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Tort | Negligence

Pure Economic Loss: Statements

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Pure Economic Loss: Statements

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  • pure economic loss (PEL) / caused by negligent statement / recoverable if D owes Cduty of care (DoC)
  • common law until 1964: no remedy / negligently false statement in Negligence (Candler v Crane Christmas [1951])

Hedley Byrne rule

  • changed common law / created exception / may recover PEL in Negligence
  • Ds negligent reference for 3rd party / lower courts: no DoC / PEL / HoL: DoC owed / special relationship if D assumes responsibility / D knows P relying on their special skill / & P reasonably relies / Ds successful disclaimer (Hedley Byrne v Heller [1964])

Hedley Byrne rule: application

  • wife mortgage / husband debts / DoC owed: reasonably foreseeable P rely clerk's advice (Cornish v Midland [1985])
  • friend buy car / DoC owed: D knew P rely / due D's knowledge / criticised: not business (Chaudhry v Prabhakar [1989])
  • hotel / environmental health / DoC: reasonable rely / position of authority (Welton v North Cornwall DC [1997])

Hedley Byrne rule: refining

Caparo v Dickman [1990]
  • P rely accounts / D 3rd party auditors / HoL: no DoC: no special relationship
  • special relationship: 1 adviser knew purpose advice / 2 adviser knew would be communicated to advisee (specifically or member ascertainable class) / 3 adviser knew advisee likely act on advice without further independent inquiry / 4 advice acted on to advisee detriment
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Pure Economic Loss: Statements

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Hedley Byrne rule: refining

  • courts tend narrowly construe purpose / criteria from Caparo v Dickman [1990]
  • takeover bid accountants / CoA: no DoC: insufficient proximity for special relationship / D not know accounts would be communicated to bidder for particular transaction (James McNaughton v Hicks Anderson [1991])
  • takeover bid advisers / DoC owed: sufficient proximity for special relationship / P's identity & nature of transaction known (Morgan Crucible v Hill Samuel [1991])

Hedley Byrne rule: extending

  • exception extended / where Hedley Byrne & Caparo requirements not satisfied / based on assumption of responsibility / include provision services
  • syndicates / HoC: DoC owed: D negligently performed professional service / PEL result omission & act recoverable (Henderson v Merrett Syndicates Ltd [1995])
  • reference / Lord Goff: extend Hedley Byrne / D assuming responsibility for P's economic welfare / HoL: DoC owed (Spring v Guardian Assurance [1995])
  • solicitor delay writing will / HoL: D's assumed responsibility to testator extended to beneficiaries (White v Jones [1995])
  • varied reasoning / seems 2 tests establishing special relationship / if negligent statement: Hedley Byrne & Caparo / if negligent provision of services: broader assumption of responsibility test
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Pure Economic Loss: Statements

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  • most common defence: valid disclaimer exists / relied upon Hedley Byrne / now statutory limitations

Unfair Contract Terms Act 1977 (UCTA 1977)

  • S(1)(b): breach of any common law duty / take reasonable care or exercise reasonable skill / S1(3): business liability only
  • S2(1): not restrict liability death or personal injury / S2(2): disclaimer must satisfy reasonableness test / S2(3): agreement or awareness not indicate voluntary acceptance of any risk
  • S11(3): fair & reasonable / having regard to all circumstances / S11(5): D's burden of proof lies

Smith v Eric Bush [1990]

  • P house buyer / D 3rd party surveyor / HoL: DoC owed / sufficient proximate 3rd party / UCTA 1977 applied: business liability / disclaimer unreasonable
  • Lord Griffiths / factors determining if disclaimer reasonable / equal bargaining power? / reasonably practicable obtain alternative advice (taking account: costs & time)? / how difficult task being undertaken? / practical consequences of decision: parties' ability to bear loss (including insurance)?
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