Liability For Economic Loss And Psychiatric Injury

Question 1

Liability for pure economic loss

Answer 1

Liability for pure economic loss caused by negligent acts and negligent misstatements.
- If a claimant successfully proves a negligent act or omission by another (the defendant), they will be able to claim damages for:
• Any physical injury suffered, and/or
• Any damage to their property

Pure economic loss: financial loss not related to personal injury or damage to property.

The traditional view is that there is no liability for loss arising out of negligent acts which is purely economic: Spartan Steel v Martin and Co.

Loss caused by negligent misstatements:
- If economic loss is caused by a negligent misstatement rather than negligent acts, then liability can be imposed if it is proven that:
• Dowed C a duty of care - There must be a special relationship between the parties (Byrne v Heller)
• There will be a special relationship if the points from Caparo v Dickman are satisfied:
1. D must possess some special skill relating to the statement. They must be specialist in the field but they don’t have to be a professional advisor:
Mutual Life & Citizens Assurance Co ltd v Evatt.
- This can be satisfied if advice is given in a social situation:
Chaudhry v Prabhakar (1988).
2. D knows that it is highly likely C will rely on the statement.
3. C does rely on and thereby incurs financial loss.
4. It was reasonable for C to rely on the advice
The reliance must be foreseeable:
Smith v Eric S Bush (1990).