Flashcards
Tort - Pure Economic Loss Essay
Cards in this deck (24)
- 1Intro - Negligence is an unintentional tortNegligence is an unintential tort. Torts that arise from intentional acts bring with them an intuitive mechanism for allocating responsibility. DoC is a mechanism for limiting the scope of liability in the absence of intention.
- 2What are the implications of this on pure economic loss?Traditionally damages are not available for pure economic loss for reasons of policy.
- 3Policy considerations for not finding a duty for PEL under negligenceCourts have been concerned that finding a duty of care for pure economic loss might lead to an indeterminate scope of liability for the defendant, known as crushing liability. In addition, that it could lead to an increase of litigation that would place an undesirable burden on the courts, known as floodgates.
- 4Legal reasons for not finding a duty for PEL in negligence.Courts have been reluctant to allow claims for pure economic loss to be pursued under negligence, as the law of contract and various economic torts were thought to be better suited to such claims.
- 5Negligent MisstatementAn exception to this is negligent misstatement following Hedley Byrne v Heller
- 6Background to Hedley ByrneDerry v Peek [1889] held that liability for pure economic loss could only be found where there was fraudulent misstatement under the tort of deceit. Nocton v Lord Ashburton [1914] held that liability for negligent misstatement might be available in a feduciary or contractual relationship (confirmed in Candler v Crane [1951]). A duty of care was first recognised for negligent misstatement by Hedley Byrne v Heller [1964].
- 7Facts of Hedley ByrneHedley Byrne concerned a reference given to the bank of an advertising agency by the bank of a client, confirming that the client was financially solvent.
- 8Finding in Hedley ByrneA duty was found in principle, however, on the facts, liability was excluded by a disclaimer.
- 9Intro to details of judgementFollowing Hedley Byrne, a number of factors fall to be considered in finding a duty of care for negligent misstatement.
- 10Devlin1. Where a party has assumed responsibility for advice given and subsequently relied upon (Lord Devlin)
- 11Reed2. Reliance must be reasonable and foreseeable (Lord Reed).
- 12Morris3. Special skill on the part of the defendant is necessary to find a duty of care (Lord Morris).
- 13How has subsequent case law applied the judgement in Hedley Byrne?The law on negligent misstatement has developed haphazardly. The various factors set out in Hedley Byrne have been applied inconsistently.
- 14How, specifically, have these 3 principle factors been treated in subsequent case law? (to follow)To follow…
- 15Lord Devlin's 'assumption of responsibility'. What does it mean? Various definitions.According to Kit Barker, 'assumption of responsibility' may refer to a choice to act (Caparo v Dickman 1990); a choice to assume responsibility (Williams v Natural Life 1998); or a choice to enter into a particular type of relationship, in which a duty is recognised by law (White v Jones). Not only does the case law not confirm which of these is correct, but the application of these various definitions has been inconsistent and occasionally contradictory.
- 16Williams v Natural LifeFor example In Williams v Natural Life [1998] a defendant managing director was found not to owe a duty of care to a claimant franchisee for financial projections relied upon when entering into a franchise agreement. Lord Steyn reasoned on the basis that there was no direct communication between the parties, and no explicit assumption of responsibility by the defendant.
- 17Smith v BushWilliams can be contrasted with Smith v Bush [1990] in which a defendant surveyor was held to have a duty of care towards a mortgagor with whom he had no direct relationship. The court held that the defendant ought to have known that the claimant would have relied on his advice, even though the defendant made no explicit assumption of responsibility. Lord Griffiths held that assumption of responsibility will be found where the law deems it to exist. In Smith it was found notwithstanding an disclaimer denying liability.
- 18Spring v Guardian / Banco Nazionale v Playboy ClubA similar contrast can be made between Spring v Guardian Assurance [1994] and Banco Nazionale v Playboy Club [2018]. In Spring the court found an assumption of responsibility in the absence of any explicit assumption of responsibility on the part of the defendant towards a third party claimant, whereas in Banco, no assumption of responsibility was found, precisely because no explicit 'mutual consent' was evident on the facts.
- 19Lord Reed: the requirement of reasonable and foreseeable reliance. Cases?Lord Reid’s element of trust or reliance has been a common feature of judgments on cases of negligent misstatement (e.g. Yianni v Edwin Evans [1982]) but is not universal. Exceptions to this rule exist primarily in cases involving wills, in which beneficiaries are third parties to a contractual relationship. In White v Jones [1998] a testator fell out with his beneficiaries, and cut them out of his will. Subsequently the testator decided to reinstate them, but due to the negligence of his solicitors, the change was never made. The court found a ‘special relationship’ between the claimant beneficiaries and defendant solicitors, although it was not possible to show reliance. How can beneficiaries to a will be said to rely on the actions of a solicitor, when they need not be aware at all of their inclusion in a will? It appears that the courts found in favour of the claimant on the basis of proximity and policy, but not on reliance.
- 20Reliance makes no senseReliance is better suited to an analysis of causation than duty. A duty either exists or does not exist at the time the statement is made, whereas reliance occurs after the fact. Foreseeability of reliance is arguably relevant to duty, but factual reliance is not.
- 21Reasonable reliance makes no sense (inc case)It follows therefore that whether or not reliance is reasonable (James McNaughton v Hicks) also cannot be relevant to duty.
- 22Lord Morris's 'special skill on the part of the defendant'. Issues with case examples.The skill and judgment of the defendant has played a role in finding a duty of care, even in cases where the defendant is not in the business of giving advice (e.g. Esso v Mardon [1976]). However, in Chaudhry v Prabhakar the court found a duty on the basis that the defendant had held himself out as holding special skill, even when he did not. Furthermore, in Nationwide v Stevenson, the skill of the claimant was found to negative the imposition of a duty that would otherwise have arisen from the skill of the defendant.
- 23'skill of the defendant' makes no sense for DoC - belongs in another categoryArguably the skill of the defendant is better suited to an analysis of standard of care than duty. A duty can logically exist regardless of the skill of the defendant, what differs is the threshold for finding a breach - a defendant with greater skill could be held to a higher standard, but this need not be relevant to the finding of a duty.
- 24Conclusion - provides a remedy. Balancing policy considerations. Judges are trying to do too much at the first hurdle.Negligence has allowed recovery for pure economic losses where the law at the time did not provide an adequate alternative remedy: privity of contract (White v Jones) and defamation (Spring v Guardian).
The lack of clarity in the law surrounding duty of care and negligent misstatement is often attributed to a desire to balance fairness with concerns about the expansion of liability. However, the uncertainty thereby created, brings with it its own kind of unfairness. In addition, confusion also arises from the tendency of courts to collapse the various elements of tortious liability into the first analytical hurdle.
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- Tort Law Flashcards on Tort - Pure Economic Loss Essay, created by Sam Grimley on 23/07/2019.
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