The Fifth Civil Division submitted the following questions to the Great Senate:

(1) If the owner of a thing which he uses himself, such as an owner-occupied house, is temporarily unable to use it by reason of a tortious interference with his ownership, does this represent a compensatable economic loss in the absence of any extra expenditure or lost revenue?

(2) If such a loss of use is compensatable, how is it to be quantified?

The Great Senate gave the following answer:

The owner of property which he himself uses, such as an owner-occupied house, who is temporarily deprived of its use as a result of a tort may be able to claim damages therefore as constituting an economic loss, despite the absence of extra expense or lost revenue.

Reasons

. . .

III. The Great Senate is of the view that, leaving aside cases involving cars for personal use, a compensatable economic loss arises when the owner of a thing is temporarily deprived of its use by a tort if (1) his domestic economy depends on the constant availability of the thing, such as the house he occupies, and (2) he would actually have used it during the period of deprivation. With this limitation the award of damages is permitted by law and does not imperil legal certainty; indeed, it is necessary to give compensation for such deprivations in order to ensure the full and just compensation of economic losses.

1. The BGB does not define the concepts of ‘patrimony’ or ‘economic harm’, but leaves it to writers and courts to flesh them out. In order to ascertain whether the plaintiff has suffered patrimonial harm, the Bundesgerichtshof generally follows the Reichsgericht in applying the ‘difference method’, and compares his present economic situation with what it would have been had the harmful occurrence not taken place. The Fifth Civil Division is right to say that the temporary loss of personal use is not reflected in such a computation, which apart from replacement costs discloses only the income lost if the thing would have been used to produce income or the savings made if it would have involved costs and liabilities.

(a) But the Bundesgerichtshof has come to realize that while this accounting operation is value-neutral, the courts must still determine what items are to be included in the account in the light of the protective function of tort liability and the compensatory function of damages.

In this sense the difference method, which is not actually enjoined by the law [references], takes on a normative aspect [references]. While it is true that economic loss will always reflect itself in an increase on the debit side or a decrease on the credit side, it is for the law to decide what items are to be included on the balance-sheet for the purposes of compensation.

(b) Such a balance-sheet must take account of the fact that wealth is significant not just in its actuality but also in its potentiality, as enabling its owner to realize his goals in life [references], a function protected by law.

If, looking only to money, the system gave compensation only for loss of the commercial use of property, it would be ignoring the gain that comes from domestic use also, deprivation of which, though not expressed in loss of income, can comparably affect the owner’s economic sphere. Thus a motor vehicle not only often represents the major item in a private person’s property but is commonly the very basis of his domestic economy and lifestyle, especially if he uses it for his profession. Even more clearly, the decision to answer one’s living needs by buying a home is largely based on economic considerations.

The price reflects the market’s valuation of such goods precisely as domestic goods, and recognizes their temporary loss as a devaluation of them. If it puts an evident constraint on the owner’s housekeeping, as when he would otherwise have used the thing, only an approach which dealt exclusively in monetary loss and gain, an approach not required by the notion of ‘patrimony’, would regard this as economically insignificant.

2. Nor is § 252 BGB compelling here. Where a thing is put to productive commercial use, loss of use is essentially shown by loss of profit, compensation for which is expressly provided for by § 252 sentence 1 BGB. This provision emphasises the importance attached by the legislator to loss of productive use in goods in commerce, and there is no comparable provision for the domestic use of goods.

But we cannot agree with the Fifth Civil Division that the law has set its face against damages for deprivation of domestic use of goods not resulting in any loss of income. Unlike provisions in earlier codes, § 252 BGB is principally designed to make it clear that damages extend to the whole economic loss regardless of the degree or type of fault which causes it [references]; to this extent the provision follows through the mandate of full compensation implied in § 249 BGB; § 252 sentence 2 BGB fits into this scheme, though hitherto the courts have seen it only as alleviating the burden of proof so as to let the plaintiff obtain proper compensation for harm which is often difficult to prove, an aim also furthered by § 287 ZPO [references]. Though the law is geared to productive use, it can be extended so as to embrace analogous domestic use without putting such a claimant in a better position as regards proof as feared by the Fifth Civil Division provided that damages are not given in abstracto, which the BGB permits only exceptionally (see §§ 288, 290, 849 BGB). For this purpose the courts have added the requirement, in the case of motor vehicles, that the loss of use be ‘actually felt’, that the victim was willing and able to use the vehicle during the period of deprivation and would actually have used it. If this limitation is carried over to other property, the victim’s position as regards proof will be comparable in cases of commercial and domestic use respectively, and it will be easy enough to relate damages for loss of domestic use to the actual harm affecting the victim’s estate without setting up any tariff for different types of case.

