Recovery for pure economic loss in English law, arising from negligence, has traditionally been limited. Notably, recovery for losses that are "purely economic" arise under the Fatal Accidents Act 1976; and for negligent misstatements, as stated in Hedley Byrne v. Heller. Economic loss generally refers to financial detriment that can be seen on a balance sheet but not physically. Economic loss is then divided into "consequential economic loss" - that which arises directly from some physical damage or injury (e.g. loss of earnings from having your arm cut off) and "pure economic loss", which is everything else.
The fear behind allowing claims for "pure economic loss" is that potentially unlimited claims could flood in. The risks may be unknowable, and parties would find it impossible to insure.[1][2] The U.S. judge Benjamin N. Cardozo famously described it as, "liability in an indeterminate amount, for an indeterminate time, to an indeterminate class".[3]
Examples of pure economic loss include:
Loss of income suffered by a family whose principal earner dies in an accident. The physical injury is caused to the deceased, not the family.[4]
Loss of market value of a property owing to the inadequate specifications of foundations by an architect.[5][6][7]
Loss of production suffered by an enterprise whose electricity supply is interrupted by a contractor excavating a public utility.
The latter case is exemplified by the case of Spartan Steel and Alloys Ltd v. Martin & Co. Ltd.[8] Similar losses are also restricted in German law[9] though not in French law.[10]
^Canadian National Railway Co. v. Norsk Pacific Steamship Co. [1992] 1 SCR 1021 (Canada), per McLachlan J
^Bishop (1982)
^Ultramares v. Touche 174 N.E 441, 444 (N.Y. 1931) (USA)
^Baker v. Bolton (1808) 1 Camp 493 (England and Wales)
^Murphy v. Brentwood District Council [1991] 1 AC 398 (England and Wales)
^Sutherland Shire Council v. Heyman (1985) 60 ALR 1, at 60-61 (Australia)
^Winnipeg Condominium Corporation No.36 v. Bird Construction Co. [1995] 1 SCR 85 (Canada)
^[1973] QB 27
^van Gerven (2001) pp187-188
^van Gerven (2001) pp198-199
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