*NEGLIGENCE: ECONOMIC LOSS AND PSYCHIATRIC HARM* Flashcards
What is a limited duty situation?
This is where there are special rules for the first element of a claim in negligence; duty of care.
What is the general rule on pure economic loss?
- the law of tort does not allow for recovery for pure economic loss
- is recoverable for consequential loss
What is pure economic loss?
- financial damage suffered thanks to the negligence of another party where there is no physical damage to a person or property.
Is there a claim in tort if C suffers economic loss by acquiring defective item of property? Authority?
- no —> if Maria buys hairdryer (it turns out to be faulty) and the retailer goes out of business and she cannot contact them. The manufacturer is not liable to pay damages
- e.g the damage they have suffered is economic loss caused by acquiring a defective item of property
- this damage is classed as pure economic loss
- no duty of care owed in respect of pure economic loss
Murphy v Brentwood District council
Economic damage unconnected to C’s personal injury or physical damage to C’s property can be either…
- pure economic loss caused by damage to property of a third party (spartan steel v martin)
- pure economic loss caused where there is no physical damage to property
Spartan Steel v Martin
Facts: D were responsible for digging up road outside C’s smelting factory —> due to their negligence they cut a power supply resulting in loss of power to C’s factory
C suffered number of forms of damage, including loss of profits and physical damage to the metal that was in process of being smelted during time power was lost
Issues:
- could C recover damages for loss of profits?
Outcome:
- C is owed a duty of care regarding physical damage to property and the damaged metal
- no duty in regard to the ‘pure economic loss’ suffered by loss of profits which could’ve further been made in time of power shortage
Rule: even where a claimant is clearly owed a duty in respect of physical damage to property, any ‘pure’ economic loss suffered in addition to physical damage are unrecoverable as either too remote, or outside the scope of the duty of care.
What is an exception to the general rule that there is no duty of care owed with pure economic loss?
- Negligent statements
Special relationship is an exception to the general rule of PEL not being recoverable. What are the two elements of a special relationship under Hedley Byrne v Heller?
1) an assumption of responsibility by D
2) reasonable reliance by C
To establish the voluntary assumption of responsibility (part of special relationship), the claimant needs to do what 4 things? Caparo
- the adviser knew the purpose for which the advice was required
- the adviser knew that the advice would be communicated to advisee
- the adviser knew the advisee was likely to act on the advice without independent enquiry
- the advisee did act on advice to their detriment Hedley Byrne v Heller & Partners Ltd 1964
Hedley Byrne v Heller [1964]
- advertising firm obtained report from a firm wanting a job done
- bank provided an oral and written report suggesting they were financially stable
- had an exclusion cause
- firm went into liquidation and lost a lot of money
- they said it was negligent to provide the letter and misstatement
- House of Lords held that it could a liability due to close relationship
- it was reasonable for Hedley to rely on bank
What is a full defence to negligence? Explain what this is.
- exclusion of liability
- an exclusion notice can only be effective if reasonable steps were taken to bring it to the claimant’s attention before the tort was committed
- for a notice to be effective to exclude liability, the wording must clearly cover thekind of loss suffered by the claimant
The ability of D to exclude liability is still limited under 1) Unfair Contract Terms Act 1977 and 2) Consumer Rights Act 2015. Outline these Acts.
1) UNFAIR CONTRACT TERMS ACT 1977
- applies where both D and C act in course of a business
- death and personal injury cannot be excluded (s 2 (1))
- other losses - requirement of reasonableness (s 2(2))
2) CONSUMER RIGHTS ACT 2015
- applies where D acts in course of a business but C is consumer
- death and personal injury cannot be excluded (s65(1))
- other losses - requirement of fairness (requirement of good faith, any significant imbalance in parties’ rights) (s62)
In Smith v Eric, HoL listed a number of factors that should be taken into account to decide question of reasonableness under 1977 Act. What are they?
1) were the parties of equal bargaining power
2) in the case of advice would it have been reasonably praticable to obtain the advice from an alternative source taking into consideration of cost and time?
3) how difficult is the task being undertaken for which liability is being excluded?
4) what are practical consequences, taking into account the sums of money at stake and the ability of the parties to bear the loss involved, particularly in the light of insurance?
White v Jones
Facts:
- mr white wished to change his will to leave 9000 for his two daughters
- his solicitor received request but took sizeable time to implement change
- mr white dies and will remained unchanged
- mr white’s two daughters sued him for negligence and were claiming amount they would have received if will was altered
Issue:
- could professional person be liable for negligence to another person with whom they have no direct contractual relationship
Outcome:
- solicitor’s negligence provided grounds for claim
- used Caparo
- loss due to delay was reasonably foreseeable
- sufficient proximate relationship between daughters and solicitor
- fair just and reasonable for liability
How could someone rely on the tort of deceit if they relied on a false statement?
- D made a false statement of fact (by words or conduct)
- D made statement knowing it might be false or knew it was false which can be proved by
1) knew statement was false
2) was reckless as to whether statement was false
3) made statement without believing it was true
- D made statement intending that C would act on it
- C did act upon statement and suffered damage as result