. . .

4. Any such extension of the law must certainly be limited to property on whose continuing availability domestic arrangements typically depend. Further extension would go beyond the need to give similar treatment to commercial and domestic property and might lead to granting compensation for non-economic harm, contrary to § 253 BGB; the law might become unpredictable and damages difficult to assess.

(a) In permitting compensation only for economic loss, § 253 seeks to limit damages to cases where objectively measurable harm occurs: when awarding damages the judge should find not on the uncontrollably subjective valuation tendered by the victim but on the valuation generally attributed to that interest by the market. The legislator also wanted to avoid any monetization of ‘ideal’ interests [references]. If things one uses in private life are rendered unusable, one’s mode of life is inevitably affected, but compensation cannot be given for all such inconvenience without giving damages for purely personal harm, which § 253 definitively renders non-compensatable, in cases of tort at any rate. It may be different on contract cases since the parties may contract out of § 253 just as they may agree that economic interests should have less protection. But so far as goods of vital importance to general daily living are concerned, there is no risk of an undue extension of damages in the non-economic area, for not only does their use in the domestic economy clearly relate to the economic sphere [references] but their prevalence and function make it possible to measure at least their economic core by means of objective standards, eschewing subjective factors peculiar to the victim personally. To this extent, at any rate, the fact that such anfractuosities would not show up in a commercial balance-sheet is not a conclusive argument against their compensatability.

. . .

(c) Decisions of the Bundesgerichtshof have staked out the bounds of liability for loss of use of motor vehicles, a situation where the plethora of cases makes it necessary to ignore some of the differences between individuals as regards the importance of the thing.

We need not now determine the range of property, apart from motor cars, whose temporary loss of use calls for compensation on the principles already stated. But the temporary loss of use of a home tortiously affected, as in the case in hand, can clearly constitute an economic loss.

It hardly needs saying that one’s domestic economy and mode of life centre on the home and that its continuing availability for occupation is a central item in daily life and intrinsic to one’s whole wealth. This very instance shows how unfair it would be to limit damages to loss of commercial use, to regard loss of domestic use not as a loss in itself but only as a source of possible loss, and to leave uncompensated the person who forbears to rent alternative accommodation: it would be an unjustifiable preference for investment in production over investment in consumption. It may be justifiable to refuse damages in cases of temporary impairment of use which the victim can reasonably temper by alternative measures he can be expected to adopt, but where the house in which the owner would have lived is rendered wholly uninhabitable even for a time, the principle that economic harm must be paid for in full requires compensation to be made.

IV. It must be for the courts to work out on a case-by-case basis methods for quantifying loss of use which are suited to the kind of property involved and the way it is treated. The only legal constraints are that quantification must satisfy the requirements of compensation, that is, apply objective standards as indicated by § 253 BGB and treat like cases alike.

It would be wrong in principle to grant damages on the basis of what it would have cost the owner to rent a substitute article for the period of deprivation. We are concerned with compensation, not reparation, and compensation is based not on the savings effected by having a thing of one’s own but on the monetary value of having one’s own thing to use. Nor can the owner claim what he might have charged the tortfeasor for the use of the thing. Such a method of computation may be justified in special instances of conflicting interests, but it is inconsistent with the general principles of damages law. Compensation is for the loss of domestic use, not for the loss of profit from a rental contract with a third party which the owner never dreamed of entering.

Nevertheless the rental market may provide a basis for measuring the loss once the rental charge has been carefully purged of all elements related to profit-making. So, too, may the basic post-acquisition costs related to the period of loss of use (interest in capital tied up, recurrent costs of keeping the property available, depreciation). And, contrary to the view of the Fifth Civil Division there is nothing wrong in this context with adding a modest supplement to the minimum sum at which the market would put the basic costs of having a thing to use, in order to take account of the fact that the fall-out effects on a person’s economy of the unavailability of such property may be very difficult to track down in detail. The mention of these possible ways of measuring the loss is not, however, intended to exclude other appropriate methods.

Back to top

This page last updated Thursday, 01-Dec-2005 11:04:42 CST. Copyright 2007. All rights reserved.