Lecture notes
Complete Notes on Pure Economic Loss and Pure Psychiatric Harm for Ulaw PgDL
- Module
- Tort
- Institution
- University Of Law (ULaw)
Complete Notes on Pure Economic Loss and Pure Psychiatric Harm for Ulaw PgDL
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Pure Economic Loss and Pure Psychiatric HarmMarch 20, 2023
1 Pure Economic Loss
• Where there is pure economic loss, there is a limited duty situation.
• This means, generally speaking, that a defendant does not owe any duty
of care to a claimant not to cause pure economic loss.
• However, there are exceptions to this general rule.
• Pure economic loss is best understood as being in opposition to conse-
quential economic loss.
• Consequential economic loss refers to a loss that follows from a damage
that has been suffered. Consider the loss of having to repair a shed that
was burnt due to a neighbour’s negligence or the loss in wages due to a
driver’s negligence.
2 Economic Loss Caused by Acquiring a Defec-
tive Item of Property
• Economic loss which is associated with acquiring a defective item of prop-
erty is classed as pure economic loss.
• In Murphy v Brentwood DC [1990] 2 All ER 908, for example, the claimant
failed in their negligence claim because the loss that they suffered was
caused by them acquiring a faulty product, namely a pool.
• However, as soon as a claimant has suffered personal injury or damage to
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.
1
, 3 Economic Loss Unconnected to the Claimant’s
Personal Injury or Physical Damage to the
Claimant’s Property
• Economic loss which is unconnected to the claimant’s personal injury (in-
cluding actionable psychiatric harm) or physical damage to the claimant’s
property is classed as pure economic loss.
• This kind of pure economic loss can be divided into two sub-types.
• One of these sub-types of pure economic loss being the economic loss
caused by damage to the property of a third party.
• The other sub-type of pure economic loss being economic loss caused where
there is no personal injury or physical damage to property.
4 Economic loss caused by damage to the prop-
erty of a third party
• An example of the pure economic loss associated with the economic loss
caused by damage to the property of a third party is my extra hire costs
when your suit is destroyed.
• The case of Spartan Steel Alloys Ltd v Martin Co (Contractors) Ltd
[1973] QB 27 is an authority here.
• The claimants were able to recover the economic loss associated with the
damage to the melt - £368 - and the loss of profit on that melt - £400;
for the melt was the property of the claimants and the profit lost on that
melt was consequential economic loss.
• The claimants, though, were not able to recover the economic loss associ-
ated with the power being cut off for 14.5 hours - £1767; for this economic
loss followed from damage to electricity cables that the claimant’s did not
own. As the electricity cables belonged to the electricity supplier, the
economic loss was classed as being pure economic loss.
• Denning justified this decision on the basis of policy considerations.
• Thus, if you negligently damage my property and cause me loss, there is a
sufficiently close relationship between us. You owe me a duty of care and
I can recover my loss from you. This is not a situation of pure economic
loss.
• And if you negligently damage property belonging to a third party and
cause me loss, there is not a sufficiently close relationship between us. You
do not owe me a duty of care and I cannot recover my loss from you. This
is a situation of pure economic loss.
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