LIABILITY FOR ECONOMIC LOSS
AND PSYCHIATRIC INJURY
VERIFIED EXAM REVISION
STUDYGUIDE
Damages
If a claimant successfully proves a negligent act or
omission by another (D) they will be able to claim
damages for:
- Any physical injury suffered
- Any damage to their property
Pure economic loss
A claimant will not be able to claim for what is called pure
economic loss e.g. loss of profits. However, there is an
exception to the rule if the claimant was relying on a
negligent misinterpretation.
Spartan Steel v Martin and Co. Ltd (1973)
An electric power cable outside the claimant's factory was
negligently cut by the defendant's workmen. This led to a
loss of power for several hours to the factory which made
steel alloys. A 'melt' in the furnace at the time of the power
cut had to be destroyed to stop it from solidifying and
wrecking the furnace. There were three parts to the claim:
For the damage to the melts on the production line and the
furnace - this could be claimed as it was physical damage.
For the loss of profit on those melts - this could be claimed
as it amounted to consequential economic loss from the
, physical damage.
For the loss of profit while the factory was out of action - it
was decided by the Court of Appeal that this part of the
claim should not be allowed as it amounted to pure
economic loss. This was a financial loss which was not
caused by physical damage to the claimant. Lord Denning
decided that a line must be drawn as a matter of policy,
and that this loss of profit was better borne by insurers
than by the defendants alone.
Weller v Foot and Mouth Disease Research Institute
(1966)
The foot and mouth virus was negligently allowed to
escape from the defendant's premises. It infected cattle,
rendering them unsaleable and causing many to be
destroyed. Restrictions were placed on the movement of
all animals for some time to prevent the spread of the
disease. The claimant was an auctioneer and brought an
action claiming the loss of profit he would have made had
he been able to continue his normal sales. His claim failed
as the court decided that pure economic loss is not
recoverable under tort law.
Pride & Partners v Institute for Animal Health (2009)
When again foot and mouth disease escaped from a
research institute in 2007 and restrictions were placed on
the movement of cattle. Farmers suffered significant
losses, including lost income, as a result of their inability to
sell or export animals, loss of milk production and the
extra costs of feeding and keeping animals on their farms.
The judge decided that these losses were all pure
economic losses and because of the 'exclusionary rule',
which excludes such losses from the scope of any duty of
AND PSYCHIATRIC INJURY
VERIFIED EXAM REVISION
STUDYGUIDE
Damages
If a claimant successfully proves a negligent act or
omission by another (D) they will be able to claim
damages for:
- Any physical injury suffered
- Any damage to their property
Pure economic loss
A claimant will not be able to claim for what is called pure
economic loss e.g. loss of profits. However, there is an
exception to the rule if the claimant was relying on a
negligent misinterpretation.
Spartan Steel v Martin and Co. Ltd (1973)
An electric power cable outside the claimant's factory was
negligently cut by the defendant's workmen. This led to a
loss of power for several hours to the factory which made
steel alloys. A 'melt' in the furnace at the time of the power
cut had to be destroyed to stop it from solidifying and
wrecking the furnace. There were three parts to the claim:
For the damage to the melts on the production line and the
furnace - this could be claimed as it was physical damage.
For the loss of profit on those melts - this could be claimed
as it amounted to consequential economic loss from the
, physical damage.
For the loss of profit while the factory was out of action - it
was decided by the Court of Appeal that this part of the
claim should not be allowed as it amounted to pure
economic loss. This was a financial loss which was not
caused by physical damage to the claimant. Lord Denning
decided that a line must be drawn as a matter of policy,
and that this loss of profit was better borne by insurers
than by the defendants alone.
Weller v Foot and Mouth Disease Research Institute
(1966)
The foot and mouth virus was negligently allowed to
escape from the defendant's premises. It infected cattle,
rendering them unsaleable and causing many to be
destroyed. Restrictions were placed on the movement of
all animals for some time to prevent the spread of the
disease. The claimant was an auctioneer and brought an
action claiming the loss of profit he would have made had
he been able to continue his normal sales. His claim failed
as the court decided that pure economic loss is not
recoverable under tort law.
Pride & Partners v Institute for Animal Health (2009)
When again foot and mouth disease escaped from a
research institute in 2007 and restrictions were placed on
the movement of cattle. Farmers suffered significant
losses, including lost income, as a result of their inability to
sell or export animals, loss of milk production and the
extra costs of feeding and keeping animals on their farms.
The judge decided that these losses were all pure
economic losses and because of the 'exclusionary rule',
which excludes such losses from the scope of any duty of
