posner's account. In the first place, he cannot explain why only the victim of a tort is entitled to sue for punitive damages. If the goal of awarding punitive damages is to ensure that people are optimally deterred, it is nonsensical to limit to victims the right to sue for punitive damages. The probability of a punitive award being made where one is required on efficiency grounds would be greatly increased if this constraint did not exist. In short, it is inefficient to permit only the plaintiff to bring proceedings for punitive damages. Beever notes that a possible reply to this point is that such a rule might provoke excessive litigation, and that a rule that permitted all and sundry to sue for such damages would therefore yield a net loss to society.Footnote ¹⁴⁴ However, the risk of excessive litigation is minimal given (1) the principle that the courts should proceed cautiously in awarding punitive damages;Footnote ¹⁴⁵ and (2) the many well-known legal devices that are in place to control excessive litigation.Footnote ¹⁴⁶ A second obstacle for Posner's account is the fact that with the exception of some jurisdictions in the United States, it is permissible to insure against liability to pay punitive damages.Footnote ¹⁴⁷ This rule regarding insurance is inefficient because the person who needs to be deterred will not be made to pay. It is therefore inconsistent with Posner's theory. Third, Posner cannot explain the fact that in the United Kingdom, punitive damages are, pursuant to Rookes, restricted to three categories of case. On his explanation, they should be available wherever they are needed to ensure that awards sufficiently deter.

1. The Law

There is considerable divergence in the law regarding the defense of illegality in the common law world. In Australia, both common law and statutory illegality defenses exist. The common law defense will apply if permitting recovery would be inconsistent with the legislative intention expressed in the criminal law statute that the plaintiff contravened.Footnote ¹⁴⁸ The statutory defensesFootnote ¹⁴⁹ are, overall, far more potent. The precise shape that they take varies considerably from jurisdiction to jurisdiction, but they generally apply where the plaintiff was injured while committing a serious offence and the commission of the offence was causally connected to the damage that the plaintiff suffered.Footnote ¹⁵⁰ In Canada, the defense of illegality was severely confined by the landmark decision in Hall v. Hebert.Footnote ¹⁵¹ Pursuant to that decision, the defense will apply only where it is necessary to deny recovery in order to preserve the coherence of the legal system. The principal situation where the defense applies is where the plaintiff seeks damages in respect of a criminal law penalty imposed on him.

The law governing the defense in the United Kingdom is in a state of flux.Footnote ¹⁵² However, speaking very generally, the defense applies in the same circumstances as it does in CanadaFootnote ¹⁵³ and also where allowing recovery would be contrary to public policy.Footnote ¹⁵⁴ In the United States, illegality is not formally a defense,Footnote ¹⁵⁵ although the fact that the plaintiff was injured while acting illegally will frequently be relevant to other rules, most notably the doctrine of contributory negligence (or “comparative responsibility,” as it is generally known in the United States in those jurisdictions that have abolished the all-or-nothing rule).

2. Corrective Justice

In a footnote in The Idea of Private Law, Weinrib concedes that the illegality defense clashes with his corrective justice theory. Recall that corrective justice is bilateral in nature, in the sense that it is concerned equally with both parties.Footnote ¹⁵⁶ Rules, if they are to be explicable in terms of corrective justice, must therefore be bilateral too. It follows that the illegality defense is problematic for Weinrib because it focuses solely on the plaintiff rather than on the parties’ relationship. As Weinrib puts it, “It is sometimes said . . . that a plaintiff who was negligently injured while committing an illegal act cannot recover. This defense is inconsistent with corrective justice, because illegality as such is not relevant to the direct interaction of doer and sufferer.”Footnote ¹⁵⁷

The difficulty created by the illegality defense is most acute for Weinrib in the case of Australia and the United Kingdom, where the defense is relatively expansive. Weinrib might argue that the defense in Canada, which recognizes a much narrower version of the defense, is actually consistent with corrective justice. As noted above, in Canada the defense applies only when it is necessary to deny relief in order to preserve the coherence of the legal system. It might be thought that Weinrib can gain some mileage from this given the stress that he places on the law's coherence.Footnote ¹⁵⁸ Weinrib suggests as much in the Idea of Private Law.Footnote ¹⁵⁹ However, it is doubtful that the law in Canada coheres with Weinrib's theory. The fact remains that the defense, even in Canada, is triggered by a unilateral consideration, namely, the plaintiff's offence. Furthermore, the need to maintain coherence in the law generally is also something that falls outside the immediate interaction between the parties.

