Economic Loss By Negligent Misstatement

Question 1

Definition of ‘Pure Economic Loss’

In the negative AND in the positive

Answer 1

Street on Torts 13e p.93

In the negative:

“A loss which is not physical damage or injury to intellectual property rights or reputation”

In the positive:

“pure economic loss involves such things as moneys expended and opportunities to profit forgone as a result of the defendant’s failure to take care”

Question 2

Recognition by the courts -

Give the ‘floodgates’ quote

Answer 2

Famously described by US Judge Benjamin Cardozo as

“liability in an indeterminate amount, for an indeterminate time, to an indeterminate class”.

Question 3

In which case were the criteria for a successful claim in Economic Loss laid out by the Law Lords?

Answer 3

Hedley Byrne v Heller and Partners Ltd (1964)

Question 4

What are the 4 criteria for a successful claim in Economic Loss

Answer 4

1. Some “special relationship” had to exist between the parties
2. The plaintiff must have relied on some special skill/knowledge that the defendant claimed to possess
3. The plaintiff must have relied upon that skill/knowledge and the defendant must have know that he would rely on that advice
4. It must have been reasonable to rely on that advice

Question 5

Give three case law examples of Economic loss claims

Answer 5

Henderson v Merrett Syndicates Ltd (1995) - bad financial advice

White v Jones (1995); “expectation loss”

Caparo Industries plc v Dickman (1990) - auditor duty of care