Pure Economic Loss Flashcards
What is pure economic loss?
Financial loss unconnected to physical loss.
- Loss arising from incorrect information.
- Loss arising from mistakes/ oversights of others.
What is it NOT- Consequential economic loss
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.
The problem with ‘excessive liability’
Floodgates.
Cardozo J in Ultramares v Touche [1932]
‘Liability in an indeterminate amount for an indeterminate time to an indeterminate class’;
Peter Gibson LJ in Reeman v Dept of Transport [1997]
‘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’
Customs & Excise v Barclays Bank [2006]: Lord Hoffman
“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.”
The nature of the problem
- 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.
Negligent statements / advice
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.
Derry v Peek [1889]
Traditionally, could only sue in tort if information fraudulent, ie, deceit
Candler v Crane Christmas [1951]
No liability but Lord Denning’s dissent.
Hedley v Byrne & Partners [1964]
HB could sue Heller for loss but disclaimer in reference protected Heller.
Hedley Byrne v Heller & Partners [1964]: Lord Devlin:
“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”
Smith v Eric Bush [1990]
‘Not quite contract’ was influential in a case such as this.
Caparo v Dickman: Five requirements:
- 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
Reeman v Debt of Transport [1997]
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.
Assumption of responsibility: Customs & Excise v Barclays Bank [2006]
- C & Ex got court order to freeze a bank account
- Bank responded too slowly and the account was emptied
- C & Ex left with nothing to claim against
- Was the bank liable to C & Ex?
Assumption of responsibility: Customs & Excise v Barclays Bank [2006]: Lord Mance
“Assumption of responsibility is on any view a core area of liability for economic loss.”
Playboy club London v Banca Nazionale del Lavoro [2018]
- 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?
Playboy club London v Banca Nazionale del Lavoro [2018]: Lord Sumption JSC
“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.”
Spartan Steel v Martin & Co [1973] CA
- 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
White v Jones [1995] HL
Beneficiaries of a will lost out on inheritance.
Spring v Guardian Assurance [1995] HL
Unfavourable reference.
Murphy v Brentwood D.C. [1991] HL
- 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.