Overall, Weinrib is correct to see the illegality defense as posing a significant difficulty for his theory of tort law. He does not offer a sustained argument in an attempt to explain away the difficulty, and it is doubtful whether the difficulty that the defense presents can be explained away. The clash between Weinrib's theory and tort law on account of the illegality defense is unresolved.

3. Rights Theory

Stevens does not discuss the illegality defense in his Torts and Rights beyond saying that he does not need to address it because it is not a rule that is specific to tort law.Footnote ¹⁶⁰ It is true that the defense is available throughout the law generally.Footnote ¹⁶¹ However, we do not believe that it can justifiably be ignored by anyone who is offering a universal theory of the whole of tort law. This is primarily because in many jurisdictions the rules that govern the defense of illegality take on a distinct hue in the tort setting. The rules that control the defense in this sphere are often very different from those that apply in, for example, the unjust-enrichment setting.Footnote ¹⁶² We are also of the view that the defense cannot justifiably be disregarded given its obvious and considerable significance in modern tort law. Ultimate appellate courts in several of the jurisdictions with which we are concerned have considered it repeatedly in recent years,Footnote ¹⁶³ and it has caught the interest of several legislatures.Footnote ¹⁶⁴

Stevens, in our view, needs to account for the illegality defense, given his mission to explain all of tort law. We also believe that he would be unable to do so. We have been influenced in this regard by a paper that Stevens wrote regarding the doctrine of contributory negligence. Stevens's position in that paper, which is also written from a rights-based perspective, is that contributory negligence should not be an answer to liability in tort.Footnote ¹⁶⁵ The basic reason given in support of that contention is that the plaintiff's conduct, so long as it is not an intervening cause, is irrelevant to whether the plaintiff's rights have been infringed, and because tort law is fundamentally concerned with whether the plaintiff's rights have been infringed, contributory negligence should be irrelevant. In Stevens's words, “The reason why contributory fault should not be a defense is that the risks I run in relation to my own interests are nobody's concern but mine.”Footnote ¹⁶⁶ Stevens correctly surmises that if what matters is the fact that the plaintiff's rights have been violated (or, put differently, that the defendant has breached the duty that he owed the plaintiff), one would expect the plaintiff's conduct to be immaterial, provided that it is not such that no right of his has been infringed. This reasoning, we think, applies mutatis mutandis to the defense of illegality. If the focus is on the plaintiff's rights, it should not matter whether the plaintiff was acting legally or illegally. But that is not the law. Stevens's theory is, therefore, prima facie unable to account for the defense of illegality. This is a major difficulty for it.

A possible escape route available to Stevens is to argue that when the illegality defense applies, the plaintiff forfeits his right. According to this line of reasoning, when the illegality defense is engaged, there is no right that needs vindicating, and it is therefore appropriate that recovery is denied. This is a rights-based account of the illegality defense. This explanation of the defense looks most plausible where the defense operates, as it does in some jurisdictions in certain contexts, not as a true defense but as a denial: a rule that prevents one or more of the elements of the cause of action in which the plaintiff sues from being satisfied.Footnote ¹⁶⁷ Where the doctrine of illegality functions in this way, it may well be that the plaintiff, when the “defense” is triggered, has no right. However, it is clear that in all of the major common law jurisdictions the doctrine of illegality functions in at least some contexts as a true defense and does not merely strike at the elements of the plaintiff's action.Footnote ¹⁶⁸ This is so most explicitly in Canada, where it has been stated at the highest level that illegality works exclusively as a defense and not, for example, as a principle that denies the existence of a duty of care.Footnote ¹⁶⁹ When the doctrine of illegality functions as a true defense, this forfeiture argument runs into formidable difficulty. This is because it depends upon the shaky proposition that a defendant ceases to be under a legal duty when a defense is enlivened. The accuracy of this proposition is dubious, and this is particularly so in relation to defenses such as illegality.

