Negligence: Economic Loss and Psychiatric Harm PDF

4 Negligence: Economic Loss and Psychiatric Harm LEARNING OUTCOMES When you have completed this chapter, you should be able to: distinguish between consequential economic loss and pure economic loss; explain pure economic loss as:...

4 Negligence: Economic Loss and Psychiatric Harm LEARNING OUTCOMES When you have completed this chapter, you should be able to: distinguish between consequential economic loss and pure economic loss; explain pure economic loss as: o economic loss caused by acquiring a defective item of property; and o economic loss unconnected to the claimant’s personal injury or physical damage to the claimant’s property; explain and apply the special rules for duty of care which apply in the limited duty situation of pure economic loss; distinguish between consequential psychiatric damage and pure psychiatric damage; explain pure psychiatric damage as psychiatric damage suffered without any physical impact or injury to the claimant; explain and apply the special rules for duty of care which apply in the limited duty situation of pure psychiatric damage. 4.1 Introduction to economic loss and psychiatric harm: limited duty situations In Chapter 2 and Chapter 3 we have considered, in depth, the basic elements required to prove a case in the tort of negligence, and the defences which can be raised to such a claim. We identified the elements of a claim in negligence as: duty of care; breach of duty; causation of damage. At 2.1.1 we began our discussion of the rules for duty of care and considered the following examples of situations where we suggested that a duty of care might not be owed: A journalist negligently reports that shares in X plc would be a good investment. Several readers invest in X plc but lose money because X plc was already in financial difficulty when the journalist published their article. A train company negligently causes a major rail crash. Several hundred bystanders suffer shock and psychiatric illness as a result of witnessing the events. 87 Tort These examples can be compared with the situations we discussed in Chapter 2 in which it was clear that a duty of care was owed. For example: A householder negligently burns down the garden shed belonging to their neighbour, so causing property damage. A motorist negligently knocks down a pedestrian and causes them to suffer a personal injury. What is the difference between the two kinds of cases? We might consider the following questions: How does property damage from a fire differ from the loss of money on a bad investment? How does personal injury from a traffic accident differ from psychiatric harm suffered by witnesses? What kind of relationship exists between a householder and their neighbour, and between motorist and pedestrian? How does this differ from the relationship between a journalist and their readers, and the train company and the witnesses? Why might a duty of care not be owed to the readers who lose money on an investment and to the witnesses who see an accident? The readers who invest and lose money have not suffered any physical damage to property. Thus, we can see that the relationship between the readers and the journalist is much less close than that between the householder and their neighbour. The witnesses who suffer psychiatric harm have not suffered any physical injury. Thus, we can see that the relationship between the witnesses and the train company is much less close than that between the driver and the injured pedestrian. In Chapter 2 on duty of care, we saw that the test for a duty of care in a new situation was laid down in the case of Donoghue v Stevenson and was expanded in the case of Caparo v Dickman. From those cases we saw that if the defendant is to owe the claimant a duty of care, there must be a sufficiently proximate relationship between them. Our discussion above has now shown us that in the following kinds of cases there may not be a sufficiently close relationship for a duty of care to arise: cases of pure economic loss (eg the money lost by the readers who invested in shares); cases of pure psychiatric harm (eg the psychiatric harm suffered by the witnesses who did not suffer any physical injury). Thus, we have learnt that the kind of loss suffered by a claimant can alert us to the fact that a duty of care may not be owed to them. We will call these ‘limited duty situations’. When we say that no duty of care is owed, we mean that the claimant cannot recover the loss suffered. So, in our examples: the readers cannot recover their loss on the shares from the journalist; and the witnesses cannot recover damages for their psychiatric harm from the train company. It is important to notice that the defendants have been negligent. Moreover, their negligence has caused the damage suffered by the claimants. The negligence of the journalist has caused their readers to lose money on their investment. The negligence of the train company has caused the witnesses to suffer psychiatric harm. Nevertheless, in these cases, the journalist and the train company do not have to pay for the consequences of their negligence. So, before we go on to look at these limited duty situations in more detail, we should appreciate why the law has placed limits upon recovery for these kinds of losses. 88  Negligence: Economic Loss and Psychiatric Harm The main problem with claims for pure economic loss and pure psychiatric harm is that they are potentially limitless. We have seen from the above examples that a defendant can cause this kind of loss without having any physical contact with the claimant. Indeed, the defendant may not even be aware of the claimant’s existence (in the case of the journalist and an individual reader, for example). If the law generally allowed recovery for pure economic loss and pure psychiatric harm, the number of claimants and the extent of their claims would be indefinite. The defendant’s liability would be boundless –​to an indeterminate number of claimants for virtually limitless amounts. If claimants were able to recover for this type of loss, a high number of claims would be brought. The floodgates would open. It is for these reasons that limits have been placed on the duties owed in respect of pure economic loss and pure psychiatric harm. (You might like to ask yourself whether or not you agree with these reasons. Is it fair that a defendant who has been negligent should not have to pay damages for some kinds of harm?) Later on in this chapter you will see that there are some limited situations in which damages can be recovered for pure economic loss and pure psychiatric harm. (This is why we refer to ‘limited duty’ situations and not ‘no duty’ situations.) You will see that, in these limited situations, recovery is allowed because it is possible to identify a sufficiently close relationship between the particular claimant and the defendant. In the rest of this chapter we will first consider further the limited duty situation of pure economic loss. Then we will look at pure psychiatric harm. It is worth noting that, in practice, the rules on recovery of damages for pure economic loss are important because they are the basis for most claims against professional advisers, such as solicitors, accountants, surveyors and financial advisers. 4.2 Pure economic loss In this section we will consider the limited duty situation which arises where a claimant has suffered pure economic loss. We said above that, as a general rule, a defendant does not owe any duty of care to a claimant not to cause pure economic loss. In other words, as a general rule, where a claimant suffers damage which is classed as pure economic loss, that loss is not recoverable. Thus, we now need to look more carefully at what constitutes pure economic loss. To do this, the easiest way to begin is to identify what is not pure economic loss. Example A householder, David, negligently lights a garden bonfire which destroys the shed belonging to his neighbour, Fred. Fred has to pay £500 for a replacement shed. Fred also pays £5 per week to a local garage to store his lawn mower for three weeks while the old shed is out of use. The £515 spent by Fred is not pure economic loss. Fred has lost money in repairing the shed and paying for storage, but his loss was caused by the physical damage to his property. The money loss follows on from the physical damage, so it can be called ‘consequential economic loss’. There are no special rules for consequential economic loss. Just as David owes Fred a duty of care not to cause damage to his shed, so he also owes a duty not to cause the consequential economic loss which follows from that damage. Fred will be able to recover the £515 for repairs and lost use from David. 89 Tort Example Adam’s negligence causes Bill to suffer a broken leg. Bill is unable to go to work for six months and suffers a loss of wages of £10,000. It also costs him £500 for physiotherapy treatment. The £10,500 for lost wages and medical treatment is not pure economic loss. Bill has lost money in not receiving his wages and in paying for the physiotherapy, but his loss was caused by the physical injury caused to him. The money loss follows on from the physical injury, so we call it ‘consequential economic loss’. As stated above, there are no special rules for consequential economic loss. Just as Adam owes Bill a duty of care not to cause him physical injury, so he also owes a duty not to cause the consequential economic loss which follows from that physical injury. Bill will be able to recover the £10,500 for lost wages and medical treatment from Adam. The above examples have enabled us to identify money losses which are not pure economic loss. Unfortunately, the law may not always seem so logical when we look at the kinds of damage which are classed as pure economic loss. Nevertheless, we can begin with one situation of pure economic loss which is clear. This is considered in the next section. 