3. Negligence: Pure Economic Loss Flashcards
What are the three types of harm categorised as pure economic loss?
- Damage to property which does not belong to the claimant
- Cost of damage to a defective product which is acquired by the plaintiff
- Financial loss not flowing from damage to claimant’s property or person
Is pure economic loss generally recoverable?
And what are the exceptions?
No.
Exceptions:
1) Reasonable reliance
2) Assumption of responsibilty; and,
3) Special relationship of trust and confidence between the parties
These three tests often overlap and a claimant need only satisfy one in order for a duty to be owed
When is a duty owed for pure economic loss caused by negligent statements, in exception to the general rule that PEL is not recoverable?
Basic Principle in Hedley Byrne: actionable cause in negligence for PEL, where there is a special relationship due to an assumption of responsibility, albeit no contract.
For negligent mistatments: where there is an assumption of responsibility for statements and the claimant has relied upon the statement to their detriment.
What is consequential economic loss and is it recoverable?
Loss which is a consequence of physical injury or damage, and is recoverable.
It is not PEL, because the loss is not purely economic.
Although the cost of damage caused to a defective product acquired by the defendant is not recoverable, how should this be distinguished from damage which is recoverable?
Where the defective product causes damage to other property, as long as the damaged property is owned by the claimant
When a claimant is able to establish the defendant owed a duty with respect to pure economic loss, what must the claimant then show?
That defendant breached the duty by falling below a reasonable standard, and causation (the usual way)
What is the four-step test applicable to negligent mistatement cases for PEL?
Assumption of responsibility test, requiring that:
1) adviser knew the purpose of advice
2) Adviser knew advice would be communicated to advisee (specifically or member ascertainable class)
3) Adviser knew it was very likely that advisee would rely on the advice without further independent inquiry
4) Advisee relied on the advice to their detriment
Are damages recoverable for loss of profits resulting from damage to another’s property?
No - constitute PEL and not consequential economic loss.
- ie. if power is cut by negligent contractor, local business cannot claim for loss of profits due to lack of power.
What did the facts in Caparo v Dickman set out?
Defendant accountants who prepared negligently audited financial statements owed a duty of care to the company only, and not the generally public, including investors.
