W7 C5 – ECONOMIC LOSS
READING
McBride and Bagshaw, pp 152-184
Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1973] QB 27 (CA)
Hedley Byrne & Co Ltd v. Heller & Partners Ltd [1964] AC 465 (HL)
Caparo Industries plc v Dickman [1990] 2 AC 605 (HL)
White v Jones [1995] 2 AC 207 (HL)
Customs & Excise Commissioners v Barclays Bank plc [2006] UKHL 28, [2007] 1 AC
181
Playboy Club London Ltd v Banca Nazionale del Lavoro SpA [2018] UKSC 43, [2018] 1
WLR 4041
Optional further reading
Stevens, Torts and Rights (OUP, 2007), pp 20-43
Rabin, ‘Tort Recovery for Negligently Inflicted Economic Loss: A Reassessment’
(1985) 37 Stanford LR 1513
QUESTIONS
Why is economic loss seen to raise particular problems for the law of negligence?
If D is the reason behind X company’s economic loss, then D is negligent, but
they will not have to pay damages to X company for the pure economic loss.
Spartan Steel v Martin is an example wherein Martin accidentally cut off the
power to the Spartan Steel factory which caused the factory to lose melt and
profits from 15 hours of a lack of production.
Negligence involves foreseeable loss, yet this is not compensated. The reason D
does not have to pay economic loss for missing 15 hours of profit is because that
is pure economic loss which is a heavy burden for Martin so instead he pays for
the profit lost from the melt, which is economic loss AND property loss.
Lord Denning further identifies in the Spartan Steel case 3 crucial things: Spartan
Steel can easily overcome the loss so should ‘get over it’ since the cutting of the
supply of electricity is a hazard everyone runs, Martin can only pay so much to
Spartan Steel so it would be too much for D to pay compensation to every place
wherein electricity was lost in the community and also that economic loss can
open the floodgates of litigation.
What is ‘pure’ economic loss?
Refers to financial loss and damage suffered by a person such as can be seen only
on a balance sheet rather than as physical injury to the person or destruction of
property.
It is not recoverable in situations that wherein we cannot trace it directly to a
harm to a person or property.
READING
McBride and Bagshaw, pp 152-184
Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1973] QB 27 (CA)
Hedley Byrne & Co Ltd v. Heller & Partners Ltd [1964] AC 465 (HL)
Caparo Industries plc v Dickman [1990] 2 AC 605 (HL)
White v Jones [1995] 2 AC 207 (HL)
Customs & Excise Commissioners v Barclays Bank plc [2006] UKHL 28, [2007] 1 AC
181
Playboy Club London Ltd v Banca Nazionale del Lavoro SpA [2018] UKSC 43, [2018] 1
WLR 4041
Optional further reading
Stevens, Torts and Rights (OUP, 2007), pp 20-43
Rabin, ‘Tort Recovery for Negligently Inflicted Economic Loss: A Reassessment’
(1985) 37 Stanford LR 1513
QUESTIONS
Why is economic loss seen to raise particular problems for the law of negligence?
If D is the reason behind X company’s economic loss, then D is negligent, but
they will not have to pay damages to X company for the pure economic loss.
Spartan Steel v Martin is an example wherein Martin accidentally cut off the
power to the Spartan Steel factory which caused the factory to lose melt and
profits from 15 hours of a lack of production.
Negligence involves foreseeable loss, yet this is not compensated. The reason D
does not have to pay economic loss for missing 15 hours of profit is because that
is pure economic loss which is a heavy burden for Martin so instead he pays for
the profit lost from the melt, which is economic loss AND property loss.
Lord Denning further identifies in the Spartan Steel case 3 crucial things: Spartan
Steel can easily overcome the loss so should ‘get over it’ since the cutting of the
supply of electricity is a hazard everyone runs, Martin can only pay so much to
Spartan Steel so it would be too much for D to pay compensation to every place
wherein electricity was lost in the community and also that economic loss can
open the floodgates of litigation.
What is ‘pure’ economic loss?
Refers to financial loss and damage suffered by a person such as can be seen only
on a balance sheet rather than as physical injury to the person or destruction of
property.
It is not recoverable in situations that wherein we cannot trace it directly to a
harm to a person or property.
