Pure Economic Loss: Rules

[Flash Card 1 of 2]

• general rule: D not owe duty of care to C not to cause pure economic loss (PEL) / loss not recoverable
• limited duty situation / only recover exceptionally / if sufficiently proximate relationship between C & D
• consequential economic loss: if C suffers personal injury or property damage / recoverable / PEL: loss not consequential from personal injury or damage to property

Damage to a third party's property

• C suffers PEL / due D negligently damaging 3rd party's property / no proximity D & A / no duty owed / PEL not recoverable
• factory power cut / D damaged 3rd party power cable / recover: physical property damage (melt) & consequential (melt loss profit) / not: profit of potential production (PEL) / policy limit D's liability (Spartan Steel v Martin [1973])

No physical damage

• PEL / no damaged property / not recoverable
• cattle market closure / PEL / not recoverable (Weller v Foot & Mouth Disease Research Institute [1966])

bits of law

Pure Economic Loss: Rules

[Flash Card 2 of 2]

Defective goods or property

• general rule: defective goods claim / under contract law / not tort
• flats structural damage / council negligent approval plans & inspection / HoL: recoverable / material damage to property / controversial: no contract / traditional: property damage only existing property & here original defective (Anns v Merton LBC [1978])
• defective flooring new factory / negligent sub contractor / recover: confirmed Anns v Merton LBC [1978] property damage definition (Junior Books v Veitchi [1983])
• decisions criticised: floodgates even if D & C no relationship / tort action interferes & undermines contract law

Murphy v Brentwood DC [1991]

• new build house / defective foundation design / repair: £45 000 / sold unrepaired £35 000 less market value / council negligently approved plans
• HoL: not recover / defective when acquired so PEL / overrules Anns v Merton LBC [1978]
• building structural damage / not apply complex structure theory: if component defective & damages whole property then classed as property damage
• Lord Bridge: .. in the absence of a special relationship of proximity imposing on the tortfeasor a duty of care to safeguard the plaintiff from economic loss... / distinguished Junior Books v Veitchi [1983]: exception satisfied / special relationship due to discussions
• PEL for defective goods / recover in tort / only if special relationship between C & D (duty of care owed)

bits of law