Categories: Wrongful Death and Pure Economic Loss
1. Overview
This week focuses on:
The effect of wrongful death on tortious actions
The concept of pure economic loss (PEL) and its recoverability
2. Effect of Wrongful Death
Common Law Principles
At common law, death of a party ends the tortious action.
Death prevents any cause of action from arising.
Lord Ellenborough in Baker v Bolton (1808) stated:
“In a civil court, the death of a human being could not be complained of as an injury.”
Legislative Changes in Australia
Australian legislation has modified common law to allow tort actions to continue after a party's death.
Exceptions: defamation actions generally do not survive the deceased (except Tasmania).
Legal Provisions
Law Reform (Miscellaneous Provisions) Act 1944 (NSW):
Estates of deceased can retain causes of action.
Dependants may pursue tort actions.
Compensation to Relatives Act 1897:
Conditions for maintaining action:
Death caused by wrongful act, neglect, or default
Deceased could have brought the action if alive
Eligible claimants: spouse, siblings, parents, and children of the deceased.
Requires ordinary negligence rules, not necessary for death to have been foreseeable—foreseeability of personal injury suffices (Chapman v Hearse).
Recoverable Damages
Damages may include:
Lost earning capacity until death
Medical expenses
Funeral expenses
Value of services rendered before death
Non-Recoverable Damages
Examples of damages not recoverable:
Exemplary damages
Loss of earnings during "lost years"
Damages for grief due to death
Issues Concerning Damages
Key considerations:
Should damages be reduced by insurance payments?
Recovery of loss of household services?
Should there be discounts for the widow’s remarriage prospects?
3. Concept of Pure Economic Loss (PEL)
Definition and Distinction
PEL refers to economic loss not resulting from physical injury (to person or property).
Caused by negligent acts, omissions, or words.
Differentiated from intentional actions resulting in economic loss (e.g., economic torts).
Examples
Economic loss vs PEL:
Wage loss
Investment losses from negligent financial advice
Medical expenses
Loss of profit from property damage
Diminished property value from defective architect advice
Historical Recovery Trends
PEL had limited recoverability until recently; now recoverable under specific conditions.
Courts' reluctance due to:
Indeterminate liability
Relationship with contract law
Loss linked to lawful commercial activities
4. PEL Caused by Negligent Words
Legal Foundation and Distinctions
PEL can arise from negligent words; courts distinguish between negligent words and actions.
Lord Reid in Hedley Byrne stated the need for treating negligent words with care, especially on informal occasions.
Historical Cases
Remedy for fraudulent misstatement exists under deceit; negligent misstatement requires more than just misstatement to invoke liability (Derry v Peek (1889))
Hedley Byrne: established liability for negligent misstatement at common law; uncertainty remained regarding conditions for liability.
Example Case: Esanda Finance Corp v PMH (1997): High Court ruled PMH had no duty of care to Esanda regarding negligent misstatements.
Duty of Care Factors
Dawson J's Analysis:
Mere foreseeability of harm does not create duty of care in case of pure economic loss.
Must show special relationship (proximity) between parties for duty to arise.
Factors highlighted in cases like San Sebastian:
Representative's realization of trust in expertise
Reasonable reliance by representee
Foreseeability of loss due to incorrect advice
Policy Reasons against Duty of Care
Concerns about increased auditing costs, complex litigation, indeterminate liability, and reliance proof difficulties
Statutory Liability for Misstatements
Australian Consumer Law: Prohibits misleading/deceptive conduct without proving negligence or duty of care.
Case Example: ACCC v Kimberly-Clark Australia: Court ruled on misleading claims about flushable wipes and false manufacturing claims.
5. PEL Caused by an Act
Duty Imposition Differences
Courts in England generally do not impose a duty for PEL caused by action; Australian courts may consider after applying “salient factors.”
Case Study: Perre v Apand (1999)
High Court held Apand had a duty to protect the Perres from PEL due to negligent supply of infected seeds.
Underlying questions for establishing duty:
Foreseeability of loss
Risk of liability
Burden on defendant
Vulnerability to loss
Salient Factors Analysis
Relevant factors include:
Financial loss foreseeability
Indeterminate liability risks
Legal coherence impacts
Ascertained class membership
Defendant's knowledge of risks
Plaintiff’s vulnerability
Notable Cases
Caltex Oil v Dredge ‘Willemstad’ (1976): Court found duty of care due to negligence affecting economic loss.
Various salient features considered by the Court.
6. PEL Caused by Defective Structures
Latent vs Obvious Defects
Tort law addresses latent defects beyond contractual agreements.
Liability for Physical Injury
Builders generally liable for physical injury therefrom.
Pure Economic Loss from Defects
PEL may arise from diminished property value due to negligent construction or design.
Bryan v Maloney (1995): High Court ruled builders owed duty of care to subsequent purchasers due to construction defects.
Proximity principle imposed duty, distinct for residential vs commercial properties.
Subsequent Case Review
Woolcock Street Investments v CDG (2004): Court found no duty of care due to lack of reliance or vulnerability on the contractor’s part.
Statutory Duty of Care
Design and Building Practitioners Act 2020 (NSW): Provides a cause of action against builders for negligent construction without needing common law duty establishment.
Section 37 outlines the general duty of care regarding construction work, covering a wide range of building-related activities.