TORT LAW FINAL NOTES OCT/NOV

Chapter Pure Economic Loss:

- Generally it is much more difficult to establish a duty of care in respect of economic loss
than in respect of damage to property or personal injury.
- Sales LJ : commented that ‘’the courts should be slow to extend the categories of case in
which a duty to protect against pure economic loss will be found to arise.
- Broadly speaking no duty of care is owed to avoid causing pure eco loss by careless
activities but that very different rules apply to careless statements (negligent
misstatements) making it easier for a claimant to recover.
- The division between the two situations is matter of historical accident in the way the
law has developed but it also has to do with the fact that in activity cases the courts
have been influenced greatly by public policies in particular the need to limit the liability
of local authorities.
- Different rules apply to intentionally inflicted economic loss.

Definition of ‘’Pure Economic Loss’’ : Pure Eco loss is loss that is purely financial, in the sense
that it does not result from property damage or damage to claimants person.
- For e.g where a person buys a product which is defective although it does not cause
personal injury or damage to property. The person is said to have suffered economic
loss because the only loss in question is the cost of repairing or replacing the product.

- There are two forms of economic loss

- 1) Pure Economic Loss

- 2) Consequential economic loss : this means financial loss that is consequential upon
damage to the claimants person or property.

- Examples include losses suffered by a claimant who has been seriously injured and must
give up work and loss of profits resulting from damage to commercial machinery. This
can be seen as loss and ‘damage to pocket’ and the law vehemently deems such losses
as recoverable because it results directly from damage to the claimant’s person or
property. The rule of thumb is that Pure Eco Loss itself is not recoverable except (where
it results from negligent misstatement or negligent provision of services). And on the
other hand ‘’Consequential economic loss’’ ‘’ IS RECOVERABLE’’

- The distinctions between ‘pure eco loss’, ‘consequential eco loss’ and ‘damage to
property’ are neatly illustrated by the decision in - (Spartan Steel and Alloys Ltd v
 Martin & Co (contractors) LTD). : Facts : The Defendants who were construction
workers, negligently cut through a cable which supplied power to the plaintiffs factory,
causing a power cut which lasted for 14 ½ hours. Without electricity the plaintiffs
furnace could not operate and they had to close their factory. The metal that was in the
furnace at the time the power went off (the ‘’melt’’) began to solidify and to save
damaging the furnace the plaintiffs had to throw it away. The plaintiffs brought an
action for three types of loss :

 Damage to the melt that was in the furnace at the time of the power cut
(physical damage to property);
 Loss of the profit which would have been made on the sale of that melt
(consequential economic loss resulting from property damage);
 Loss of profits on four further melts which would have been processed
during the 14 ½ hours the factory was closed because of the power cut
(pure economic loss).

- Held : A majority of the Court of Appeal held that the first two claims were recoverable,
but the third claim was not