Economic Loss

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ALWAYS CONSIDER

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(parties) Loss, duty, breach causation, remoteness, and defences...

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Whether a duty of care is owed is determined by

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the type of loss being suffered.

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Types of loss

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1. Physical/Property Damage (includes psychological)

2. Economic loss: - Consequent economic loss (to physical damage).

- Pure economic loss. Weller v Foot & Mouth Disease

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Which is considered as a separate category when establishing a duty of care:

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Pure Economic Loss

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What are the policy concerns?

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- Floodgates

- Crushing liability

- Danger of interfering with rules of contract (particularly privity)

- Danger of conflicting duties (where there are 3 parties)

- Need for flexibility in future decisions

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Economic Loss Consequent on Physical Damage

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More or less = profit lost because of the thing that has been damaged. e.g. lost salary from a broken leg or damaged goods. Also the cost of repairing/replacing the damaged thing.

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What two cases show the limits of what is consequential and what is pure?

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Spartan Steel & Alloys Ltd v Martin & Co

Conarken Group Ltd v Network Rail Infrastructure Ltd

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Spartan Steel & Alloys Ltd v Martin & Co

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Defendants negligently cut off power to the plaintiff's factory. Ruined melts.

Court said - Damaged metal = physical and therefore recoverable.

Loss of profit on the damaged metal = consequential and recoverable.

Loss of profits on melts they couldn't do while the power was down = pure economic loss. NOT recoverable.

Denning - why didn't you have a back up generator?

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Conarken Group Ltd v Network Rail Infrastructure Ltd

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The outer limit of consequential economic loss.

Lorry (negligently driven) smashed a bridge. Railway closed for repairs. Network Rail had to compensate rail operators. Claimed for this cost as consequential. Was accepted as such.

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Pure Economic Loss

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Economic loss not flowing from damage to a person or property.

Loss arising from damage to another's property, i.e. claimant suffers despite having no proprietary interest. Weller & Co v Foot & Mouth Disease Research Institute.

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Weller & Co v Foot and Mouth Research Institute

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Defendants let out disease, killing animals. Auction house tried to sue. Animals weren't theirs = pure economic loss. So claim fails. (Farmers could've claimed though)

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Defective Items

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Not possible to claim for inherently defective items. This is pure economic loss.

Physical Damage = something good made bad.

e.g. Donoghue v Stevenson - didn't claim for defective drink but for the illness caused. i.e. physical damage.

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High water mark for defective claims

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Junior Books v Veitchi Co Ltd - bad floors.

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c.f. Lobsters - damaged (claim). Pumps that damaged them - defective (no claim)

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Muirhead v Industrial Tank Specialists

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The swing the other way - repairing plaster on walls of a flat.

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D & F Estates Ltd v Church Commissioners

failed. Not something that could have caused more damage or become dangerous.

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Ten years after built cracks appeared in walls, caused by defective foundations.

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Murphy v Brentwood District Council

Couldn't claim for the cost of repairing foundations because the dangerous defect manifested before any actual damage had occurred. House is one thing, therefore cracks in the wall doesn't constitute damage but evidence of the inherent defect. Therefore, as with the devaluation, pure economic loss and no duty owed. Repair would have been recoverable but not as a tort.

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Complex Structure Theory

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Each part of the whole can be treated as individual pieces of property so, if one is defective but damages another, this is recoverable.

There is an argument that houses should be such but Murphy shows the courts think otherwise.

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Exceptions to Pure Economic Loss General rule

Where loss can be recovered.

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Ministry of Housing v Sharp: Breach of Statutory duty = a foreseeable pure economic loss.

Ross v Caunters: Breach of fiduciary duty by a solicitor = foreseeable pure economic loss.

Murphy v Brentwood (obiter): Adjoining occupiers, where neighbour's property damages neighbours - tends to be brought under nuisance.

Complex Structure (see before).

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Pure Economic Loss & 3rd Parties

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often involves incorrectly drafted wills - Ross v Caunters

or with job references - Spring v Guardian Assurance (but then might come under defamation)