Economic Loss

Question 1

Pure economic Loss

Answer 1

Purely financial in the sense that it does not result from damage to the claimants property or injury to the claimants person

Question 2

Is consequential economic loss recoverable?

Answer 2

Yes

Question 3

Is pure economic loss recoverable

Answer 3

No

Question 4

Spartan Steel Alloys vs Martin and Co

Answer 4

Defendants negligently cut through a cable which stopped power the plaintiffs factory causing 14.5 hour long power cut.

Question 5

Spartan Steel, Which damage was recoverable

Answer 5

Damage to the melt that was in the furnace - physical damage
Loss of profit which would have been made - consequential economic loss

Question 6

Spartan Steel, Which damage was not recoverable

Answer 6

Loss of profits on four further melts which would have been processed in the 14.5 hours the factory was without power

Question 7

Policy consideration - Justification for restricting the bounds of duty on the defendant. (2 points)

Answer 7

Tort Law should not undermine contract law - Tort law will not impose on the defendants an obligation which is more extensive than hat which they have agreed. Under freedom of contract doctrine people have the ability to allocate responsibility, Tort law should not intervene with this and impose unfair responsibilities.

Desire to avoid crushing liability - The number of people impacted by personal injury and property damage is limited but the of people who could suffer economic loss as a result of a negligent act is enormous. - Law: you will only be liable for the financial loss of those you have contracted with

Question 8

Derry v Peek Principle

Answer 8

‘To found an action for damages there must be a contract and a breach or fraud’

Question 9

Candler v Crane, Christmas and Co principle

Answer 9

‘In the absence of a contract fraud or fiduciary no duty of care exists’

Question 10

Relational Economic Loss

Answer 10

These cases arise when the defendant negligently causes personal injury or property damage to a third party. Claimant suffers economic loss as a result.
Treated like pure economic loss - no duty of care

Question 11

Weller v Foot and Mouth Disease Research Institute

Answer 11

Researchers negligently created a virus that killed cows when they became affected by it. Claimant owned a cattle action - claimant does not own the property that has been damaged.
Case of relational economic loss.

Question 12

Ann v Merton London Borough Council - (Old Law, no longer considered correct)

Answer 12

Claim being brought against the council for failing to properly inspect the house which was damaged.
Regarded as physical damage and the claim succeeded

Question 13

Murphy v Brentwood District Council

Answer 13

Foundations of the house not sufficient but they had been inspected by the council
Claim brought against the council for approving the house despite it being faulty.
House of Lords held that it was only pure economic loss and Anns was wrong

Question 14

Defective premises act 1972

Answer 14

Someone who takes on work in provision of a flat/house owes a duty of care to the person who bought it for six years

Question 15

Hedley Bryne v Heller

Answer 15

Advertising agency requested to do advertising work for Easipower
Advertising agency contracts Easipower’s bank to see if Easipower is credit worthy
Easipowers bank made a statement confirming the creditworthiness of Easipower but did so without responsibility
Advertising agency (claimant) lost money as Easipower was not credit worthy.
House of Lords held: A statement could give rise to a duty of care, In Hedly bryne the statement was given without responsibility which removed the duty of car e

Question 16

Hedley Bryne Principle

Answer 16

A duty of care may exist where damages arise form negligent misstatement.

Question 17

The Hedley Byrne Test

Answer 17

• Special Relationship
• Voluntary assumption of responsibility
• Reliance on the advice
• The reliance on the advice was reasonable

Question 18

Esso Petroleum v Mardon (Special relationship - Hedley Byrne Test)

Answer 18

Mardon made a financial loss after being told by Esso that they should expect to double what they actually received.
Esso not in the business of given advice but the special relationship criteria was said to be satisfied because the defendant claimed or appeared to have relevant knowledge to the business transaction
Duty of care arose

Question 19

Chaudry v Prabhakar

Answer 19

Defendants acted as claimants agent and bought a ca on her behalf which turned out to be a financial loss. A special relationship was said to exist despite the social context.

Question 20

What must the assumption of responsibility be in the Hedley Byrne test

Answer 20

Voluntary

Question 21

Customs and Excise v Barclays bank - assumed responsibility

Answer 21

Barclays negligently did not freeze the assets of an account which was evading tax owed to customs and excise. Because Barclays did not volunteer responsibility they are not liable. They had the order served onto them.

Question 22

Playboy club v Banca Nazionale - assumed responsibility

Answer 22

Playboy check the credit worthiness of their client using the defendant bank. Bank said a specific client was worthy of credit. No assumption of responsibility to playboy as playboy did not know why the credit check was being asked for. - they therefore did not assume responsibility.

Question 23

Smith v Eric Bush - assumed responsibility

Answer 23

Information was given but responsibility is not assumed because disclaimer is given
However courts can decide to ignore a disclaimer and apply a duty where they feel it is unreasonable to uphold a disclaimer

Question 24

Caparo v Dickman - assumed responsibility

Answer 24

Claimant asked auditor for information on how the company was doing because he was a shareholder. Claimant decided to use this information to make a further investment in the company.
Defendant did not assume responsibility to him as an investor just as a shareholder so responsibility wasn’t assumed.

Question 25

Howard Marine and Dredging Co v Ogden principle - Reliance

Answer 25

In order for it to be reasonable to rely on information the claimant must have communicated the seriousness of the need for information.
If it is not clear to the defendant the seriousness of the request for the information it would not be considered reasonable to rely on this information.

Question 26

Scullion v Bank of Scotland

Answer 26

Claimant bought the house as a business to rent out
Not considered reasonably reliable to trust the single audit financed by the bank because the claimant was buying the property for business purposes.

Question 27

James McNaughton v Hicks Anderson negligent statement principles

Answer 27

Considered purpose for which statements made
Considered purpose for which statement was communicated
Relationship between advisor and advisee and any third party