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.