Pure Economic Loss
1. General Principles:
a. Property Damage vs Pure Economic Loss:
(1) Claimant must have a proprietary interest in the property:
The Aliakmon – P contracted to buy cargo to be shipped on D’s
vessel. Cargo was damaged. At the time, P was neither owner nor
possessor of the cargo.
Pure contractual interest – didn’t have title until money
passed.
Cannot sue as only economic loss not property damage.
(2) There must be a physical change to the property:
Renders it less valuable or less useful.
Hunter v Canary Wharf –
While dust merely entering the property does not constitute
property damage, it may do if it gets trodden into the carpet
or interferes with electrics etc.
b. Consequential Economic Loss vs Pure Economic Loss:
Spartan Steel v Martin –
Ds employees were digging up a road when they negligently
damaged an electric cable, which Ds knew was the direct supply
from the electricity board’s power station to C’s factory. As a result,
the Cs could not keep the metal at the correct temperature and
complete the “melt”, causing the metal to depreciate in value by
£368. They lost a profit from the sale of the metal from that melt of
£400. They could have also completed four further melts during the
power-cut, loss of profit = £1,767.
The plaintiffs could recover the physical damage to the one
melt and the loss of profit on that melt, but not for the loss of
profits on the further melts because that was economic loss
independent of the physical damage.
Can only claim for economic loss that directly flows from
property damage.
2. When does the law impose a duty of care in relation to pure economic loss?
Hedley Byrne v Heller –
Applicants were advertising agents, who had placed substantial forward
advertising orders for a company on terms by which they, the appellants,
were personally liable for the cost of the orders. They asked their bankers to
inquire into the company’s financial stability and their bankers made
inquiries of the respondents, who were the company’s bankers. The
respondents gave favourable references but stipulated that these were
“without responsibility”. In reliance on these references, the appellants placed
orders which resulted in a loss of £17,000.
There was an actionable cause in negligence – where there is a
special relationship in certain circumstances this could give rise to a
claim for pure economic loss – assumption of responsibility.
Lord Devlin: “if a doctor negligently advises a patient that he cannot
safely pursue his occupation when in fact he can and he loses his
livelihood, there is said to be no remedy. Unless, of course, the
patient was a private patient, and the doctor accepted half a guinea
for his trouble: then the patient can recover all. I am bound to say,
my Lords, that I think this to be nonsense.”
Factors:
(1) Statement must be issued for a clear and known purpose:
1. General Principles:
a. Property Damage vs Pure Economic Loss:
(1) Claimant must have a proprietary interest in the property:
The Aliakmon – P contracted to buy cargo to be shipped on D’s
vessel. Cargo was damaged. At the time, P was neither owner nor
possessor of the cargo.
Pure contractual interest – didn’t have title until money
passed.
Cannot sue as only economic loss not property damage.
(2) There must be a physical change to the property:
Renders it less valuable or less useful.
Hunter v Canary Wharf –
While dust merely entering the property does not constitute
property damage, it may do if it gets trodden into the carpet
or interferes with electrics etc.
b. Consequential Economic Loss vs Pure Economic Loss:
Spartan Steel v Martin –
Ds employees were digging up a road when they negligently
damaged an electric cable, which Ds knew was the direct supply
from the electricity board’s power station to C’s factory. As a result,
the Cs could not keep the metal at the correct temperature and
complete the “melt”, causing the metal to depreciate in value by
£368. They lost a profit from the sale of the metal from that melt of
£400. They could have also completed four further melts during the
power-cut, loss of profit = £1,767.
The plaintiffs could recover the physical damage to the one
melt and the loss of profit on that melt, but not for the loss of
profits on the further melts because that was economic loss
independent of the physical damage.
Can only claim for economic loss that directly flows from
property damage.
2. When does the law impose a duty of care in relation to pure economic loss?
Hedley Byrne v Heller –
Applicants were advertising agents, who had placed substantial forward
advertising orders for a company on terms by which they, the appellants,
were personally liable for the cost of the orders. They asked their bankers to
inquire into the company’s financial stability and their bankers made
inquiries of the respondents, who were the company’s bankers. The
respondents gave favourable references but stipulated that these were
“without responsibility”. In reliance on these references, the appellants placed
orders which resulted in a loss of £17,000.
There was an actionable cause in negligence – where there is a
special relationship in certain circumstances this could give rise to a
claim for pure economic loss – assumption of responsibility.
Lord Devlin: “if a doctor negligently advises a patient that he cannot
safely pursue his occupation when in fact he can and he loses his
livelihood, there is said to be no remedy. Unless, of course, the
patient was a private patient, and the doctor accepted half a guinea
for his trouble: then the patient can recover all. I am bound to say,
my Lords, that I think this to be nonsense.”
Factors:
(1) Statement must be issued for a clear and known purpose:
