Tort - Negligence: Economic Loss & Psychiatric Harm PDF

Tort -- Negligence: Economic Loss and Psychiatric Harm **Pure Economic Loss**: - General rule: a defendant does not owe any duty of care to a claimant not to cause economic loss -- where a claimant suffers damage which is classes as pure economic loss, that loss will not be recoverab...

Tort -- Negligence: Economic Loss and Psychiatric Harm **Pure Economic Loss**: - General rule: a defendant does not owe any duty of care to a claimant not to cause economic loss -- where a claimant suffers damage which is classes as pure economic loss, that loss will not be recoverable **Economic loss caused by acquiring a defective item of property** - Murphy v Brentwood DC 1990 -- claimant bought a newly constructed house, 11 years later found out the foundations were dangerous, eventually went to sell it and sold it for £35,000 less than if it was structurally sound -- sued Brentwood District Council for negligently approving the foundation plans -- House of Lords held that the loss suffered by the claimant was pure economic loss -- not recoverable - Key points: defects in the house had become apparent before they cause any physical damage to any person or property - A claimant would incur the cost of repairs or suffer a reduction in values of the property -- court held that this amounted to pure economic loss -- the claimant had simply acquired something which was less valuable than the price they had paid for it - 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 duty to arise - If personal injury or physical damage occurs, more likely to have not just suffered pure economic loss **Economic loss unconnected to the claimants personal injury or physical damage to the claimants property** - Economic loss unconnected to the claimants personal injury or physical damage to the claimants property can be either: - Economic loss caused by damage to the property of a third party - Spartan Steel & Alloys Ltd v Martin & Co (Contractors) 1973 - Could not claim for the four future melts as they were owned by a third party-- claimant was owed a duty of care for damage to property which it did own, and financial loss consequent on that damage (product in the furnace and loss of profit) - NOT pure economic loss: If a defendant negligently damages the claimants 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 - 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 - Economic loss caused where there is no personal injury or physical damage to property **Economic loss causes where there is no personal injury or damage to property: actions** - Falls within the general rule that there is no duty of care for pure economic loss - Weller & Co v Foot and Mouth Disease Research Institute 1966 - Defendant occupied premises where it carried out experiments concerning foot and mouth disease - outbreak disease and cattle in vicinity because infected and two cattle markets closes. - The claimant claimed for damages for loss of business against the defendant in negligence for allowing virus to escape - Court 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 and therefore classified as pure economic loss **Economic loss cause where there is no personal injury or damage to property: Statements** - General rule remains - Exception: special relationships - Cases where the court is able to find that there an especially close relationship between the claimant and the defendant -- may be described broadly as situations in which the defendant has assumed a responsibility towards the claimant - Hedley Byrne & Co Ltd v Heller & Partners Ltd - House of Lords held 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 - \*\* in this case -- House of Lords found that while there was a duty of care 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 - Established two elements to a special relationship: - An assumption of responsibility by the defendant - Reasonable reliance by the claimant - Caparo Industries plc v Dickman 1990 - Expanded upon the 'special relationship' test - Four criteria to be satisfied - 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 - James McNaughton Papers Group Ltd v Hicks Anderson & Co 1991 - Case followed Caparo -- applied this test to determine liability - Court of Appeal decide that a company accountant owed no duty of care to a prospective takeover bidder who relied on the accountant's hurriedly prepared draft accounts. The 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 - Morgan Crucible Co plc v Hill Samuel Bank Ltd 1991 - 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 bidders 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 - General rule: usually no duty of care will be owed in respect of advice given in a social situation because there is no assumption of responsibility -- confirmed in the case Chaudhry v Prabhakar 1989 - While Chaudhry predates Caparo, it nevertheless illustrates the issues to be considered in applying the Caparo test - Court stated generally a durt 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 - Held that the defendant did not 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 judgement. 