When one commits a wrong, the the reasons that rendered the act concerned wrongful continue to exist even when they are outweighed by countervailing reasons. They do not vanish. The point can be nicely illustrated by way of the defense of defensive force.Footnote ¹⁷⁰ Suppose that defensive force is used to kill a terrorist who was about to detonate a bomb, the blast from which would have killed many people. Killing the terrorist was obviously justifiable, at least if he could not have been prevented from exploding the bomb by less drastic means. However, equally plainly, the fact that the killing of the terrorist was justifiable does not mean that are no reasons not to kill the terrorist. We have reasons not to kill people even if they are terrorists who are about to murder many innocent people. What we are dealing with here is a situation in which the reasons not to kill the terrorist were outweighed by reasons in favor of killing him. Because the reasons not to kill the terrorist remain intact, so, too, it is plausible to think, does the legal duty not to commit batteries, even though a defensive-force defense applies.

This reasoning applies a fortiori where a nonjustificatory defense is in play. Reasons created by torts to refrain from committing particular acts clearly remain intact (and hence the defendant still owes a duty) when a nonjustificatory defense, such an immunity or illegality, applies. For instance, a person who is entitled to diplomatic immunity obviously has reasons on this analysis not to commit a battery despite his immunity. He is still under a duty not to strike people. The same is true where the defense of illegality is enlivened. This means, of course, that offenders continue to have rights despite their offending. Accordingly, this forfeiture argument is of no assistance to Stevens.

4. Economic Theory

The defense of illegality is an obvious and significant problem for Posner's account. Tort law, Posner claims, imposes liability where the defendant is the cheapest loss avoider, this being the most efficient rule. However, in Australia and the United Kingdom the defense may prevent liability from arising where liability should be imposed according to this criterion. Suppose that D acts unreasonably (according to the Learned Hand formula) and causes injury to P as a result. The efficient rule is for D to be held liable. However, in Australia and the United Kingdom, if the plaintiff was injured while acting illegally, he will be unable to recover if (in the case of Australia) his illegality was causally connected to the damage about which he complains or (in the case of the United Kingdom) recovery would be contrary to public policy (and the relevant policy factors go well beyond the variables in the Learned Hand formula). There seems to be a significant clash between the law in these jurisdictions and Posner's theory.

A reply available to Posner is that the illegality defense deters criminal behavior by the plaintiff and that even though it means that the defendant is not deterred by tort law where it applies, there is a net gain in societal wealth. However, this response is implausible for several reasons.Footnote ¹⁷¹ First, plaintiffs are unlikely even to know about the illegality defense and therefore cannot be deterred by it. As Lord Justice Millett observed in Tribe v. Tribe, the type of people who commit offences that are likely to trigger the defense are “unlikely to be . . . studious reader[s] of the law reports.”Footnote ¹⁷² Second, even if a given plaintiff does know about the defense, it is doubtful that she would be deterred by it. If the risk of being both punished by the criminal law and suffering serious personal injury in the course of an illegal enterprise is insufficient to deter the plaintiff, it is hardly likely that the risk that the plaintiff might be denied a remedy in tort that she may have otherwise enjoyed will make a difference to her decision-making process. Third, even if, contrary to what we have just suggested, the illegality defense may influence behavior, it may be just as likely to encourage offending as it is to deter it.Footnote ¹⁷³ Suppose that P and D steal a car and that P is injured as a result of D's negligent driving. P is unlikely to be able to recover damages from D in either Australia or the United Kingdom.Footnote ¹⁷⁴ This makes such joint illegal enterprises cheaper for D than would otherwise be the case.

Can Posner explain the illegality defense in Canada? Recall that the main situation where the defense applies in Canada is where the plaintiff sues in respect of the loss that he suffers as a result of having a criminal law penalty imposed on him. It is efficient for the defense to apply in this context. Assuming that the criminal law produces the optimal gain to society in terms of wealth by imposing a sanction, it must be inefficient for tort law to reverse what the criminal law has done. And even if the criminal law has produced a suboptimal result, it is probably inefficient to have a second set of proceedings to correct the criminal law's errors (the efficient thing to do in this situation would be for the criminal law to correct its own mistakes via the appellate apparatus or for the criminal law to be changed by the legislature so that it produces an efficient outcome). Nothing need be said here about the situation in the United States, where no formal defense of illegality exists.

