lecture 9b negligence & nervous shock

7/28/2019 Lecture 9b Negligence & Nervous Shock

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Economic Loss Economic Loss Economic Loss Economic Loss One of the most uncertain areas in the law on negligence ishow 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 inbusiness in the long run. http://www.answers.com/topic/economic-loss

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Economic Loss Economic Loss Economic Loss Economic Loss

The most common example of economic loss is where a

person who has suffered physical damage makes a claimclaim forfor

lossloss of of businessbusiness profitsprofits while the damage is put right.

Case example: Spartan Steel & Alloys Ltd v Martin & Co Ltd

1973.

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Economic Loss Economic Loss Economic Loss 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 isinterrupted 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 inFrench law beyond the normal requirements that a claimant's asserted loss mustbe certain and directly caused.

http://en.wikipedia.org/wiki/Pure_economic_loss

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Economic Loss Economic Loss Economic Loss Economic Loss SpartanSpartan Steel & Alloys Ltd v Martin & Co Ltd 1973.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 andnegligently damaged that cable. As a consequence, the factory wasdeprived of electricity for 15 hours which has caused physical damage tothe factorys furnaces and metal, lost profit on the damaged metal andlost profit on the metal that was not melted during the time theelectricity was off. Spartan Steel claimed all the three heads of damage.

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Economic Loss Economic Loss Economic Loss Economic Loss SpartanSpartan Steel & Alloys Ltd v Martin & Co Ltd 1973.Steel & Alloys Ltd v Martin & Co Ltd 1973.

Decision:

The Court of Appeal, consisting of Lord Denning MR, Edmund-Davies LJ andLawton LJ have delivered a majority judgment (Edmund-Davies LJdissenting), that the Spartan Steel could only recover the damages totheir furnaces, the metal they had to discard and the profit lost on thediscarded metal. They could not recover the profits lost due to the factorynot being operational for 15 hours. Their main reasoning for this was thatwhile the damage to the metal was "physical damage" and the lost profitson the metal was "directly consequential" upon it, the profits lost due tothe blackout constituted "pure economic loss".

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Economic Loss Economic Loss Economic Loss Economic Loss SpartanSpartan Steel & Alloys Ltd v Martin & Co Ltd 1973.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 dutyof 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 hisleading 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 fromtime to time.If claims for pure economic loss in such cases were allowed, it might lead to countlessclaims, some of which may be spurious (the " floodgates " argument).It would be unfair to place the entire weight of many comparatively small losses upon theshoulders of one person in such cases.The law does not leave the claimant without remedy by allowing him to recover theeconomic losses that are directly consequential upon physical damage.

http://en.wikipedia.org/wiki/Spartan_Steel_%26_Alloys_Ltd_v_Martin_%26_Co_%28Contractors%29_Ltd7


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Economic Loss Economic Loss Economic Loss Economic Loss Claim discussion in case scenario for Claim discussion in case scenario for O2 mobile store.O2 mobile store.

loss of profits connected with the repair to the premises subject to the limitations placed on the recoveryof economic loss arising out of damage to property as opposed to pure economic loss as decided inSpartan 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 factoryowners should insure against this type of loss.

Pure economic loss is not recoverable (Murphy v Brentwood district council 1990)(Murphy v Brentwood district council 1990) unless it arises fromnegligent advice or misstatements as per Hedley Byrne & Co Ltd v Heller & Partners Ltd 1964Hedley Byrne & Co Ltd v Heller & Partners Ltd 1964 or fallswithin the special circumstances of Junior Books vJunior Books v VeitchiVeitchi Co Ltd 1983.Co Ltd 1983.

Apply facts of Murphy to determine O2 mobile store (assignment case scenario) will be able to recoverany loss to their trade.8


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Economic Loss Economic Loss Economic Loss Economic Loss Murphy v Brentwood District Council (1990)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. Theowner sold the property without fixing the problems, incurring a loss of about 35,000 onits market value and then sued the council for ne li ence or certif in the lans on the

basis of negligent advice. At first instance, the claimant was awarded damages, but atappeal 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 mademore or less at the same time as the Caparo Industries plc v Dickman (1990) andcompletely 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%299


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Economic Loss Economic Loss Economic Loss Economic Loss Junior books v Junior books v Veitchi Veitchi Co Ltd 1983Co 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 JuniorBooks and the main contactor there was no relationship in contract through which JuniorBooks could sue Veitchi. Therefore Junior Books was forced to brin 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 knownand who was relying on their skill and judgment as flooring contractors

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In this case, there is a special relationship

akin (related by blood) to contract

Junior Books v Junior Books v Junior Books v Junior Books v Veichi Veichi Veichi Veichi Co Ltd 1983Co Ltd 1983Co Ltd 1983Co Ltd 1983

between claimant and defendant, a claim for

loss of profits may succeed.

