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Tort Law > Pure economic loss > Flashcards

Pure economic loss Flashcards

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1
Q

Courts reluctant for PEL actions

A

Because of policy concerns for allowing liability in thise area
* Floodgates
* Crushing liability
* Fradulent claims
* Interefere with rules of contract through tort.

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2
Q

PEL definition

A

Economic loss that arises where there has been no damage to the claimant’s property or injury to their person

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3
Q

General rule if loss is PEL

A

It will not be recoverable.

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4
Q

PEL Definition

A

Arises where there has been no damage to the claimant’s property or injury to the person.
* Defective items
* Loss arising from damage to another’s property
* Economic loss not flowing from damage to person or property

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5
Q

Economic loss not flowing from damage to person or property

A

Were a claimant has made a bad investment
Missed a contractual opportunity.
Lost an inheritance.

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6
Q

Loss arising from damage to the property of anaother

A

Loss caused by damage to that which they have no proprietary interest.

Weller & Co v Foot & Mouth Disease Reasearch Institute 1965

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7
Q

Weller & Co v Foot & Mouth Disease Reasearch Institute 1965 - FACTS

A
  • Agricultural auction claimed for loss of profits.
  • Defendants had released Foot and both virus and infected local cattle
  • Auction ban
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8
Q

Weller & Co v Foot & Mouth Disease Reasearch Institute 1965 - HELD

A
  • Unsuccessful as for PEL
  • Loss flowed from damage to cattle owned by farmers.
  • Would have succeed had it been CEL
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9
Q

Defective items

A
  • Not poss to claim for cost of repairing inherently defective item categorized as PEL
    Murphy v Brentwood District Council 1990
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10
Q

Murphy v Brentwood District Council 1990 - FACTS

A
  • Claimant bought a house that developed structural defects due to inadequate foundations.
  • Foundations approved by the Council
  • Claimant sold for £35k = less
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11
Q

Murphy v Brentwood District Council 1990 - HELD

A
  • Loss was PEL = not recoverable
  • Always had been inherently defective.
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12
Q

General Rule for PEL

A
  • No DoC owed in respect to PEL

Spartan Steel & Alloys Ltd V Martin & Co (Contractors) 1973

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13
Q

Spartan Steel & Alloys Ltd V Martin & Co (Contractors) 1973
General Rule

A

No DoC owed in respect to PEL

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14
Q

Spartan Steel & Alloys Ltd V Martin & Co (Contractors) 1973

A
  • Steel alloys = a process req continuous power
  • Neg damaged cable - shut off for 14 hrs
  • Metal processed was ruined
  • Suffered loss of profit
  • 4 further melts of profit
  • Damaged electricity cable
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15
Q

Spartan Steel: Damaged Metal

A
  • HoC: Damaged Metal
  • ToL: Phys damage (property)
  • DoC: Owed in respect to the property damage = recoverable
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16
Q

Spartan Steel: Loss of profit on damaged metal

A
  • HoC: Loss of profit on damaged metal
  • ToL: CEL
  • DoC: Owed re: CEL = Recoverable
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17
Q

Spartan Steel: loss of profit for four further melts

A
  • ToL: PEL
    Loss resulted from damage to the Electric Cable
  • No DoC owed - fnot recoverable
    Would have been recovereable had they owned cable
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18
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A
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19
Q
A
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20
Q

Exceptions to general rule for PEL

A
  • PEL caused by negligent misstatements
  • Wills
  • References
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21
Q

Can PEL be caused by a negligent act

A

No only by a negligent misstatement.

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22
Q

Pure economic loss caused by negligent statement

A
  • Might find a DoC owed.
    Hedley Byrne v Heller 1964 - could be liability for careless statements.
  • Negligent statements normally result in PEL
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23
Q

Hedley Byrne v Heller 1964

A
  • Could be liability for careless statements
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24
Q

Perrett v Collins 1998

A

Negligent statements cause physical harm then the usual DoC rules apply to the question of duty

25
Q

Wills

A
  • Relationship between the solicitor and testator
  • But any negligence impacts the beneficiary
  • Solicitor owes a duty to the beneficiary to achieve practical justice.
    White v Jones
26
Q

White v Jones 1995

A
  • Solicitors owed a DoC to beneficiaries
  • Sue the solicitor for any loss
  • Sister argued with father, but made up with him.
  • Alteration to Will was not made - solicitor could foresee the loss and had undertaken a responsibility.
27
Q

Esterhuizen v Allied Dunbar Assurance plc 1998

A

DoC owed to beneficiaries extends beyond solicitors to other companies offering will making services

28
Q

References

A

Spring v Guardian Assurance plc & Others 1995

29
Q

Spring v Guardian Assurance plc & Others 1995

A
  • Defendants gave disparaging job reference about claimant. Unable to gain employment as a result.
  • Sued for negligence.
  • Owed a DoC to referee to provide an accurate ref.
  • Assumed a responsibility to referee.
30
Q

C

A
31
Q

Spring v Guardian Assurance plc & Others 1995 - FACTS

A
  • Advertising agency asked to buy space for Easipower Ltd.
  • Approached bank for credit ref - bank assured claimant. £17k
  • Relied on this advice, but not creditworthy
  • Sued bank for negligent advice.
    disclaimer
32
Q

Spring v Guardian Assurance plc & Others 1995 - HELD

A
  • Had it not been disclaimer
  • Bank would have owed a DoC to claimant
    or PEL
  • Disclaimers must now be viewed in light of the UCTA and CRA
33
Q

Hedley Byrne: Three key concepts

A

Three key tests were discussed when est a DoC
* Reasonable reliance
* Assumption of responsibility
* Special relationship of trust and confidence.
Not all three have to be satisfied
Can be based on either / or.
Trying to establish a proximate relationship; and whether it is fair, just and reasonable

34
Q

Do all three tests need to be satisfied to find a DoC for PEL via negligent misstatement

A
  • Either / or - not all three
  • Trying to enjoy est a proximate relationship
  • Est if fair just and reasonable to impose a duty.
35
Q

Hedley Byrne: Reasonable Reliance Test

A
  • Claimant relied on defendant’s advice. Fact.
  • Reasonable for claimant to rely on advice.
  • Ought to have known claimant was relying on advice. Fact.
36
Q

When considering whether it was reasonable for cliamant to rely on defendant’s advice, consider teh

A
  • Special skill or knowledge held by the defendant / claimant
  • General context in which advice is given
  • Other relevant general factors.
37
Q

Special skill or knowledge held by the defendant

A
  • Defendant needs some special expertise
  • Unlikely to be a special relationship if the parties are on equal footing.
38
Q

Esso Petroleum Co Ltd Mardon 1976

A

Employee of Esso was to assess potential output of stations.
Advised claimant a petrol station would sell around 200,000.
Claimant relied on advice.
Petrol station sold only 75,000.
Assumed responsibility based on his expertise

39
Q

Special skill or knowledge held by cliamant

A

Courts may fair it is not fair, just or reasonable for the claimant to have relied on the defendant’s advice.

40
Q

Stevenson v Nationwide Building Society 1984

A
  • Claimant was an estate agent and insurance broker
  • PEL by relying on negligent survey.
  • Estate agent should have been more aware of a need to get and independent valuation.
41
Q

Yianni v Edwin vans 1982

A
  • First time buyer relied on building society valuation, although told not to.
  • Held it was reasonable, first time buyer and modest value.
42
Q

General context in which is advice is given

A

No DoC will be owed where the advice was given in social situation because there is no assumption of responsibility.
Not always the case

43
Q

Chaudhry v Prabhakar and Another 1989

A
  • Defendant advise close friend on what second hand car
  • Must not have been in an accident
  • Not a mechanic, said he bought it off a friend, car was unroadworthy and worthless
    Turned out car had been in an accident
  • Obiter: Would have found duty.
44
Q

Lejonvarb v Burgess 2017

A

CoA found a DoC to exercise reasonable skill and cares between friends for professional services provided free of charge on the basis of assumption of responsibility.

45
Q

Other relevant general factors to consider when

A
  • Nature of advice
  • Potential risk to claimant
  • Availability
  • Practicality of a second opinion
46
Q

Voluntary assumption of responsibility

A
  • Used to est a DoC in Hedley Byrne
  • Voluntary assumption of responsibility for correctness of their statement.
    Relationships are “equivalent to contact”
47
Q

Henderson v Merrett Syndicates Ltd 1995

A
  • Claimants financial affairs managed by defendant.
  • HoL found defendant had assumed resp to perform professional services.
  • Liable for damages PEL
  • Reasonably relied on advice. Assumed responsibility.
48
Q

Lejonvarn v Burgess 2017

A
  • Defendant supplied professional circumstances to a friend for landscaping
  • Clients in a professional sense if not contractual.
  • Assumption of responsibility.
49
Q

Establishing what is required for an “assumption of resp”

A

Courts have been vague.
Caparo lays out criteria.

50
Q

Caparo Industries Test for assumed responsibility

A

Defendant must:
* communicate advice to claimant & know it will be communicated.
* know the purpose for which claimant will use
* know or reasonably believe, claimant will rely without independent enquiry.
* have acted upon advice to their detriment.

51
Q

Caparo Ind plc v Dickman and others 199-

A

Did auditors of public company (Fidelity) owe DoC to shareholders.
* Faulty audit
* No DoC held
* Purpose of audit not for investors
* Investors = class of person of indeterminate size.

52
Q

Banca Nazionale del Lavoro v Playboy Club & Others 2018

A
  • 4 Caparo criteria: Est voluntary assumption of responsibility/
  • Could not rely to recover losses suffered by negligent credit reference
  • Wasn’t identifiable or known what credit ref was soucht.
53
Q

Manchester Building Society v Grant Thornton UK 2021

A
  • Reinforced Caparo Principle
  • Focus on purpose of evidence.
  • Auditors asked to advise claimant building society as to whether could use hedge accounting for business model
  • Implemented business model - exposed to regulatory capital demands
    Advise was incorrect = PEL
    Loss suffered related to purpose fell within scope of DoC
54
Q

SC held that scope of DoC assumed by professional advisor was governed …

A
  • Governed by the purpose of the duty
  • Why was the advice given?
  • Does the loss fall within scope of purpose / DoC
55
Q

Special relationship of trust and confidence between the parties

A
  • Trusting advice
  • Degree of care as the circumstances required.
  • Reasonable and ought to have known enquirer was relying on the advice.
  • Test overlaps with reasonable care.
56
Q

Disclaimers

A
  • Hedley Byrne - clear that they did not accept responsibility.
  • UCTA 1977 and CRA 2015
    Smith v Eric S Bush - rely on disclaimer subject UCTA 1977
57
Q

Smith v Eric S Bush

A
  • Reliance on a disclaimer subject UCTA 1977 s 2(2) = invalid
  • Surveyor owed duty for PEL for neg survey. FT buyer. Modest value.
  • Reliance was reasonable, forseeable to rely and loss
58
Q

HoL: Factors to take into account when deciding if a disclaimer is reasonable

A
  • Equal bargaining power?
  • Reasonably practicable to obtain alternate advice - cost & time?
  • Difficulty of task?
  • Practical consequences - insurance?

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