Tort: Pure Economic Loss

Front 1

Weller v Foot and Mouth Research Institute (1965)

Back 1

Pure economic loss unrecoverable.

Hint 1

C, an animal auction house, tried to sue D for negligently releasing F&M into cow population. Farmers could have sued for loss of property (cows)

Front 2

Spartan Steel v Martin (1973)

Back 2

Pure economic loss arising from a negligent act cannot be recovered. Consequential economic loss from a negligent act is recoverable.

Hint 2

D negligently severed power lines cutting of electricity to C's factory. They could claim for loss of steel (physical damage) and consequential economic loss from this but not loss of potential profits or time during which power was off.

Denning: factories should have processes in place to mitigate these risks. Or work harder the next day!

Front 3

Muirhead v Industrial Tanks & Others (1986)

Back 3

C can only claim for damage caused by defect product not pure economic loss.

Hint 3

C had bought motors for lobster tanks from D1 that were in fact for France so wrong voltage. D1 became bankrupt so C sued manufacturers D2 (no contract). Court would only allow claim for damage caused by defect (loss of lobsters + consequent economic loss).

Front 4

Junior Books v Veitchi (1983)

Back 4

Exception to no claim from defect: based on special relationship and reliance. Heavily distinguished by later cases.

Hint 4

C had specifically asked subcontractor (no contract) to lay floor that would hold heavy printing machines. Floor was defective. C managed to claim damages.

Front 5

Murphy v Brentwood (1990)

Back 5

If integral part of building is defective and damaged = pure economic loss. If damage damages someone or something other than the structure = claimable loss

Hint 5

The D local authority failed to inspect the foundations of a building adequately, the building became dangerously unstable. C, being unable to raise any money for repairs, had to sell the house at a considerable loss, which he sought to recover from D. This action failed as the loss was identified as a pure economic loss.

'Complex structure theory' - if another part of the building can be considered as 'other property' then there can be a claim.

Front 6

1. Perrett v Collins (1998)

2. Clay v Crump (1964)

Back 6

If a neg. misstatement causes physical damage = C can claim

Hint 6

1. Neg mis regarding flight worthiness of plane led to crash

2. Architect's neg plans led to wall collapsing.

Front 7

Hedley Byrne V Heller (1964)

Back 7

Pure economic loss from negligent misstatement can be recovered if: there is reasonable reliance, an assumption of responsibility, a special relationship

between parties w/o a contract.

Hint 7

Rules for reasonable reliance...

1. C relied on advice given by D

2. It was reasonable for C to rely on this advice

3. The D knew, or ought to have known, that C relied on their advice

Front 8

Chaudhry v Prabhakar (1989)

Back 8

If someone holds themselves out to be an expert then C can be expected to rely on their neg misstatement.

Hint 8

‘When considering the question of whether a duty of care arises, the relationship between the parties is material. If they are friends, the true view may be that the advice or representation is made on a purely social occasion and the circumstances show that there has not been a voluntary assumption of responsibility.’

Defence council conceded a DoC existed but the case has been criticised for using the HBvH principle in a non business case.

Front 9

1. Stevenson v Nationwide (1984)

2. Yianni v Edwin Evans (1982)

3. Smith v Eric S Bush (1990)

Back 9

Reasonable reliance of C on D depends on knowledge of both C and D. Did C have enough knowledge to make decision for themselves?

The more parity between parties the less likely the court will find a DoC.

Hint 9

1. C was an estate agent so D could not expect him to rely solely on his property advice. Court would not disregard non-reliance clause under UCTA 1977.

2. C was a first time buyer and could be expected to rely on survey.

3. the relationship between the valuer and the purchaser is ‘akin to contract’. Court disregarded non-reliance clause under UCTA 1977.

Front 10

Henderson v Merrett (1995)

Back 10

Example of assumption of responsibility under HB v H

Hint 10

D, managing agents, had been directly responsible for giving advice on shares.

Cases can be considered in contract and tort. But if a contract exists it may affect level of damages.

Front 11

Williams v Natural Life (1998)

Back 11

Individuals must have assumed an assumption of responsibility in order to create a special relationship as in HB v H

Hint 11

C took on franchise of D based on information in brochure which proved to be false. D went into liquidation so C tried to sue managing director.

Front 12

Caparo v Dickman (1990)

Back 12

Third Party Neg Mis.

If statement is made by D for X then C must prove Reasonable Reliance plus:

1. D knew the advice would be seen by C

2. D knew exact purpose to which C would use the statement

3. D knew that C would rely solely on statement

4. Purpose to which C will use statement is one that D should be expected to protect C.

V hard to prove!

Hint 12

Lord Bridge "To hold the maker of the statement to be under a duty of care in respect of the accuracy of the statement to all and sundry for any purpose for which they may choose to rely on it is not only to subject him, in the classic words of Cardozo C.J. to "liability in an indeterminate amount for an indeterminate time to an indeterminate class" (Ultramares Corporation v. Touche (1931)

Front 13

Al-Nakib Investments v Longcroft (1990)

Back 13

Failure of third party neg misstatement

Hint 13

D produced a brochure but info was used not for the purpose that it was intended = no claim.

Front 14

White v Jones (1995)

Back 14

Third party w/o reliance

D, due to neg, had forgotten to make last minute change to will and C was disinherited. Court found DoC as relationship was foreseeable and proximate and class of claimants was small.