Economic loss

  • Created by: Nikki
  • Created on: 10-04-15 10:32

Hedley Byrne - the basic principle

Until 1964, C could not sue D in negligence if D's positive act resulted in C suffering pure economic loss

It being reasonably foreseeable was not enough

Hedley Byrne

  • HB sued H, claiming H owed them duty of care that it did not mislead them as to E's creditworthiness and H breached this duty 
  • HL dismissed HB's claim as the information was given 'without responsibility'
  • BUT if H had not done this, it would have owed HB a duty to take care not to mislead them as to E's creditworthiness

If A takes on a job of advising B on a particular matter, A will 'assume a responsibility' to B for the quality of his advice if and only if he indicates to B that she can safely rely on his advice

If A takes on a job of advising B on a particular matter and he indicates to B that B can safely rely on that advice, A will owe B a duty to take care he does not give B incorrect advice on that matter

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Situations of giving advice (1)

'without responsibility' --> not normally owe B a duty of care in giving that advice --> but if acting in course of business then s2(2) UCTA regulates this

given directly to advisee knowing it will be relied on

  • when taking on a job of advising B, A implicitly indicates to B that she can rely safely on his advice
  • Welton v North Cornwall District Council (1997) --> food safety inspector 
  • doesn't depend on waht A intended, but on the impression given to B

given on a social occasion

  • normally will not owe duty of care to advisee
  • displaced if A gives B advice and in doing so explicitly assures B that she can safely rely on his advice
  • Chaudry v Prabhakar (1989) --> case of buying a car, P assures C it's in good condition and she doesn't need to seek other opinion --> C buys car and it isn't roadworthy

given in a published work --> not owe duty of care

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Situations of giving advice (2)

given by a non-expert

  • stated in case law that not owe duty of care if not hold himself out as being expert on the matter --> criticisms from court - seems too strong
  • better view --> if A makes it obvious he is not an expert, something that should be taken into account in deciding whether A indicated to B his advice could safely be relied on

official registers

  • register where someone has to be before they are allowed to trade
  • Yuen Kun Yeu v A-G for HK (1988) -- if A in charge of maintaining the official register, A does not invite people looking at the register to think they can rely on him to have taken care to ensure that C is fit and proper person to deal with -- deposit-taking companies case

given by third party

  • Williams v Natural Life Health Foods Ltd (1998) --> MD gave advice but never dealt with C --> MD had not owed C duty of care under basic principle in HB --> lack of contact meant MD did not at any point indicate to C that they could rely safely on his advice
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Hedley Byrne - the extended principle

Dicta in HB suggests if A indicated to B that B can safely rely on his to perform particular task with certain degree of care and skill and B has so relied on A, A will owe B duty to perform task with that degree of care and skill

Cases where A is a professional --> indicated 'professional' degree of care and skill --> A knows B's request is made in belief A can be safely relied on to perform task T with such a degree of care and skill and B knows that A knows this --> A agrees to perform T for B

But will not owe duty to carry it out with any more skill that objectively indicated he could be safely relied on to exercise --> Philips v William Whitely Ltd (1938) (ear piercing case) --> Wilsher v Essex Area HA --> skill of a reasonably competent person in A's post

Junior Books Ltd v Veitchi Co Ltd (1983) --> work of laying floor -- poor job -- 2 years later floor had to be completely replaced -- HL held that D had owed JB duty to lay floor with certain degree of skill -- basis that D indicated in negotiations they could be so relied on and JB relied on D to do so by causing D to be nominated as subcontractors

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Hedley Byrne - 2 misconceptions

(1) HB only relevant in pure economic loss cases

  • no sign remakrs of Law Lords were meant to be confined to cases where D has caused another to suffer form of pure economic loss

(2) recovery for pure economic loss only allowed in HB cases

  • not an exhaustive set of rules
  • no single principle underlying all of economic loss
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Difficult cases (1)

Property surveys

Surveyor owes buyer duty of care which is not dependent on surveyor having contact with buyer -- buyer may not pay for their own surveyor and simply rely on fact taht lender has leant them money based on survey of the house, which they take to mean that the house is in good condition


Spring v Guardian Assurance plc (1995) 

  • D supplied SA with reference that stated S was 'a man of little or no integrity and could not be regarded as honest'
  • argued D owed him and breach a duty to use reasonable skill and care in supplying his prospective employers with references about him
  • HL found D had owed such a duty of care
  • cannot be explained in terms of HB
    • D hadn't indicated to S he could safely rely on them to use reasonable skill and care in preparing references 
    • even if the did S never did anything in expectation taht they would
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Difficult cases (2)

