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Economic Loss
One of the most uncertain areas in the law on negligence is how far and in what circumstances there is liability for financial loss (economic loss).

Economic loss is a situation in which a producer does not earn the level of profit that would justify remaining in business in the long run. http://www.answers.com/topic/economic-loss

Economic Loss
The most common example of economic loss is where a person who has suffered physical damage makes a claim for loss of business profits while the damage is put right. Case example: Spartan Steel & Alloys Ltd v Martin & Co Ltd 1973.

Economic Loss
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. Loss of market value of a property owing to the inadequate specifications of foundations (practicalities) by an architect. Loss of production suffered by an enterprise whose electricity supply is interrupted by a contractor excavating (digging) a public utility. The latter case is exemplified by the English case of Spartan Steel and Alloys Ltd v. Martin & Co. Ltd . Similar losses are also restricted in German law though not in French law beyond the normal requirements that a claimant's asserted loss must be certain and directly caused.
http://en.wikipedia.org/wiki/Pure_economic_loss
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Economic Loss
Spartan Steel & Alloys Ltd v Martin & Co Ltd 1973. Facts:
Spartan Steel and Alloys Ltd had a stainless steel factory in Birmingham, which obtained its electricity by a direct cable from the power station. Martin & Co Ltd were doing work on the ground with an excavator and negligently damaged that cable. As a consequence, the factory was deprived of electricity for 15 hours which has caused physical damage to the factorys furnaces and metal, lost profit on the damaged metal and lost profit on the metal that was not melted during the time the electricity was off. Spartan Steel claimed all the three heads of damage.

Economic Loss
Spartan Steel & Alloys Ltd v Martin & Co Ltd 1973. Decision:
The Court of Appeal, consisting of Lord Denning MR, Edmund-Davies LJ and Lawton LJ have delivered a majority judgment (Edmund-Davies LJ dissenting), that the Spartan Steel could only recover the damages to their furnaces, the metal they had to discard and the profit lost on the discarded metal. They could not recover the profits lost due to the factory not being operational for 15 hours. Their main reasoning for this was that while the damage to the metal was "physical damage" and the lost profits on the metal was "directly consequential" upon it, the profits lost due to the blackout constituted "pure economic loss".
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Economic Loss
Spartan Steel & Alloys Ltd v Martin & Co Ltd 1973.
Decision (contd): Although the majority seemed to agree that Martin & Co Ltd owed the Spartan Steel a duty of care and the damage was not too remote since it was foreseeable, they declined to allow the recovery of pure economic loss for policy reasons outlined by Lord Denning in his leading judgment: Statutory utility providers are never liable for damages caused by their negligence. A blackout is a common hazard and a risk which everyone can be expected to tolerate from time to time. If claims for pure economic loss in such cases were allowed, it might lead to countless claims, some of which may be spurious (the "floodgates" argument). It would be unfair to place the entire weight of many comparatively small losses upon the shoulders of one person in such cases. The law does not leave the claimant without remedy by allowing him to recover the economic losses that are directly consequential upon physical damage.
http://en.wikipedia.org/wiki/Spartan_Steel_%26_Alloys_Ltd_v_Martin_%26_Co_%28Contractors%29_Ltd 7

Economic Loss
Claim discussion in case scenario for O2 mobile store.
loss of profits connected with the repair to the premises subject to the limitations placed on the recovery of economic loss arising out of damage to property as opposed to pure economic loss as decided in Spartan Steel & Alloys Ltd v Martin & Co Ltd 1973. Decision to case example Spartan Steel & Alloys Ltd v Martin & Co Ltd 1973. : -claim for damage to goods was successful -claim for loss of profit to these goods was successful -claim for loss of profit on the future goods i.e. those which could not be manufactured because of the shutdown of the furnace was not successful The case clearly illustrates the issue of fair, just and reasonable as it was felt by the court that factory owners should insure against this type of loss. Pure economic loss is not recoverable (Murphy v Brentwood district council 1990) unless it arises from negligent advice or misstatements as per Hedley Byrne & Co Ltd v Heller & Partners Ltd 1964 or falls within the special circumstances of Junior Books v Veitchi Co Ltd 1983. Apply facts of Murphy to determine O2 mobile store (assignment case scenario) will be able to recover any loss to their trade.
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Economic Loss
Murphy v Brentwood District Council (1990) Facts:
Under similar circumstances to Anns v Merton London Borough Council (1978), the faulty foundations of a house had resulted in 45,000 of damage to walls and pipe work. The owner sold the property without fixing the problems, incurring a loss of about 35,000 on its market value, and then sued the council for negligence or certifying the plans on the basis of negligent advice. At first instance, the claimant was awarded damages, but at appeal the decision was reversed.

Decision:
The House of Lords held that this was pure economic loss and there had been no injury. To hold the council liable for it should not, for policy reasons, be allowed. This judgement was made more or less at the same time as the Caparo Industries plc v Dickman (1990) and completely reversed the judgement in Anns v Merton London Borough Council (1978). Perhaps the central role of policy in these decisions marked the end of the development of a generalized duty of care.
http://www.oddflower.org/gdl/index.php/Murphy_v_Brentwood_District_Council_%281990%29
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Economic Loss
Junior books v Veitchi Co Ltd 1983 Facts:
Veitchi was a special nominated subcontractor who was employed to lay flooring at Junior Books' factory. The floor was defective but because there was a contract between Junior Books and the main contactor there was no relationship in contract through which Junior Books could sue Veitchi. Therefore Junior Books was forced to bring an action in tort and argue that Veitchi owed Junior Books a non-contractual duty of care.

