Tort Unit 3 Chapter 4 Pure Economic Loss and Pure Psychiatric Harm

What are the three elements of a negligence claim?

Duty of care; breach of duty; causation of damage.

What is a limited duty situation?

A situation where special rules restrict whether a defendant owes a duty of care for a particular type of loss.

Why does the law restrict claims for pure economic loss and pure psychiatric harm?

To prevent potentially unlimited liability to an indeterminate number of claimants for potentially unlimited amounts.

What is the floodgates argument?

The concern that allowing recovery could expose defendants to an excessive and unpredictable number of claims.

What is consequential economic loss?

Financial loss that follows from physical injury to the claimant or physical damage to the claimant's property.

What is pure economic loss?

Financial loss that is not consequent on physical injury to the claimant or physical damage to the claimant's property.

What is the general rule for pure economic loss?

There is generally no duty of care to prevent pure economic loss, so it is not recoverable in negligence unless an exception applies.

What is the first category of pure economic loss?

Economic loss caused by acquiring a defective item of property.

What is the second category of pure economic loss?

Economic loss unconnected to the claimant's personal injury or physical damage to their property.

Why can a third party who receives a defective product struggle to claim its replacement cost in negligence?

The loss is pure economic loss, and the claimant may lack a sufficiently close relationship with the defendant. The contractual remedy will generally lie with the purchaser against the seller.

What did Murphy v Brentwood DC [1990] establish?

The cost of repairing a defective building, or its reduced value, is pure economic loss and generally irrecoverable in negligence.

What was the key principle in Murphy v Brentwood DC?

Where the defect damages only the defective property itself, without causing personal injury or damage to other property, the loss is pure economic loss.

What happens if a defective product causes personal injury?

The claimant may recover for the personal injury, but the cost of replacing the defective product itself remains pure economic loss.

What happens if a defective product damages other property belonging to the claimant?

The damage to the other property is physical damage, and financial losses consequent on it may be recoverable.

What is pure economic loss caused by damage to third-party property?

Financial loss suffered by the claimant because the defendant damaged property belonging to someone else, rather than the claimant.

What did Spartan Steel & Alloys Ltd v Martin [1973] establish?

Loss caused by damage to a third party's property is pure economic loss and generally irrecoverable, whereas loss consequent on damage to the claimant's own property may be recovered.

Which losses were recoverable in Spartan Steel?

The value of the damaged metal in the furnace and the profit lost on those melts, because they followed from physical damage to the claimant's property.

Which loss was not recoverable in Spartan Steel?

Profit lost on four further melts that could not be produced during the power cut, because this was pure economic loss.

What would have changed the result in Spartan Steel?

If the claimant had owned the damaged electricity cable, the lost profits during the power cut could have been consequential economic loss.

What did Weller & Co v Foot and Mouth Disease Research Institute [1966] establish?

Loss of business caused by the closure of cattle markets, without physical damage to the claimant's property, was pure economic loss and irrecoverable.

What is the general rule for pure economic loss caused by negligent actions?

No duty of care is generally owed where negligent actions cause financial loss without physical injury or damage to the claimant's property.

What is negligent misstatement?

A careless statement of information or advice that causes the claimant financial loss through reliance on it.

What is the general rule for negligent misstatement?

Pure economic loss caused by a negligent statement is generally irrecoverable, subject to the special relationship exception.

What is the key exception for negligent misstatement?

The Hedley Byrne principle: liability may arise where the defendant assumes responsibility and the claimant reasonably relies on the statement.

What did Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] establish?

A duty of care for pure economic loss may arise where there is a special relationship involving assumption of responsibility and reasonable reliance.

What were the facts of Hedley Byrne?

A bank gave a favourable credit reference about its customer. The claimant relied on it, extended credit and lost money when the customer became insolvent.

What were the two elements of a special relationship under Hedley Byrne?

Assumption of responsibility by the defendant and reasonable reliance by the claimant.

What is assumption of responsibility?

The defendant expressly or impliedly undertakes responsibility to take care when providing information, advice or services.

What is reasonable reliance?

The claimant's reliance on the defendant's information or advice must be reasonable in the circumstances.

Why did the defendant escape liability in Hedley Byrne?

The bank had effectively excluded responsibility through its disclaimer.

What did Caparo Industries plc v Dickman [1990] establish in relation to negligent misstatement?

It developed the Hedley Byrne special relationship test by identifying four criteria for assumption of responsibility.

What were the facts of Caparo v Dickman?

Auditors prepared company accounts showing a profit. An investor relied on them to purchase further shares and suffered loss when the accounts were incorrect.

What was the decision in Caparo v Dickman?

The auditors owed no duty to the claimant in its capacity as an investor purchasing shares, because the necessary special relationship was not established.

What are the four Caparo criteria for assumption of responsibility in negligent misstatement?

