Pure economic loss / negligent misstatement

Question 1

Liability for economic loss in negligence

Answer 1

Generally no duty of care owed to avoid causing another to suffer a loss which is purely economic, where the financial loss is not related to a personal injury or damage to property - Spartan Steel and alloys Ltd v Martin

Question 2

Exception for pure economic loss

Answer 2

Where the economic loss is caused by a negligent misstatement (which includes advice) rather than a negligent act, liability may be imposed - Hedley Byrne v Heller

Question 3

Hedley Bryne

Answer 3

A negligent misstatement may give rise to an action for damages for economic loss.
D owes duty of care in making of statement only if there is a ‘special relationship’

Question 4

Test for special relationship as outlined in Caparo v Dickman

Answer 4

• D who made statement possesses some special skill relating to the statement - Chaudry v Prabhakar
• Knows its highly likely the claimant will rely upon it - Smith v Bush
• The claimant does rely on it thereby incurring financial loss
• Reasonable for claimant to so rely upon it

Question 5

Spartan Steel and alloys Ltd v Martin

Answer 5

Economic loss resulting directly from physical damage to property caused by a D’s negligence is recoverable, but purely economic loss is not.

Question 6

Chaudry v Prabhakar

Answer 6

A person who possesses special skill or knowledge and voluntarily gives advice to another, owes a duty of care

Question 7

Smith v Bush

Answer 7

A duty of care can arise in misstatements made in a professional context as its likely the claimant will rely