Economic Loss Flashcards
Spartan Steel & Alloys v Martin & Co
[1973]
Defendant contractors negligently cut an electricity mains cable in digging up a road. Left factory without power for 14 hours.
1) Damage to the steel in the furnace at the time which was thrown away.
2) Loss of profit that could have been made selling steel in the furnace.
3) Anticipated lost profit on other steel that would have been processed.
Couldn’t recover 3), can only recover for losses caused directly by damage from the defendant’s negligence.
Hedley Byrne v Heller and Partners
[1963]
Hedley Byrne, an advertising agency, was asked to buy advertising space for Easipower Ltd. Hedley twice contacted Easipower’s bank for a credit check, both cane back positive. Second time, specifically asked whether they were “trustworthy in the way of business, to the extent of £100,000 per annum.” Easipower later collapsed, and Hedley sought recovery.
Heller had a term “without responsibility on be part of this bank or its officials.” Had there even no disclaimer, would have been able to recover.
Can claim for pure economic loss if these 4 conditions are satisfied:
1) A special relationship of trust and confidence between the parties;
2) Party preparing advice has voluntarily assumed the risk;
3) Reliance on advice/information by other party;
4) Such reliance was reasonable in the circumstances.
Special relationship case and quote:
Lord Reid: “the party seeking information or advice was trusting the other to exercise such a degree of care as the circumstances required, where it was reasonable for him to do that, and where the other gave the information or advice knowing the inquirer was relying on him.”
Esso Petroleum v Mardon [1976]
Esso Petroleum v Mardon
[1976]
An employee of Esso, whose job it was to assess the potential output of petrol stations, advised Mr Mardon, who was thinking of leasing a petrol station. Mr Mardon entered a lease on the reliance of advice that the station would sell at least 200,000 gallons a year, but only sold 78,000 in the first 15 months.
The Court of Appeal held that the required special relationship had been created because, in making the statement, Esso’s employee had undertaken a responsibility based on his expertise.
Customs & Excise Commissioners v Barclays Bank
[2006]
Customs officers obtained freezing order on the bank accounts of two companies which were in debt with regards to their tax payments. Barclays wasn’t allowed to let payments leave the bank accounts. Barclays negligently allowed some to be made. Customs & Excise sought to recover this money, for economic loss.
House of Lords ruled there was no assumption of responsibility, as it was not voluntary, the freezing orders are enforced by law.
Caparo Industries plc v Dickman
[1990]
Caparo was considering a takeover bid of another company, Fidelity. Caparo looked at information prepared by Dickman, Fidelity’s auditors. Information showed that they were doing well, received this audit because they were shareholders. Caparo launched its takeover bid and then found out that they were worthless.
No DoC was owed to Caparo because audits were a requirement for businesses, for shareholders not investors. In capacity as a shareholder, the information could be relied upon, but not as its capacity as a potential investor.
White v Jones
[1995]
Two sisters were cut out of their father’s will following an argument. Later, the rift in the relationship mended and the father instructed his solicitor to redraft the will including an inheritance of £9,000 for each daughter. When he discovered this hadn’t been done, he re-ordered it. When he died, it was found the will had not been changed the daughters sued.
House of Lords allowed the claim. Hedley Byrne can extend to provision of services.