The defendant knew the purpose of the advice; knew it would be communicated to the claimant or an ascertainable class; knew the claimant was likely to act without independent inquiry; and the claimant acted on it to their detriment.

Why does the defendant's knowledge of the purpose of advice matter?

It helps establish that the defendant undertook responsibility for the particular use made of the advice.

Why does the defendant need to know who will receive the advice?

The claimant must be specifically identified or belong to an ascertainable class to whom the advice will be communicated.

Why does independent inquiry matter under Caparo?

If the defendant knows the claimant is likely to rely without making independent checks, this supports the existence of a special relationship.

What must the claimant show about reliance under Caparo?

The claimant must have acted on the advice to their detriment.

What is the overall Hedley Byrne and Caparo checklist?

Assumption of responsibility; knowledge of purpose; knowledge of recipient or ascertainable class; likely reliance without independent inquiry; actual detrimental reliance; and reasonable reliance.

What did James McNaughton Papers Group Ltd v Hicks Anderson & Co [1991] establish?

An accountant owed no duty to a prospective takeover bidder where the accountant did not know the draft accounts would be communicated to the bidder for that transaction.

What did Morgan Crucible Co plc v Hill Samuel Bank Ltd [1991] establish?

Financial advisers and directors may owe a duty to an identified bidder where they make express representations to influence that bidder's conduct in a known takeover battle.

What is the general rule for advice given in a social situation?

There is generally no duty because the defendant has not assumed responsibility.

What did Chaudhry v Prabhakar [1989] establish?

A duty can arise between friends where one has greater expertise, knows the other will rely on their skill and judgment, and thereby assumes responsibility.

What did Spring v Guardian Assurance plc [1994] establish?

An employer may owe a duty of care to a former employee when providing a negligent reference to a prospective employer.

Why is Spring v Guardian Assurance significant?

The claimant did not receive or rely on the statement personally; the prospective employer relied on it, but the defendant had assumed responsibility towards the claimant.

What did White v Jones [1995] establish?

A solicitor may owe a duty of care to intended beneficiaries where negligent delay in preparing a will causes them to lose their inheritance.

Why is White v Jones an extension of Hedley Byrne?

It extended the assumption of responsibility principle beyond negligent statements to the negligent provision of professional services.

What did Henderson v Merrett Syndicates Ltd [1994] establish?

A claimant may bring a claim in tort for negligent professional services even where there is also a contract, provided the tortious duty is consistent with the contractual duty.

When can a professional owe a duty in tort as well as under a contract?

Where the duty to take reasonable care in tort is consistent with the duty owed under the contract.

What standard applies when assessing breach by a professional?

The standard of a reasonably competent member of that profession.

What is the relevance of Bolam to negligent professional advice?

It may help assess whether the professional met the standard expected of a reasonably competent professional.

What must a claimant establish after proving duty of care in a pure economic loss claim?

Breach of duty and causation of damage, followed by consideration of any relevant defences.

What is the factual causation test in negligence?

The claimant must show that, but for the defendant's breach, the loss would not have occurred.

Why is causation often straightforward in negligent advice claims?

The claimant will usually already have established that they relied on the advice and suffered loss when proving the duty requirements.

What is an exclusion notice?

A notice or disclaimer attempting to exclude or restrict the defendant's liability.

What are the two basic requirements for relying on an exclusion notice?

Reasonable steps must have been taken to bring it to the claimant's attention before the tort, and its wording must cover the loss suffered.

Which legislation controls exclusion of liability for negligence?

The Unfair Contract Terms Act 1977 (UCTA) and the Consumer Rights Act 2015 (CRA).

What does UCTA 1977 s 1(1)(b) cover?

Common law duties to take reasonable care or exercise reasonable skill.

What does UCTA 1977 s 2 regulate?

Exclusion or restriction of liability for negligence.

When does UCTA 1977 apply?

Where the defendant acts in the course of business; it may apply where the claimant is not a consumer.

When does CRA 2015 apply?

Where the defendant acts as a trader and the claimant acts as a consumer for purposes wholly or mainly outside their trade, business, craft or profession.

Can liability for death or personal injury caused by negligence be excluded?

No. UCTA 1977 s 2(1) and CRA 2015 s 65(1) prohibit this.

When can liability for other loss caused by negligence be excluded?

Only where the exclusion satisfies the UCTA reasonableness requirement or the CRA fairness requirement.

What does UCTA 1977 s 11(3) require?

A non-contractual exclusion notice must be fair and reasonable to allow reliance on, having regard to all the circumstances at the time liability arose.

What does CRA 2015 s 62 require?

A consumer term or notice must be fair, taking account of good faith and any significant imbalance in the parties' rights and obligations to the consumer's detriment.

What did Smith v Eric S Bush; Harris v Wyre Forest DC [1989] establish?

Exclusion notices used by professional valuers and surveyors were not reasonable under UCTA in the circumstances.

What factors did Smith v Eric S Bush identify when assessing reasonableness?

