Pure Economic Loss - Finsih Extended Hedley, Resonble Relince, Volutnry Responsibility,specil Skill N Chndler Flashcards
Spartan and steel and alloy v Martin(1973)
Pure economic loss
Rule = pure economic loss is unrecoverable for damages (due to policy concerns,floodgates)
Facts:
1.contractors negligently cut power to a factory for 14 hours
2.factories could not operate the steel furnace,molten steel was disregarded
Factory claimed
1.lost steel = physical damage
2.lost profit from unsold steel = consequential economic loss
3.anticioated profit from future production = pure economic loss
Outcome:
1.yes recovery for lost steel
2.yesrecovery for lost profit of unsold steel
3.no recovery for pure economic loss, anticipated profit from future production
Why; ownership nd pure loss = lack of earnings is not recoverable because it is pure economic loss. Destruction of property owned by c but cables were not owned by c. If the factory owed the cables every loss could be seen as consequential nd recoverable
The aliakmon
Pure economic loss
Rule = ownership, c must own the goods to claim damages!!!!
Facts
C couldn’t recover because they lacked legal possession title to the destructed goods
Shell uk v total uk
Pure economic loss
Rule=exception to aliakmon, shell could claim beneficial owner because the legl owner joined the claim
Facts ;
In December 2005, a major explosion occurred at the Buncefield oil storage terminal in Hertfordshire due to the negligent overfilling of a fuel tank by Total UK Ltd.
maitlandchambers.com
The explosion caused extensive damage to fuel storage tanks, pipelines, and associated equipment used by Shell UK Ltd to distribute oil.
Legal ownership of the damaged infrastructure was held by special-purpose vehicle companies (UKOP Ltd and WLPS Ltd), which acted as bare trustees for Shell and other petroleum companies.
Shell, as a beneficial owner and shareholder of these trustee companies, suffered significant economic losses due to its inability to supply fuel following the incident.
Why
The Court of Appeal allowed Shell’s appeal, recognizing that a beneficial owner could recover economic losses in negligence, provided the legal owner is joined in the proceedings.
maitlandchambers.com
The court emphasized that denying Shell a remedy based solely on the absence of legal title would be overly formalistic, especially since the legal owner was a bare trustee with no independent interests.
analysis of shell uk v total
Expanded the law to include beneficial owners not just legl owners
It underscores the importance of substance over form in legal relationships, particularly in complex commercial arrangements involving trusts and joint ventures
analysis of sparatan
1.The courts limited recovery for pure loss
Why;
To prevent floodgate of exaggerated claims
Prevent crushing liability of single defendant
2.sprtn emphasized that some economic law like power cuts is normal risk in modern life, best mnged through insurance, contract but not litigation
Cattle v Stockton waterworks
The issue was ownership, it was not his property that was destructed
Losses r only consequential to destruction of his own property
Reluctant to flood the gtes even though relational is suffered by many
analysis of cttle v stokton
The issue was ownership, it was not his property that was destructed
Losses r only consequential to destruction of his own property
His contrct merely less vluble -not good enough. He excluded from the document becs
Weller v foot nd mouth disease research institute
Relational
Rule = no doc owed
Facts
C were cattleautioneers who claimed that D research institute had imported an African virus and allowed it to escape, causing the disease to spread to cattle and giving rise to financial harm to the claimants since they had to close cattle markets
Outcome; Held that there was a duty to take reasonable care owed only to those persons whose person or property might foreseeably be injured by a failure to take such care, but not to Plaintiff who had no proprietary interest in the property damaged
D pride nd partners v animals
Relational economic loss
Rule=no doc owed to farmers whose cattle passed the point of maturing t which they would most likely profitably be slaughtered or whose cttle suffered welfare problems
Anns v Mertons
Pure economic loss from defective products
Rule - d, local authorities, owed. Doc to the resident to ensure foundations were in correct depth
Facts;
Claimants occupied a block of flats which had been built on shallow foundations – despite approval by Merton LBC. • About 8 years after the flats had been built, cracks appeared on the walls and the floors became unstable due to sinking foundations.
