Economic Loss
2015
Question 7
John was seriously injured at work when a piece of molten metal struck his eyes, causing him to
lose sight in one eye. It is not in dispute that John’s employer’s (Sinks UK) failed to supply safe
plant and machinery. However, John was not wearing protective goggles at the time and it was
strictly against company health and safety policy for an employee to use the machinery without
protective goggles. John knew of the rule but has always refused to wear the goggles. John
sought advice from a solicitors firm (Advise U), specialising in medical negligence. He wanted to
know about the prospects of suing his employers. He was advised by Henrietta, a newly admitted
solicitor. John’s case was the first she had taken on without supervision. Henrietta informed John
that he would definitely be able to successfully sue his employers for negligence. Henrietta failed
to advise John about. John spent £10,000 in pursuit of his claim, which he eventually lost because
the court found that John was 100% responsible for his own injuries.
Advise John as to whether he can recover his financial losses from Henrietta.
Students can assume that Advise U will be vicariously liable if a tort is found to have been
committed by Henrietta.
General remarks
The case requires discussion of liability for pure economic loss resulting from a negligent
misstatement, breach of duty and causation, with emphasis on the first issue.
Law cases, reports and other references the examiners would expect you to use
McWilliams v Sir William Arrol & Co Ltd (1962); Ross v Caunters (1980); White v Jones (1995);
Bolam v Friern Hospital Management Committee (1957); Chester v Afshar (2002).
Common errors
The facts of the question state that the employers were (in effect) in breach of duty and you
should not dwell on this factor, but should only address breach in the context of the legal adviser.
A good answer to this question would…
argue that Ross v Caunters and White v Jones will apply as regards John’s pure economic loss –
provided that it can be established that Henrietta’s failure to warn John of the defence of
contributory negligence was consistent with the Bolamstandard. Strong answers also used the
case of McWilliams to determine whether the breach caused John’s injury and, on the principle of
McWilliams it is argued that John’s employers will not be liable because they will be able to
establish that even if the goggles had been supplied, John would not have worn them. An
inventive answer might equate Henrietta’s advice with a disclosure of risk – per Chester vAfshar.
Poor answers to this question…
did not pay sufficient attention to the line of authority (exemplified in White) dealing with the
case of professional negligence and pure economic loss.
2015
Question 7
Hasan and Devla both inherited £90,000 from their recently deceased parents.Hasan decided to
invest his money in a country house retreat and Devla decided to invest in shares. Devla’s best
friend (Edward) was a financial adviser and during a drinks party advised Devla to invest in a
, company (JOY UK) which organised children’s parties. Devla was very interested in the prospect
but wanted to check the company’s audited accounts before making a final investment decision.
The audited accounts showed a healthy profit and so Devla invested £40,000. Unfortunately, the
audited accounts had been prepared by an accountant (Ponsonby) who was dismissed for
professional negligence. Hasan’s attractive country cottage was found to have been built on
insecure foundations and is now subject to a defect which poses an imminent threat to his health
and safety.Devla lost the full amount of her investment and Hasan has been advised that he must
spend £20,000 to cure the defects in the property.
Advise all parties as to their rights and liabilities in respect of Devla andHasan’s pure economic
losses.
General remarks
The question requires knowledge and application of the principles governing pure economic
losses resulting from negligent acts and negligent misstatements.
Law cases, reports and other references the examiners would expect you to use
Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd (1973); Anns v Merton LBC (1978);
Murphy v Brentwood DC (1991); Hedley Byrne Co Ltd v Heller Partners (1963); Caparo
Industries Plc v Dickman (1990); Chaudhry v Prabhakar(1989).
Common errors
Ignoring or dealing inadequately with the Anns/Murphy line of authority on liability for pure
economic losses resulting from defective premises.
A good answer to this question would…
recognise that Hasan’s situation is almost identical to the case of Anns and thus that the solution
falls within Murphy v Brentwood, concluding that Hasan would not be able to recover for his
financial losses.Good answers would also identify that Devla’s situation raises the more
substantial questions concerning duty of care in cases of pure economic loss. Good answers
would demonstrate a strong understanding of the Hedley/Caparo test and concludethat Edward
clearly had knowledge of the purposes for which his statement would be used but the statement
was made in a social setting in circumstances in relation to which Chaudhry is unlikely to apply.
Moreover, Devla appears not to have relied upon Edward’s advice and the issue concerning the
audited accounts falls solidly within the Caparo situation – the accounts not being prepared for
the purposes of making investment decisions.
Poor answers to this question…
Tended to cover reasonably well the issue of statements resulting in pure economic loss but
failed to address, or address adequately, negligent acts.
Student extract
In the case of Hasan he seems to have also suffered an economic loss. According to Spartan Steel
v Martin, economic loss is not attainable unless it is based on damage to property or damage to
self. Hasan’s loss seems to be based on a defect in the property. This is not based on damage to
himself or the property. According to Anns v Merton Borough Council, he would have had a claim
but this was overruled in the case of Murphy v Brentwood District Council. Hence, according to
this case he would not have a claim. He would have to seek redress from the defectives premises
act, contract law or his insurers.