1. The Law

The rule established by the nineteenth-century case of Rylands v. FletcherFootnote ¹⁷⁵ has evolved in different ways in different parts of the common law world. In the United States, it came to be understood as establishing a principle of strict liability that applies only to ultrahazardous activities.Footnote ¹⁷⁶ In the United Kingdom, the rule is not confined to ultrahazardous activities,Footnote ¹⁷⁷ although it does impose strict liability. In Canada, the relevant law—at least in the common law provinces—is substantially the same as that in the United Kingdom.Footnote ¹⁷⁸ In Burnie Port Authority v. General Jones Pty Ltd.,Footnote ¹⁷⁹ the High Court of Australia declared that, “[t]he rule in Rylands v. Fletcher, with all its difficulties, uncertainties, qualifications, and exceptions, should now be seen . . . as absorbed by the rules of ordinary negligence.”Footnote ¹⁸⁰ The rule does not, therefore, exist as a discrete cause of action in Australia, and situations in which it would have applied are now simply determined by the tort of negligence.

2. Corrective Justice

The rule in Rylands, which today exists in one guise or another in each of Canada, the United Kingdom, and the United States, clashes with Weinrib's theory by virtue of the fact that it imposes strict liability. According to Weinrib, strict liability is incompatible with his theory because strict liability affords preferential treatment to plaintiffs whereas corrective justice treats the parties as equals.Footnote ¹⁸¹ Unsurprisingly, the clash between the rule in Rylands v. Fletcher and Weinrib's corrective justice theory has not escaped his attention. In an attempt to ameliorate the problem, he seeks to show that the clash is merely apparent rather than real. He contends that the rule in Rylands is “an extension, not a denial, of the fault principle.”Footnote ¹⁸²

He offers three arguments in this connection. The first is that the rule in Rylands merely “limit[s] rather than eliminate[s] the relevance of culpability.”Footnote ¹⁸³ This is because, he says, some of the defenses that are available in relation to the tort “show . . . that culpability is still operative.”Footnote ¹⁸⁴ In particular, Weinrib adverts to the defenses of act of God, vis major, and act of third party. His second argument is that the rule continues the idea accepted by the law of negligence that the riskier the activity, the greater the amount of care that is needed. Weinrib's claim here is essentially that at some point the activity becomes so risky that a “lack of care can be imputed from the very materialization of the risk.”Footnote ¹⁸⁵ The rule in Rylands is said to constitute the law's determination of the location of that point. The third argument is that the rule merely relieves “the plaintiff of the need to locate the specific faulty act” and that it cannot be implied from the fact that the activity in question was not an unlawful activity or that “all of the defendant's acts within the activity were faultless.”Footnote ¹⁸⁶

We see difficulties in all of these arguments, which we mention below. However, before doing this, we want to lock horns directly with Weinrib's overarching contention that the rule in Rylands is an extension of the fault principle and does not, properly understood, impose strict liability. The simple fact is that the authorities preclude this interpretation. The courts have repeatedly stressed that the liability regime instantiated by the rule is strict. For example, in Cambridge Water Co. Ltd. v. Eastern Counties Leather Plc., Lord Goff (who delivered a speech with which the other Law Lords all agreed) said that “the principle is one of strict liability.”Footnote ¹⁸⁷ Similarly, the California Court of Appeals in Pierce v. Pacific Gas & Electric Co. said that “[t]he doctrine of ultrahazardous activity provides that one who undertakes an ultrahazardous activity is liable to every person who is injured as a proximate result of that activity, regardless of the amount of care he uses.”Footnote ¹⁸⁸

