Pure Economic Loss

Question 1

What is pure economic loss?

Answer 1

Financial loss unconnected to physical loss.
- Loss arising from incorrect information.
- Loss arising from mistakes/ oversights of others.

Question 2

What is it NOT- Consequential economic loss

Answer 2

Consequent on physical injury, eg;
- Loss of earnings
- Costs of medical treatment
Consequent on damage to property:
- Cost of repair/ replacement
- Loss of earnings/ profits from use of asset.

Question 3

The problem with ‘excessive liability’

Answer 3

Floodgates.

Question 4

Cardozo J in Ultramares v Touche [1932]

Answer 4

‘Liability in an indeterminate amount for an indeterminate time to an indeterminate class’;

Question 5

Peter Gibson LJ in Reeman v Dept of Transport [1997]

Answer 5

‘It can readily be seen that negligence causing loss not connected with nor flowing from physical damage to property or person gives rise to problems of scope’

Question 6

Customs & Excise v Barclays Bank [2006]: Lord Hoffman

Answer 6

“In the case of personal or physical injury, reasonable foreseeability of harm is usually enough … to generate a duty of care.
“In the case of [pure] economic loss, something more is needed.”

Question 7

The nature of the problem

Answer 7

• Main hurdle for the claimant is to prove existence of a duty of care.
• Courts often deny existence of a duty as a way of limiting recovery.

Question 8

Negligent statements / advice

Answer 8

If you pay for advice, and it is bad/ incorrect = breach of contract.
BUT, if no contract, or the contracting party cannot be sued, only negligence might provide a remedy.

Question 8

Derry v Peek [1889]

Answer 8

Traditionally, could only sue in tort if information fraudulent, ie, deceit

Question 9

Candler v Crane Christmas [1951]

Answer 9

No liability but Lord Denning’s dissent.

Question 10

Hedley v Byrne & Partners [1964]

Answer 10

HB could sue Heller for loss but disclaimer in reference protected Heller.

Question 11

Hedley Byrne v Heller & Partners [1964]: Lord Devlin:

Answer 11

“It is a responsibility that is voluntarily accepted or undertaken, either generally where a general relationship is created … or in relation to a particular transaction.”
“… wherever there is a relationship equivalent to contract, there is a duty of care.”
“I regard this proposition as an application of the general concept of proximity”

Question 12

Smith v Eric Bush [1990]

Answer 12

‘Not quite contract’ was influential in a case such as this.

Question 13

Caparo v Dickman: Five requirements:

Answer 13

• Advice required for a particular purpose
• Advisor must be aware of purpose for which advice is required
• Advisor must be aware that advice will be communicated to advisee for the known purpose
• It must be known that the advice will probably be acted on for that purpose without (further) independent advice or enquiry
• Advice is acted on to the detriment of the advisee

Question 14

Reeman v Debt of Transport [1997]

Answer 14

An incorrect certificate of seaworthiness for their boat. Therefore the boat was worthless.
The certificate was neither:
1. Claimant specific
2. Purpose specific
3. Transaction specific
Therefore no duty was owed.

Question 14

Assumption of responsibility: Customs & Excise v Barclays Bank [2006]

Answer 14

1. C & Ex got court order to freeze a bank account
2. Bank responded too slowly and the account was emptied
3. C & Ex left with nothing to claim against
4. Was the bank liable to C & Ex?

Question 15

Assumption of responsibility: Customs & Excise v Barclays Bank [2006]: Lord Mance

Answer 15

“Assumption of responsibility is on any view a core area of liability for economic loss.”

Question 16

Playboy club London v Banca Nazionale del Lavoro [2018]

Answer 16

• Club did not itself ask its customer’s bank for the reference.
• Instead, an associated company, Burlington Street Services Ltd, did so without disclosing the purpose of the inquiry or the fact that the reference was required for the benefit of the Club.
• Club lost money – customer defaulted. Reference, therefore, inaccurate. Could Club recover from the Bank?

Question 17

Playboy club London v Banca Nazionale del Lavoro [2018]: Lord Sumption JSC

Answer 17

“The defendant’s voluntary assumption of responsibility remains the foundation of this area of law … It is fundamental to this way of analysing the duty that the defendant is assuming a responsibility to an identifiable (although not necessarily identified) person or group of persons, and not to the world at large or to a wholly indeterminate group.”

Question 18

Spartan Steel v Martin & Co [1973] CA

Answer 18

• D’s cut power cable – physical damage
  S. Steel without electricity – furnaces inoperative for 14 hours
• Claim for “melt” in furnace at the time of accident allowed
• Claim for subsequent loss of profit from 4 “missed” melts unsuccessful

Question 19

White v Jones [1995] HL

Answer 19

Beneficiaries of a will lost out on inheritance.

Question 20

Spring v Guardian Assurance [1995] HL

Answer 20

Unfavourable reference.

Question 21

Murphy v Brentwood D.C. [1991] HL

Answer 21

• House foundations inadequate
• Passed by Brentwood D.C. under building regs
• Owners had to sell at undervalue once discovered
• Tried to sue B.D.C. for loss - Classed as purely economic
• No special relationship of proximity between owners and B.D.C. which would allow them to recover economic loss.