Flashcards in Pure Economic Loss Deck (12):
What is Pure Economic Loss?
This is loss which is not consequential on personal or property injury.
If you can make economic loss parasitic on personal property damage, most times no problem with damages.
Spartan Steel v Martin
Distinction between pure and consequential loss.
Factory is owned by P. Outside the factor, a contractor working on the road is unaware of an electricity cable, severs it and the factory loses power for some 14 and a half hours.
1. Damage to metal that was contained in their furnaces at the time electricity was cut off was recoverable because it was straightforward property damage.
2. Loss of profits on those particular batches of metal recoverable because it was consequential economic loss.
3. Loss of production during the time it took to restore electricity could not be recoverable.
What is Relational Economic Loss?
P suffers pure economic loss as a consequence of their relationship with someone else's property that gets damaged. P does NOT own the land but they rely on that property for producing their own profit.
What are the policy concerns for imposing a DOC in relation to Pure Economic Loss?
1. Economic loss not socially harmful because if one person drops out, a competitor will swoop in and take their spot so doesn't cause society economic loss. Perre v Apand
2. Stifling of legitimate competition/ commercial freedom.
3. Indeterminate liability - Perre v Apand
4. Conflict / incoherence. Duties of care imposed may be in conflict with the duties already assigned under the contracts between the parties - Perre v apand
5. Alternative means of protection: P's may be able to protect themselves against economic losses through more careful negotiations of a contract.
What's the problem with Indeterminacy? First Factor: Uncertainty of time
Uncertainty of time involved in claims, D will be exposed to liability over a long and extended period of time.
Hill v Vanbert - Solicitor negligence in advice in relation to wills. Appropriate to impose DOC? Not really but can deal with this by limitation clauses in statuts.
What's the problem with Indeterminacy? Second factor: Too many claims for the courts to handle?
Might produce too much litigation if a DOC was established in the first case.
Denning v Spartan Steel - some claims might be inflated or misleading claims being made.
Perre v Apand - said P's might do it vexatiously.
What's the problem with Indeterminacy? Third Factor: Excessive liability
When there are large amounts of claims for the D:
1. Liability disproportionate to D's moral fault. Though this doesn't apply in personal injury cases.
2. Undesirable effects of large liabilities on pricing and services. Hill v Van Erp e.g. If you have a large amount of liability, e.g. auditors will increase their prices drastically.Solution to this would be D not liable and leave investors who purchase shares to take their own precautions when buying shares.
What's the problem with Indeterminacy? Fourth factor: Uncertain liability/ class of claimant?
Perre v Apand - if you leave D in the position of uncertainaty, this inhibits their freedom of action. They can't lead an autonomous life.
Furthermore, uncertainty affect's D's capacity to insure against losses. Also problematic for P because how do they claim damage if D has no insurance.
What is the approach to DOC in novel cases in relation to Pure Economic Loss?
Perre v Apand.
D was supplying potato seeds. They supplied this to particular farms in Sparnon SA.
Sparnon's (infected seed potatoes) were not the complainants. But the consequence of D supplying defective seeds to this farm was that a whole variety of interests around the Sparnon's farm within a 20km radius were economically affected. This is because WA Regulations prevented importation of infected potatoes anywhere within 20km of the infected area. They could no longer run their business because they were huge importers.
Number of plaintiffs and circumstances:
1. Warruga farms who grew and exported potatoes within the 20km zone. Normally exported to QA, now unable to do so.
2. Rangara were family venture, they were growers ONLY, no export. Consequence of ban by WA, they can't sell their potatoes to the first plaintiff for export. They would grow it, sell it to first P and they would sell it. So now Rangara had no use for their potatoes.
3. Third plaintiff was also a family company, they owned and let processing facilities for potatoes to 1st plaintiff. Now operations were no longer going ahead, the plant no longer needed to be leased.
4. Fourth plaintiff were family members of owners of land used by P1 and P2. The land couldn't be used for 5 years, as a consequence of which the value of the land dropped. How could they sell it where you couldn't use the land to grow anything. Even though their land had not been contaminated, it dropped in value because of the infection of the neighbour's land.
Held: DOC owed to all plaintiffs.
McHugh J developed the Multifactorial approach for new cases:
1. Loss suffered by P or members of the group reasonably foreseeable?
2. Indeterminate liability? Too uncertain that D can't appreciate nature and type and likely number of claims to be brought?
3. If no to Q2 would a DOC impose an unreasonable burden on the autonomy of D?
4. If no to Q3 was P vulnerable to loss from P's conduct?
5. Did D know that it's conduct could cause harm to individuals such as P? (knowledge of an 'ascertainable class")
6. Control over P's actions so as to stop them (Renolds v Katoomba)?
Reynolds v Katoomba
When a member of a club is a problem gambler but is able to look after his owwn interests and is not open to the club's control, the club owes no DOC to protect that person against financial loss from gambling.
The club couldn't make sure that he wouldn't just go down the road to the next pub and gamble there.
Kakavas v Crown
Case where he was a problem gambler. Got more and more restrictions on different Casino's in Australia over the years.
July 2004, P alleges he suffers from a special disability. Each defendant knew of his special disability.
The D's then, whether or not being the reason of knowledge of his special disability, decided to do whatever they could to get him to gamble in their casinos.
They continued giving him money to gamble, getting him other privileges such as flying on private jets etc.
In the end, he had a total debt of $30,000,000. The casino benefited that much as well but through 'means of ill practice within the meaning of s2.3.5 of the Gambling Regulations Act 2003".
Unconscionable conduct on the part of D because they knew P lacked self control of his gambling habit.
"a duty of care if breached, can give rise to an action in negligence, and hereby sustain a claim for damages for economic loss, may arise if the P is known by the D to be vulnerable to harm, and yet by careless conduct of the D, while not pursuing any legitimate interest, induces the P to do or refrain from doing something which exposes that vulnerability and this is a cause of harm".