• The Claimants claimed the local authority had negligently failed to supervise the construction of a building.
• Lord Wilberforce classified this as ‘material physical damage’- ‘damage’ in the loose sense of the word - as opposed to pure economic loss, meaning that damages for the cost of repairs were recoverable.
• As a matter of classification, Lord Wilberforce got this wrong – the damage suffered was economic loss, because no separate ‘damage’ had been done to the property of the claimants by the defendant’s alleged breach of duty, other than the defective building itself.
Outcome
Murphy v Brentwood
Pure economic loss from defective products
Outcome/rule = Faulty foundations cause no loss or damage other than a financial loss, unless they are dangerous or cause further physical damage to the ‘fabric of the house’ by subsidence or collapsing walls.
• Builders/local authorities might be held liable in tort if an undiscovered defect suddenly materialised and caused personal injury or damage to property other than the building itself, but no duty of care is owed for damage caused by a defect that has become ‘apparent’, i.e. which the C has already discovered or ought reasonably to have discovered.
Lord Wilberforce decision in anns - why it was wrong
• Pure economic loss from defective products
Lord Wilberforce classified this as ‘material physical damage’- ‘damage’ in the loose sense of the word - as opposed to pure economic loss, meaning that damages for the cost of repairs were recoverable.
• As a matter of classification, Lord Wilberforce got this wrong – the damage suffered was economic loss, because no separate ‘damage’ had been done to the property of the claimants by the defendant’s alleged breach of duty, other than the defective building itself.
analysis of Anns v Merton
Pure economic loss from defective products
Meaning between physical damage nd pure economic loss was very blurred - further clear in junior books cse
analysis of murrphy v Brentwood
Pure economic loss from defective products
There is. Question to whether this caters to product defects on top of structural, house, defects in Murphy nd anns ie. Wine
Plus
Courts re hesistnt to impose liability on public uthorities
Hedley v Byrne
Pure economic loss from negligent misstatement
Rule = no liability for heller due to hellers disclaimer of responsibility
Facts: Hedley Byrne were interested in working with Easipower, a company they had not previously worked with, so they sought a financial reference from their bank. Heller and Partners provided a satisfactory reference for Easipower, ‘they r considered good for its ordinary business’ which turned out to be incorrect and inappropriate. Hedley Byrne relied nd spent 17,000 on the company. suffered losses following non-payment from Easipower, they sought a claim against Heller and Partners.
Outcome: Not liable – there was an effective disclaimer in this case.
Legal principle: There was an actionable cause in negligence, where there is special relationship in certain circumstances this could give rise to a claim for purely economic loss, special relationships where there is an assumption of responsibility, albeit no contract.
4 exceptions for pure economic loss of negligent misttement, hedley v Byrne
Hedley Byrne exception where 4 conditions were met:
1. A special (or fiduciary) relationship of trust and confidence exists between the parties; AND
2. The party preparing the advice/information has voluntarily assumed the risk (expressly or impliedly); AND
3. There has been reliance on the advice/information by the other party; AND
4. Such reliance was reasonable in the circumstances.
Derry v peek
Fraud, pre Hedley rule for pure economic loss from negligent misttment
Rule
- fraud, false rep of fact which was made hd to be proved in order to suede deceit
Facts
The directors of a company issued a prospectus stating that they had the right to run trams on steam power. They needed the approval of the Board of Trade to do this, and they didn’t have this approval. The directors believed that they would be given such approval as a matter of course, but as it turned out, the Board of Trade refused to give it. In the end, the company wound up and the claimant, who had bought shares in the company relying on the prospectus, brought an action in deceit.