Weinrib's overarching assertion is untenable given the authorities, but it is nonetheless worth understanding precisely why the arguments that he offers in support of it are unconvincing. His first argument is that culpability is made relevant by certain defenses to liability arising under the rule in Rylands. The main problem with this argument is that even if it is accepted, it would not follow that the rule in Rylands is consistent with Weinrib's corrective justice theory of tort law. In order to demonstrate that the rule in Rylands complies with his theory, it is necessary to show, relevantly, not only that it imposes liability based on fault but also that the fault requirement is such that the parties are treated as equals. Merely because a given liability rule is based on fault does not mean that it complies with his version of corrective justice, which is a point that Weinrib himself makes elsewhere in The Idea of Private Law.Footnote ¹⁸⁹ Critically for present purposes, the fault-based defenses to liability arising under the rule in Rylands mentioned by Weinrib do not result in the liability regime created by the rule treating the parties as equals. This is because the defenses are relevant only in limited situations. They do not apply in every situation (or even in most situations) in which the elements of the cause of action in Rylands are present and the defendant is faultless.

A good illustration of the point is Jones v. Festiniog Railway Co.Footnote ¹⁹⁰ In this case, the defendants were held liable under the rule in Rylands in respect of sparks that escaped from a locomotive and caused damage to the plaintiff's land. Crucially, the defendants were held liable even though it was shown that they had taken all reasonable care and were hence faultless.Footnote ¹⁹¹ No defense applied. Another example is Humphries v. Cousins.Footnote ¹⁹² In this case, sewage escaped from the defendant's land through no fault of the defendant and damaged the plaintiff's land. No defense was engaged, and the faultless defendant was held liable under the rule in Rylands. Many further illustrations could be given but are unnecessary, for the short point to be taken from these cases is that contrary to Weinrib's analysis, the mere existence of fault-based defenses does not mean that the rule in Rylands treats the parties as equals. Rather, notwithstanding the existence of these defenses, the rule generally affords plaintiffs preferential treatment, contrary to Weinrib's corrective justice theory of tort law.

Weinrib's second argument in support of the proposition that the rule in Rylands is fault-based—that fault can be imputed to the defendant who is held liable under the rule given the dangerousness of the activity that led to the escape—is also unconvincing. Weinrib simply does not tell us why he thinks it is right to impute fault to a defendant who commits the tort in Rylands. However, even if he is correct in making this claim, this would not mean that the rule in Rylands is consistent with his version of corrective justice. Constructive fault is not the same thing as actual fault, and only a rule that is sensitive to actual fault treats the parties as equals. To say that a defendant who is not at fault should be deemed to be at fault does nothing to redress the favorable treatment that the rule in Rylands affords plaintiffs. It does nothing to explain why someone who is actually faultless may incur liability.

Weinrib's third argument for characterizing the rule in Rylands as imposing fault liability—that the rule merely relieves the plaintiff of the need to isolate a specific faulty act in a wider activity—holds no water either. Simply because the plaintiff in proceedings under the rule in Rylands does not have to prove that the defendant was at fault in committing a specific act does not mean that the defendant is at fault. There may be nothing faulty in the conduct of a defendant who commits the tort in Rylands. Footnote ¹⁹³ There is nothing wrong per se in, for example, constructing a reservoir. The fact remains, therefore, that liability under the rule in Rylands may be attached to faultless conduct.

For the foregoing reasons, Weinrib's attempt to portray the rule in Rylands as being based on fault is unsuccessful. The rule in its various manifestations in Canada, the United Kingdom, and the United States is one of strict liability and, as such, is fundamentally incompatible with Weinrib's corrective justice theory.

3. Rights Theory

There is significant theoretical support for the notion that the rule in Rylands does not involve any wrong and hence no violation of a right. The logic underpinning this view is that a person may be held liable for this tort despite the fact that, to invoke the example already given, in accumulating water in a reservoir the defendant complied with all relevant standards of behavior. As Peter Jaffey puts it, “[a] claim under the rule in Rylands v. Fletcher . . . arises from a primary liability relation that allocates to D the risk of loss to [P] without imposing on him a duty to prevent it.”Footnote ¹⁹⁴ If this interpretation of the rule is correct, the rule presents a significant problem for Stevens's theory. This is because it contradicts Stevens's mantra that torts involve the breach of a duty/infringement of a right.