4.2.1 Economic loss caused by acquiring a defective item of property Examples Maria buys a compact disc player as a gift for her son, James. The player does not work because it is faulty. James has no contract with the retailer. (Assume that the Contract (Rights of Third Parties) Act does not apply.) Maria buys a hairdryer for herself from a retailer, ‘Super Cheap Ltd’. Super Cheap Ltd goes out of business. The hairdryer does not work because it is faulty. Maria discovers that the hairdryer was manufactured by Electrics Co. Maria has no contract with Electrics Co. James could not sue the retailer in negligence for the cost of replacing the faulty CD player. Maria could not sue Electrics Co in negligence for the cost of replacing the faulty hairdryer. The proper remedy would be for the person who purchased the goods (Maria in each case) to sue the person with whom she had a contract (the retailer in each case). James and Maria would be seeking to sue in negligence because they cannot have a remedy in contract. James wants to sue in negligence because he never had a contract to purchase the player. Maria wants to sue the manufacturer of the hairdryer in negligence because the retailer has gone out of business. There would have been a close relationship between the parties to the relevant contracts. By contrast, there is no sufficiently close relationship between James and the retailer, or Maria and the manufacturer. Another way that this could be looked at is to say that, if claimants like James and Maria were allowed to sue in negligence in cases like this, the law of tort would interfere with and undermine the law of contract. So, James and Maria cannot sue for these losses in negligence. 90  Negligence: Economic Loss and Psychiatric Harm The situations in the examples above can be summarised as: the damage they have suffered is economic loss caused by acquiring a defective item of property; this damage is classed as pure economic loss; no duty of care is owed in respect of pure economic loss. Thus, once we identify James and Maria’s damage as pure economic loss, we know that it cannot be recovered in tort. It is relatively easy to identify why the damage in the above examples was classed as pure economic loss. A more complex example of pure economic loss caused by acquiring a defective item of property is considered below. In Murphy v Brentwood DC 2 All ER 908, the claimant bought a newly constructed house. Eleven years later the claimant discovered that the foundations were dangerous. The foundations were subsiding, causing serious cracking in the walls of the house. The claimant eventually sold the house for £35,000 less than its market value would have been if it had been in a sound condition. The plans for the foundations had been approved by Brentwood District Council. The claimant sued Brentwood District Council for negligently approving the foundation plans. The House of Lords held that the loss suffered by the claimant was pure economic loss –​so not recoverable. The key point in Murphy was that the defects in the house had become apparent before they caused any physical damage to any person or other property. The only thing suffering damage from the cracking and subsiding was the house itself. A claimant in that situation would incur the cost of repairs, or suffer a reduction in value of the property –​and the court held that this amounted to pure economic loss. Essentially, the claimant had simply acquired something which was less valuable than the price they had paid for it. Example Kate decides to have a new swimming pool built in her garden. She contracts with EZ Build Co for them to build the pool. During construction the pool is inspected by the local authority to check that the pool walls are strong enough to meet safety regulations. When the pool is completed Kate pays EZ Build. However, later, Kate finds that the walls of the pool are collapsing because they were not constructed properly. No one has been hurt, but the pool will cost a lot to repair. When Kate tries to contact EZ Build, she finds that they have gone out of business. Kate obtains evidence which proves that the local authority was negligent when it inspected the walls of the pool. Could Kate sue the local authority in tort for the cost of repairing the pool? Applying Murphy it is clear that Kate cannot sue the local authority for the cost of repairs to the pool. Even though Kate may be able to prove that the local authority was negligent and that this caused her loss, she still cannot recover damages from the local authority. The damage which Kate has suffered is economic loss caused by acquiring a defective item of property (the pool). This is classed as pure economic loss. No duty of care is owed in respect of pure economic loss; therefore the loss is not recoverable. 91 Tort However, where a claimant has suffered personal injury or damage to other property that is caused by acquiring a defective item of property, the law is much more ready to accept that there is a sufficiently close relationship between claimant and defendant for a duty of care to arise. Examples Suppose that, in the example above, the hairdryer bought by Maria caught fire and burned her hand. In this case Maria has suffered personal injury. The special rules on pure economic loss would not apply. However, the cost of replacing the hairdryer is pure economic loss and is, therefore, not recoverable in negligence. Suppose that, in the example above, the compact disc player given to James overheated and burned a hole in his bag. In this case James has suffered physical damage to his bag. The cost of replacing the bag is consequent on that physical damage. James has not suffered pure economic loss and the special rules would not apply. However, the cost of replacing the compact disc player is pure economic loss and is, therefore, not recoverable in negligence. Another kind of loss which is also classified as pure economic loss is considered below. It might be thought that the next kind of loss does not bear much logical relation to ‘defective products’ loss. It may help to remember the reason why certain kinds of loss are classified as ‘pure economic loss’. In each case it is because they do not involve the defendant in a sufficiently close relationship with the claimant. 4.2.2 Economic loss unconnected to the claimant’s personal injury or physical damage to the claimant’s property In this section we will see another kind of damage which is classified as pure economic loss. That is, economic loss which is unconnected to the claimant’s personal injury (including actionable psychiatric harm) or physical damage to the claimant’s property. Examples A journalist negligently advises that shares in X plc would be a good investment. Several readers of his paper suffer losses when they invest in X plc. The lost investment is classed as pure economic loss because there is no physical damage to person or property. Tony agrees to lend Dale his new suit to wear for a smart wedding. The day before the wedding, Tony’s suit is destroyed in a fire caused by the negligence of Sam. Dale cannot wear Tony’s suit to the wedding so he has to hire a replacement costing £100 instead. In this example there is physical damage to property –​Tony’s suit. However, Dale would be the claimant for his lost £100. In this case there is no physical damage to property belonging to the claimant (Dale). There is only physical damage to property belonging to someone else (Tony). Dale’s loss is classed as pure economic loss and Dale cannot recover his £100 from Sam. (Tony’s loss of his suit is simply ordinary physical damage. Tony can recover that loss from Sam in the usual way.) 92  Negligence: Economic Loss and Psychiatric Harm From these examples we can see that we can sub-​divide this kind of pure economic loss into two categories. Economic loss unconnected to the claimant’s personal injury or physical damage to the claimant’s property can be either: economic loss caused by damage to the property of a third party; or economic loss caused where there is no personal injury or physical damage to property. 4.2.2.1 Economic loss caused by damage to the property of a third party Examples We have considered Dale’s extra hire costs when Tony’s suit is destroyed in the example above. Alison is on her way to the station to catch a train. She is stuck in a large traffic jam caused by a serious road accident. She misses the train and has to purchase another ticket for a later one. This costs Alison more money. Alison finds out that the road accident was caused by the negligence of Conrad, who crashed into a lorry owned by Morris. In this example there is no damage to any property owned by Alison. The extra cost of her train ticket is classed as pure economic loss. Alison knows that Conrad was negligent. She could also show that his negligence caused her loss. Nevertheless, she cannot recover that loss from Conrad. Conrad does not have to pay for this consequence of his negligent actions. A more complex example of this kind of pure economic loss is considered below. In Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd QB 27, the claimant manufactured metal in a factory which was directly supplied with electricity by a cable from a power station. The factory worked 24 hours a day. The defendant’s employees damaged the electricity cable while drilling a nearby road. The result was a power cut to the factory caused by the defendant’s negligence. The damaged electricity cable belonged to the electricity supplier. It did not belong to the claimant. The power cut caused the following losses: products (known as ‘melts’) in a furnace which solidified; loss of profit on those products; loss of profits on four further melts which could have been processed during the time the electricity was unavailable. In Spartan Steel the claimant could not recover for the four future melts. This was pure economic loss because it was caused by damage to property belonging to a third party –​ the cable which belonged to the supplier –​so no duty of care was owed. However, the claimant was owed a duty of care for damage to property which it did own, and financial loss consequent on that damage. So, this covered the products in the furnace which solidified and the loss of profit on those products. 