Held - to succeed in deceit, the claimant had to prove fraud = a false representation of fact which had been made:
Knowingly
Without belief in its truth;
Recklessly, careless as to whether it was true or fal
Nocton v lord ashburton
Fraud, pre Hedley rule for pure economic loss from negligent misttment
Facts:
A solicitor gave negligent advice to a client, resulting in financial loss.
Unlike Derry, there was no fraud, just negligent misstatement.
The relationship was fiduciary (solicitor-client).
Held:
Duty of care exists in fiduciary relationships, even without fraud.
This was not inconsistent with Derry v Peek.
Recognised that non-fraudulent misstatements can be actionable where a special relationship (like fiduciary duty) exists.
Candler v crane, Christmas nd co
Facts:
Accountants prepared financial statements knowing they would be shown to Candler to attract investment.
Candler relied on the negligent accounts, invested money, and suffered a loss.
He sued the accountants for negligence.
Held:
No duty of care was found.
The court followed a strict approach, refusing to impose liability for pure economic loss from negligent misstatements unless there was a contract or fiduciary relationship.
However, Lord Denning (dissenting) argued that a duty should exist where the defendant knows the purpose of the advice and that it will be relied upon.
Mutual life nd citizen assurnce v evatt
Esp petroleum v mrdon
Rule - special relationship existed due to assumed responsibility due to this expertise
Esso employee told Mardon a petrol station would sell 200,000 gallons a year.
Mardon relied on this and signed a lease, but only sold 78,000 gallons in 15 months.
Held:
A special relationship existed.
The Esso employee had assumed responsibility due to his expertise.
Mardon’s reliance was reasonable.
Therefore, a duty of care was owed, and Esso was liable.
Caparo cht gpt
Reasonable reliance
Rule =
Fcts
Caparo Industries plc purchased shares in a company called Fidelity plc.
They relied on audited financial statements prepared by Dickman, the company’s auditor.
The accounts showed Fidelity was profitable, but in reality, the company had made a substantial loss.
Caparo, after becoming a majority shareholder, discovered the true financial position and sued Dickman for negligent misstatement, claiming the audit was misleading.
Legal Issue:
Did the auditor (Dickman) owe a duty of care to Caparo as an investor relying on the financial statements?
Held (Decision):
No duty of care was owed by the auditor to Caparo in this context.
The House of Lords set out the “Caparo test” for establishing a duty of care.
Caparo Test (Three-Part Test):
Foreseeability – Was the harm foreseeable?
Proximity – Was there a sufficiently close relationship?
Fair, just, and reasonable – Is it fair, just, and reasonable to impose a duty?
Chandry v phrsbhcker
Rule =in a social context “special skill” may give rise to a duty of care.
Claimant wished to buy a used car and sought advice from a friend who held himself out as being knowledgeable about cars. He agreed to help and discouraged her from seeking advice from a qualified mechanic. Despite her stipulating that she did not want a car that had been involved in an accident, he negligently recommended her a car that had been – it was worthless.
Held – he was liable for economic loss.
White v jones
Extended hedley Byrne
Facts:
A father asked his solicitor (Jones) to amend his will to include a £9,000 legacy to each of his daughters (White).
The solicitor delayed for over a month and failed to make the changes.
The father died before the will was amended, so the daughters received nothing.
The daughters sued the solicitor for professional negligence.
Legal Issue:
Could a solicitor be liable in negligence to intended beneficiaries who suffered loss due to failure to carry out a client’s instructions?
Held (Decision):
Yes, the solicitor owed a duty of care to the intended beneficiaries.
The House of Lords allowed the daughters’ claim, even though there was no contract between them and the solicitor.
Key Legal Points:
Duty of Care Extended:
A duty of care can arise to third parties (like intended beneficiaries), especially where no other remedy exists.
Negligent Professional Services:
Professionals like solicitors can be liable for economic loss caused by their negligence, even to those outside the contract.
Avoiding a Legal Black Hole:
Without this ruling, no one could be held accountable, even though negligence caused foreseeable harm.