Stevens tries in two ways to deal with the difficulty that the rule in Rylands causes for his theory. He suggests, first, that it is an anomaly; and, second, that it should be regarded as a subset of the law of private nuisance.Footnote ¹⁹⁵ Leaving to one side the fact that these claims are probably irreconcilable,Footnote ¹⁹⁶ neither one rescues his theory from the problem of fit that the rule presents. It is not altogether clear what Stevens means when he describes the rule in Rylands as an “anomaly.” If he means by this that the rule ought never to have been created, he is making a prescriptive claim. For the reasons given above,Footnote ¹⁹⁷ such claims cannot rescue explanatory theories. They involve arguing that the data should be changed so that they fit the theory, whereas theories that seek to explain the law (which is how Stevens describes his theory) must take the law as it exists.

If, by contrast, what Stevens means by describing the rule in Rylands as an anomaly is that it is an outlier within tort lawFootnote ¹⁹⁸ —and an outlier because it affords the plaintiff a cause of action without the defendant having breached any ex ante private right held by the plaintiff against the defendant—then, again, he is on shaky ground. This is so because there is nothing particularly unusual (still less unique) in tort law affording a cause of action in the absence of an ex ante private right on the part of the plaintiff. Many other torts (or rules of tort law) do likewise, such as the tort of causing loss by unlawful means, the dependency action afforded by the Fatal Accidents Act 1976 (UK),Footnote ¹⁹⁹ the action for inducing breach of contract,Footnote ²⁰⁰ the action created by the Congenital Disabilities (Civil Liability) Act, 1976 (UK),Footnote ²⁰¹ and the tort of public nuisance.Footnote ²⁰² Given these actions, it is implausible to contend that the rule in Rylands is an outlier or in any way unique in constituting a tort that is not animated by the infringement of a private right held by the plaintiff.

Stevens's second argument—that the rule in Rylands has been subsumed within the law of private nuisance—proceeds on the assumption that the law of private nuisance is compatible with his theory. Stevens is certainly not alone in suggesting that the rule in Rylands is part of the law of private nuisance. Statements to this effect have often been made in the United Kingdom, including at the ultimate appellate level.Footnote ²⁰³ However, even if the action has been subsumed within the law of private nuisance in the United Kingdom, which is something that is hotly debated,Footnote ²⁰⁴ this has plainly not happened elsewhere in the common law world. In Canada, for example, the rule in Rylands and the action in private nuisance are separate.Footnote ²⁰⁵ It is also noteworthy that the reporters of the Restatement (Third) of Torts: Liability for Physical and Emotional Harm regard the law of private nuisance as independent of the ultrahazardous activities rule. Although liability may arise in both fields simultaneously, no suggestion can be found in the Restatement that the bases of liability have been merged.Footnote ²⁰⁶ Accordingly, even if Stevens's claim that the rule in Rylands is now part of the law of private nuisance is an accurate description of the position in the United Kingdom, Stevens is still unable provide a compelling universal theory of tort law.Footnote ²⁰⁷

4. Economic Theory

In contrast to the theorists so far considered, Posner is considerably more at ease with the rule in Rylands (or, more accurately, the American version of that rule concerning ultrahazardous activities). Writing with William Landes, he maintains that the ultrahazardous activities rule is mandated “where achieving optimal accident avoidance requires altering the defendant's activity rather than his care or the plaintiff's activity or care.”Footnote ²⁰⁸ In such circumstances, “a rule of strict liability makes economic sense.”Footnote ²⁰⁹ Posner further argues that the tort of negligence would not offer an adequate form of regulation in such circumstances. In his famous article, “A Theory of Negligence,” Posner writes:Footnote ²¹⁰

Given this stance, Posner cannot explain the law in all of the jurisdictions with which we are concerned. For in Australia, ultrahazardous activities are governed by the tort of negligence (into which body of law the rule in Rylands was subsumed, as noted above). So, although Posner's account may chime with the rules in the Canada, the United Kingdom, and the United States,Footnote ²¹¹ he is unable to accommodate the Australian position given that, on his account, ultrahazardous activities require regulation by way of a strict liability rule. On the assumption that Posner is right in this regard—that is, that he is correct to suggest that there is “a serious limitation of the negligence system” in cases of this kind—the law in Australia is inefficient.