93 Tort The result in Spartan Steel would have been different if the claimant had been the owner of the damaged electricity cable. The lost profit during the time that the electricity was cut off would have been recoverable. This is because it would have been consequential economic loss, following on from damage to property belonging to the claimant (the cable). (If Spartan Steel owned the cable, it would also have had a further claim –​for the cost of repairs to the cable itself.) In conclusion: If a defendant negligently damages the claimant’s property and causes the claimant loss, there is a sufficiently close relationship between the claimant and the defendant. The defendant owes the claimant a duty of care and the claimant can recover their loss from the defendant. This is not a situation of pure economic loss. If the defendant negligently damages property belonging to a third party and causes the claimant loss, there is not a sufficiently close relationship between the claimant and the defendant. The defendant does not owe the claimant a duty of care and the claimant cannot recover their loss from the defendant. This is a situation of pure economic loss. In this section we have considered the situation where there is some physical damage, but it is not suffered by the claimant. The next two sections consider further instances of pure economic loss which is caused without any physical damage at all. 4.2.2.2 Economic loss caused where there is no personal injury or damage to property: actions Economic loss caused by negligent actions where there is no physical damage falls within the general rule that there is no duty of care for pure economic loss. In Weller & Co v Foot and Mouth Disease Research Institute 1 QB 569, the defendant occupied premises where it carried out experiments concerning foot and mouth disease. It was assumed that the defendant had imported a virus onto its premises which had escaped and caused the outbreak of disease. Cattle in the vicinity became infected and two cattle markets in the area had to be closed. The claimant, auctioneers, claimed damages for loss of business against the defendant in negligence for allowing the foot and mouth virus to escape. It was held that the claimant could not recover its loss from the defendant because the loss was not caused by physical damage. It was caused by the forced closure of the cattle market. It was therefore classified as pure economic loss and no duty of care was owed. 4.2.2.3 Economic loss caused where there is no personal injury or damage to property: statements This section considers cases where loss is caused without any physical damage, and by a negligent statement rather than a negligent action. In this kind of case there is very great potential for unlimited liability. For instance, in the example of the negligent journalist giving bad investment advice, the journalist does not know whether his statement will be read and relied on by 100 readers or 10,000. As with all other kinds of pure economic loss, the general rule remains, therefore, that no duty of care is owed. There is no duty not to cause pure economic loss, and damages cannot be recovered. However, this is one instance in which it is recognised that there is an exception to the general rule. The exception is explained in the remainder of this section. 94  Negligence: Economic Loss and Psychiatric Harm Negligent statements: special relationships The reason for the general rule for no duty of care for pure economic loss is that there is not a sufficiently close relationship between the claimant and the defendant. The exception to the general rule arises in cases where the court is able to find that there is, in fact, an especially close relationship between the claimant and the defendant. These cases may be described broadly as situations in which the defendant has assumed a responsibility towards the claimant. Example In the case of the journalist who gave negligent financial advice, one particular reader of the newspaper telephones the journalist and says that he would like some more specific advice. The journalist advises him how many shares to buy. The journalist assures the reader that his advice can be relied on. It could now be said that the journalist probably does owe a duty of care to this particular reader. This is because the actions of the journalist have created a special relationship between him and the reader. The journalist has undertaken a responsibility towards the reader. Until 1964 the rule relating to pure economic loss caused by negligent statements was the same as for any other pure economic loss: the claimant could not recover. This position altered dramatically with the case of Hedley Byrne & Co Ltd v Heller & Partners Ltd. In Hedley Byrne v Heller & Partners Ltd AC 465, the claimant was supplying services to a company X. The defendant was X’s banker who had supplied the claimant with a favourable credit reference for X. The claimant relied on the favourable reference, extended credit to X, and lost a large amount of money when X went into liquidation. The question for the court was –​even if the bank was negligent –​did it owe any duty of care to the claimant? The House of Lords held that there could be liability for a negligent statement, even though the loss was pure economic loss –​provided there was an especially close relationship between claimant and defendant. (The House of Lords found that, while a duty of care was owed, the defendant had used an effective disclaimer of liability which meant it escaped liability to the claimant. Such disclaimers that aim to exclude liability are now subject to statutory control –​this is considered at 4.2.4 below.) Hedley Byrne established that a duty is owed if there is a special relationship between the defendant and the claimant. The two elements to a special relationship under Hedley Byrne are: (a) an assumption of responsibility by the defendant; (b) reasonable reliance by the claimant. In 1990 the law in this area was considered again by the House of Lords in the case of Caparo Industries plc v Dickman 1 All ER 568. (This case was considered in Chapter 1 as Caparo set the broad general test for novel duty situations.) Caparo considered the case of pure economic loss caused by negligent statements and expanded upon the ‘special relationship’ test in Hedley Byrne. Caparo expands upon and restates the criteria necessary to establish a special relationship giving rise to a duty of care. 95 Tort In Caparo Industries v Dickman and others 1 All ER 568, the defendants were a firm of auditors, who had prepared the accounts for a company called Fidelity. In the accounts the defendants had stated that Fidelity had made a profit. The claimant was a company which owned some shares in Fidelity. The claimant relied on the defendants’ statement by buying additional shares in Fidelity to make a successful takeover bid. The defendants were alleged to have been negligent because the statement in the accounts was incorrect. In fact Fidelity had not made a profit; it had made a loss. The claimant suffered a loss because it had paid an excessive price for the additional shares in Fidelity. The House of Lords found that no duty of care was owed by the defendants to the claimant in its capacity as an investor purchasing shares in Fidelity. The necessary special relationship was not established. The case of Caparo laid down the four criteria to be satisfied for a defendant to have assumed a responsibility towards a claimant: The defendant knew the purpose for which the advice was required. The defendant knew that the advice would be communicated to the claimant (either specifically or as a member of an ascertainable class). The defendant knew that the claimant was likely to act on the advice without independent inquiry. The advice was acted on by the claimant to its detriment. Cases which followed Caparo have applied this test to determine liability. In James McNaughton Papers Group Ltd v Hicks Anderson & Co (a firm) 1 All ER 134, the Court of Appeal decided that a company accountant owed no duty of care to a prospective takeover bidder who relied on the accountant’s hurriedly prepared draft accounts. This decision was made on the basis that there was insufficient proximity of relationship between the accountant and the bidder. The accountant did not know his statement, the accounts, would be communicated to the bidder for that particular transaction. In Morgan Crucible Co plc v Hill Samuel Bank Ltd 1 All ER 148, the Court of Appeal decided that in a contested takeover battle, if, after an identified bidder has emerged, the directors and financial advisers of a target company make express representations with a view to influencing the bidder’s conduct, they may owe a duty not to mislead the bidder negligently. In this case the identity of the bidder was known and the nature of the transaction was known, so proximity of relationship was established. The general rule is that, usually, no duty of care will be owed in respect of advice given in a social situation because there is no assumption of responsibility. This is confirmed in the case of Chaudhry v Prabhakar 1 WLR 29. While Chaudhry predates Caparo, it nevertheless illustrates the issues to be considered in applying the Caparo test. In Chaudhry v Prabhakar 1 WLR 29, the court stated that, generally, a duty of care will not be owed in respect of advice given in a social situation, but then found that on the particular facts of that case a duty was owed. On the facts, the claimant and defendant were friends. The defendant gave advice to the claimant about the purchase of a motor car. The claimant relied on the advice but the car turned out to be unroadworthy and worthless, so the claimant suffered a loss. 96  Negligence: