Pure Economic Loss

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Last updated 12:18 PM on 5/2/26
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9 Terms

1
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What is PEL?

  • Only losing money

  • Financial loss that does NOT come from injury or property

2
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Cattle v Stockton

  • Relational economic loss

  • Loss caused by damage to property C does not own but depends on

  • Not recoverable

3
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Spartan Steel v Martin:

  • D negligently caused power cut

  • C’s factory lost power for 14hrs cooling molten metal making it useless

  • C can claim compensation for damaged metal

  • C can claim profits lost from the metal (damaged property)

  • But D owes no DOC for losing production output that would have happened in that time

  • Floodgates reason: everyone could sue that way, becomes massive and uncontrollable

4
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Hedley Byrne v Heller:

  • Bank (D) negligently provided C with good credit reference about X (C’s customer)

  • C suffered bad debts as a result as they relied on D’s word

  • But D said ‘this is without responsibility’, so no assumption of responsibility

  • You can only claim PEL from statements if there is a special relationship

5
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What is a special relationship?

  • Hedley Byrne

  • Assumption of responsibility (D takes responsibility for what they said)

  • Reliance (C reasonably relies on it)

6
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Caparo v Dickman:

  • Auditors negligently made accounts and so Caparo bought shares and lost money

  • No claim as auditors were not personally advising Caparo

  • Advice given personally MAY be recoverable but generally is not 

  • Relationship of proximity must be there

7
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PEL is not recoverable in negligence because:

  • Avoids floodgates, losses can be spread widely  

  • Where C has ability to protect herself using contract law, there is less need to provide an additional layer of tort law protections (Leigh and Sullivan v Aliakmon Shipping)


8
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PEL:

  • The law restricts recovery for PEL to avoid indeterminate liability

  • Reflects policy choice to prioritise certainty over fairness

9
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Test for when DOC arises exceptionally for PEL:

  • Whether D assumed responsibility for what they did 

  • Whether the loss to C was a reasonably foreseeable consequence

  • Whether rs between parties was one of sufficient proximity

  • Whether it’s fair just and reasonable to impose DOC