claimant's (C) pure economic loss resulting from defendant's (D) carelessness only gives rise to Negligence claim if duty of care, for D to owe C duty of care there must be sufficient proximity
general rule: D not owe any duty of care to C not to cause pure economic loss, therefore loss not recoverable
limited duty situation: C can only recover for loss exceptionally (if possible to show sufficiently close relationship between C & D)
consequential economic loss: economic losses if C suffers personal injury or damage to property, recoverable
pure economic loss: loss not consequential from personal injury or damage to property
without special rule for economic loss: floodgates open for indeterminate number of Cs for claims for limitless amounts
Damage to a third party's property
damage to third party's property may result in pure economic loss: if A borrows item from B & item damaged due to D's negligence, B can claim for damaged property, but A cannot claim for any pure economic losses incurred (having to hire substitute item)
plaintiffs (P) owned steel factory, electricity supplied by direct cable owned by third party (Electricity Board)
Ds carelessness carried out road works & damaged cable, Electricity Board had to shut down power supply to P's factory for 14.5hrs overnight to mend
factory worked 24hrs a day, when power stopped metal was being melt processed in furnace (which required constant temperature & therefore power)
if P left mixture in furnace without power it could damage machinery, so P used alternative method to process, producing less valuable material (physical damage: £368 & loss of profit: £400)
Ps also lost opportunity to load furnace further 4 times during power cut (losing profit: £l 767)
which losses could P recover?
P could recover: damage to melt in furnace when power cut (£368) & loss of profit on that melt (£400), as cost of physical damage to P's property (the melt) & consequential economic loss (the lost profit)
P not recover: loss of profit during whole period power cut, as pure economic loss caused by damage to property of third party (cable belonged to Electricity Board)
Lord Denning: .. I think the question of recovering economic loss is one of policy. Whenever the courts draw a line to mark out the bounds of 'duty' they do it as a matter of policy so as to limit the responsibility of the defendant...
if A suffers pure economic loss due to D negligently damaging third party's property, insufficiently close relationship between D & A, no duty owed & losses not recoverable
No physical damage
pure economic loss may arise where there has been no physical damage
Weller & Co v Foot & Mouth Disease Research Institute  1 QB 569
D negligently released foot & mouth disease which affected cattle
P operated cattle market which had to close due to outbreak & P lost revenue
could P recover for the loss?
P could not recover: loss not caused by physical damage, was pure economic loss & no duty of care owed by D
pure economic loss without physical damage is not recoverable
Defective goods or property
general rule: claim for defective goods can be made under contract law
Ps new factory had defective flooring & lost money during refit, Ps had contract with main builders
Ps claimed against Ds, the negligent specialist sub-contractors, who attended meetings with builders & P discussing flooring
could Ps recover in tort?
Ps could recover from Ds, confirming view of property damage in Anns v Merton London Borough Council 
Anns v Merton London Borough Council  & Junior Books v Veitchi  heavily criticised for: opening floodgates to unlimited claims, where D may have no relationship with C & allowing claims in tort interferes & undermines contract law
P bought new build house but ceiling & water pipes cracked due to defective foundation design
cost of repairs: £45 000, P sold house unrepaired for £30 000 (£35 000 below market value of house in sound condition)
P sought damages from D, local council, who negligently approved building plans
could P recover from D?
House of Lords: loss was pure economic loss, as property was defective when acquired (resulting in having to repair or scrap - both at economic loss)
D did not owe duty of care as pure economic loss
effect of decision: overrule Anns v Merton London Borough Council 
building structural damage so not apply complex structure theory (if component in large item defective & damages whole property then classed as property damage)
Lord Bridge: .. [no duty arises in the acquisition of defective property] in the absence of a special relationship of proximity imposing on the tortfeasor a duty of care to safeguard the plaintiff from economic loss...
Junior Books v Veitchi  distinguished: exception was satisfied, was special relationship between D & P (due to discussions at meeting about flooring)
pure economic loss for defective goods recovered in tort: only if special relationship between P & D (duty of care owed)
This site is best viewed with style sheets (CSS) enabled and an up-to-date browser.