Diagnosis of special needs

Phelps v Hillingdon London BC (2001)

  • age 11 sent to educational psychologist to be tested -- failed to notice dyslexia
  • C's difficulties continued until left school age 16 with no GCSEs
  • shortly after, dyslexia diagnosed
  • HL held education psychologist had owed C duty to test her with reasonable degree of care and skill 
  • cannot be explained by HB -- no assumption of responsibility towards C or parents, only duty to advise school and local authority

Wills - White v Jones (1995)

  • B's daughters sued D solicitors in negligence, arguing D had owed them duty to draw up B's new will with a reaosnable degree of care and skill --> D breached this by taking so long --> had D not breached it, they would have inherited £9000 each --> HL allowed claim
  • cannot be explained by HB -- no indication to C that they could rely on D; C never relied on D drawing up will; no contact so no 'assumption of responsibility
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Difficult cases (3)

Loss of land rights -- Ministry of Housing v Sharp (1970)

  • developers buying land asked D to do search of local land charges register and tell themw hat charges existed on land
  • D did notinform developers of MH charge --> when land sold it came free of MH charge
  • MH sued D in negligence --> CA held D owed MH duty of care in responding to developers' query --> cannot be explained by HB --> no assumption of responsibility

General average -- Morrison Steamship v Greystoke Castle (cargo owners) (1947)

  • collision between two ships (GC and C) -- C 25% to blame
  • GC put in port for repairs -- had to unload and reload cargo
  • maritime prnciple of general average -- when one party in sea venture suffered loss as parrt of that venture, other parties obliged to take on proportionate share of that loss -- applied to owners of cargo - C had to pay £18000
  • C claimed 25% amount from D -- relational econ loss so noramlly denied but HL allowed claim
  • not clear if this applies to land as well as sea
  • attempt to limitdecision in Murphy v Brentwood DC -- won by slight majoirty and turned on specialities of maritime law
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Difficult cases (4): business sterilisation

Harris v Evans (1998) -- crane to provide bungee jumping --> duty of care denied

Jain v Trent Strategic HA (2009) -- nursing home --> duty of care denied (public interest)

AUS case Perre v Apand Pty Ltd (1999) -- potato disease case -- D company not public body -- claim allowed --> emphasised C's degree of vulnerability

Pride & Partners v Institute of Animal Health (2009) -- foot and mouth -- denied because duty of care not aimed at protecting C's business - distinguished from AUS case -- number of claims

Local authority or public official has carlessly misused its powers with result that a business has ot been allowed to carry on trading --> UK courts may be willing to find duty owed if:

  • D ahs wrecked C's business through postiive and illegitimate act
  • C was powerless to protect himself against what D did
  • finding that D owed C dutyof care would not expose D to 'liability in an indeterminate amount fo ran indeterminate time to an indeterminate class'
  • finding that D owed C duty of care not to act as he did wouldn't be contrary to public interest
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Explanation of difficult cases (1)

Severe dependency as a basis for duty of care

Can be explained on basis that if A knows that B's future will be ruined if he does a psoitive act x, then A will owe B a duty to take care not to do this

2 things follow

  • dutyof car eshould only be owed in survey case where surveyor knew that his survey would be relied on by purchaser
  • CA wrong to rule that Spring had not application in Kapfunde

Business sterlisation

Finding a duty of care protects people's significant interests in being allowed ot make a living through self-employment

If this is right, duty should only be owed where C is real person deprive of living by someone else's carelessness or a company with a real person as sole owner

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Explanation of difficult cases (2)


White v Jones applies in case where A wanted to confer a benefit on B, and C undertakes to assist A in conferring that benefit on B, but C's carelessness in assisting A ends up preventing A from conferring that benefiton B --> C found to have owed B a duty to be careful in assisting A -- basis of duty = fact that B would hav eahd benefit that A wanted to confer but for C's intermeddling

Interference with intangible property

Ministry of Housing v Sharp (1970)

Better to say that it was reasonably foreseeable that a mistake on part of D would caue C to los a proprietary interest that C had in land which developers were going to purchase and it was that which gave rise to duty of care

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Explanation of difficult cases (3)

Expense incurred as a reult of property being put in danger

Explain HL decision in Greystoke Castle case as equivalent of Page v Smith in proprietary context

  • duty because reaonsably foreseeable that crashing into GC would damage C's cargo --> geared towards protecting C's cargo from being damaged --> breach did not result in damage but immediate result was pure economic loss --> did not matter that C did not suffer type of harm D's duty impsoed to avoid --> still sue for different less harm that D's breach of duty had immediately resulted in C suffering

The Orjula (1995)

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