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Recovery for pure economic loss in English law, arising from negligence, has traditionally been limited. Notably, recovery for losses that are "purely economic" arise under the Fatal Accidents Act 1976; and for negligent misstatements, as stated in Hedley Byrne v. Heller . Economic loss generally refers to financial detriment that can be seen on a balance sheet but not physically. Economic loss is then divided into "consequential economic loss" - that which arises directly from some physical damage or injury (e.g. loss of earnings from having your arm cut off) and "pure economic loss", which is everything else.
The fear behind allowing claims for "pure economic loss" is that potentially unlimited claims could flood in. The risks may be unknowable, and parties would find it impossible to insure. [1] [2] The U.S. judge Benjamin N. Cardozo famously described it as, "liability in an indeterminate amount, for an indeterminate time, to an indeterminate class". [3]
Examples of pure economic loss include:
The latter case is exemplified by the case of Spartan Steel and Alloys Ltd v. Martin & Co. Ltd . [8] Similar losses are also restricted in German law [9] though not in French law. [10]
The complex structure theory is an argument which has been put forward in pure economic loss cases which suggests that a large chattel may be considered to consist of several parts and so damage to other "property" for the purpose of applying Donoghue v Stevenson principles. This theory as a normative doctrine has been rejected by Lord Bridge in Murphy v Brentwood. [11] [12]
Negligence is a failure to exercise appropriate care expected to be exercised in similar circumstances.
Donoghue v Stevenson [1932] AC 562 was a landmark court decision in Scots delict law and English tort law by the House of Lords. It laid the foundation of the modern law of negligence in common law jurisdictions worldwide, as well as in Scotland, establishing general principles of the duty of care.
William Baliol Brett, 1st Viscount Esher, PC, known as Sir William Brett between 1868 and 1883, was a British lawyer, judge, and Conservative politician. He was briefly Solicitor-General under Benjamin Disraeli and then served as a justice of the Court of Common Pleas between 1868 and 1876, as a Lord Justice of Appeal between 1876 and 1883 and as Master of the Rolls. He was raised to the peerage as Baron Esher in 1885 and further honoured when he was made Viscount Esher on his retirement in 1897.
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 is an English tort law case on economic loss in English tort law resulting from a negligent misstatement. Prior to the decision, the notion that a party may owe another a duty of care for statements made in reliance had been rejected, with the only remedy for such losses being in contract law. The House of Lords overruled the previous position, in recognising liability for pure economic loss not arising from a contractual relationship, applying to commercial negligence the principle of "assumption of responsibility".
English tort law concerns the compensation for harm to people's rights to health and safety, a clean environment, property, their economic interests, or their reputations. A "tort" is a wrong in civil law, rather than criminal law, that usually requires a payment of money to make up for damage that is caused. Alongside contracts and unjust enrichment, tort law is usually seen as forming one of the three main pillars of the law of obligations.
Anns v Merton London Borough Council[1977] UKHL 4, [1978] AC 728 was a decision of the House of Lords that established a broad test for determining the existence of a duty of care in the tort of negligence, called the Anns test or sometimes the two-stage test for true third-party negligence. The case was overruled by Murphy v Brentwood DC [1991].
Economic torts, which are also called business torts, are torts that provide the common law rules on liability which arise out of business transactions such as interference with economic or business relationships and are likely to involve pure economic loss.
Caparo Industries PLC v Dickman[1990] UKHL 2 is a leading English tort law case on the test for a duty of care. The House of Lords, following the Court of Appeal, set out a "three-fold test". In order for a duty of care to arise in negligence:
Winterbottom v Wright (1842) 10 M&W 109 was an important case in English common law responsible for constraining the law's 19th-century stance on negligence.
Canadian tort law is composed of two parallel systems: a common law framework outside Québec and a civil law framework within Québec. Outside Québec, Canadian tort law originally derives from that of England and Wales but has developed distinctly since Canadian Confederation in 1867 and has been influenced by jurisprudence in other common law jurisdictions. Meanwhile, while private law as a whole in Québec was originally derived from that which existed in France at the time of Québec's annexation into the British Empire, it was overhauled and codified first in the Civil Code of Lower Canada and later in the current Civil Code of Quebec, which codifies most elements of tort law as part of its provisions on the broader law of obligations. As most aspects of tort law in Canada are the subject of provincial jurisdiction under the Canadian Constitution, tort law varies even between the country's common law provinces and territories.
In English tort law, an individual may owe a duty of care to another, in order to ensure that they do not suffer any unreasonable harm or loss. If such a duty is found to be breached, a legal liability will be imposed upon the tortfeasor to compensate the victim for any losses they incur. The idea of individuals owing strangers a duty of care – where beforehand such duties were only found from contractual arrangements – developed at common law, throughout the 20th century. The doctrine was significantly developed in the case of Donoghue v Stevenson, where a woman succeeded in establishing a manufacturer of ginger beer owed her a duty of care, where it had been negligently produced. Following this, the duty concept has expanded into a coherent judicial test, which must be satisfied in order to claim in negligence.
The Fatal Accidents Act 1846, commonly known as Lord Campbell's Act, was an Act of the Parliament of the United Kingdom, that, for the first time in England and Wales, allowed relatives of people killed by the wrongdoing of others to recover damages.
The Fatal Accidents Act 1976 is an Act of the Parliament of the United Kingdom, that allows relatives of people killed by the wrongdoing of others to recover damages.
Economic loss is a term of art which refers to financial loss and damage suffered by a person which is seen only on a balance sheet and not as physical injury to person or property. There is a fundamental distinction between pure economic loss and consequential economic loss, as pure economic loss occurs independent of any physical damage to the person or property of the victim. It has also been suggested that this tort should be called "commercial loss" as injuries to person or property can be regarded as "economic".
Henderson v Merrett Syndicates Ltd [1994] UKHL 5 was a landmark House of Lords case. It established the possibility of concurrent liability in both tort and contract.
Canadian National Railway Co v Norsk Pacific Steamship Co, [1992] 1 SCR 1021 is a leading Supreme Court of Canada decision on pure economic loss in tort law. The court recognized situations in which pure economic loss is compensable. In particular, the court held that relational economic loss falls within the category of losses that are sufficiently proximate to give rise to a duty of care.
Landmark Cases in the Law of Tort (2010) is a book edited by Charles Mitchell and Paul Mitchell, which outlines the key cases in English tort law.
Spring v Guardian Assurance plc[1994] UKHL 7, [1995] 2 AC 296 is a UK labour law and English tort law case, concerning the duty to provide accurate information when writing an employee reference.
The floodgates principle, or the floodgates argument, is a legal principle which is sometimes applied by judges to restrict or limit the right to make claims for damages because of a concern that permitting a claimant to recover in such situations might open the metaphorical "floodgates" to large numbers of claims and lawsuits. The principle is most frequently cited in common law jurisdictions, and in English tort law in particular.
Spandeck Engineering v Defence Science and Technology Agency [2007] SGCA 37 was a landmark decision in Singapore law. It established a new framework for establishing a duty of care, differentiating the Singaporean law of tort from past English common law precedent such as Caparo v Dickman and Anns v Merton, whilst also allowing for claims in pure economic loss, which are generally not allowed in English law.
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