Pure Economic Loss Flashcards
Spartan Steel and Alloys Ltd v Martin & Co (1973)
Outcome -
Reasonable foreseeability test to be considered (Caparo)
Damages were awarded for the damaged property and the profit lost on the sale of that property
Future loss of sales and profit was not awarded - too remote
‘Flood gates’ is a considered policy consideration.
Companies should look to mitigate losses and have insurance in place
What is pure economic loss?
An economic loss which does not flow from damage to claimant’s person or property.
Hedley Byrne & Co Ltd v Heller & Partners Ltd (1984)
the exception; assumption of responsibility of economic loss
A negligent misstatement may give rise to an action for damages for economic loss. When a party seeking information or advice from another - possessing a special skill - and trusts him to exercise due care, and that party knew or ought to have known that the first party was relying on his skill and judgment, then a duty of care will be implied
Special relationship must be present.
Claimant went into business with someone, but asked their bank to provided a reference. The bank failed to perform an accurate credit check and provide a suitable reference. The company went bust and owed money to the Claimant. Claimant lost because there was a disclaimer in place
CEC v Barclays Bank PLC (2006)
Customs and Excise asked Barclays to freeze the account of a customer convicted of tax evasion but in fact had negligently failed to freeze the bank account and the account holder removed all the funds and fled.
Barclays Bank was held not responsible.
There is no duty for the bank to prevent its customer from gaining access to their money. It had also responded to the Court Order.
A duty will arise when the defendant voluntarily assumes responsibility for what was said to the claimant (the equivalent to a contract)
The test is Caparo - 3 stage test
Proximity, foreseeability and whether it was fair, just and reasonable to apply a duty.
Caparo shown that there was no reasonable foreseeability.
Murphy v Brentwood District Council (1990)
The cost of replacing a defective building or some property is considered pure economic loss and not ‘damage to property’
Hedley Byrne & Co Ltd v Heller & Partners Ltd
Negligent Misstatement case where a bank provided a credit assessment of a client stating they were creditworthy meaning that claimant entered into business with that client on the basis of this statement statement. The statement was incorrect and the company went into administration and the claimant lost its investment.
The bank was able to avoid liability following a disclaimer within the statement stating they accept no responsibility for the information contained within the statement.
