7)Pure economic loss

Question 1

What is pure economic loss?

Answer 1

Pure economic loss arises where there has been no damage to the claimant’s property or injury to their person.

Examples include bad investments, missed contractual opportunities, or lost inheritances.

Question 2

What are the four main categories of loss in negligence?

Answer 2

• Personal injury/property damage
• Consequential economic loss
• Pure economic loss
• Psychiatric damage

Question 3

What type of loss is recoverable if it is personal injury or property damage?

Answer 3

Recoverable

Question 4

What type of loss is not recoverable under general rules of negligence?

Answer 4

Pure economic loss

Question 5

Give an example of economic loss not flowing from damage to person or property.

Answer 5

A bad investment or loss of a contractual opportunity.

Question 6

In which case did the claimant suffer pure economic loss due to damage to another’s property?

Answer 6

Weller & Co v Foot & Mouth Disease Research Institute [1965]

Question 7

What is the key case regarding defective products being categorized as pure economic loss?

Answer 7

Murphy v Brentwood District Council [1990]

Question 8

What does the general rule state about duty of care in relation to pure economic loss?

Answer 8

No duty of care is owed.

Question 9

What was the key case illustrating the general rule about pure economic loss?

Answer 9

Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1973]

Question 10

What are the three exceptions to the general rule regarding pure economic loss?

Answer 10

• Pure economic loss caused by negligent statements
• Wills
• References

Question 11

What landmark case established liability for careless statements?

Answer 11

Hedley Byrne v Heller [1964]

Question 12

In the case of White v Jones, who can sue the solicitor for negligence regarding a will?

Answer 12

The beneficiary

Question 13

What is the significance of the case Spring v Guardian Assurance plc?

Answer 13

It established that a referee owes a duty of care to the subject of the reference.

Question 14

What is the distinction made by courts regarding pure economic loss?

Answer 14

Between loss caused by a negligent act and loss caused by a negligent statement.

Question 15

Fill in the blank: The general rule is that no duty of care is owed in respect of _______.

Answer 15

pure economic loss

Question 16

What is the primary concern of courts regarding claims for pure economic loss?

Answer 16

Policy concerns and the fear of opening floodgates to liability.

Question 17

What happens if pure economic loss is caused by a negligent act?

Answer 17

The courts will not recognize a duty of care.

Question 18

What example illustrates pure economic loss caused by a negligent statement?

Answer 18

Advice given by a bank that leads to financial loss due to reliance on incorrect information.

Question 19

What are the implications of a negligent statement in a will?

Answer 19

The solicitor may owe a duty of care to beneficiaries.

Question 20

What is a key aspect of the Hedley Byrne case?

Answer 20

It established that liability can arise from negligent statements in certain relationships.

Question 21

What does the term ‘negligent misstatement’ refer to?

Answer 21

A statement made carelessly that results in pure economic loss.

Question 22

In Spartan Steel, what was the classification of the loss of profit on damaged metal?

Answer 22

Consequential economic loss

Question 23

In Spartan Steel, what was the classification of the loss of profit on further melts due to the electricity cable damage?

Answer 23

Pure economic loss

Question 24

What is the court’s stance on disclaimers related to pure economic loss?

Answer 24

They will examine the validity of disclaimers in relation to duty of care.

Question 25

What did the defendant bank assure the claimant regarding Easipower?

Answer 25

That Easipower was creditworthy

Question 26

What was the financial consequence for the claimant after relying on the bank's advice?

Answer 26

The claimant suffered a loss of £17,000

Question 27

What was the basis of the claimant's lawsuit against the defendant bank?

Answer 27

Negligent advice that led to financial detriment

Question 28

What disclaimer was included in the bank's advice?

Answer 28

The advice was prepared 'without responsibility'

Question 29

What was held regarding the duty of care owed by the bank without the disclaimer?

Answer 29

The bank would have owed a duty of care for pure economic loss

Question 30

What are the three key concepts/tests discussed for establishing a duty of care?

Answer 30

* Reasonable Reliance * Assumption of Responsibility * Special Relationship of Trust and Confidence

Question 31

Is it necessary for all three tests to be satisfied to find a duty of care?

Answer 31

No, a duty can be found based on any one of the tests or a combination

Question 32

What is the first requirement of the reasonable reliance test?

Answer 32

The claimant relied on the defendant’s advice

Question 33

What does the second requirement of the reasonable reliance test assess?

Answer 33

Whether it was reasonable for the claimant to rely on the defendant’s advice

Question 34

What is the third requirement of the reasonable reliance test?

Answer 34

The defendant knew or ought to have known that the claimant was relying on their advice

Question 35

List the factors considered by courts when assessing the reasonableness of reliance.

