TORT SUPERVISION IV REVISION
Negligence: Duty of Care (Part II) – Pure Economic Loss and Psychiatric Injury
I. PURE ECONOMIC LOSS
Pure economic loss – financial damage not accompanied by any physical damage to person/property:
requires more than reasonable foreseeability aka. HB principle
Consequential economic loss – accompanied by physical damage; this requires only reasonable
foreseeability
BASIC HEDLEY BYRNE PRINCIPLE
Assumption of Responsibility in circumstances akin to contract
Spartan Steel & Co. Ltd – can’t ground duty of care on reasonable foreseeability that V would suffer
pure economic loss because of floodgates fear & interest in economic loss = not important to justify DoC
Hedley Byrne – HoL two stage test; liability arises in cases of negligent misstatement if:
1. There is an assumption of responsibility (either expressly – Williams b Natural Life
Health Foods – or impliedly – Spring v Guardian Services), in that D knows or ought to
have known that the claimant will rely on the information D gives to him
2. The claimant was reasonable in relying on this information
Limitations of Hedley Principle
1. Advice given without responsibility. Can not rely on Hedley as long as A makes clear there is no
responsibility; s2(2) UCTA 1977 – duty of care arises if A was in the ‘course of business’ in advising B
2. Social Occasion – can’t use Heldey unless A explicitly assures B she can safely rely on advice
(Chaudry v. Prabakhar)
3. Non-expert – if A makes clear he is not an expert, courts usually find A indicated advice couldn’t be
safely relied on (Mutual Life & Citzens Assurance Co. )
4. Expert is not liable to his readers – Candler v Crane, Christmas & Co
5. Advice by a third party – claimant’s claim was rejected by HoL in Williams v Natural Life Health
Foods; lack of contact between D and claimants
6. White v Jones – main question – not whether the defendant had assumed responsibility to draft a will,
but whether this responsibility was owed to beneficiaries of will with whom he had no contract.
Something other than Hedley must’ve been used
Extended Hedley Principle/Difficult Cases
Hedley Byrne principle extended from negligent misstatement to possible liability for negligent performance/non-
performance of a service to give rise to a duty of care. This doesn’t explain these difficult cases:
Junior Brooks – duty of care arose despite no contract between D (subcontractor) and V. This –
described as a “unique” case only
White v Jones & Smith v Eric Bush: extended HB to proximate third party (beneficiaries). NB: both
of these cases required more than assumption of responsibility of a task, so was something more than HB
principle used?
Spring v Guardian Assurance – D had duty to give V a good reference prepared w/ reasonable degree
of skill and care when he agreed to provide a reference
Phelps v Hillingdon LBC – psychologists owe patients DoC to test them with reasonable degree of skill
& care
Task only has to be performed with same degree of skill & care indicated – Philips v William Whiteley
Caparo Test
In difficult cases where HB not enough/assumption of responsibility doesn’t arise – turn to Caparo test of
foreseeability, proximity & fairness, reasonableness &justice:
HM Customs & Excise v Barclays Bank: established two-step process to generate DoC in economic
loss cases:
1. Apply the Hedley Byrne principle first. If an assumption of responsibility can be
established, there is no need for further investigation. If it cannot be established then,
2. Apply the Caparo test.
II. PSYCHIATRIC INJURY
Negligence: Duty of Care (Part II) – Pure Economic Loss and Psychiatric Injury
I. PURE ECONOMIC LOSS
Pure economic loss – financial damage not accompanied by any physical damage to person/property:
requires more than reasonable foreseeability aka. HB principle
Consequential economic loss – accompanied by physical damage; this requires only reasonable
foreseeability
BASIC HEDLEY BYRNE PRINCIPLE
Assumption of Responsibility in circumstances akin to contract
Spartan Steel & Co. Ltd – can’t ground duty of care on reasonable foreseeability that V would suffer
pure economic loss because of floodgates fear & interest in economic loss = not important to justify DoC
Hedley Byrne – HoL two stage test; liability arises in cases of negligent misstatement if:
1. There is an assumption of responsibility (either expressly – Williams b Natural Life
Health Foods – or impliedly – Spring v Guardian Services), in that D knows or ought to
have known that the claimant will rely on the information D gives to him
2. The claimant was reasonable in relying on this information
Limitations of Hedley Principle
1. Advice given without responsibility. Can not rely on Hedley as long as A makes clear there is no
responsibility; s2(2) UCTA 1977 – duty of care arises if A was in the ‘course of business’ in advising B
2. Social Occasion – can’t use Heldey unless A explicitly assures B she can safely rely on advice
(Chaudry v. Prabakhar)
3. Non-expert – if A makes clear he is not an expert, courts usually find A indicated advice couldn’t be
safely relied on (Mutual Life & Citzens Assurance Co. )
4. Expert is not liable to his readers – Candler v Crane, Christmas & Co
5. Advice by a third party – claimant’s claim was rejected by HoL in Williams v Natural Life Health
Foods; lack of contact between D and claimants
6. White v Jones – main question – not whether the defendant had assumed responsibility to draft a will,
but whether this responsibility was owed to beneficiaries of will with whom he had no contract.
Something other than Hedley must’ve been used
Extended Hedley Principle/Difficult Cases
Hedley Byrne principle extended from negligent misstatement to possible liability for negligent performance/non-
performance of a service to give rise to a duty of care. This doesn’t explain these difficult cases:
Junior Brooks – duty of care arose despite no contract between D (subcontractor) and V. This –
described as a “unique” case only
White v Jones & Smith v Eric Bush: extended HB to proximate third party (beneficiaries). NB: both
of these cases required more than assumption of responsibility of a task, so was something more than HB
principle used?
Spring v Guardian Assurance – D had duty to give V a good reference prepared w/ reasonable degree
of skill and care when he agreed to provide a reference
Phelps v Hillingdon LBC – psychologists owe patients DoC to test them with reasonable degree of skill
& care
Task only has to be performed with same degree of skill & care indicated – Philips v William Whiteley
Caparo Test
In difficult cases where HB not enough/assumption of responsibility doesn’t arise – turn to Caparo test of
foreseeability, proximity & fairness, reasonableness &justice:
HM Customs & Excise v Barclays Bank: established two-step process to generate DoC in economic
loss cases:
1. Apply the Hedley Byrne principle first. If an assumption of responsibility can be
established, there is no need for further investigation. If it cannot be established then,
2. Apply the Caparo test.
II. PSYCHIATRIC INJURY
