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Part  7 Limitations of liability

I.  Limitation as regards causation

As explained above in Chapter 5 II. A. ( no 7 / 289 ), the concept of causality and its 7 / 681 delimitations are controversial.

A.Adequacy theory

According to the traditionally dominant theory191 and case law192, it is a prerequi- 7 / 682 site for delictual liability that there be an adequate causal link between the dam-

aging act and the result.

1.Definition of adequate causation

a.Concept

Adequate causation means that the damage would not have arisen without the 7 / 683 damaging act and that it is a usual consequence of such an act193.

b.Purpose

The underlying idea is that only the legally relevant part of a potentially, infinite 7 / 684 chain of causation ought to be taken into consideration. Since besides this, no le-

gal causation is assumed, the area imputable to the damaging party is limited to a reasonable extent.

191Wagatsuma, Jimu kanri, futô ritoku, fuhô kôi [ Negotiorum gestio, unjust enrichment and tort ] 154 f; Katô, Fuhô kôi [ Tort ] 152 f.

192Imperial Court of 22. 5. 1926, Minshû 5, 386.

193Wagatsuma, Jimu kanri, futô ritoku, fuhô kôi [ Negotiorum gestio, unjust enrichment and tort ] 154 f.

2.Analoguous application of art 416 CC

a.Interpretation of art 416 CC

(  1   ) Ordinary damage

7 / 685 It is generally considered that art 416 para 1 CC sets out the principle of adequate causation. According to this provision, the damage that would usually arise due to failure to perform an obligation, ie that is connected by an adequate causal link to such failure, must be compensated.

(   2  ) Special damage

7 / 686 Article 416 para 2 CC further stipulates which circumstances are to be taken into account when assessing whether there was adequate causation. According to this, even special circumstances that the parties foresaw or could have foreseen must be taken into account when assessing whether there is an adequate causal link with the failure to perform the obligation.

b.Analogous application to torts

7 / 687 It is argued that art 416 CC contains general principles of tort and thus, naturally,

is not only applicable to failure to perform obligations but also by analogy to torts194.

3.Problems with the adequacy theory

7 / 688 However, the following criticisms are made in relation to the adequacy theory.

a.Applicability in Japan

7 / 689 The critics point out that the adequacy theory originates from German law and, therefore, that it is not appropriate in Japanese law since this is based on different prerequisites195.

(   1  ) German law

7 / 690 German law takes the principle of full compensation as its premise, according to which the entire damage that is causally connected with the failure to perform must be compensated if the prerequisites for a compensation claim have been met. The adequacy theory serves to limit the liability to a reasonable scope.

194Imperial Court of 22. 5. 1926, Minshû 5, 386.

195Hirai, Songai baishô-hô no riron [ Theory of the law of damages ] 90 ff; idem, Saiken kakuron II Fuhô kôi [ Law of obligations Particular Part II Tort ] 81 f, 109 f.

(   2  ) Japanese law

(  i ) Differences with respect to the principles of compensation

Article 416 CC, on the other hand, is based on the reception of English law, namely 7 / 691 the rule established in Hadley v Baxendale and thus it follows the principle of restrictive compensation. According to this, the damage that would ordinarily arise

must be compensated, but not damage that arose due to special circumstances, insofar as such were not foreseeable. This means, however, precisely that there are cases in which damage is not recoverable although it is causally linked with the failure to perform an obligation, ie that the scope of the recoverable damage is limited from the outset. Consequently, the prerequisites for applying the adequacy theory are missing from Japanese law.

(  ii  ) Prerequisites of art 416 CC – breach of contract

The purpose of art 416 CC lies further in granting a party compensation for the im- 7 / 692 pairment of his interests that ought to have been furthered by the contract, this hav-

ing been frustrated by the failure to perform. This is not the case with respect to torts.

b.Unclear yardstick

The second point of criticism is that the yardstick for adequate causation is un- 7 / 693 clear.

(   1  ) Lack of clarity

Firstly, there is no way to clearly state what an adequate causal link constitutes. 7 / 694 Therefore, the result is frequently merely described using other words.

(   2  ) Manifold assessment factors

In reality, assessing whether causation is adequate involves a whole range of dif- 7 / 695 ferent aspects. While the term » adequate causation « is always spoken of, in fact

very diverse factors are decisive.

