Law of Tort - Paper 2 (Negligence: Pure Economic Loss)

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  • Created by: chloefyf3
  • Created on: 22-07-22 14:20
What is the traditional approach taken by the courts about pure economic loss?
a claimant cannot recover for PURE economic loss, which means they cannot recover for losses unless they flow from actual physical damage
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What happened in the case of 'Spartan Steel v Martin & Co Ltd (1973)?
- C could recover damages for lost profits from power cut caused by D in relation to steel C was processing at the time as losses flowed from damage to steel (consequential loss)
- could not recover for lost profits (pure economic loss) due to being unabl
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What was held in the case of 'Spartan Steel v Martin & Co Ltd (1973)?
such losses were not recoverable as it would not be fair, just and reasonable to impose a duty of care on defendants for pure economic loss suffered by claimants
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What case confirmed the rule of pure economic loss?
Jain v Strategic Health Authority (2009)
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What happened and what was held in the case of Jain v Strategic Health Authority (2009)?
- local authority obtained a court order to shut nursing home on grounds that turned out to be wrong
- one C's had regained license they had gone out of business

- despite grave injustice, no duty of care owed to avoid causing pure economic loss
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What might the defendant do to show an exception to the rule?
make a negligent misstatement (inaccurate statement made due to defendants negligence)
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What case relates to negligent misstatements?
Hedley Byrne v Heller and Partners Ltd (1964)
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What happened in the case of Hedley Byrne v Heller and Partners Ltd (1964)?
- C advertising agency (Hedley Byrne) booked ads
in the media for Easipower Ltd + were liable to pay for them if Easipower couldnt
- C's wrote to Heller & Partners (Easipowers bankers), asking if Easipower could pay
- bank wrote letter marked 'without
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What was held in the case of Hedley Byrne v Heller and Partners Ltd (1964)?
house of lords rejected claim as Heller & Partners had clearly marked their letter 'without responsibility'
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However, in this case what did the House of Lords accept about pure economic loss?
a duty of care can be owed in respect of pure economic loss where there is a negligent misstatement if certain criteria are met
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How can a negligent misstatement be given and what must it be by the claimant?
written / verbal statement

relied on by the claimant
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Next, what must there be between the parties?
a special relationship
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What are the five key elements required to establish the special relationship?
1 - D must possess special skill / expertise
2 - D must voluntarily assume responsibility for statement
3 - D knows / ought to know identify of person(s) relying on statement
4 - D knows / ought to know purpose of statement whilst making it
5 - C must sh
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Which two cases can be used when establishing criteria 1) the defendant must possess a special skill or expertise?
Smith v Eric S Bush (1990)

Lennon v MPC (2004)
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What happened and what was held in the case of Smith v Eric S Bush (1990)?
- C bought a house, relying on surveyors report
- chimney breast collapsed
- C sued surveyor for negligent misstatement

- was reasonably foreseeable that C would rely on report as surveyor had expertise as a 'professional man'
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Who was held to also fall within the category of a professional man in the case of Lennon v MPC (2004)?
a personnel officer who had access to specialist knowledge
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Where can criteria 1 also be the case?
where the claimant relies on the defendants skill and judgement
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What are two cases to show this?
Chaudhry v Prabhakar (1988)
&
Mutual Life v Evatt (1971)
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What happened and what was held in the case of Chaudhry v Prabhakar (1988)?
- C passed driving test and asked D (knew about
cars) to find her a car to buy (clarified it should not have been in an accident)
- car advised by D was un road worthy (had been in major accident) so C sued

- there was a duty of care as C had relied o
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What happened and what was held in the case of Mutual Life v Evatt (1971)?
- insurance company representative provided free advice to C, in a social context, about a competitors products

- only a duty of care if D held himself as being in the business of giving such advice
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Why was criteria 2 - D must voluntarily assume
responsibility for his statement - not established in Hedley Byrne v Heller and Partners Ltd (1964)?
the bankers had put a disclaimer of ''without responsibility'' on their letter
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Why was criteria 2 - D must voluntarily assume
responsibility for his statement - established in Lennon v MPC?
the personnel officer had assumed responsibility for giving an employee advice on his entitlement to benefits when moving jobs
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What does criteria 3 - D knows / ought to know identify of person or class of persons relying on statement - mean in other words?
there must be a known user
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What case is used when applying criteria 3?
caparo v dickman
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What happened and what was held in the case of Caparo v Dickman?
- D readied set of annual accounts for company
- a shareholder, relying on accounts, took over company
- company not worth what accounts said, so he sued accountants for misstatement

- D not liable (accounts were not prepared for an individual but for th
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What does criteria 4 - D knows / ought to know purpose of statement whilst making it - mean in other words?
there must be a known purpose
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Why was criteria number 4 not satisfied in Caparo v Dickman?
the accounts were not drawn up for the purpose
of assisting a takeover, but were prepared to allow the shareholders as a whole to control the company
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What happened and what was held in the case of Law Society v Peat Marwick (2000)?
- D's accountants missed that money held by solicitors on behalf of clients was stolen
- law society had to pay clients back out of compensation fund and sued D's to recover losses

- law society owed duty of care as accountants knew law society would use
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What was held about criteria 5 - C must show he relied on statement and that this was reasonable to do - in the case of Smith v Eric S Bush?
it was reasonable for a house purchaser to rely on the surveyors report prepared for the building society which was granting a mortgage to the purchaser
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What was held about criteria 5 - C must show he relied on statement and that this was reasonable to do - in the case of JEB Fasteners Ltd v Marks Bloom & Co?
could not claim as they had made the decision to buy the company based on their own view of the businesses's financial position and had not relied on the accounts that the defendant had prepared
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If all five elements are satisfied, what is owed by the defendant and will the claimant's claim for pure economic lass succeed?
a duty of care

may succeed depending on causation and defences
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Other cards in this set

Card 2

Front

What happened in the case of 'Spartan Steel v Martin & Co Ltd (1973)?

Back

- C could recover damages for lost profits from power cut caused by D in relation to steel C was processing at the time as losses flowed from damage to steel (consequential loss)
- could not recover for lost profits (pure economic loss) due to being unabl

Card 3

Front

What was held in the case of 'Spartan Steel v Martin & Co Ltd (1973)?

Back

Preview of the front of card 3

Card 4

Front

What case confirmed the rule of pure economic loss?

Back

Preview of the front of card 4

Card 5

Front

What happened and what was held in the case of Jain v Strategic Health Authority (2009)?

Back

Preview of the front of card 5
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