Relative bargaining power; availability, cost and time of alternative advice; difficulty of the task; sums at stake; parties' ability to bear the loss; and insurance.

What is pure psychiatric harm?

Psychiatric harm suffered without physical impact or physical injury to the claimant.

What is consequential psychiatric harm?

Psychiatric harm that follows from physical injury to the claimant; it is treated as part of the consequences of that injury.

What is the general rule for pure psychiatric harm?

There is generally no duty of care to prevent it unless the claimant satisfies the special rules.

What is the difference between consequential and pure psychiatric harm?

Consequential psychiatric harm follows physical injury; pure psychiatric harm occurs without physical impact or injury to the claimant.

What types of harm can qualify as pure psychiatric harm?

A medically recognised psychiatric illness or a shock-induced physical condition, such as a miscarriage or heart attack.

Is simple worry or anxiety sufficient for a claim for pure psychiatric harm?

No. The claimant must have a medically recognised psychiatric illness or a shock-induced physical condition.

What did Paul v Royal Wolverhampton NHS Trust [2024] establish about sudden shock?

The requirement that a medically recognised psychiatric illness be caused by a sudden shock was removed.

What are the two categories of victim in pure psychiatric harm claims?

Primary victims and secondary victims.

What is a primary victim?

A person actually involved in the incident who was in the area of physical danger or reasonably believed they were in danger.

What is a secondary victim?

A person who was not involved in the incident in the same way, but witnessed injury to another or feared for another person's safety.

What did Page v Smith [1995] establish?

A primary victim can recover for pure psychiatric harm where physical injury was reasonably foreseeable, even if psychiatric injury itself was not foreseeable.

What are the requirements for a primary victim to establish a duty?

The claimant must be a primary victim and the risk of physical injury must have been reasonably foreseeable.

Does a primary victim need to show psychiatric harm was foreseeable?

No. It is sufficient that physical injury was reasonably foreseeable.

What were the facts of Page v Smith?

The claimant was involved in a car accident, suffered no physical injury, but developed a medically recognised psychiatric illness.

What did Dulieu v White & Sons [1901] establish?

A duty was owed where a pregnant barmaid suffered a shock-induced miscarriage after a horse-drawn van negligently crashed into the pub, because she reasonably feared for her safety.

What is the Alcock test?

The test for whether a duty of care is owed to a secondary victim who suffers pure psychiatric harm.

What are the four Alcock control mechanisms?

Foreseeability of psychiatric harm; close ties of love and affection; proximity in time and space; and proximity of perception.

What is the foreseeability requirement under Alcock?

It must be reasonably foreseeable that a person of normal fortitude in the claimant's position would suffer a psychiatric illness.

What is the relationship requirement under Alcock?

The claimant must have close ties of love and affection with the person endangered by the defendant's negligence.

Which relationships carry a presumption of close ties of love and affection under Alcock?

Parent and child; husband and wife; fiancé and fiancée.

Can the presumption of close ties of love and affection be rebutted?

Yes. Evidence may show that the relationship was not in fact close.

What must claimants outside the presumed categories prove under Alcock?

They must prove that they had a close relationship of love and affection with the immediate victim.

What is proximity in time and space under Alcock?

The claimant must be present at the accident or its immediate aftermath.

What is proximity of perception under Alcock?

The claimant must see or hear the accident or its immediate aftermath with their own senses.

Can a claimant recover if they only learn about the accident from another person?

No. A third-party account does not satisfy proximity of perception.

What did McLoughlin v O'Brian [1982] establish?

A claimant may witness the immediate aftermath of an accident at hospital and still satisfy proximity in time and space.

What were the facts of McLoughlin v O'Brian?

The claimant arrived at hospital about an hour after a road accident and saw her injured family members still in the condition they had been at the scene.

Why did Mr Alcock's claim fail in Alcock?

He identified his brother-in-law in the mortuary eight hours after the disaster, which was not the immediate aftermath.

What did Alcock establish about live television broadcasts?

Watching broadcasts did not satisfy the perception requirement where viewers could not see identifiable individuals suffering in the accident or its immediate aftermath.

What is a possible novus actus interveniens in the context of Alcock broadcasts?

A broadcaster's breaking of its code of ethics by transmitting recognisable images of individuals' suffering might constitute a new intervening act.

What did Paul v Royal Wolverhampton NHS Trust [2024] establish about medical negligence secondary victim claims?

A person who witnesses a close relative's death or its immediate aftermath from a medical condition negligently left undiagnosed or untreated cannot claim as a secondary victim on that basis.

What is the general rule for rescuers following White v Chief Constable of South Yorkshire Police [1999]?

Rescuers receive no special status; they are treated as primary or secondary victims according to whether they were exposed to physical danger.

What did White v Chief Constable of South Yorkshire Police [1999] establish?

Being an employee or rescuer does not automatically create a duty of care for pure psychiatric harm.