Answer 35

* Special skill or knowledge held by the defendant * Special skill or knowledge held by the claimant * General context in which advice is given * Other relevant general factors

Question 36

What is required for a special relationship to exist between the parties?

Answer 36

The defendant needs special expertise to know the facts better than the claimant

Question 37

In which case did the court find that Esso owed a duty of care based on assumed responsibility?

Answer 37

Esso Petroleum Co Ltd v Mardon [1976] QB 801

Question 38

What was the outcome of Stevenson v Nationwide Building Society [1984] regarding the claimant's reliance?

Answer 38

The claimant's action failed due to his own expertise

Question 39

In Yianni v Edwin Evans [1982], why was the claimant found reasonable in relying on the building society's advice?

Answer 39

The claimant was a first-time buyer and could not afford a full survey

Question 40

What is the significance of the general context in which advice is given?

Answer 40

Generally, no duty of care is owed in social situations unless responsibility is assumed

Question 41

What case indicated that a duty of care could be found even in a social setting?

Answer 41

Chaudhry v Prabhakar and Another [1989] 1 WLR 29

Question 42

What does the second test for establishing a duty of care involve?

Answer 42

Voluntary assumption of responsibility by the defendant

Question 43

What are the four criteria for establishing a voluntary assumption of responsibility as outlined in Caparo v Dickman?

Answer 43

* The defendant must communicate the advice to the claimant * The defendant must know the purpose for which the claimant will use the advice * The defendant must know or reasonably believe that the claimant will rely on the advice without independent enquiry * The claimant must have acted upon that advice to their detriment

Question 44

What was the outcome of Caparo Industries plc. v Dickman regarding the auditors' duty of care?

Answer 44

No duty was owed to potential investors based on the audit

Question 45

In Banca Nazionale del Lavoro v Playboy Club & Others, what was confirmed regarding the Caparo criteria?

Answer 45

They could be regarded as criteria for establishing voluntary assumption of responsibility

Question 46

What was the key focus in the case Manchester Building Society v Grant Thornton UK LLP?

Answer 46

The purpose of the advice regarding hedge accounting

Question 47

What is the general rule regarding duty of care in respect of pure economic loss?

Answer 47

No duty of care will be owed in respect of pure economic loss.

Question 48

What are the exceptions to the general rule of duty of care regarding pure economic loss?

Answer 48

Pure economic loss caused by a negligent statement.

Question 49

What are the three tests identified in Hedley Byrne v Heller for establishing a duty of care?

Answer 49

* Reasonable reliance * Assumption of responsibility * Special relationship of trust and confidence between the parties

Question 50

How many of the three tests in Hedley Byrne v Heller need to be satisfied for a duty of care to be owed?

Answer 50

Only one test needs to be satisfied.

Question 51

What does the reasonable reliance test require from the claimant?

Answer 51

* The claimant relied on the defendant’s advice * It was reasonable for the claimant to rely on the defendant’s advice * The defendant knew or ought to have known the claimant was relying on the advice

Question 52

What case illustrated the concept of a special relationship of trust and confidence?

Answer 52

Hedley Byrne.

Question 53

What must be considered if a defendant has taken positive steps against assuming responsibility for their words?

Answer 53

The validity of such steps (the disclaimer) must be considered.

Question 54

What was the outcome regarding disclaimers in Hedley Byrne?

Answer 54

The defendant could not be said to be assuming responsibility if they made it clear they did not accept responsibility.

Question 55

What legislation regulates disclaimers in the context of negligence?

Answer 55

* Unfair Contract Terms Act 1977 (UCTA 1977) * Consumer Rights Act 2015 (CRA 2015)

Question 56

In Smith v Eric S. Bush, why did the defendant owe the claimant a duty of care?

Answer 56

* The claimant was a first-time buyer * The house was of modest value * The defendant should have known the claimant would rely on their survey

Question 57

What was the significance of the disclaimer in Smith v Eric S. Bush?

Answer 57

The disclaimer was deemed unreasonable under s.2(2) of UCTA 1977.

Question 58

What factors should be considered to determine if a disclaimer is reasonable?

Answer 58

* Equal bargaining power * Reasonable practicability of obtaining alternative advice * Difficulty of the task undertaken by the defendant * Practical consequences including financial stakes

Question 59

What is the relationship between UCTA 1977 and CRA 2015 regarding disclaimers?

Answer 59

Both Acts essentially provide the same position regarding the validity of disclaimers.

Question 60

What role does a disclaimer play in the context of advice given?

Answer 60

It might negate a duty of care if deemed reasonable.

Question 61

What must be true for a disclaimer to be valid under UCTA 1977 and CRA 2015?

Answer 61

The disclaimer must be fair and reasonable in all the circumstances.

Question 62

What is an example of a case where a disclaimer was ruled invalid?

Answer 62

Smith v Eric S. Bush.