Crown liability in Canada: Developing compensation policies for regulatory failure

This article explores and criticizes the use of private tort law and the common law courts to impose liability on governments for losses associated with regulatory failure. After describing the recent history of government liability law in Canada and the traditional deterrent and compensatory rationales for tort liability, the authors argue that the requirement of personal liability of public officials, the exclusion of "policy" decisions from tort liability, a legal requirement of "negligence," the institutional characteristics of the courts, and the assumption of a deterrent impact of tort law are all inappropriate in addressing government liability claims. The article then explores a variety of mechanisms operating within the federal bureaucracy to respond to liability claims. These include the allocation of losses to individual bureaucrats and to the Consolidate Revenue Fund within government, the allocation of legal costs within govermnent, the incentive effects of the settlement process, the ex ante review of losses by Treasury Board, the ex post review of losses by the Office of the Auditor General, and the treatment of excluded claims. The authors then argue for the development of feedback mechanisms within government to ensure that liability signals are received by and influence administrative decision-making. The authors conclude that the existing substantive legal principles and court processes are inadequate in themselves to ensure that government liability claims are addressed so as to reflect appropriately the relationship of the individual to the state in the regulatory process, and to ensure that hability risks are adequately incorporated into the regulatory decision-making process. They argue that a different set of principles should be developed and applied in addressing government liability claims; and further that these principles should be applied either through the courts with necessary reforms in response to existing institutional limitations, or through agency-specific administrative processes.