Negligently Inflicted Pure Economic Loss Flashcards
(28 cards)
‘Pure economic loss’ meaning
Negligence causes financial loss that occurs independently of any physical injury or property damage
How should the caselaw be used to apply to scenarios of Negligently Inflicted pure psychiatric loss
Incremental (step-by-step) approach
Analogous precedents - Lord Toulson (in An Informer v A Chief Constable
When does Negligent Misstatement arise?
- D makes statements
- Inaccurate
- Made without a proper degree or skill and care about their inaccuracy
- Where they owe a Duty of Care
-Caused C financial loss - no warranty given
What other causes of action are there against financial loss
**Derry v Peek **- Fraudulent Misrepresentation
What is the difference between Misrepresentation and Fraud
Thomas v Taylor Wimpey
- Negligent misrepresentation in tort is a claim in negligence (you must prove a negligent act).
- A claim under** s.2(1) of the MA 1967** is not a claim in negligence.
- Why? Because C doesn’t need to prove D was negligent — it’s enough that the representation was false and D can’t prove they had reasonable grounds for belief.
3 Distinct types of Pure Economic Loss
- 1.) Negligent Misstatemenet
- 2.) Negligent Provision of Services
- 3.) Relational Economic Loss
Who does Negligently Inflicted Pure Economic Loss usually affect?
* Solicitors
Other professionals
How to establish duty of care in negligent misstatement?
- Variety of tests - according to **Customs and Excise Commisioners **
1.) Assumption of Responsibility - Hedley Byrne
2.) Caparo Test
3.) Incremental Test
When to use each test for the duty of care?
1.) Assumption of Responsibility - ‘first port of call’ - Objective test
2.) If fails then Caparo (where there is no real and true assumption of responsibility on the facts
3.) **Incremental test **- law can develop novel categories with established principle (Only to be used as a cross-check on whether the legally significant features of a situation give a result that is farily close to an alreadt decided scenario)
How should the tests be used?
Customs and Excise
- These are not just slogans - you need to identify the factual situations in which they provide useful guidance
Factors to consider in Duty of Care for ALL 3 TYPES OF ECONOMIC LOSS
20 factors write down
- Statement in response to a request v volunteered?** REQUEST MORE LIKELY DOC**
- Information relied for the same purpose it was given? **IF SAME PURPOSE THEN LIKELY DOC
** - Statement maker made it for express purpose of being communicated to C + D knew it would be passed to C? IF YES then DOC
-** Did D specifically know C?** (small ascertainable class of persons)
Can assumption of responsibility ever be used in already established recognised relationships?
Miller v Irwin Mitchell LLP
The assumption of responsibility test is suitable for some recognised relationships such as solicitor and clien
Different scenarios where negligent misstatement DoC may be offered?
1.) Bi-partite situation of C recipient and loss sufferer and D statement-maker
2.) Tri-partie situation of C, D and X
3.) The ‘victim’ situation
The bi-partite situtation of C and D
Scenario where DoC may be established
- Simple scenario -** (C loss sufferer + D Statement-Maker)**
MLC Assurance Co Ltd v Evatt
- Company that gave advice was not in that field of giving advice
- Although they assured C, and C relied upon it no DoC
Chaudhry v Prabhakar:
- C and D were in a direct one-to-one interaction.
- D made the statement to C personally, knowing she would rely on it.
Tripartie situation of C, D, and X
Where a DoC is still owed due to negligent misstatement
- C is the person who relies on information and suffers loss
- D is the person who makes the statement
- X is a third party (often the intended recipient), but the information is passed on to C
Cases of tripartite situations where a DoC is still owed
Hedley Byrne - Bank told Company that TP had good credit - but disclaimer that they should not be relied upon
**Smith v Eric S Bush (a firm)
**
Harris v Wyre Forest DC
The Victim Situation
Third type of Negligent Misstatement situation where a DOC is owed
- Scenario occurs where C is not an advisee who** has acted on the statement,** and indeed **never would rely **upon it
**Harris v Evans **
- (Harris Bunjee jumping business)
- (Evans with report brought it crashing down)
Harris is a victim of another persons reliance because the report allowed the council to shut his business down
1.) Out of pocket expenditure 2.) Loss from reliance of TP
What is negligent provision of services
Different scenario of type of pure economic loss
- Negligent careless provision of service
**Henderson **-> Solicitor - Client (includes provision of other services not really to do with statements)
- Detrimental Reliance not necessary
Leading case of Negligent Provision of Services
Leading case of White v Jones
Leading case of White v Jones
- Mr Barret had a falling out with two daughters - made a new will cutting them out - they made out and Mr Barret decided he would put them back in - Asked Solicitor to put them back an give 9k each -> Formal instruction given in July and Appointment made for Mr Barret in September -> Before that Mr Barret died before then -> Two Daughters annoyed -> sued Mr Jones in negligence (provision of service)
Held - D owed DoC to two daughters (19. Fairness 17. No Floodgate Principle at issue (testamentary trust death + inter vivos))
Richard v Hughes
- Two Hughes Children - to set up a trust fund for children + entered into contract with accountant who would monitor the trust fund -> Did not
- Could children be owed DoC
CoA (despite inter vivos BUT anything said on White V Jones about testamentary was dicter)
Law - accountancy - any other profession
Shift from White v Jones to Richard v Hughes
- Does not need to be impossible to fix
- Testamentary merely dicter (only)
- Liability of professionals expanded
What is Relational Economic Loss
last type
- Solid line of essential facility (telephone bridge) + X owns it
- C uses it for business
- D negligently damages facility
- X is ok because he can sue D for property damage
- C can sue D for relational economic loss because they cannot sue for property damage but use it for their business
- C has contractual relationship with X -> gives rise to DoC
- X cannot sue for C
General rule for relational economic loss
- Generally disallowed (pure economic loss)
- A ‘lacuna in the law’ results
- Lacuna subsists to this day - **Spartan Steel and Alloys Ltd **
- Scope of exclusionary rule widened to contractual relations as well - *D Pride and Partners *
5 reasons why recover was precluded in Spartan Steel
ii. Other remedies available
iii. Floodgates concerns
iv. Distribute losses across whole community
v. Consequential economic loss easier to quantify
