Economic Loss: Relational Economic Loss Flashcards Preview

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Flashcards in Economic Loss: Relational Economic Loss Deck (20):

What is relational economic loss?

"Relational" economic loss is a pure economic loss suffered in consequence of damage caused to the property of a third party Perre v Apand
In this case, technically doesn't come under relational economic loss. Because the reason the neighbours suffered was because the neighbouring land was contaminated and that itself triggered the operation of the regulations which prevented importation of potatoes.


Typical scenarios: Utility Disruptions

1. Phone network Outage - Optus
2. Power cut - Spartan Steel v Martin
3. Gas cut - Johnson Tiles v Esso Australia


Johnson Tiles v Esso Australia

This case the gas line was cut, people had to use electric devices. They either suffered personal discomfort or purchased more expensive equipment.
Employees suffered because they were laid off as companies that relied on gas could not operate.


Typical scenarios: Disruption of transport / Delivery Mechanisms

1. Caltex Oil v The Dredge
2. Colour Quest
3. Norsk


Colour Quest v Total Downstream

P's were Esso.
They used a refinery to store fuel in a depo not far from Heathrow Airport.
They had contractual rights to use pipelines from Heathrow to another location to refill. Some person at the depo forgot to turn the tap off when they were filling the vast tanks of aviation fuel. Next morning there was a mist of Aviation fuel. Small spark and the whole thing exploded. P's had to spend more money to ship the aviation fuel by road (which was considerably more expensive).
They sought to claim additional costs of shipping fuel.


Typical scenarios: Viral outbreaks

1. Weller v FMDRI
2. Perre v Apand


Weller v FMDRI

FMDRI negligently allowed a disease into the community. Regulations were imposed which prevent cattle being bought or sold within the area. From the P's POV, this prevents cattle from being auctioned. P was the owner of the auctioning facility. Because of the intervention of the regulatory scheme, the auctioneer lost a vast amount of money. He was economically interested in them.


Typical Scenarios: Interference with Individual contracts

The Aliakman - P agreed to seller to accept risk that goods might be damaged in transit on the way to him. The goods are damaged in transit by a D's carrier's negligence and P is forced to pay more because the goods are worth less.
Difficulty was that he hadn't actually been given ownership of property when it was damaged. He had no ownership of the goods but he had agreed to buy them in any condition in which they arrive and so can't claim damage to property.
He of course, suffers economic loss.
The courts struggle because if they intervened, then they would be interfering with the contract made between the two parties.



Main policy problems?

1. Ripple effects: A single act of neligence has effect of rippling outwards to affect a number of people.
2. Excessive liability: liability out of promotion to D's fault? Caltex Oil v The Dredge
3. Uncertain liability/ class of claimant? Perre v Apand inhibits freedom of D. Uncertainaty prevents D from insuring efficiently, which means P's might go uncompensated.
4. Coflict / incoherence. Aliakman.


Traditional Rule?

Traditionally, if you suffered purely relational economic loss, there was no DOC. Cattle v Stockton Waterworks.
This case: P was a contractor who had been engaged to work on property. He didn't own the property.
D caused the property he was working on to flood. Result of flooding, heh ad to spend longer time to complete his contract to build the property. He lost business.
Sued for economic losses.
Held: No liability on D in regards of the flood. No problem with the loss suffered, problem was that it was thought these losses were too remote to make the D accountable for.


Exception: Joint Venture

The Greystoke Castle (1947)
Shipping goods.
P was owner of goods being shipped. Ship carrying goods was damaged by D in a collision as a result of which the ship had to go into repairs. While being repaired, goods being loaded on and off after the ship was repaired.
Under contract between P and owner of ship, P was obliged to pay contribution towards the cost of loading and unloading.
Even though property was not damaged, he was obliged to pay some money out because of damage to ship.
HOL found no difficulty in saying that he can recover. Reason being the person who owned the good was in a joint venture with the person who owned the ship and that this justified the goods owner a claim in damages for the damage of the ship. It's almost as if they're the same enterprise.


Modern Australia Law: Abandoning the Exclusory Rule

Was established in Caltex Oil v The Dredge
P was Caltex. They owned oil. THey had a pipeline that went from refinery at Cornell. The oil would get refined and go back across the pipeline and get distributed by Caltex.
Caltex DID NOT own the pipe.
Pipe was damaged by failure of D1 (Dredger in Botany Bay) and D2 (surveyor, responsible for producing charts that indicated whereabouts on the floor of the bay, the pipeline ran).
P's were able to recover for OIL that was lost. Why? It was the actual value of the oil lost. Also under the contract, AOR(owners of the pipeline) had agreed to be liable for any oil lost as a result of damage to the pipeline.
P also claimed damages for alternative transport. P's had to ship the oil and could not use the pipeline anymore.
HC allowed recovery, changing the law.


Duty control devices that judges came up with in Caltex Oil v The Dredge?

1. Stephen J (majority): (1) Knowledge of D. D knew in this case that the pipeline only ran to the P's refinery and to no other refinery. (2)facts that the loss had been suffered was a direct loss. He said because it was direct because all it was claiming was alternative transport for oil, not for further loss of profit. The alternative transport was an obvious consequence of severing the pipeline.
2. Gibbs & Mason JJ (Minority): there's a duty wherever harm is foreseeable to the plaintiff individually and as a member of an ascertained class. In this case, only P would be damaged as the pipeline ran only to THEIR refinery.
3. Jacobs J(majority): physical closeness of P's property (P's oil in this instance) to the property that was damaged (pipeline) such that a physical effect on the P's property was foreseeable.


