BCR Delict Economic Loss Economic Loss Loss that

BCR Delict Economic Loss

Economic Loss • Loss that Pursuer is claiming is a financial one. • Prior to 1964 could not claim for an economic loss • Delict law only for property loss or personal injury.

Economic Loss Analysis • Easy cases • I damage your car – not an economic loss problem – Donoghue • I break your leg – ditto • Lets look at the kind of cases which cause problems • Secondary Economic Loss • Pure Economic Loss

Secondary Economic Loss • Easy to identify. • In the story look for property being damaged AND the pursuer suffers a financial loss following on from that property being damaged. • Or someone suffers a personal injury AND the pursuer suffers a financial loss following on from that property damage. • Can you think of an example of each of these scenarios?

Secondary Economic Loss Dynamco v. Holland Hannen & Cubitts (Scotland) Ltd. , 1972 • Occupiers of a factory raised an action against contractors who were working nearby and had cut the electricity cable leading to the factory. The claim was one for a purely financial loss on the ground that the plant was unable to operate for over 15 hours. The cable belonged to the state provider of electricity, ie NOT either of the parties. • Held. There was no duty of care.

Secondary Economic Loss S. C. M. (UK) Ltd v W. J. Whittal & Son Ltd [1970] • Defendant contractors cut underground electric cables near the plaintiff's factory. The power supply to the factory failed. Molten metal solidified in the plaintiff's machines which were physically damaged as a result. Production was halted for seven and a half hours. The power cut prevented the plaintiffs processing four more melts. • The plaintiffs successfully claimed damages in respect of the physical damage to property and the financial loss directly resulting from that damage [consequential economic loss] namely the loss of profit on the 'melt' that was actually interrupted by the failure of the electrical supply. However, so far as the other melts were concerned the Court refused the claim.

Analysis of cases • Negligence – property damage – financial loss • No recovery if damaged property does not belong to the pursuer. • Dynamco – electrical cables were damaged with consequence factory closed and pursuer lost money. Pursuer did not own electrical cables. • SCM – electrical cables damaged with consequence that one of the machines that they owned was damaged which then caused further damage. That was recoverable.

Pure Economic Loss • Negligence which results in financial loss only. • In the story there is no property damage nor is anybody injured. • Can you think of example when this might happen? • Next case almost as big as Donoghue v Stevenson. Transformed the Law of Delict

Pure Economic Loss Hedley Byrne & Co Ltd v Heller & Partners • Facts A firm of advertising agents gave their own credit (unusual situation in business) to a client, Easi. Power. • Relied upon the defendant banker's reference and suffered loss in excess of £ 17, 000 when the client became insolvent. • The reference had been given carelessly and with a disclaimer of liability. • Held that liability for negligence may extend to careless words [negligent misstatement] as well as careless deeds and that damages may be awarded for financial [economic] loss as well as for physical injury to persons and property in that context.

Pure Economic Loss • Such a duty of care [re statements made] arose where a 'special relationship' can be identified. • The party seeking the information or advice was trusting the other to exercise such a degree of care as the circumstances required, where it was reasonable for him to do that, and where the other gave the information or advice when he knew or ought to have known that the enquirer was relying on him.

Pure Economic Loss • The pursuer relied on the defender's skill and judgment or his ability to make careful enquiry. • The defender knew, or ought reasonably to have known, that the pursuer was relying on him • It was reasonable in the circumstances for the pursuer to rely on the defender.

Economic Loss Analysis • • D damages P’s property – easy recovery D damages P’s property, P loses use – relatively easy recovery D injures P – easy recovery D injures P, P loses wages – easy recovery D damages X’s property, P loses money – v. difficult recovery D injures X, P loses money – v. difficult recovery D causes P economic loss directly – possible Hedley Byrne recovery.