PART VII - ECONOMIC LOSS

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PART VII - ECONOMIC LOSS Powered By Docstoc
					   Torts LWB133
Week 6 Semester 2 ,2000

   Part VI - Economic Loss
PART VII - ECONOMIC LOSS

 SECTION 1
   – Negligent and Fraudulent Misrepresentation


 SECTION 2
   – Pure Economic Loss Other than by
     Misrepresentation



                                              2
Novel Categories of Negligence
 cases not clearly covered by precedent
   – examples
     •   nervous shock
     •   pure economic loss
     •   public authorities
     •   non-feasance




                                           3
Negligence Action
 Three elements
  – duty
  – breach
  – damage




                    4
Duty of Care
 Courts are reluctant to find a duty of care
  owed by a defendant to a plaintiff if the
  damage suffered by the plaintiff is classified
  as pure economic loss




                                                5
What is pure economic loss?
 it is not physical damage
 it is not economic loss which is
  consequential on physical damage




                                     6
POLICY CONSIDERATIONS
 the fear of indeterminate liability
 disproportion between defendant’s
  blameworthiness and liability
 interrelationship between liability in tort
  and contract
 the need for certainty
 the effect of insurance
                                                7
Developing approach of the
High Court
 Hill v Van Erp (1997)
  – concept of proximity is no longer supported by
    a majority of the High Court as a general
    principle or unifying theme
  – the term proximity is still used by some
    members of the High Court as an umbrella term



                                                 8
Novel fact situation
 was the loss reasonably foreseeable?
 On a consideration of previously decided
  cases
  – what additional factors over and above
    reasonable foreseeability are required to
    establish the existence of a duty of care in the
    particular category of case
  – are there any policy factors that weigh for or
    against the finding of a duty of care
                                                       9
Perre v Apand (1999) 73 ALJR 1190
 Establishing a duty of care in case of pure
  economic loss
  – no majority view
     • four possible approaches
        – 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
                                                         10
            » Kirby J
Categories of cases
 A number of categories can be identified
  from decided cases concerning recovery of
  pure economic loss
  – negligent misrepresentation
  – economic loss resulting from damage to
    property of another
  – failure of a professional person to perform an
    undertaking or service properly
  – economic loss resulting from defective
    construction of buildings                        11
Continuing relevance of these categories

 Following the decision in Perre v Apand
   – High Court is moving towards synthesising
     instances of pure economic loss
   – identification of factors which will determine
     existence of duty of care
      • may replace approach adopted in past cases
         – particularly cases of pure economic loss resulting from
           negligent acts
      • emphasis on features of control and vulnerability
   – no uniform approach by members of Court                         12
Negligent Misrepresentation
 First category of case involving pure
  economic loss in which the courts
  recognised the existence of a duty of care
  – pure economic loss resulting from negligent
    words




                                                  13
Hedley Byrne v Heller (1964)
 no need to establish a contractual or fiduciary
  relationship
 person giving the information must be possessed
  of special skill (or hold themselves out as having
  such skill)
 assumption of responsibility by the speaker
 reasonable reliance by plaintiff
 no disclaimer of responsibility

                                                       14
Position in Australia
 MLC v Evatt (High Court)
 accepted that duty of care could arise
  irrespective of contract or fiduciary
  relationship
 Barwick CJ identified features of special
  relationship which would give rise to duty
  of care

                                               15
FEATURES OF RELATIONSHIP

 speaker knows or ought to know:
     – trusted by recipient to give information recipient
        believes speaker has capacity to give
     – the information is of a serious or business nature
   speaker knew or ought to have known that recipient
    intended to rely on the information
   reasonable for recipient to seek or accept and rely on
    speaker advice
   no need for recipient to actively seek the information or
    advice
   no requirement that speaker have special skill              16
Appeal to Privy Council
 speaker must carry on business of giving
  advice or let it be known the claims to
  possess special skill in the field




                                             17
Subsequent High Court Decisions

 Shaddock v Parramatta City Council (1981)
   – no requirement that speaker be possessed of special
     skill (not necessary to decide in this case)
 San Sebastian (1986)
   – determined that reliance was the most significant
     element in establishing proximity
   – no requirement that statements made in response to
     request for information or advice



                                                           18
Esanda Finance Corporation Ltd v
Peat Marwick Hungerfords
 1997 High Court decision
 confirms approach adopted in MLC v Evatt
 and San Sebastian




                                             19
Impact of decision in Perre v Apand

 ? whether decision in Perre v Apand will
  impact on the factors relevant to the
  establishment of a duty of care for
  negligently inflicted pure economic loss
  resulting from negligent misstatement.




                                             20
Fraudulent Misrepresentation
 Comparison with negligently inflicted pure
  economic loss
             Five Elements
 a representation of fact
 defendant knew representation was false or
  recklessly indifferent
 defendant intended plaintiff to rely on the
  misrepresentation
 plaintiff did rely on the representation
 plaintiff suffered damage
                CBC v Brown
 misrepresentation of fact
   – defendant gave written advice that customer
     financially stable
 defendant knew representation was false
   – question of fact
 defendant intended plaintiff to rely on representation
   – not relevant that statement made to intermediary
     acting on behalf of a class of persons
 effect of disclaimer
   – cannot exclude liability for deceit
 did plaintiff rely on representation?
   – yes! they would have breached the contract
 did the plaintiff suffer damage in fact and
  law?
   – loss was direct and foreseeable consequence of
     the fraudulent misrepresentation
        Krakowski v Eurolynx
 Krakowskis
  – plaintiffs/appellants
 Eurolynx
  – defendant/first respondent
 Mallesons (Eurolynx’s solicitors)
  – second respondent
         The representation
 an allegation that the disclosed instrument
  of lease was not the exhaustive contractual
  arrangement between E and the lessee
 falsity of the representation
 inducement
 fraud by Eurolynx
Next Week
 Pure economic loss other than by
  representation
  – economic loss resulting from damage to
    property of another
  – failure of a professional person to perform an
    undertaking or service properly
  – economic loss resulting from defective
    construction of buildings
 Significance of decision in Perre v Apand          27

				
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