What's the approach in new novel cases?

As in Perre v Apand and in Caltex Oil v The Dredge
1. Foreseeability
2. Indeterminacy
3. Autonomy / Commercial Freedom
4. Vulnerability
5. Knowledge of the risk
6. Conflict of duties


How to cure the issue of Indeterminacy?

1. Knowledge (actual or constructive) of ascertainable & Specific class of D. Not just where the harm is foreseeable to the P, but also to the ascertainable class. Specific class - implies small and contrasted with general.
2. Perhaps P could recover provided he/she is a first line victim (first line victim defined as those who are primarily affected. Primarily here means not as a result of the ripple effect). So people in the first line are more likely to be ascertainable by D than those at the rippling stage.
3. Transferred loss (by a contract) with someone else, will be able to claim damages. (Aliakman: seller of goods that owned them at time of damage. P suffered economic loss becuase the contract had transferred risk of damage to goods from the vendor to the buyer. But all that happened was loss was transferred from one to the other, and wasn't a ripple effect).
4. Joint Venture.
5. P's property was threatened but not damaged (Jacobs J from Caltex Oil v The Dredge). This isn't within reasoning in Perre v Apand. And in this case, no indeterminacy where damage to neighbour's property affects yours. It might be influential at the edges.


McMullin v ICI

A bit like viral outbreak cases.
Involved food contamination.
D's (ICI) chemicals got into the foot chain by cattle feed. As a result of contamination, regulations were imposed on transport of meat, sale of meat, export of meat, basically any products that had been food for cattle.
Plaintiff's found into a whole variety of categories:
1. Owners of cattle contaminated by D. Held: DOC owed. No physical harm to the cattle, but their value goes down.
2. Purchasers - contracts with purchase of contracts were not devalued. Obliged to pay full price for cattle, who were then contaminated. Held: DOC owed.
3. Purchasers of the contaminated meat
4. Feed lot operators (people responsible for feeding cows. They didn't own cows). Regulations came in and they were unable to transport cattle outside of their premises and had to carry on caring for cattle. They suffered a loss. Held DOC Owed.
5. Groups 5, 6 and 7 not owed DOC.
6. Category six: no longer transport of the cattle.
7. Because of ban, they couldn't export perfectly good cattle. They suffered pure loss of profit and NOT entitled to recover.

Distinction from 1-4 and 5-7?
1-4 as a result from transferred losses, effectively contractually assumed risk of someone else's property. 4, they have possession of property that is contaminated.
5-7 never owned or possessed any contaminated meat


Johnson Tiles v Esso Australia

Defendant is owner of gas processing plant.
They provide gas to Gascor - statutory organisation that regulates production. They pass gas onto retailers of gas under contracts. P who were affected come into three categories:
1. Business customers - loss of profit owing to loss of production during the time they had no gas supply
2. Householders - suffer economic loss as they had to purchase alternative equipment for activities
3. Employees of businesses.

No duty owed to ANY of the 3 even though there was foreseeable harm.
First two categories: problem is not one of indeterminate liability. Its easy for D to work out his liabilities. D could have ascertained both for business customers and householders, the likely number of claims. D had access to retailers customer accounts.
The conflict argument is what made no DOC owed.
P's not vulnerable (neither P1 nor P2). Business customers were not vulnerable because they could reasonably have taken steps to install back up equipment that didn't run on gas (even though this would involve economic losses).
Not vulnerable because they had access to first party insurance that covered them against costs.
Businesses of course had first party insurance.

Third category: indeterminate liability.


Fortuna Seafoods v The Ship "Eternal Wind"

P is a seafoods marketing company.
They are in exclusive relationship with a company called Fortuna fishing.
Arrangements between owners effectively share financing.
One company is a trustee for the company i.e. they have a very close relationship.
Only reason they're separate entities is due to restrictions which existed on the way in which seafood products were marketed that it made it sensible for fishermen to have one company that owns the vessel and another that owns the marketing operation for the seafood that is caught.

D negligence damages Fortuna's ship. Sinks the ship. As a consequence of which, Fortunate fishing has a claim for property damage. But Fortuna suffers economic loss, but they don't own the ship so can't claim consequential economic loss.

Majority 2-1 held: DOC Owed.
1. Knowledge of an ascertainable class. D knew or ought to have known that P would be affected as an ascertainable class of people by the sinking of the ship.
Knew or ought to have known that fishing companies work the way it did.
D should have known that there was a company that was economically reliant on the first company. So the second company formed part of an ascertainable class that were able to claim damages.

Mahoney J: First line victim- they're the first people to suffer pure economic loss.

D was also involved in the same industry, so they should have known that the companies were highly integrated.



If you can establish that the person has insurance, then they won't be vulnerable.


Indeterminate Liability example:

Too indeterminate idea: Cannot find a class to which he belongs. Just because he's one of the three doesn't mean there's just those business that would be effected. KNowledge, argue same reasons for indeterminate. Best argument would be Johnson Tiles and the theory that they were aware of businesses involved. Difference is there's no business records available for people to be aware of.