Three categories of loss:
Physical damage: actual economic loss
Economic loss consequent on physical damage: consequential economic loss
Pure economic loss
Generally pure economic loss is not recoverable
Physical damage
Quantum – ‘how much’ –liability hearing decides if liable and then the quantum hearing decides how much
Loss of earnings / medical care + costs
Issues:
Remoteness - are they too remote? Where does it stop?
Speculative economic loss - claiming for speculative future losses – can claim but high evidential burden
Economic loss consequent on physical damage
Lost profit on the thing that has been physically damaged – cost of repairing/replacing etc.
Spartan Steel & Alloys Ltd v Martin & Co (Contractors Ltd): D negligently cut off power to plaintiff’s factory ruining melts that were being processed – damaged metal was physical damage and so loss was recoverable – additionally the metal would have been sold at a profit – so loss of profit on damaged metal was also recoverable
Pure economic loss: Not recoverable
Loss that arises where there has been no damage to the claimant’s property
Policy reason: crushing liability – indeterminate number of claims from indeterminate number of people
People are expected to take measures to protect themselves – insurance etc. (Spartan)
Purely financial loss
If the claimant has suffered no physical damage to his person/property then his loss will be pure economic loss e.g. where they have made a bad investment, missed a contractual opportunity etc.
Spartan Steel: as a result of the electricity being cut off, the factory was not able to operate for some time – C claimed that during the period of shutdown they could have made further profit from processing further ‘melts’: this was held to be irrecoverable – purely financial and did not result from any damage to the plaintiff’s property.
Heads of Damage:
Claimed for damaged melt: actual economic loss
Profit on the melt: consequential economic loss
Four potential melts that would have been made had the power not been turned off: NO – pure economic loss – potential melts have no relationship to the original damage – separate – one isn’t reliant upon the other
Policy reasons – Lord Denning said he had to draw a line to avoid crushing material
Duty to mitigate losses: should have had a furnace, back-up generator, could have worked harder etc.
Loss arising from damage to property of another
If suffers loss as a result of damage to property which the claimant has no proprietary interest then it will be classed as pure economic loss
Weller & CO v Foot & Mouth Disease Research Institute: C was an agricultural auction house that brought a claim of profits vs. the institute: D had negligently released the foot and mouth virus and infected local cattle resulting in cattle movement ban and cancellation of local auctions – claim was unsuccessful - no damage to their own property
Cattle v Stockton Waterworks : same ratio – you have to have a proprietary interest in the damaged property
Defective items – generally dealt with in contract law – not tort
Can’t claim for the cost of repairing an inherently defective item – because pure economic loss – contract law deals with defective goods per se
C’s claim that his property is not up to the standard he hoped or expected then his claim will not succeed in tort – unless defective good causes damage – you can sue for the damage but not for the defect
Donnoghue v Stevenson – if she had discovered the snail before drinking the ginger beer or hadn’t suffered any ‘injury’ from drinking it – then she would not have been able to recover tort from the manufacturer for the simple defect
Expansion of liability
At one point – courts seemed to blur distinction btw property defects – confusion btw contract claims and tort claims
Anns – example of one of these cases – defects in the house – cracks in the wall – should be dealt with in contract – but HL allowed it – DOC of local authorities to make sure that the foundations are adequate- suing for a pure economic loss
Dutton v Bognor Regis: House built on a rubbish tip – court allowed claim even though it is a defective product
Negligent misstatement cases - Batty v Metropolitan Property Realisations and Dennis v Charnwood Borough Council – courts became more willing to allow pure economic loss claims
High water mark – Junior Books v Veitchi Co. Ltd. – C contracted with main contractors but asked to use sub-contracted floorers – so wanted the defendants to do the flooring – but it was defective - action vs. flooring sub-contractors for faulty flooring – HL allowed the claim –defendants knew they were being relied upon – reliance and special relationship – situation analogous to a contract - duty of care because there had been ‘assumed responsibility’ – Lord Roskill – relationship was ‘almost as close a commercial relationship...as it is possible to envisage short of privity of contract’
Very difficult to justify case
Has never been overruled but distinguished – now regarded as relying on its own facts
Contraction of Liability
Muirhead v Industrial Tank Specialities Ltd: claim for damage to property (ie dead lobsters) was allowed but not for a defect in product ( faulty pumps) – did the right thing and sued the tank company in contract law and won– but they went bust so he didn’t get any money – so sued the pump manufacturers in tort law (no contract with them) – tried to use Junior Books – but courts distinguished it – there was no reliance in this situation (pump managers didn’t know who the plaintiff was) so the claim failed
Simaan General Contracting Co.v Pilkington Glass Ltd: defect in the supplying of glass for the defendants for a building in Abu Dhabi, court refused a claim for pure economic loss in the absence of a contractual relationship btw the parties – no proximity so the claim failed
In both D & F Estates v Church Commisssioners for England and...
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