Economic Loss and Psychiatric Harm It was held that the defendant did owe the claimant a duty of care, despite the fact that they were friends. This was because the defendant had more experience and knowledge about cars than the claimant, and the claimant had made it clear that she would be relying on his skill and judgment. In those circumstances this was not simply advice given on a social occasion. The defendant had gone beyond this and had assumed a responsibility to the claimant –​so that a duty was owed. Although Caparo did not alter the law drastically in the case of negligent statements, the restating of the criteria necessary to determine whether there is sufficient proximity of relationship does have the effect of making it more difficult for the claimant to prove the case. In terms of the relationship between the test established in Hedley Byrne and that in Caparo, the four-​stage test established in Caparo is used to determine whether the defendant has assumed a responsibility to the claimant –​so as to give rise to a special relationship. A checklist of the overall test derived from both Hedley Byrne and Caparo is as follows: Is there a special relationship between the defendant and the claimant? Did the defendant assume a responsibility towards the claimant? Did the defendant know the purpose for which the advice was required? Did the defendant know that the advice would be communicated to the claimant (either specifically or as a member of an ascertainable class)? Did the defendant know that the claimant was likely to act on the advice without independent inquiry? Was the advice acted on by the claimant to its detriment? Was it reasonable for the claimant to rely on the defendant for advice? When the test is applied, there is likely to be some overlap between the different parts of it. For example, if the defendant knows that the claimant has sought its advice for a particular purpose and intends to rely on it, this could tend to show that it was reasonable for the claimant to rely on the advice. In the next section you will see that the duty of care established in Hedley Byrne and Caparo has been extended to some new situations. In these new situations it is not always easy to see how the test set out above is satisfied in full. You may not always be able to identify reliance by the claimant. However, you will see that the cases can still be explained as ones in which there is an assumption of responsibility by the defendant. 4.2.2.4 Economic loss caused where there is no personal injury or damage to property: extension of the special relationship The Hedley Byrne principle has been extended to cover a wider class of cases of pure economic loss –​essentially, cases where the defendant has assumed a responsibility towards the claimant. In Spring v Guardian Assurance plc 3 WLR 354, the claimant’s former employer provided a reference to his prospective new employer. The reference had been prepared negligently. As a result it was incorrect and was very unfavourable towards the claimant. This resulted in the claimant not being employed by the prospective new employer. The claimant claimed damages for the pure economic loss which he suffered as a result of the negligent statements in the reference. It was held that a duty of care was owed to him by his former employer. 97 Tort Spring is different to the cases considered above because the negligent statement was not made to the claimant. It was made to a third party (the prospective employer), who relied on it to the detriment of the claimant. Spring extends the Hedley Byrne principle to this wider class of cases. It can be explained on the basis that the employer had assumed a responsibility to the claimant to take care in providing the reference. In White v Jones 1 All ER 691, a client instructed a solicitor to draft a new will for him. The solicitor negligently delayed in drafting the will. Unfortunately the testator died before the new will was drawn up. This meant that the testator’s old will took effect. The claimant in this case would have been a beneficiary under the new will. He was not a beneficiary under the old will. The solicitor’s negligence had therefore caused him to lose his prospective inheritance under the new will. The court held that a duty was owed to the claimant. Although it could not be said that the beneficiary had relied on the solicitor, it was still possible to find a sufficiently close relationship between them. This was because the solicitor could clearly foresee that if the will were not drafted before the testator died, the potential beneficiaries would not be able to claim their inheritances. The case of White v Jones can be explained on the basis that the solicitor undertook a responsibility towards the potential beneficiaries (as well as to the testator). There is one further key feature of the facts in White which make it different from the cases considered above. In this case the solicitor did not make a negligent statement. He provided services in a negligent way. Thus, in White v Jones, it is possible to see the extension of the Hedley Byrne principle from negligent statements to pure economic loss caused in the negligent provision of professional services, where there has been an assumption of responsibility. Henderson v Merrett Syndicates Ltd 3 All ER 506 is a more complex example of the extension of the Hedley Byrne principle to the negligent provision of professional services. Some of the claimants in Henderson had a contract with the defendant for the provision of professional services. However, the contractual claims were statute barred because the limitation period for those claims had expired. Nevertheless, the claimants were still allowed to bring a claim in tort against the defendant. It was very important that the duty in tort (to take reasonable care) was consistent with the duty owed under the contract (also a duty to take reasonable care). Henderson established that a claimant can rely on a claim in tort even though they also have a contract with the defendant for the professional services. However, this is possible only if the duty in tort is consistent with the duties owed under the contract. This completes our discussion of the duty of care in cases of pure economic loss. We will look at the other elements of a negligence claim in the next section. 4.2.3 Pure economic loss: breach of duty and causation of damage The discussion above has been wholly concerned with the first element of a claim in negligence: whether a duty of care is owed. In those situations where a duty of care is owed not to cause pure economic loss, it is necessary to go on to consider the other elements of a claim in negligence: breach of duty and causation of damage. It is also necessary to consider possible defences. 98  Negligence: Economic Loss and Psychiatric Harm Example Hannah has a claim for negligent financial advice by an accountant, Kate. In considering breach of duty, Hannah would need to prove that Kate has failed to meet the standard of care expected of a reasonable member of that profession. The case of Bolam would be relevant here. Hannah must then establish causation of damage. Hannah would need to show that but for Kate’s negligent advice, she would not have suffered loss. Usually this will be clear in negligent advice cases because, as discussed above, part of the test for a duty of care to arise in the first place is that the claimant suffered a loss by relying on the advice. If all elements –​duty of care, breach of duty and causation of damage –​are satisfied, we must then turn to consider any relevant defences. The defence which is most relevant in the case of negligent statements and services is the exclusion of liability. This is considered in the section below. 4.2.4 Exclusion of liability There are two important requirements which any defendant needs to satisfy before they will be able to rely on an exclusion notice. These are: Reasonable steps must have been taken to bring the exclusion notice to the claimant’s attention before the tort was committed. The wording of the notice must cover the loss suffered by the claimant. The ability of a defendant to exclude liability is further limited by the Unfair Contract Terms Act 1977 and the Consumer Rights Act 2015. In Hedley Byrne the defendant was able to escape liability by relying on a defence. It excluded its liability by using a disclaimer: the information was said to have been supplied ‘without responsibility’. However, since then the situation has been changed, firstly by the Unfair Contract Terms Act 1977 (UCTA 1977) and more recently by the Consumer Rights Act 2015 (CRA 2015). These Acts can restrict the ability of a defendant to exclude liability under a disclaimer. UCTA 1977 applies to claims in negligence. This is because, under s 1(1)(b), the Act is said to apply to ‘any common law duty to take reasonable care or exercise reasonable skill’. Section 2 of the Act is relevant to the defendant’s ability to exclude liability for negligent acts or omissions. Section 2 does not apply to ‘consumer contracts’ or ‘consumer notices’. For UCTA 1977 to be applicable, the defendant must be acting in the course of business. For CRA 2015 to be applicable, the defendant must be acting as a trader (ie for purposes relating to that person’s trade, business, craft or profession) and the claimant must be acting as a consumer (ie for purposes that are wholly or mainly outside the individual’s trade, business, craft or profession). Note that where the claimant is not acting as a consumer, UCTA 1977 may still apply. The defendant cannot exclude liability for death or personal injury resulting from negligence. This is under s 2(1) of UCTA 1977 and s 65(1) of CRA 2015. With regard to any other type of loss or damage, the defendant can exclude or restrict their liability only if the exclusion satisfies the requirements of reasonableness under s 2(2) of UCTA 1977 or fairness under s 62 of CRA 2015. 