Pure Economic Loss Flashcards
Explain decision in Murphy case.
- Foundations to the house were faulty and this was found by Murphy 11 years later.
- Claim in negligence against the council which approved the foundation plans failed due to being pure economic loss.
- Effectively the key point was harm suffered was merely damage to the house. In effect C had just obtained something which was less valuable than the price they paid for it. This amounted to pure economic loss.
What is the general rule in relation to pure economic loss?
D does not usually owe a duty of care when the damage suffered amounts to pure economic loss.
Where may the court be willing to accept pure economic loss for the basis of a claim?
If the defective property causes injury or damage to a claimant (either through physical injury or damage to other property they own).
Give the two types of economic loss unconnected to physical damage to C’s person or property.
1) economic loss caused by damage to the property of a third party;
2) economic loss caused where there is no physical damage.
Explain the case of Spartan Steel.
- C’s made metal in factory supplied by electricity through capable from power station.
- D’s employees damaged electricity cable drilling nearby road, causing power cut to factory.
- C could not claim for loss of future profit (for goods made during the time the power was out). However they could claim for damage to the products which were in the furnace (ie products they owned) and the loss of profits attached to those damaged goods.
- Note that if they owned the cable as well, they could have claimed loss of profit for the time during the power was out (as they wold have owned the property in question). This is because it would have be consequential economic loss following on from damage to property belonging to the claimant (ie the cable).
Explain consequential economic loss
Economic loss arising from damage to property belonging to the claimant.
Eg C owns electricity cable which is destroyed and as a result they lose profit from factory supplied by that electricity. This would be deemed consequential economic loss, arising from damage to property the claimant owned. This would be recoverable.
Explain the rule where D damages property belonging to a third party which causes the claimant economic loss.
This is a situation of pure economic loss. D would not owe C a duty of care as there is not a sufficiently close relationship between C and D.
Give the two ways economic loss can be caused where there is no physical damage to any property.
1) caused by negligent actions.
2) caused by negligent statements.
Explain economic loss caused by actions where there is no physical damage.
- Economic loss caused by negligent actions where there is no physical damage falls within general rule there is no duty of care for pure economic loss.
- Example in case of Weller - D’s premises accidentally leaked a virus causing cattle farms nearby to close as precaution. C could not claim from D as there had been no physical damage to any property. Loss was therefore classified as pure economic loss.
Explain economic loss caused by statements where there is no physical damage.
Economic loss caused by negligent statements is deemed to be pure economic loss and as such there is not duty of care owed.
There is an exception however where there is a negligent statement and a special duty exists between the C and D.
Explain negligent statements made where special relationship between the parties exists.
Courts will find the loss suffered is recoverable provided there is a special relationship between the parties. This will generally be where it is deemed there is a sufficiently close relationship between the parties.
Explain the criteria in Caparo which laid down the four criteria necessary to find a defendant has assumed responsibility for the claimant (namely in an advice situation).
1) D knew the purse for which the advice was required;
2) D knew that the advice would be communicated to the claimant (either specifically or as a member of ascertainable class);
3) D knew C was likely to act on the advice without independent inquiry;
4) Advice was acted on by C to its detriment.
Explain the general rule as to whether negligent statements can amount to a breach of duty in social situations.
Usually a duty of care in relation to statements will not be owed in respect of advice given in social situations due to no assumption of responsibility.
Explain the exception to the rule there is no duty of care in social situations in relation to statements.
- Case of Chaudhry
- Generally duty of care is not owed in social situations but duty was found in this case;
- C and D were friends. D gave C advice re buying car which C relied on.
- Car turned out unroadworthy and D was liable.
- Duty was found as D has knowledge and expertise in relation to cars, and C made it clear she was relying on D’s skill and judgment. effectively D had gone beyond the duty and assumed responsibility towards C.
Explain the test which is now used to determine whether there is a special relationship between C and D.
1) Did D assume responsibility towards the claimant:
- Did D know purpose for which advice was required?
- Did D know advice would be communicated to client (solely or as member of ascertainable class)?
- Did D know that C was likely to act on advice without independent inquiry?
- Was advice acted on by C to its detriment?
2) Was it reasonable for C to rely on D for advice?