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 - Overall test derived from both Hedley Byrne and Caparo: - 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 - When the test is applied there is likely to be some overlap between the different parts of it **Economic loss caused where there is no personal injury or damage to property: extension** - 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 claimants - Spring v Guardian Assurance plc 1994 -- the claimants 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 - 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 (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 - White v Jones 1995 - 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 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 inheritance - This case can be explained on the behalf that the solicitor undertook a responsibility towards the potential beneficiaries (as well as to the testator) - 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 White v Jones it is possible to see the extension of the Hedley Byrne principle from negligent statements to pure economic loss cause in the negligent provision of professional services, where there has been an assumption of responsibility - Henderson v Merrett Syndicates Ltd 1994 - 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 contact with the defendant for the provision of profession 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 **Exclusion of liability** - Two requirements to satisfy before the defendant can rely on exclusion notice - Reasonable steps must have been taken to bring the exclusion notice to the claimants 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 - Hedley Byrne -- defendant was able to escape liability by relying on a defence - Used a disclaimer: the information was said to have been supplied 'without responsibility' -- However since then the situation has changed - UCTA 1977 applies to claims in negligence - Applies when: - It is not possible for the defendant to exclude liability for death or personal injury - It is not possible for the defendant to disclaim liability for negligent acts causing other damage - S 1(1)(b): the Act is said to apply 'to any common law duty to take reasonable care or exercise reasonable skill' - S 2: is relevant to the defendant ability to exclude liability for negligent acts or omissions (does not apply to consumer contracts or consumer notices) - For UCTA to be applicable the defendant must be acting in a course of business - S 2(1): defendant cannot exclude liability for death or personal injury resulting from negligence - S 2(2): Reasonableness test -- 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 - S 11 -- reasonableness is defined - S 11(3) -- is the relevant provision as far as negligence is concerned -- deals with the effect of a non-contractual exclusion notice - 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 - Circumstances are to be looked at as they were at the time when liability would have arisen - 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 - For CRA 2015 to be applicable the defendant must be acting as a trader (ie for purposes relating to that persons trade, business, craft or profession) and the claimant must be acting as the consumer (for the purposes that are wholly or mainly outside the individuals trade, business, craft of profession) - S 65(1): defendant cannot exclude liability for death or personal injury resulting from negligence - S 62: fairness -- 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 fairness - Similar considerations to s 11 of the UCTA 1977 but also includes requirement of good faith, focusing on any significant imbalance in the parties rights and obligations to the detriment of the consumer - Smith v Eric Bush; Harris v Wyre Forest District Council 1989 - House of Lords found that a duty of care was owed by the defendant valuers/surveyors to the house purchases. The valuations were given in the course of business. The House of Lords decided that the UCTA 1977 governed the use of exclusion notices in these cases - Smith v Eric Bush -- the exclusion notice said that neither the building society nor the surveyor warranted that report and valuation would be accurate and. That the report was being supplied without any assumption of responsibility - 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 exclusion 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 - 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 - In conclusion - Whether a disclaimer is reasonable or not depends on all the circumstances of the case -- it is impossible to produce an exhaustive lsit of factors which would be considered in decided whether a disclaimer is reasonable or not -- similar conclusion when looking at fairness under CRA 2015 **Pure Psychiatric Harm** - 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 sufficiently proximate relationship between a claimant who has suffered pure psychiatric harm and a defendant who may have caused this type of harm - General rule: a defendant does not owe any duty of care to a claimant not to cause pure psychiatric harm - Exception: if a claimant has been closely enough affected by the defendants negligence than a duty of care is owed to them **Pure Psychiatric Harm defined** - Defining feature of pure psychiatric harm is that it is caused without any physical impact or injury to the claimant - Types of psychiatric harm which might be caused without physical impact can include a very wide range of illnesses and conditions -- a defendants potential liability could be indefinite **Pure psychiatric harm -- limiting factors for duty of care** - 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 - 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 (eg. miscarriage or heart attack) - The requirement that the claimants 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 2024) - 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 simply worry and anxiety **Pure Psychiatric harm -- different types of victims** - Page v Smith 1995 -- provided the terminology of how to categorise the different types of victims - Primary Victims - Someone who was actually involved in the incident - Was in the actual area of danger - Reasonably believed that they were in danger - Secondary Victims - Someone who was not involved in the incident in the same way - Witnesses injury to someone else - Fears for the safety of another person - Primary Victims - Step 1: pure psychiatric harm (suffered with