99 Tort ‘Reasonableness’ is defined in s 11 of UCTA 1977. Section 11(3) is the relevant provision as far as negligence is concerned. This deals with the effect of a non-​contractual exclusion notice. It states that the requirement of reasonableness means that it should be fair and reasonable to allow reliance on the exclusion notice, having regard to all the circumstances. The circumstances are to be looked at as they were at the time when liability would have arisen. ‘Fairness’ under s 62 of CRA 2015 involves similar considerations but also includes the requirement of good faith, focusing on any significant imbalance in the parties’ rights and obligations to the detriment of the consumer. Where UCTA 1977 or CRA 2015 apply: it is not possible for the defendant to exclude liability for death or personal injury; it is possible for the defendant to disclaim liability for negligent acts causing other damage, provided the disclaimer is reasonable under the 1977 Act or fair under the 2015 Act. Although s 11 of UCTA 1977 defines ‘reasonable’ and s 62 of CRA 2015 defines ‘fair’, neither Act provides any examples of when a disclaimer might be considered reasonable or fair. The requirement of reasonableness was considered in the case below. In Smith v Eric S Bush; Harris v Wyre Forest District Council 2 All ER 514, the House of Lords found that a duty of care was owed by the defendant valuers/​surveyors to the house purchasers. The valuations were given in the course of business. The House of Lords decided that UCTA 1977 governed the use of exclusion notices in these cases. In Smith v Eric S Bush, the exclusion notice said that neither the building society nor the surveyor warranted that the report and valuation would be accurate, and that the report was being supplied without any assumption of responsibility. In Harris, the exclusion notice said that no responsibility whatsoever was implied or accepted for the value or condition of the property. The House of Lords did not find that the exclusions satisfied the requirement of reasonableness. The House of Lords listed a number of factors which should be taken into account in deciding the question of reasonableness: Were the parties of equal bargaining power? In the case of advice, would it have been reasonably practicable to obtain the advice from an alternative source, taking into account considerations of cost and time? How difficult is the task being undertaken for which liability is being excluded? What are the practical consequences, taking into account the sums of money at stake and the ability of the parties to bear the loss involved, particularly in the light of insurance? In conclusion, whether a disclaimer is reasonable or not depends on all the circumstances of the case. It is impossible to produce an exhaustive list of factors which would be considered in deciding whether a disclaimer is reasonable or not. A similar conclusion may be reached when looking at fairness under CRA 2015. 4.3 Pure psychiatric harm This chapter returns again to the issue of when a defendant may owe a claimant a duty of care and considers another ‘limited duty situation’. The situation under consideration here is where a claimant has suffered pure psychiatric harm. While the law determining when a duty of care may be owed for pure psychiatric harm is different to that governing pure economic loss, nevertheless, the themes discussed in relation to pure economic loss are equally relevant in relation to this type of harm. 100  Negligence: Economic Loss and Psychiatric Harm A prerequisite for a duty of care is a sufficiently proximate relationship between the claimant and the defendant. As with pure economic loss, there is generally a lack of a sufficiently proximate relationship between a claimant who has suffered pure psychiatric harm, and a defendant who may have caused this type of loss. This helps to explains why, as a general rule, a defendant does not owe any duty of care to a claimant not to cause pure psychiatric harm. Example A train company negligently causes a major rail crash. Several hundred bystanders suffer shock and psychiatric illness as a result of witnessing the events. If this example is compared with the situation of a motorist who negligently knocks down a pedestrian and causes personal injury, it is possible to note some important differences. The witnesses who suffer psychiatric harm have not suffered any physical injury. The defendant train company has caused harm without having any physical contact with the claimant witnesses. The relationship between the witnesses and the train company is much less close than that between the driver and the injured pedestrian. The lack of proximity between claimants and defendants means that the defendant’s potential liability could be boundless, to an indeterminate number of claimants. This is the reason why the courts place limits upon the duty of care in cases of pure psychiatric harm and why, as a general rule, a defendant does not owe any duty of care to a claimant not to cause pure psychiatric harm. As with pure economic loss, there are some limited situations in which damages can be recovered for pure psychiatric harm. The courts have laid down rules to establish when a defendant does owe the claimant a duty of care not to cause them pure psychiatric harm. The aim of the rules is to define when a claimant has been closely enough affected by the defendant’s negligence. If a claimant has been closely enough affected by the defendant’s negligence then a duty of care is owed to them. If the claimant falls outside the class of closely affected victims then no duty of care is owed to them. Such a claimant will not receive compensation for their pure psychiatric harm, even if they can show that the defendant was negligent and that this negligence was the cause of their psychiatric harm. In the example above, the negligence of the train company has caused the witnesses to suffer psychiatric harm. Nevertheless, the train company does not have to pay for the consequences of its negligence. As a general rule, a defendant does not owe any duty of care to a claimant not to cause pure psychiatric harm. In other words, as a general rule, where a claimant suffers damage which is classed as pure psychiatric harm, that loss is not recoverable. 4.3.1 Pure psychiatric harm defined It is necessary to define what constitutes pure psychiatric harm. To do this, the easiest way to begin is to identify what is not pure psychiatric harm. 101 Tort Example A motorist negligently knocks down a pedestrian, Jim, and causes him personal injury. Jim suffers a broken leg. He also suffers from the following further effects of the accident: he feels anxious and has nightmares about the accident; he has a medically diagnosed phobia of cars. The nightmares and phobia may have been caused by the shock of the accident. However, this is not pure psychiatric harm. The nightmares and phobia follow on from the physical injury which Jim suffered, so they are consequential psychiatric harm. There are no special rules for consequential psychiatric harm. The consequential psychiatric harm which Jim has suffered simply forms part of his physical injury. A claimant like Jim who suffers physical injury will be compensated for all of his pain and suffering. This will include any consequential distress and mental anguish. Note that Jim suffers a medically diagnosed phobia, but he also suffers from simple anxiety and nightmares. All of these effects can be recovered as part of the consequences of his physical injury. By contrast, when pure psychiatric harm is considered, the type of harm that the claimant may receive compensation for is far more restrictive. The defining feature of pure psychiatric harm is that it is caused without any physical impact or injury to the claimant. The types of psychiatric harm which might be caused without physical impact can include a very wide range of illnesses and conditions. The list might include psychiatric illnesses such as post-​traumatic stress disorder, lesser conditions such as worry and anxiety, and physical illnesses which might be caused by a sudden shock, such as a heart attack or a miscarriage. The list might also include the gradually developing depression caused by caring for an injured relative. This illustrates the point we made above –​that a defendant’s potential liability could be indefinite. In order to address this problem, the courts have developed some more specific rules which define more narrowly the kinds of pure psychiatric harm for which a duty of care can be owed. These are considered below. 4.3.2 Pure psychiatric harm –​limiting factors for duty of care The definition of pure psychiatric harm is psychiatric harm suffered without physical impact. However, only certain kinds of pure psychiatric harm will give rise to a duty of care. This is because the courts have developed rules to define more narrowly the kinds of pure psychiatric harm for which a remedy can be obtained. A summary of these rules is set out below. Where a claimant has suffered pure psychiatric harm –​ie without physical impact –​the injury must be either: a medically recognised psychiatric illness; or a shock-​induced physical condition (such as a miscarriage or heart attack). 102  Negligence: Economic Loss and Psychiatric Harm (The requirement that the claimant’s medically recognised psychiatric illness needed to have been caused by a ‘sudden shock’ was removed by the Supreme Court in Paul and another v Royal Wolverhampton NHS Trust UKSC 1.) (In Chapter 6 on employers’ liability, it will noted that claims for stress caused within the employment relationship have their own rules, which are different from those considered in this chapter.) The requirement for a medically recognised psychiatric illness means that there is no duty of care in relation to effects which do not amount to a defined and diagnosed illness. This would rule out, for example, cases of simple worry and anxiety. So, for example, a claimant who has no physical injury and suffers only from worry and anxiety will not be compensated, even if they can show that the defendant was negligent and that this negligence caused the claimant’s damage. A summary of the rules considered above is: pure psychiatric harm is psychiatric harm suffered without physical impact; it must be a medically recognised psychiatric illness, or a shock-​induced physical condition. However, there are further limitations. The courts have not allowed recovery for pure psychiatric harm unless the claimant has been closely enough affected by the defendant’s negligence. This involves considering how far the claimant was involved in the events caused by the defendant’s negligence. This is examined in the next section. 