Tort Week 5 - Pure Economic Loss in Negligence

This week’s work deals with when compensation for the tort of negligence is considered to be the correct response to pure economic loss caused to the plaintiff by the defendant. You will have gathered from Week 2 that English law has had problems dealing with cases of pure economic loss. A useful recent trend has been to emphasise that pure economic loss cases can be sub-divided into categories where different policy issues might hold sway. Professor Feldthusen has suggested the following five categories: 1. Independent liability of Statutory Public Authorities; 2. Negligent Misstatement; 3. Negligent Performance of a Service; 4. Negligent Supply of Shoddy Goods or Structures; 5. Relational Economic Loss. So far English judges have not followed this analysis. Indeed the most recent caselaw suggests that categories 2 and 3 overlap to some extent, and there is no liability for 1, 4 or 5. Nevertheless we should still heed the lesson that the factors which make pure economic loss cases difficult may not be the same in all cases.

In approaching this week’s work you might want to bear the following questions in mind:

I. What is the difference between "economic loss" and "property damage"? Are there different types of "pure economic loss", some of which are more worthy of protection than others?

II. What is the difference between "statements" and "conduct"? What is the difference between providing a service and providing goods? Should these differences be legally significant?

III. What does it mean to say that a relationship is "best governed by contract"? Does it always mean the same thing? What is the "privity fallacy"?

IV. What are the policy reasons for restricting recovery of pure economic loss in negligence? Are these reasons the same in each category of cases?

V. What is the role of the ‘assumption of responsibility’ concept? Does it provide any guidance?

Core Reading

Winfield & Jolowicz , pp. 124-153 (Not really enough)

Markesinis & Deakin, pp. 88-123, 211-216

**4 articles by Stapleton: 107 LQR 46, in Birks (ed), Frontiers of Liability, 111 LQR 301, 58 MLR 820

**Hedley Byrne v Heller [1964] AC 465

**Spartan Steel v Martin [1973] QB 27; 89 LQR 10

Anns v Merton LBC [1978] AC 728

*Junior Books v Veitchi [1983] 1 AC 520

*The Aliakmon [1986] AC 785, and [1985] QB 350, at 389-401 [NB Carriage of Goods by Sea Act 1992]

D&F Estates v Church Commissioners [1989] AC 177

*Smith v Eric Bush [1990] 1 AC 831

**Caparo v Dickman [1990] 2 AC 605; 54 MLR 739

**Murphy v Brentwood [1990] 2 All ER 908, HL

**Spring v Guardian [1994] 3 All ER 129, HL

**Henderson v Merrett [1994] 3 All ER 506, HL

**White v Jones [1995] 1 All ER 691, HL

*Invercargill CC v Hamlin [1996] 1 All ER 756, PC

**Williams v Natural Life Health Foods [1998] 1 WLR 830, HL

McFarlane v Tayside [1999] 3 WLR 1301, HL

Additional Reading

i. Mis-statement Cases

MHLG v Sharp [1970] 2 QB 233

Mutual Life v Evatt [1971] AC 793

Esso v Mardon [1976] QB 801

Morgan Crucible v Hill Samuel [1991] Ch 295

Gran Gelato v Richcliff [1992] 1 All ER 865

*Nicholas H [1995] 3 All ER 307, HL

ii. Service Cases

*White v Jones, *Henderson v. Merrett, supra

Aiken v Stewart Wrightson Members’ Agency Ltd [1995] 3 All ER 449

Carr-Glynn v Frearsons (a firm) [1998] 4 All ER 225

*Gorham v British Telecommunications [2000] 1 WLR 2129

iii. Shoddy Goods Cases

Junior Books v Veitchi [1983] 1 AC 520

Muirhead v Industrial Tank [1986] QB 507

Aswan v Lupdine [1987] 1 All ER 135

Simaan General Contracting v Pilkington Glass (No. 2) [1988] QB 758

Hamble Fisheries v Gardner, ‘The Rebecca Elaine’ [1999] 2 Lloyd’s R 1

iv. Defective Buildings - see last week’s list

v. Relational Cases

Cattle v Stockton Waterworks (1875) LR 10 QB 453

Weller v Foot & Mouth Disease Research Institute [1966] 1 QB 569

Reid v Rush & Tompkins [1989] 3 All ER 228

Caltex / Willemstad (1976) 136 Commonwealth LR 529 [Australia]

Canadian National Railway v Norsk Pacific (1992) 91 Dominion LR (4th) 289 [Canada]

*Perre v Apand (1999) [High Court of Australia, see Week 2 list]

vi. Cases at the Contractual Interface (NB Henderson)

Tai Hing Cotton v Liu Chong [1986] AC 80

Simaan, supra

Whittaker (1996) 16 Ox JLS 191

Additional Articles

Bishop 96 LQR 360; 2 Ox JLS 1 [Economic analysis of Mis-statement]

Markesinis 103 LQR 354 [Comparative]

Cooke 107 LQR 46 (1991)

Cane, Tort Law and Economic Interests, (2nd ed.) Ch. 10

Strategic Guidance: Ensure that you know the core material well. There is no excuse for not having read the recent House of Lords cases. To answer the essays you should also have made attempts to look at (as a bare minimum) some of the additional material under i ii, & v.

Essays: 1995. What is the role played by assumption of responsibility in cases of negligence causing economic loss? Does the meaning given to assumption of responsibility provide a convincing rationale for those instances in which the courts are willing to impose tortious liability for economic loss and those where they are not?

1991. "Within the limited category of what, for the sake of convenience, I may refer to as ‘the negligent statement cases’, circumstances may differ infinitely and, in a swiftly developing field of law, there can be no necessary assumption that those features which have served in one case to create the relationship between the plaintiff and the defendant on which liability depends will necessarily be determinative in another case." (Lord Oliver in Caparo v Dickman) Discuss.

Please write one page essay-plans to the following two questions.

(a) Lords Goff and Browne-Wilkinson use the phrase "assumption of responsibility" differently in White v. Jones. Will either version prove useful in deciding when a defendant owes a duty of care?

(b) Should the House of Lords amend the law on liability for economic loss suffered by a claimant as a result of damage negligently caused by the defendant to a third party’s property?