B.Three-step approach

Nowadays, an approach that seeks to examine the issues related to adequate causa- 7 / 696 tion, which were hitherto examined together, separately in three steps196 is influential.

196Cf Hirai, Songai baishô-hô no riron [ Theory of the law of damages ] 135 f; idem, Saiken kakuron II Fuhô kôi [ Law of obligatons Particular part II Tort ] 110 as well as Maeda, Minpô IV-2 ( Fuhô kôi-hô ) [ Civil law IV-2 ( Law of torts ) ] 126; Ikuyo / Tokumoto, Fuhô kôi-hô [ Law of tort ] 116 ff;  Shinomiya, Fuhô kôi [ Tort ] 407; Shiomi, Fuhô kôi-hô I [ The law of tort I ]2 362 f, 386 f.

1.Factual causation

7 / 697 As the first step, thus, the existence of a factual connection must be examined, ie whether the damaging act actually caused the material result.

2.Protective scope

7 / 698 In a second step, there is a legal evaluation of how far the result that is factually linked in terms of causation can be imputed to the damaging party.

3.Assessment of damage

7 / 699 In the third step, the question is how the damage that falls within the protective scope can be measured in monetary terms.

II.  Yardstick to determine the protective scope

7 / 700 There is debate on which yardstick should be used to determine the protective scope. In this respect, the following two opinions are variously supported; they differ as to whether they distinguish between the primary and consequential harm.

A.Uniform yardstick

7 / 701 The traditional understanding is that no distinction is made between the primary harm and consequential harm; instead the protective scope is determined according to a uniform yardstick.

1.Adequacy theory

7 / 702 According to the traditionally dominant theory and case law outlined above, the protective scope is determined on the basis of adequacy. Nonetheless, it has already been pointed out that this yardstick is not sufficiently clear and definite.

2.Protective purpose of the duty

a.Significance

7 / 703 By contrast, it is also argued that the damaging party is liable for all harm within the area to which the conduct duties he infringed related. Thus, the question of

whether there is liability depends on whether the infringement of the right falls within the protective purpose of the conduct rule violated by the damaging party.

B.Distinction between primary and consequential harm

On the other hand, there is also an influential opinion to the effect that a distinc- 7 / 709 tion must be drawn between the primary and consequential harm and that this

means imputability to the damaging party must be examined in a twofold manner197.

197See on this, eg, Maeda, Minpô IV-2 ( Fuhô kôi-hô ) [ Civil law IV-2 ( Law of torts ) ] 130 ff, 302 ff; Shinomiya, Fuhô kôi [ Tort ] 431 f, 449 f; Shiomi, Fuhô kôi-hô [ Law of tort ] 178 f; idem, Fuhô kôi-hô I [ The law of tort I ]2 390 f, which, however, do differ in the nuances respectively.

1.Primary harm – protective purpose of the duty

7 / 710 According to this view, the question of whether the primary harm falls within the relevant protective scope must be answered based on the extent of the purpose ascribed to the rule giving rise to the duty. This is in line with the assessment of fault in the objective sense.

2.Consequential harm – connection with wrongfulness

7 / 711 On the other hand, the question of whether the consequential harm falls within the protective scope must be examined in the context of the wrongfulness aspect.

a.Concept behind the wrongfulness aspect

7 / 712 The idea behind the wrongfulness aspect is that when the especial danger triggered by the primary harm manifests, the damaging party responsible for the primary harm is also liable for this consequential result.

b.Underlying ideas

7 / 713 This is based on the following considerations.

(   1  ) General risk of life – casus sentit dominum

7 / 714 In principle, it is the rule that the owner of the right ( victim ) must himself bear the risks of everyday life.

(   2  ) Especial dangers

7 / 715 If the damaging party, however, has created a danger exceeding that of the general risks of life due to the primary harm brought about by his intention or negligence, then he is also liable for the consequences of this danger being realised. This is significant in the following sense.

(  i  ) Requirement of intention or negligence

7 / 716 If the damaging party committed the primary harm intentionally or negligently, then he is liable for the consequential harm even if there is no intention or negligence in this respect.

(  ii  ) Limitation to the realisation of an especial danger

7 / 717 However, if the result is not due to the realisation of a special danger created by the primary harm, then such must be seen in itself as primary harm so that once again intention and negligence must be determined.

III.  Types of consequential harm

In the following, some specific problems connected with consequential harm will 7 / 718 be examined.