4.3.3 Pure psychiatric harm –​different types of victim The rules for duty of care in relation to pure psychiatric harm are different depending on how far the claimant was involved in the events caused by the defendant’s negligence. Example Sarah is setting off for work on her motor bike. As Sarah rides carefully down the road, a car driven by Peter comes round the corner too fast and knocks Sarah off the bike. Sarah is unhurt but suffers psychiatric harm. A pedestrian, Jane, witnesses the event from a safe distance. She finds the event very shocking and she also suffers psychiatric harm. Sarah and Jane are in the same position in that they have both suffered pure psychiatric harm –​they have both suffered a psychiatric injury without any physical impact. However, Sarah and Jane are different in that Sarah was actually involved in the incident. Sarah was in the actual area of danger. Jane was never in any danger –​ she merely witnessed the events. The House of Lords in Page v Smith 2 All ER 736 provided us with the terminology of how to categorise the different types of victims of pure psychiatric harm as follows: Primary victims A primary victim is someone who was actually involved in the incident. So, a primary victim: was in the actual area of danger; or reasonably believed that they were in danger. 103 Tort Secondary victims A secondary victim is someone who is not involved in the incident in the same way. So a secondary victim: witnesses injury to someone else; or fears for the safety of another person. The above example can be described using the terminology from case law. It would be said that: Sarah is a primary victim of Peter’s negligence. Jane is a secondary victim of Peter’s negligence. The following sections describe the different tests which apply to determine whether or not a duty of care is owed to a primary and to a secondary victim in relation to pure psychiatric harm. Secondary victims, like Jane, must meet a more stringent set of requirements before a duty can be owed to them. 4.3.4 Primary victims Pure psychiatric harm has been defined as that which is suffered without physical impact. If a duty of care is to be owed, the harm must be a medically recognised psychiatric illness, or a shock-​induced physical condition. It should be noted that this requirement is the same for both primary and secondary victims. Once this requirement is satisfied, however, the further rules for primary and secondary victims are different. In Page v Smith 2 All ER 736, the claimant was involved in a car crash caused by the defendant’s negligence. He did not suffer any physical injury. However, the shock of the accident caused a medically recognised psychiatric illness. The House of Lords reviewed the law on pure psychiatric harm and held that, since physical injury to the claimant was foreseeable, a duty of care was also owed in respect of the pure psychiatric harm which he actually suffered. The requirements for a duty of care to be owed to a primary victim are: primary victims are owed a duty of care in relation to their pure psychiatric harm, provided the risk of physical injury was foreseeable; for primary victims it is not necessary for the risk of psychiatric harm to be foreseeable. The case of Dulieu v White & Sons 2 KB 669 provides a good example of the application of the test for duty of care in the case of a primary victim. The claimant was a pregnant barmaid working in a public house. The defendants negligently drove a horse-​drawn van so that it crashed into the public house. The claimant suffered severe shock leading to miscarriage. It was held that the defendants did owe a duty of care to her. The claimant suffered a shock without any physical impact on her. Thus, she suffered pure psychiatric harm. She suffered a shock-​induced physical condition, the miscarriage. She was a primary victim because she reasonably feared for her own physical safety. The defendants’ negligence had created a foreseeable risk of physical harm to the claimant. 104  Negligence: Economic Loss and Psychiatric Harm Therefore they owed her a duty of care, even though the actual harm which she in fact suffered was pure psychiatric harm rather than a physical injury. You should have noticed that this case was decided in 1901. In fact, this was before the courts had really developed the idea of primary and secondary victims. However, with hindsight, we can see that the current tests may be applied to explain the result in this case. So, to summarise, we can say that a defendant owes a primary victim a duty of care not to cause pure psychiatric harm, provided that the risk of physical injury was foreseeable (although it did not in fact occur). You will see that the test for duty in relation to secondary victims is much more stringent, and we consider this below. 4.3.5 Secondary victims A secondary victim is someone less closely involved in the incident caused by the defendant’s negligence. Example A train company negligently causes a major rail crash. Several hundred bystanders suffer shock and psychiatric illness as a result of witnessing the events. Everyone who witnesses the event and suffers psychiatric harm as a result can be described as a secondary victim. However, not all secondary victims are owed a duty of care. Some individuals may suffer psychiatric harm as a result of the defendant’s negligence but the defendant will not be required to compensate them. In relation to those victims, the defendant will escape the consequences of their negligence. This is because the courts narrow down the number of secondary victims to whom a duty of care is owed. The first limitation on whether a secondary victim will be owed a duty of care is considered above. In order to be owed a duty of care, the secondary victim must have suffered a medically recognised psychiatric illness, or shock-​induced physical condition. This will rule out, for example, those who have suffered only distress or anxiety, etc. This requirement is the same for both primary and secondary victims. There are additional requirements which narrow still further the number of secondary victims to whom a duty is owed. These requirements were handed down in the case of Alcock v Chief Constable of South Yorkshire Police 4 All ER 907. This case is the key authority on the rules relating to secondary victims. The case of Alcock v Chief Constable of South Yorkshire Police arose from the Hillsborough football stadium disaster. This was a tragic event in which a large number of Liverpool Football Club supporters were killed or injured. The incident was caused by the negligence of police officers in allowing the stadium to become overcrowded. As a result of the overcrowding, spectators in one part of the ground were crushed. Claims were brought by relatives of the victims who had witnessed the events and claimed in respect of pure psychiatric harm suffered as a result. The defendants admitted negligence but denied that a duty of care was owed to these particular victims. The claimants were not allowed to recover damages for the psychiatric harm they suffered. The court held that, in the circumstances, no duty of care was owed to them. 105 Tort The House of Lords in Alcock set down the current test to determine whether a duty of care is owed for pure psychiatric harm suffered by a secondary victim. All of the following requirements must be satisfied: Foreseeability of psychiatric harm. It must be reasonably foreseeable that a person of normal fortitude in the claimant’s position would suffer a psychiatric illness. Proximity of relationship. The claimant must have a close relationship of love and affection with the person who is endangered by the defendant’s negligence. Proximity in time and space. The claimant must be present at the accident or its immediate aftermath. Proximity of perception. The claimant must see or hear the accident, or its immediate aftermath, with their own senses. These requirements are often referred to as the ‘Alcock control mechanisms’. The effect of the test in Alcock is to impose requirements which will narrow down the number of secondary victims to whom a duty of care is owed. Each of these requirements is considered in more detail below. (The Supreme Court in Paul and another v Royal Wolverhampton NHS Trust UKSC 1 decided that a person who suffered psychiatric injury from witnessing the death of a close relative, or its immediate aftermath, from a medical condition which a doctor or health authority had negligently failed to diagnose and treat was not entitled to claim damages as a secondary victim.) 4.3.5.1 Secondary victims: foreseeability of psychiatric harm It helps to understand the requirement for foreseeability of psychiatric harm for secondary victims to compare the position for primary victims. Primary victims are closely involved in the accident caused by the defendant’s negligence. Therefore a duty of care is owed to them in relation to pure psychiatric harm, provided only that some physical injury to them was foreseeable (even though it does not in fact occur). The courts have held that in relation to primary victims it is not necessary for the risk of pure psychiatric harm to be foreseeable. In essence, the courts have taken the view that no distinction should be made between physical injury to a primary victim and psychiatric injury to a primary victim. By contrast, if the claimant is only a secondary victim they are not as closely involved in the accident. They have not been placed in any danger themselves. Their position is clearly different from that of someone who has been exposed to the risk of physical harm. The courts recognise this difference by requiring a secondary victim to demonstrate that psychiatric injury was a foreseeable consequence of the defendant’s negligence. In essence, the court should ask: ‘If an ordinary person in the claimant’s position witnessed these events, is it foreseeable that they would suffer a psychiatric injury?’ Example A mother is watching her child at play when the child is struck by a car negligently driven by the defendant. The mother suffers psychiatric harm. The court will ask: ‘Would any normal person have suffered psychiatric harm in those circumstances?’ Clearly, the answer here is likely to be yes. Thus, the mother, as claimant, would satisfy the first requirement of the Alcock test. The first element of the test for duty of care to a secondary victim is: Was it reasonably foreseeable that a person of normal fortitude in the claimant’s position would suffer a psychiatric illness? 106  Negligence: Economic Loss and Psychiatric Harm 4.3.5.2 Secondary victims: proximity of relationship The second requirement under Alcock is that the claimant must have a close relationship of love and affection with the person who is endangered by the defendant’s negligence (the ‘immediate victim’). The House of Lords stated that: Where a relationship of parent/​child, husband/​wife and fiancé/​fiancée exists, there is a presumption of a relationship of close ties of love and affection. If the defendant knows that, although the claimant falls into a category where love and affection can be presumed, the claimant was not in fact very close to the victim, the defendant can adduce evidence to the court to rebut the presumption of love and affection. If the claimant falls outside the categories where close ties of love and affection can be presumed, the claimant must prove that a close relationship of love and affection existed. 4.3.5.3 Secondary victims: proximity in time and space and proximity of perception The requirements under Alcock are that: the claimant must be present at the accident or its immediate aftermath; and the claimant must see or hear the accident, or its immediate aftermath, with their own senses. It is convenient to examine these two tests together since there is overlap between them. (It is difficult to envisage how a claimant could see or hear an event with their own senses without being present.) Proximity in time and space In McLoughlin v O’Brian 2 All ER 298, one of the claimant’s children was killed and her husband and other two children were severely injured in a road accident. The incident was reported to the claimant while she was at her home, some two miles from the scene. The claimant arrived at the hospital about an hour after the accident. At the hospital the claimant saw the extent of the injuries to her family as they were still in the same condition they had been at the scene of the accident, ie covered in oil and mud. As a result, she suffered severe and persisting psychiatric harm, for which she claimed damages. The House of Lords held that the claimant could recover for her pure psychiatric harm. The decision in McLoughlin can be compared with the position of one of the claimants in the case of Alcock. Mr Alcock identified his brother-​in-​law in the mortuary eight hours after the incident. Mr Alcock did not satisfy the test laid down in McLoughlin because the identification could not be described as part of the ‘immediate aftermath’. To satisfy the test of proximity in time and space, the claimant need not actually be present at the time of the incident. However, they must at least come upon the immediate aftermath. Proximity of perception McLoughlin considered the question of how the event must be perceived by the claimant. It was decided that: the claimant must have personally perceived the event ‘through sight or hearing of the event or of its immediate aftermath’; a claimant cannot be compensated if the event is communicated by a third party. 107 Tort In Alcock, some of the claimants were not physically at the football game but went on to suffer psychiatric harm as a result of what they saw during the live television broadcasts of the tragic events. These claimants did not succeed in showing that a duty of care was owed to them. This meant that their claim for damages failed. The House of Lords held it was important that, although the claimants had watched live TV pictures of events at the stadium, they were not able to see pictures showing the suffering of identifiable individuals. The court decided that what the claimants did see was not equivalent to seeing and hearing the event or its immediate aftermath. This aspect of the Alcock case therefore illustrates the final part of the test for duty of care: The claimant must see or hear the accident, or its immediate aftermath, with their own senses. If broadcasters were to break their own code of ethics and transmit images of recognisable individuals’ suffering, this might amount to a new intervening act (novus actus interveniens). Thus, this could break the chain of causation between the defendant’s negligent act and the claimant’s loss. In Alcock, it was also noted that a live television broadcast might be sufficient to render the tortfeasor liable to claimants in shock if the ‘impact of the simultaneous television pictures would be as great, if not greater, than the actual sight of the accident’. The example given in Alcock was of ‘a special event of children travelling in a balloon, in which there was media interest, particularly amongst the parents, [showing] the balloon suddenly bursting into flames’. 4.3.6 Rescuers Now that we have considered the general position in relation to primary and secondary victims, we need to look at how those rules apply in the particular situation of rescuers. The leading authority on the issue is the decision of the House of Lords in White v Chief Constable of the South Yorkshire Police 1 All ER 1. White v Chief Constable of the South Yorkshire Police 1 All ER 1 arose out of the Hillsborough disaster. The claimants in this case were police officers. In each instance the police officers claiming damages in White had suffered pure psychiatric harm. However, the police officers had not gone into the actual area of danger during the incident at the football ground. Although they were involved in rescue activities, they were never at risk of physical injury. The claimants’ pure psychiatric harm came from being exposed to shocking events and scenes during the course of their employment as police officers and while they were acting as rescuers. The claimants’ argument was that they should enjoy a special status. A duty of care should be owed to them in respect of pure psychiatric harm either because they were acting as rescuers, and/​or because they were in the course of their employment. The claimants’ cases failed. The House of Lords did not accept that being an employee conferred a special status and that a duty of care should be owed to the officers in respect of pure psychiatric harm simply because that harm was suffered during the course of their employment. The House of Lords also did not accept that being a rescuer conferred a special status and that a duty of care should be owed to the officers in respect of pure psychiatric harm simply because that harm was suffered during the course of acting as a rescuer. 108  Negligence: Economic Loss and Psychiatric Harm The House of Lords’ decision in White means that rescuers (and those acting in the course of their employment) should be treated in the same way as any other victim who suffers only pure psychiatric harm. Therefore: If a rescuer has been in the actual area of danger, they are a primary victim. A duty of care is owed to a primary victim, provided there is a foreseeable risk of physical injury (even though the injury they in fact suffer is pure psychiatric harm). If a rescuer has not been in the actual area of danger so that they have not been exposed to any risk of physical injury, they will be classed as a secondary victim. They will be owed a duty of care only if they meet all of the tests laid down in Alcock. The tests in Alcock are designed to reduce the number of secondary victims to whom a duty of care is owed. A professional rescuer might well be able to meet the first test: that it was reasonably foreseeable that a person of normal fortitude in the claimant’s position would suffer psychiatric harm. (There is no special rule which says that professional rescuers are expected to be more than usually resistant to shocking events. Police officers, ambulance staff and firefighters are not expected to display more than normal fortitude.) It is also likely that a rescue situation would mean that the two tests of proximity in time and space and proximity of perception are met. However, it is unlikely that the professional rescuer will have any ties of love and affection with the immediate victims whom they are assisting. Thus, the requirement for proximity of relationship is unlikely to be met. A case which is a very good illustration of a successful claim by a rescuer for pure psychiatric harm is Chadwick v British Railways Board 2 All ER 945. In this case two trains had crashed, resulting in 90 people dying. Mr Chadwick lived near to the disaster and went to help. As he was of small stature, he was asked to crawl into the debris and give injections to the wounded. He was involved in the rescue for many hours. He did not suffer physical injury, but as a result of his experiences he suffered pure psychiatric harm. It was held that a duty of care was owed to him. From the facts it is clear that Mr Chadwick was involved in the incident as a primary victim. He was clearly in the area of danger and at risk of physical injury. 