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Torts LWB133 Week 7 Semester 2, 2000. Pure Economic Loss continued. Action in Negligence. Duty Breach Damage. Pure Economic Loss. Category of damage not physical damage not consequential economic loss. Exclusionary Rule. - PowerPoint PPT Presentation
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Torts LWB133 Week 7Semester 2, 2000
Pure Economic Loss
continued...
Action in Negligence
Duty Breach Damage
Pure Economic Loss
Category of damage– not physical damage– not consequential economic loss
Exclusionary Rule
Traditionally no right to recover in negligence for pure economic loss
Recovery no longer excluded– Hedley Byrne v Heller– Caltex Oil v Dredge Willemsdad
No general rule
No general rule which recognises existence of a duty of care to avoid reasonably foreseeable economic loss
Exceptions
Possible to identify a number of exceptions to rule that generally no duty of care owed to avoid foreseeable economic loss– first scenario in which duty found to be owed
• economic loss resulting from negligent misstatement– Hedley Byrne v Heller
– Esanda
– exceptions not limited to cases of loss resulting from negligent misstatement
Reluctance to find duty owed
Policy considerations, for example;– fear of indeterminate liability
• eg Caltex
– inconsistency with community standards re what is ordinarily legitimate in the pursuit of personal advantage
• eg Bryan v Maloney
Establishing a duty
Reasonable foreseeability of economic loss will never be sufficient– compare with physical injury
• eg Deane J in Jeansch v Coffey
Something more will always be required
Pursuit of a General Principle? Judicial attempt to define the something more
unsuccessful, for example;– Anns v Merton London Borough Council
• two stage test
– Proximity• Jaensch v Coffey
• San Sebastian
• Bryan v Maloney
– Incremental/Case by Case Approach• Hill v Van Erp
Where are we now?
Perre v Apand– no uniform approach to establishing a duty of
care in a novel fact case– no general acceptance that pursuit of general
principle was desirable or possible• see eg per Gaudron J at 1194-5
– the law is still developing
Perre v Apand
P - potato growers– grown for export to WA market
D - proved seed to Sparnons on nearby property– seed infected with bacterial wilt
WA legislation prohibited import of potatoes from within 20 K radius of affected property– P could not sell their potatoes in WA
Classification of P’s Loss
P’s property not infected with the disease– no physical damage to person or property of P
Loss suffered was inability to sell potatoes in WA– pure economic loss
Issue for High court
Did the defendant owe a duty of care to the plaintiff to avoid the foreseeable risk of economic loss?
Outcome
All 7 justices allowed the Perre’s claim
Reasoning
Primary policy concerns– indeterminate liability
• High Court concluded this was not a problem here
– concern not to render ordinary business practice tortious
• this was not a issue in this case
– was there a more appropriate remedy?– Insurance not an issue
Four possible approaches to duty issue
the incremental– McHugh, Hayne & Callinan JJ
the legally recognised rights– Gaudron J
the protected interests - “salient features”– Gleeson CJ & Gummow J
the three-stage Caparo– Kirby J
Common Features
Is P vulnerable or dependent on D?– were the plaintiffs otherwise able to protect
themselves?
Was D in overall control of the situation? D’s knowledge
– of the Ps as an ascertained class– of P’s vulnerability
Is there physical/commercial closeness?
Previously decided cases
Economic loss resulting from negligent misstatement
Economic loss resulting from damage to the property of another
Failure of a professional person to perform an undertaking or service properly
Defective buildings
Spartan Steel & Alloys Ltd v Martin & Co
Plaintiff’s claim
damaged material– physical damage
loss of profit on that material – consequential economic loss
loss of profits on further melts– pure economic loss
Caltex Oil v The Dredge ‘Willemstad’
loss suffered by Caltex– oil lost from pipeline
• physical damage
– increased transportation costs• pure economic loss
Oil spill
Dredge
Alternative transport
Limitation on the persons or class of persons to whom duty of care owed for pure economic loss
unanimous decision that duty was owed to Caltex
different reasoning adopted by each member of the court
Reasoning Defendant has knowledge of plaintiff individually not
merely as member of unascertained class– Gibbs and Mason JJ
Sufficient proximity between tortious act and injury– Stephen J
physical effect on the person or property of the plaintiff– Jacobs J
No policy reasons to disallow recovery– Murphy J
Attempts to Apply Caltex
Christopher &Ors v The Motor Vessel “Fiji Gas”– the view of the majority in Caltex was that damages based
upon purely economic loss not connected with damage to the person or property of the plaintiff are not, in general, recoverable
Ball v Consolidated Rutile
25
Failure of a professional person to perform an undertaking or service properly
Does a solicitor who prepares a will owe a duty of care to an intended but disappointed beneficiary?
Hill v Van Erp
Brennan CJ– accepted that practical justice tends in favour of a
remedy
– did not accept that duty arose through extension of principles in Hedley Byrne
– necesary to define the elements additional to mere foreseeability which would allow recovery
• claim only by intended but disappointed beneficiary
• duty owed is in the performance of work in respect of which he owes a corresponding contractual duty to the testator
Dawson J adopted incremental approach something more than reasonable
foreseeability is required to establish a duty of care
• what is sufficient or necessary in one case is a guide to what is sufficient or necessary in another
proximity is result of a process of reasoning; not the process itself
relationship of proximity established by assumption of responsibility and reliance
Toohey J
agreed in general with the reasoning of Dawson J
Gaudron J there were no policy factors which operated to deny the
existence of a duty of care policy favoured the finding of a duty of care the contractual relationship between the testator and
the solicitor was relevant
• a duty to a third party would only arise where the alleged duty was consistent with the duty owed to the client
the element of control was relevant the nature of the loss suffered was the loss of:
• a precise legal right which, in turn, has resulted in economic loss
Gummow J
there were no policy reasons to disallow recovery
recognition of a duty did not interfere with any existing legal right
• the facts of the case fell within a gap in the law
duty arose as a result of a complex of factors (at page 530)
Defective Buildings
cases in which the plaintiff’s property is and always has been defective
traditionally no duty of care in tort
English cases
1978 - Anns v Merton London Borough Council
1983 - Junior Books v Veitchi 1989 - D&F Estates v Church
Commissioners for England 1990 - Murphy v Brentwood C.C.
Liability of Builder for Defective Foundations in Australia
particular category of case involving liability in tort for defective structures
Bryan v Maloney– diminution in value of the house categorised
as pure economic loss
Significance of Perre v Apand? No majority approval of incremental approach Case by case approach Reasonable foreseeability of economic loss not
sufficient Identification of relevant factors
– emerging emphasis on vulnerability, dependence and control?
Policy considerations remain important