A.Consequential harm and the same victim

One group of cases consists of consequential harm in relation to the same victim 7 / 719 that suffered the first damage. Within this group, two sup-groups can be distinguished, depending on who causes the consequential harm.

1.Damage inflicted by a third party

The first sub-group are cases in which the consequential damage is brought about 7 / 720 by a third party, other than the damaging party that caused the primary harm.

This is the case, for instance, when the victim suffers bodily injury due to a traffic accident caused by the first damaging party and then dies due to medical malpractice by the treating physician ( second damaging party ).

sult that the victim would be brought to a medical facility as a result of the traffic accident and die as a result of medical error there. According to the Learned-Hand formula, a crucial element is assessing whether the probability of the result happening ( death of the victim ) is particularly high as a result of the first damaging party’s act, ie liability in such case hinges on which medical treatment is necessitated by such a traffic accident and how high the resulting probability is that the victim die.

a.Uniformity theory

ability. In this respect too, it is ultimately the above-numbered factors ( 1 ) to ( 4 ) that are material.

200Supreme Court of 9. 9. 1993, Hanrei Jihô 1477, 42.

201Shinomiya, Fuhô kôi [ Tort ] 450 f, 455 f.

B.Consequential harm in relation to another – indirect victim

7 / 733 It is also conceivable, however, that someone other than the victim of the primary harm is affected by the consequential harm. In this case, the question is whether when a third party suffers consequential harm resulting from the first damage that the direct victim suffers due to the damaging party, this third party ( the indirect victim ) can seek compensation from the damaging party202. In this context, two types of case must be distinguished.

1.Damage inflicted upon near relatives

7 / 734 The first cases are those in which the relevant third party is a close relative of the victim. Within this context, two sub-groups must be distinguished.

a.Takeover of the damage

7 / 735 Firstly, it is conceivable that a third party bears the loss the victim sustained and indemnifies the victim. This happens, for example, when close relatives ( eg guardians ) pay the medical costs for the victim.

(   1  ) Victim’s compensation claim

7 / 736 In this case, the damage sustained is the medical treatment costs that the victim normally would have had to pay except that a close relative has taken them on for him. This means that the direct victim has a claim for compensation against the damaging party203.

(   2  ) Close relative’s claim for compensation

7 / 737 In general, a close relative who has paid in lieu of the victim will be granted a claim for compensation against the damaging party204. Nevertheless, the rationale for this claim is problematic.

(  i  ) Extent of the compensation

7 / 738 The earlier prevailing theory proceeded on the basis that the damaging party had committed a tort against the victim and took as its premise whether the loss sustained by the close relative fell within the scope of the recoverable damage. According to the adequacy theory, the crux is whether it might be expected that due

202Shinomiya, Fuhô kôi [ Tort ] 493 f; Shiomi, Fuhô kôi-hô [ Law of tort ] 182 f; idem, Fuhô kôi-hô I [ The law of tort I ]2 392 f.

203Supreme Court of 20. 6. 1957, Minshû 11–6, 1093.

204Imperial Court of 12. 2. 1937, Minshû 16, 46.

to the damaging act by the tortfeasor, a close relative would take over the treatment costs.

(  ii  ) Subrogation of the party paying compensation

Nowadays, there is a lot of support for the view that the victim has a compensation 7 / 739 claim against the damaging party and a close relative, who has indemnified the

victim for the costs, can exercise this compensation claim in analogous application of art 422 CC205 in lieu of the victim206.

b.Own damage

205Art 422 CC stipulates: » If an obligee receives the full value of any thing or right which is the subject of the claim as the compensation for damage, the obligor shall be subrogated to the creditor in relation to such property or right by operation of law «.

206Shinomiya, Fuhô kôi [ Tort ] 497; Hirai, Saiken kakuron II Fuhô kôi [ Law of obligations Particular part II Tort ] 184 f; Shiomi, Fuhô kôi-hô [ Law of tort ] 183.

207Supreme Court of 25. 4. 1974, Minshû 28–3, 447.

208Hirai, Saiken kakuron II Fuhô kôi [ Law of obligations Particular part II Tort ] 185 f.

209Shiomi, Fuhô kôi-hô [ Law of tort ] 184.

perform his work. Therefore, there is no duty on the damaging party to foresee the damage to the indirect victim and avoid it and accordingly, there is no liability to compensate this damage either.

bb.Exception