4.3.7 Pure psychiatric harm: breach of duty and causation of damage The discussion above considers whether a duty of care is owed in relation to pure psychiatric harm –​in relation to primary and secondary victims and rescuers. It is important to remember that, in every claim for negligence, the claimant needs to demonstrate not only that a duty of care was owed to them, but also that the duty was breached and that the breach caused the damage from which the claimant has suffered. Often, a defendant in a case of pure psychiatric harm does in fact admit that they fell below a reasonable standard of care and so was in breach of duty. Instead the argument centres on whether or not a duty was owed. Also, sometimes causation of damage is assumed for the sake of argument, so that the court is free to concentrate on the question of whether or not a duty is owed. In this kind of case, if the court was satisfied on duty, the claimant would then have to go on to actually prove the damage. In relation to damage, there is one particular issue that needs to be considered in more detail. This relates to remoteness of damage. For damage to be recoverable in the tort of negligence, it must not be too remote. Damage is too remote if it is not a reasonably foreseeable consequence of the defendant’s negligence. However, a proviso to this requirement is the ‘egg-​shell skull’ rule. The egg-​shell skull rule basically means that the defendant must take their victim as they find them. It is relevant, for example, where a claimant suffers from some pre-​existing characteristic 109 Tort which makes them more vulnerable, so that the damage they suffer is greater than could reasonably have been expected. Under the ‘egg-​shell skull’ rule, the claimant only needs to show that some damage of the kind they suffered was reasonably foreseeable. Provided this is satisfied, they can recover damages for the full extent of the loss which they actually suffer –​it does not matter that the full extent of their loss could not reasonably have been foreseen. This issue is relevant to the Alcock test for secondary victims above, and whether it is reasonably foreseeable that a person of normal fortitude in the claimant’s position would suffer a psychiatric illness. What if the claimant is not a person of normal fortitude? What if they have an ‘egg-​shell’ personality, in that they are particularly vulnerable to psychiatric harm? In relation to secondary victims, the rules on duty of care and remoteness of damage work together as follows. In order to show that a duty is owed to them, the claimant must still get over the first hurdle of foreseeability. So, they must show that it was reasonably foreseeable that a person of normal fortitude in the claimant’s position would suffer a psychiatric illness. (They must then establish breach of duty.) However, once the claimant has done this, they can rely on the ‘egg-​shell skull’ rule in relation to causation of damage. So, they can recover damages for all psychiatric injury they suffer. This is so even if it is greater in extent than could reasonably have been foreseen (and so greater than would have been expected in a person of normal fortitude). In other words, defendants must take their victims as they find them, even in cases of psychiatric injury. The ‘egg-​shell skull’ rule also applies in the normal way to primary victims. In Page v Smith (see 4.3.4), the claimant was particularly vulnerable because they suffered from a pre-​existing condition. This condition was exacerbated by the accident. The extent of the pure psychiatric harm which the claimant suffered from a simple road accident was more than anyone could reasonably have foreseen. Nevertheless, the claimant recovered damages for the full extent of his psychiatric injury. SUMMARY In this chapter you have been concerned with the first element of a claim in negligence: duty of care. You have studied the special duty of care rules which apply in the limited duty situations of pure economic loss and pure psychiatric damage. First you looked at economic loss. You saw that it is necessary to distinguish between consequential economic loss and pure economic loss. This is because, whereas the ordinary rules of negligence apply to consequential economic loss, special rules for duty of care apply to pure economic loss. Now that you have studied this chapter, you should be able to define and recognise pure economic loss as: economic loss caused by acquiring a defective item of property; and economic loss unconnected to the claimant’s personal injury or physical damage to the claimant’s property. You are now in a position to explain and apply the special rules for duty of care which apply in the limited duty situation of pure economic loss. Next, you studied psychiatric damage. You saw that it is necessary to distinguish between consequential psychiatric damage and pure psychiatric damage. This is because, whereas the ordinary rules of negligence apply to consequential psychiatric damage, special rules for duty of care apply to pure psychiatric damage. 110  Negligence: Economic Loss and Psychiatric Harm Now that you have studied this chapter, you should be able to define and recognise pure psychiatric damage as psychiatric damage suffered without any physical impact or injury to the claimant. You are now in a position to explain and apply the special rules for duty of care which apply in the limited duty situation of pure psychiatric damage. You should now be able to recognise the importance of the rules you have studied in this chapter to lawyers in practice. We have frequently reminded ourselves that a lawyer who is acting for a defendant in a negligence claim needs to consider whether or not the claimant can establish all the elements of a claim. You are now able to explain those elements: duty of care, breach of duty and causation of damage. When a lawyer analyses a claim in this way, often it will be clear that a defendant’s conduct has fallen below a reasonable standard of care, and that this has caused harm to the claimant. Thus, if a duty of care is owed, breach of duty and causation of damage can both be established. Nevertheless, a defendant may be able to argue that they have no liability to the claimant because a duty of care is not owed. Thus, in an appropriate case, lawyers can use the rules on pure economic loss and pure psychiatric damage to argue that no duty of care is owed to the claimant. Where there is no duty of care, there is no claim in negligence. 111 Tort Figure 4.1 Negligence: pure economic loss flowchart What type of economic loss has the claimant suffered? Pure economic loss. The general Consequential economic loss. rule is that there is no duty of care Consider a claim in negligence owed by the defendant to the claimant. in the normal way Unless an exception applies, there is no liability in negligence Is there a ‘special relationship’ between the claimant and the defendant that gives rise to a duty of care? NO. There is no liability in Negligent statements Did the defendant negligence – Did the defendant assume a assume a responsibility responsibility to the claimant? to the claimant – Did the defendant know the in situations purpose for which the advice such as the cases of was required? – Spring ? – Did the defendant know that the – White ? advice would be communicated – Henderson? to the claimant? If YES, – Did the defendant a duty of care know that the claimant was is owed likely to act on the advice Consider without independent enquiry? breach of duty – Was the advice acted upon by the claimant to their detriment? – Was it reasonable for the claimant to rely on the defendant for advice? IF YES to all the above questions, a duty of care is owed. Consider breach of duty Was the defendant in breach of duty? YES. Consider NO. There is causation no liability in negligence Did the defendant’s breach cause damage to the claimant? YES. Consider defences NO. There is no liability in Was there a notice excluding liability? negligence IF YES — were reasonable steps taken to bring the exclusion notice to the claimant’s attention before the tort was committed? — did the wording of the notice cover the loss suffered by the claimant? IF YES — consider the statutory control of exclusion notices under UCTA 1977 or CRA 2015 112  Negligence: Economic Loss and Psychiatric Harm Figure 4.2 Negligence: pure psychiatric harm flowchart What type of psychiatric harm has the claimant suffered? Pure psychiatric harm Consequential psychiatric Stress at work. harm. Consider a Consider claim in negligence in employer liability the usual way Has the claimant suffered a medically recognised psychiatric condition or a shock induced physical condition? YES. Consider whether the claimant is NO. There is no a primary victim or a secondary victim liability in negligence Primary victim: was the claimant in the actual area of danger or reasonably believed that they were in danger? YES. Was the risk of NO. Can the claimant physical injury reasonably satisfy the Alcock test foreseeable? for secondary victim: – Is it reasonably foreseeable that a person of normal fortitude YES. A duty of NO. Consider whether in the claimant’s position would care is owed. the claimant was a suffer a psychiatric illness? Consider breach secondary victim – Does the claimant have a of duty close relationship of love and affection with the person who is endangered by the defendant’s negligence? – Was the claimant present at the accident or its immediate aftermath? – Did the claimant see or hear the accident, or its immediate aftermath, with their own senses? If YES to all elements If NO to any elements of the Alcock test then of the Alcock test a duty of care is owed. then there is no Consider breach of duty liability in negligence Was the defendant in breach of duty? YES. Consider causation NO. There is no liability in negligence Did the defendant’s breach cause damage to the claimant? YES. Consider NO. There is defences no liability in negligence 113