Pure Economic Loss Duty of Care Flashcards
Definition of pure economic loss
Loss that makes the claimant financially worse off than they were before the negligent event
Definition of consequential economic loss
Loss that flows from another injury that is non-economic in nature
Rules for recovery for the two types of economic losses
Pure = no recovery Consequential = can recover to the extent that the damage was foreseeable (The Wagon Mound No.1)
Distinction between pure economic loss and consequential economic loss
Conarken Group v Network Rail Infrastructure Ltd (loss of income flowed from closure of the rail lines)
Spartan Steel & Alloys Ltd v Martin & Co (loss from profit from materials that could no longer be processed due to non-operational furnace cannot be recovered)
McFarlane v Tayside Health Board (consequential loss from distress versus economic loss of childrearing)
Rationale for not allowing pure economic loss
Spartan Steel & Alloys Ltd v Martin & Co
Case specific: the suppliers had statutory immunity which is why the road repair company was sued, which makes it inappropriate to impose liability
General reasons: law should encourage self-reliance, floodgate, distributive justice (each bear own loss than whole loss on one party)
Dissent by Davis LJ: should be liable same as physical damage
PEL DOC for buildings
Murphy v Brentwood District Council (sucky case)
Cracks only manifestation of the PEL, need the defective element to cause damage to some other property
No connection between foundations of the house and the walls
No recourse until there is greater damage e.g. house falls down
Cooke: arbitrary fine distinctions, not practical
Still good law: Robinson v PE Jones
PEL DOC for defective products
Donoghue v Stevenson, Dutton v Bognor Regis Urban District Council
Reasons for no PEL DOC in buildings
No transmissible warranty of quality
Contract law’s ‘caveat emptor’ (buyer beware)
Statute requires that property fit for habitation when completed
Role of knowledge in PEL DOC building cases
Right of claim not lost, only when it becomes unreasonable to stay there given knowledge of defects (Targett v Torfaen Borough Council)
Examples from other jurisdiction for building cases
Canada
Australia
Tests for duty of care for PEL
a) Assumption of responsibility test (Hedley Byrne v Heller)
b) Caparo duty of care test
Assumption of responsibility test (Hedley Byrne)
a) Voluntary assumption of responsibility
b) Reasonable reliance
When is there voluntary assumption of responsibility?
a) Express
- Williams v Natural Life Health Foods (X, representations in professional capacity only)
- Calvert v William Hill Credit (promised to close gambling account)
b) Implied
- Henderson v Merrett Syndicates (conducted financial affairs)
- White v Jones (did not include daughters in willl)
- Gorham v British Telecomm (negligent advice about pension)
When is there reasonable reliance?
Steel v NRAM (no reasonable reliance; NRAM had access to correct position and could counter negligent advice)
Caparo test
Smith v Eric S Bush (implies that assumption of responsibility does not have to be voluntary, extending Hedley Byrne to 3rd parties)
Caparo (no duty of care because no proximity; not yet shareholder during first audit and reliance on audited accounts were not intended for management decisions)
An Informer v A Chief Constable (no duty of care for public policy reasons)
