Economic Loss Flashcards
What is Pure Economic Loss?
Spartan Steel v Martin
Facts: • Contractors digging near a factory hit an electric cable which caused the factory
•Factory has to throw out melt as it would have damaged the melter if left in
• C claimed damages in three aspects:
1.) lost melt that had to be thrown away
2.) profits that would have been made from the melt
3.) future melts that would have been processed over the time the electric was out
Judgment: All allowed except 3rd aspect
L.P:• Claims for consequential loss allowed
• Loss of profits from future melts was not reasonably foreseeable
• did not want to open floodgates to hypothetical loss
The general rule for Economic Loss
If Loss is pure then there will be no duty of care.
No claims for hypothetical loss
Hedley Byrne & Co v Heller & Partners Ltd
Facts: • Hedley is an advertising company that was asked to buy some advertising space for Easipower
• They contact D ( C’s bank) to prepare a report about the trustworthiness of Easipower
• On the basis of a positive response, Hedley contracted with Easipower who later collapsed
• Hedley claimed against D for negligent report
Judgement: Appeal dismissed
L.P: • in the report was a note attached reading “ without responsibility” which avoided them of all liability
• four conditions have to be met:
1.) special relationship of trust and confidence
2.) party preparing advice have assumed risk
3.) there has been reliance on advice
4.) reliance was reasonable in circumstances
Henderson v Merrett Syndicates Lyd
Facts: • C alleged there was negligent closure of one or more years of account
Judgment: Dismissed
L.P: • Implied Assumption of Responsibility
• Hedley principle applied and no DoC found
Customs and Excise Commissioners v Barclays Bank
Facts: • C seeking to recover outstanding VAT from companies obtained freezing injunctions on companies which had assets in a bank
• Bank failed to prevent payments out of accounts
• C claimed damages for negligence
• at first instance it was held that there was no DoC
• On appeal by C, they argued the loss satisfied all elements of the caparo test
Judgment: Lords found no DoC
L.P: • Cases involving pure economic loss have no single common denominator and have to be dealt with on a case by case basis
• More likely bank was in contempt of court
• cannot hold a duty against someone who holds an order against them
White v Jones
Facts: • After a family dispute c was disinherited
• After reconciliation, the testator wrote to his solicitor instructing a new will to be drafted including C
• Testator died before the new will was drafted meaning C remained excluded
• C claimed solicitors had been negligent
Judgment: claim successful
L.P: • Reasonably foreseeable that solicitors lack of action would consequent in C’s loss
Williams v Natural Life Health Foods Ltd
Facts: • C brought action against managing director and shareholder for negligent advice
Judgment: C successful
L.P: • For a director/ Employee to be personally liable for negligent misstatement under the Hedley principle, has to be a reasonable reliance by C on assumption of personal responsibility of D
How to establish Economic loss
Voluntary Assumption of Responsibility? If no,
Implied Assumption of Responsibility? If no,
Imposed responsibility? If no,
Caparo text?