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Economic Loss Economic Loss Economic Loss 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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The facts: A solicitor gave negligent advice to a testator (aperson who makes a will) and drew up a will carelessly. A gift

to the claimant (an intended beneficiary) failed as a result.

Ross vRoss vRoss vRoss v Caunters Caunters Caunters Caunters 1980198019801980

Decision: The solicitor owed a duty of care to beneficiariessince 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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The special nature of the Junior Books case has been

stressed in subsequent decisions, which have

Muirhead Muirhead Muirhead Muirhead v Industrial Tank Specialties Ltd 1986 v Industrial Tank Specialties Ltd 1986 v Industrial Tank Specialties Ltd 1986 v Industrial Tank Specialties Ltd 1986

reverted to the ward of damagesdamages forfor economiceconomic

lossloss onlyonly wherewhere thatthat lossloss isis attachedattached to to physicalphysical

lossloss. Case example: Muirhead v Industrial Tank

Specialties Ltd 1986.

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The facts : The claimants, wholesale fish merchants, purchased

lobsters in the summer with the intention of selling them at

Muirhead Muirhead Muirhead Muirhead v Industrial Tank Specialties Ltd 1986 v Industrial Tank Specialties Ltd 1986 v Industrial Tank Specialties Ltd 1986 v Industrial Tank Specialties Ltd 1986

.

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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The claimant may compensation for nervous shockcaused by the defendants negligent act. Typically the

Nervous Shock Nervous Shock Nervous Shock Nervous Shock

witnessed an accident in which a close relative is

injured. CompensationCompensation willwill notnot bebe awardedawarded forfor meremere

grief grief oror distressdistress: : thethe claimantclaimant mustmust proveprove aa definitedefinite

andand identifiableidentifiable psychiatricpsychiatric illnessillness..

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There is a duty of care not to cause nervous shock byputting a person in fear of his own safety Dulieu v


,

childrenchildren Hanbrook Hanbrook v v StokeStoke BrosBros 19251925,, 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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Hanbrook Hanbrook v v StokeStoke BrosBros 19251925Facts:

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, liabilityliability

beingbeing excludedexcluded inin thethe latterlatter casecase. . Persons outside the zone of physical danger

were nevertheless owed a duty of care, because injury by shock was the only kindof injury that was foreseeable in such circumstances.

httphttp:://www //www. .swarbswarb. .coco..uk/lisc/PrInj uk/lisc/PrInj1900192919001929. .php php

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A person suffering nervous shock may have a claim if they canshowshow thatthat therethere waswas aa sufficientlysufficiently closeclose relationshiprelationship

betweenbetween themselvesthemselves andand thethe rimarrimar victimvictim andand thatthat thethe


eithereither sawsaw thethe accidentaccident withwith theirtheir unaidedunaided sensessenses oror camecame

uponupon thethe immediateimmediate aftermathaftermath. .

Case example: McLoughlin v OBrian 1982.

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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

McLoughlin McLoughlin McLoughlin McLoughlin v OBrian 1982v OBrian 1982v OBrian 1982v OBrian 1982

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 cameupon the immediate aftermath. Therefore she could recover damages.

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It appears then that distinction can be drawn between those who have aclose family tie to the victim and a meremere 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 thosethose whowho areare toldtold of of thethe

accidentaccident oror witnesswitness it it viavia simultaneous televisiontelevision broadcastbroadcast .

Case examples: Alcock & Others v Chief Constable of South Yorkshire

Police 1991 and Vernon v Bosley 1997.

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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

Vernon vVernon vVernon vVernon v Bosley Bosley Bosley Bosley 1997 1997 1997 1997

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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The Piper Alpha disaster in the North Sea produced further

developments in this area. TheThe issueissue waswas whether whether a a duty duty of of casecase waswas

owed owed toto aa meremere bystander bystander whowho witnessed witnessed a a horrific horrific accident 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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It is established then that a person who suffers

nervous shock as a result of participating to the

Chadwick v British Railways Broad 1967 Chadwick v British Railways Broad 1967 Chadwick v British Railways Broad 1967 Chadwick v British Railways Broad 1967

rescue of injured victims in accident would be

owed a duty of care:

Case example: Chadwick v British Railways Board 1967 Case example: Chadwick v British Railways Board 1967

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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

Chadwick v British Railways Broad 1967 Chadwick v British Railways Broad 1967 Chadwick v British Railways Broad 1967 Chadwick v British Railways Broad 1967

.

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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lecture 9b negligence & nervous shock

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