Comment on extract
2015
Question 7
John was seriously injured at work when a piece of molten metal struck his eyes, causing him to
lose sight in one eye. It is not in dispute that John’s employer’s (Sinks UK) failed to supply safe
plant and machinery. However, John was not wearing protective goggles at the time and it was
strictly against company health and safety policy for an employee to use the machinery without
protective goggles. John knew of the rule but has always refused to wear the goggles. John
sought advice from a solicitors firm (Advise U), specialising in medical negligence. He wanted to
know about the prospects of suing his employers. He was advised by Henrietta, a newly admitted
solicitor. John’s case was the first she had taken on without supervision. Henrietta informed John
that he would definitely be able to successfully sue his employers for negligence. Henrietta failed
to advise John about. John spent £10,000 in pursuit of his claim, which he eventually lost because
the court found that John was 100% responsible for his own injuries.
Advise John as to whether he can recover his financial losses from Henrietta.
Students can assume that Advise U will be vicariously liable if a tort is found to have been
committed by Henrietta.
General remarks
The case requires discussion of liability for pure economic loss resulting from a negligent
misstatement, breach of duty and causation, with emphasis on the first issue.
Law cases, reports and other references the examiners would expect you to use
McWilliams v Sir William Arrol & Co Ltd (1962); Ross v Caunters (1980); White v Jones (1995);
Bolam v Friern Hospital Management Committee (1957); Chester v Afshar (2002).
Common errors
The facts of the question state that the employers were (in effect) in breach of duty and you
should not dwell on this factor, but should only address breach in the context of the legal adviser.
A good answer to this question would…
argue that Ross v Caunters and White v Jones will apply as regards John’s pure economic loss –
provided that it can be established that Henrietta’s failure to warn John of the defence of
contributory negligence was consistent with the Bolamstandard. Strong answers also used the
case of McWilliams to determine whether the breach caused John’s injury and, on the principle of
McWilliams it is argued that John’s employers will not be liable because they will be able to
establish that even if the goggles had been supplied, John would not have worn them. An
inventive answer might equate Henrietta’s advice with a disclosure of risk – per Chester vAfshar.
Poor answers to this question…
did not pay sufficient attention to the line of authority (exemplified in White) dealing with the
case of professional negligence and pure economic loss.
2015
Question 7
Hasan and Devla both inherited £90,000 from their recently deceased parents.Hasan decided to
invest his money in a country house retreat and Devla decided to invest in shares. Devla’s best
friend (Edward) was a financial adviser and during a drinks party advised Devla to invest in a
, company (JOY UK) which organised children’s parties. Devla was very interested in the prospect
but wanted to check the company’s audited accounts before making a final investment decision.
The audited accounts showed a healthy profit and so Devla invested £40,000. Unfortunately, the
audited accounts had been prepared by an accountant (Ponsonby) who was dismissed for
professional negligence. Hasan’s attractive country cottage was found to have been built on
insecure foundations and is now subject to a defect which poses an imminent threat to his health
and safety.Devla lost the full amount of her investment and Hasan has been advised that he must
spend £20,000 to cure the defects in the property.
Advise all parties as to their rights and liabilities in respect of Devla andHasan’s pure economic
losses.
General remarks
The question requires knowledge and application of the principles governing pure economic
losses resulting from negligent acts and negligent misstatements.
Law cases, reports and other references the examiners would expect you to use
Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd (1973); Anns v Merton LBC (1978);
Murphy v Brentwood DC (1991); Hedley Byrne Co Ltd v Heller Partners (1963); Caparo
Industries Plc v Dickman (1990); Chaudhry v Prabhakar(1989).
Common errors
Ignoring or dealing inadequately with the Anns/Murphy line of authority on liability for pure
economic losses resulting from defective premises.
A good answer to this question would…
recognise that Hasan’s situation is almost identical to the case of Anns and thus that the solution
falls within Murphy v Brentwood, concluding that Hasan would not be able to recover for his
financial losses.Good answers would also identify that Devla’s situation raises the more
substantial questions concerning duty of care in cases of pure economic loss. Good answers
would demonstrate a strong understanding of the Hedley/Caparo test and concludethat Edward
clearly had knowledge of the purposes for which his statement would be used but the statement
was made in a social setting in circumstances in relation to which Chaudhry is unlikely to apply.
Moreover, Devla appears not to have relied upon Edward’s advice and the issue concerning the
audited accounts falls solidly within the Caparo situation – the accounts not being prepared for
the purposes of making investment decisions.
Poor answers to this question…
Tended to cover reasonably well the issue of statements resulting in pure economic loss but
failed to address, or address adequately, negligent acts.
Student extract
In the case of Hasan he seems to have also suffered an economic loss. According to Spartan Steel
v Martin, economic loss is not attainable unless it is based on damage to property or damage to
self. Hasan’s loss seems to be based on a defect in the property. This is not based on damage to
himself or the property. According to Anns v Merton Borough Council, he would have had a claim
but this was overruled in the case of Murphy v Brentwood District Council. Hence, according to
this case he would not have a claim. He would have to seek redress from the defectives premises
act, contract law or his insurers.
Comment on extract
