Economic Loss Flashcards
Weller & Co v Foot and Mouth Disease Research Institute 1966
D negligently allowed spread of foot and mouth disease.
Plaintiff was an auctioneer who lost money owing to quarantine restrictions which meant he was unable to hold his weekly cattle auctions.
Negligence action failed because he had only lost profit, the D would however have been liable to compensate farmers whose livestock became ill.
Pure Economic Loss
Normally not recoverable in negligence.
Pure economic loss is that which is not derived from physical injury, death or property damage but rather failure to receive expected future profit or receipt of some financial benefit.
Spartan Steel & Alloys v Martin 1973
-illustrates the sometimes elusive dividing line between physical damage and economic damage.
D negligently drove a power shovel through the cable, which belonged to a utility company, which supplied electricity to the plaintiffs factory causing a 14 hour power cut.
Plaintiff suffered losses under 3 headings:
But only pure economic loss in 1 instance, as it DID NOT FLOW DIRECTLY FROM PHYSICAL DAMAGE TO PLAINTIFFS PROPERTY.
Anns v Merton LBC 1978
Overruled in later case of Murphy, but illustrates the uncertainty surrounding pure economic loss in the courts
The D’s creation of defective property was regarded as damaged proeprty.
Plaintiffs occupied flats in a block which after 8 years began to develop cracks and unstable floors.
A cause of which was built on foundations which were too shallow.
House of Lords held that plaintiffs had suffered material damage and ordered the council to compensate for repair costs needed to avoid danger to the occupants of the building.
Murphy v Brentwood
Plaintiff was owner of house which had been built on inadequate foundations leading to cracked walls.
Lost profit on the sale of the house owing to the remedial work which was going to be necessary to restore the foundations.
Sued the council who had approved the original construction plans for the house.
House of Lords held in Murphy that Anns had been wrongly decided -the loss that had been described as physical was actually pure economic loss and was not recoverable as the building had never existed without its defective foundations and in a sense had been fundamentally flawed from the start.
Conmarken Grouo v Network Rail Infrastructure 2011
The extent of consequential economic loss was linked to the Wagon Mound test for reasonable foreseeability.
Negligent Misstatement:
Cases in which the claimant has suffered pure economic loss due to a negligent statement by the defendant provide a significant exception to the reluctance of the law to recognise a duty of care.
Statements may include:
- advice
- references
- provisions of informations
- services
Derry v Peek 1889
Established a presumption that liability in tort was only possible for loss caused by a fraudulent, deceit, rather than negligent statement.
However this was changed in Hedley
Hedley Byrne & Co v Heller
House of Lords reassessed the position and opened up a new category of liability.
- plaintiff an advertising agency inquired using their own bankers into the financial situation and health of a company it was thinking of entering into a number of advertising contracts.
- on the strength of the reference the Hedley Bryne entered into contracts on behalf of the other company, Easipower, and lost £17,000 when that company went into liquidation.
Hedley Bryne Exception
It was recognised by the House of Lords that cases of pure economic loss were very different from those of physical damage as of Donoghue BUT it was felt that the ingredients of foreseeability and proximity could be adapted into a general principle of proximity: BASED ON A SPECIAL RELATIONSHIP BETWEEN PARTIES WHICH WOHLD GIVE RISE TO A DUTY OF CARE IN MAKING STATEMENTS.
Special Relationship - Duty of care
- Claimant relied on D’s skill and judgement or his ability to make careful inquiry.
- D knew, or ought reasonably to have known that the claimant was relying on him,
- it was reasonable in the circumstances for C to rely on D.
What sort of person is subject to the Hedley Byrne duty of care when making a statement?
Mutual Life & Citizens Assurance Co Ltd v Evatt 1971
Minority opinions in this case found that ‘specific or professional expertise in giving advice was not required IT WAS SUFFICIENT THAT THE PLAINTIFF HAD CONSULTED A BUSINESSMAN IN THE COURSE OF HIS BUSINESS AND MADE IT PLAIN THAT HE SOUGHT CONSIDERED ADVICE AND INTENDED TO ACT UPON THAT ADVICE. - Esso Petroleum v Mardon 1976
Chaudhury v Prabhaker 1989
A social setting or relationship does not normally fulfil the requirement for a special relationship.
Chaudhury - D was asked by his friend to advise him about the purchase of a used car- no finding of breach of duty of care.
Weston v North Cornwall DC 1997
Duty of care can arise in situations in which the claimant alleges that his loss has been caused by the defendants failure to warn him about a situation/pressuring him to do something.
-Welton: threats by an environmental health inspector that he would close a bed and breakfast unless expensive renovations were done gave rise to Hedley Byrne liability.
Causation and the Hedley Byrne Special Relationship.
JEB Fasteners v Marks Bloom & Co 1981
Hedley only establishes a duty of care- claimant must also prove breach and causation.
JEB: held that misstatement had not motivated the plaintiff to make his loss-making takeover bid. So effectively the D’s breach had not caused the D’s loss.