Decision:
The House of Lords ruled that there was a sufficient degree of proximity between the parties to allow Junior Books to sue in tort. # Course book decision: The defendants owed the claimants a duty of care. They were not producing goods for an unknown consumer; they were working for a particular person whose identity was known and who was relying on their skill and judgment as flooring contractors

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Junior Books v Veichi Co Ltd 1983

In this case, there is a special relationship akin (related by blood) to contract between claimant and defendant, a claim for loss of profits may succeed.

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Economic Loss
But claims have been made successfully in the last 25 years where no actual physical damage occurred at all.

Case example: Ross v Caunters 1980

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Ross v Caunters 1980

The facts: A solicitor gave negligent advice to a testator (a person who makes a will) and drew up a will carelessly. A gift to the claimant (an intended beneficiary) failed as a result. Decision: The solicitor owed a duty of care to beneficiaries since it was reasonably foreseeable that they would be damaged by negligent advice. The beneficiary could therefore sue for loss since he was actually in mind when solicitor drew up the will. In this case, there is no actual physical damage occurred at all, but beneficiary could sue for economic loss.
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Muirhead v Industrial Tank Specialties Ltd 1986

The special nature of the Junior Books case has been stressed in subsequent decisions, which have reverted to the ward of damages for economic loss only where that loss is attached to physical loss. Case example: Muirhead v Industrial Tank loss Specialties Ltd 1986.
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Muirhead v Industrial Tank Specialties Ltd 1986

The facts: The claimants, wholesale fish merchants, purchased lobsters in the summer with the intention of selling them at Christmas when prices were higher. The pumps which they purchased to oxygenate the water were inadequate. The lobsters died. Decision: The death of the lobsters was reasonably foreseeable and this loss was recoverable. The additional losses were purely economic and were not recoverable. In this case, the actions caused a physical loss for the claimant.
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Nervous Shock
The claimant may compensation for nervous shock caused by the defendants negligent act. Typically the claimant has suffered a reaction when they have witnessed an accident in which a close relative is injured. Compensation will not be awarded for mere grief or distress: distress: the claimant must prove a definite and identifiable psychiatric illness. illness.
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Nervous Shock
There is a duty of care not to cause nervous shock by putting a person in fear of his own safety Dulieu v White & Sons 1901, or in fear for the safety of his children Hanbrook v Stoke Bros 1925, or by making him an actual witness to an act of negligence by which he suffers nervous shock such as seeing his house on fire: Attia v British Gas plc 1987.
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Nervous Shock
Hanbrook v Stoke Bros 1925 Facts: Damages were claimed for a mother after her child was injured. Held: An express distinction was to be made between shock caused by what the mother saw with her own eyes and what she might have been told by bystanders, liability being excluded in the latter case. case. Persons outside the zone of physical danger were nevertheless owed a duty of care, because injury by shock was the only kind of injury that was foreseeable in such circumstances.
http: http ://www. //www.swarb. swarb.co. co.uk/lisc/PrInj uk/lisc/PrInj19001929 19001929. .php
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Nervous Shock
A person suffering nervous shock may have a claim if they can show that there was a sufficiently close relationship between themselves and the primary victim and that they either saw the accident with their unaided senses or came upon the immediate aftermath. aftermath. Case example: McLoughlin v OBrian 1982.

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McLoughlin v OBrian 1982

The facts: The claimant was called to the hospital where her husband and children were receiving emergency treatment shortly after an accident caused by the defendant. She was informed that her daughter had died. She suffered nervous shock.

Decision: It was reasonably foreseeable that the claimant would be affected. She had a close relationship with the primary victims and came upon the immediate aftermath. Therefore she could recover damages.

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Nervous Shock
It appears then that distinction can be drawn between those who have a close family tie to the victim and a mere bystander bystander. . There is also a distinction between those who witness an event and are proximate to the accident in terms of time and space and those who are told of the accident or witness it via simultaneous television broadcast.

Case examples: Alcock & Others v Chief Constable of South Yorkshire Police 1991 and Vernon v Bosley 1997.

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Vernon v Bosley 1997

The facts: Two young children were passengers in a car driven by the defendant, their nanny, when it went off the road and crashed into the river. The claimant, their father, did not see the accident but was called to the scene and witnessed the unsuccessful attempt to rescue the children. The claimant suffered nervous shock

Decision: The claimant could recover damages from the defendant.

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Nervous Shock
The Piper Alpha disaster in the North Sea produced further developments in this area. The issue was whether a duty of case was owed to a mere bystander who witnessed a horrific accident with his own unaided senses and subsequently suffered nervous shock. Case example: McFarlene v E E Caledonia Ltd 1994.

Course book Decision: No duty of care was owed in these circumstances. As a mere bystander he had no claim. (pg 152)

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Chadwick v British Railways Broad 1967

It is established then that a person who suffers nervous shock as a result of participating to the rescue of injured victims in accident would be owed a duty of care:
Case example: Chadwick v British Railways Board 1967

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Chadwick v British Railways Broad 1967

The facts: A serious train crash occurred as a result of the negligence of the train driver. The claimant attended the scene and over a prolonged period of time helped in the rescue work. As a result he suffered nervous shock.

Decision: A duty of care was held to rescuers and as nervous shock was foreseeable in the circumstances. The defendants were liable

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