1. Duty of care -financial loss and negligent statements
Lecture 12
The Tort of Negligence 2
Duty of care -financial loss and negligent statements
Breach of Duty

2. Duty of care :- financial loss
The courts have not usually regarded it as just and reasonable to impose a duty of care when the damage is PURE ECONOMIC LOSS , only exceptionally allowing it where there is a high degree of proximity. They are more likely to impose a duty for CONSEQUENTAL ECONOMIC LOSS

3. MIURHEAD v INDUSTRIAL TANK SPECIALTIES Ltd [1986] QB 507
The claimant ran a lobster farm and was supplied with oxygen pumps manufactured by the defendant through a contract with a third party. The pumps were not compatible with the UK electricity system and kept cutting out

4. The claimants lobsters died and he was unable to restock for a substantial period of time while he attempted to work out what was wrong.
HELD the claimant was entitled to recover the consequential cost of restocking the lobsters and for the loss of profit on those that died.

5. He was not entitled to recover profits lost during the time the lobster production was suspended or the cost of replacing the pumps as these were pure economic loss only

6. rationale
Pure economic loss is usually derived from goods being defective and can often be dealt with under contract
Consequential economic loss is the knock on costs of the damage caused by the defendants negligence

7. So ……
This case shows that a business mistake can result in legal liability under contract and /or tort and as employers are vicariously liable for the acts of their employees during the course of their employment , the need to meet professional business standards of behaviour is imperative

8. negligent statements
There is considered to be no difference between liability arising from negligent statements and from negligent acts
If a job involves giving professional advice there may be liability for what is done AND what is said as a duty of care is owed to clients

9. e.g.
Lawyers
Accountants
Auditors
Valuers and surveyors
etc

10. HEDLEY BYRNE v HELLER[1963]AC 465
An advertising agency was given a reference from a clients bank which incorrectly stated that the client was creditworthy and in reliance on this mounted a campaign for the defendant who then went into liquidation without paying

11. HELD there is a duty not to make careless statements which cause economic loss provided a special relationship of close proximity “akin to contract” exists between the parties
( though in this case a disclaimer prevented such a relationship existing)

12. It must be :-
Reasonable for the claimant to rely on the statement
Reasonably foreseeable to the defendant that reliance would be placed

13. criteria for reliance - considerations
Defendants ability to give reliable advice i.e. qualifications/expertise
The circumstances in which the advice was given i.e. business / social
Use of a disclaimer may make reliance unreasonable and unforeseeable

14. remember
Professionally you are liable for what you do AND what you say
Don’t hold yourself out as possessing knowledge that you don’t have
If you don’t know, say so !

15. 2) BREACH OF DUTY
After establishing a duty of care , the claimant must show that this duty has been broken (breached) by the defendant

16. test for breach of duty
Whether the defendant has failed to do what a ‘reasonable person’ would have done or has done what a reasonable person would not have done.
Whether the defendants conduct amounts to a breach of duty depends on the circumstances of the case

17. considerations
a) The likelihood that damage or injury will be incurred
b) The seriousness of any damage or injury
c) The cost and ease of taking precautions
d) The social need for the activity

18. a) likelihood of damage/injury
The greater the likelihood of an accident the more care the defendant may need to take
BOULTON V STONE [1951] AC 850
the claimant was injured by a cricket ball hit from the defendant clubs grounds .The fence was 17 feet high and the ball travelled over 80 yards .

19. HELD the hit was a rare occurrence
HELD the hit was a rare occurrence . The defendant was not liable as reasonable care had been taken to reduce the risk

20. b) The seriousness of any damage/injury
The greater the extent of the likely damage the more the defendant is expected to do to reduce its risk.
PARIS v STEPNEY COUNCIL [1951] AC 367 :-
the claimant was employed by the defendant. He only had one eye and was blinded in his other eye in an accident at work

21. HELD the defendant failed to act with reasonable care by failing to supply goggles as the consequence of injury to the claimants eyes was much more serious than to other employees

22. c) cost/ease of precautions
The courts seek to impose a standard of care that gives reasonable protection to the claimant while not unduly burdening the defendant
This is described as a risk benefit analysis
A risk free environment can never be guaranteed

23. WITHERS V PERRY CHAIN Ltd [1961] 1 WLR 1314
The claimant was employed in a factory where contact with grease was necessary. She became allergic to the grease and developed a skin condition and was moved to the most grease free position possible but the allergy persisted

24. HELD the defendant had done all that was reasonably expected to prevent harm to the claimant and therefore was not in breach of duty and the claimant’s case failed

25. d) social need
The court may assess the social utility of the defendants conduct in determining whether he was negligent
DABORN V BATH TRAMWAYS [1946] 2 All ER 333:- the issue was whether the driver in war time of a left hand drive ambulance had been negligent in turning left without a signal

26. HELD the duty of care had not been broken as the purpose to be served in using the ambulances justified the assumption of abnormal risk

27. burden of proof
The burden of proving that the defendant did not act reasonably lies with the claimant
But if the situation is such that the only or most likely explanation of the accident is that the defendant was negligent the claimant may claim “res ipsa loquitur”

28. res ipsa loquitur This means “the facts speak for themselves”
This has the effect of placing the burden of proof on the defendant who must show either how the accident occurred or that he has not been negligent

29. conditions of res ipsa loquitur
The event which caused the accident must have been in the defendants control and
The accident must be of such a nature that it would not have occurred if proper care had been taken by the defendant

30. CASSIDY V MINISTER OF HEALTH [1951] 1 All ER 574
The claimant went into hospital for treatment of 2 stiff fingers but left with 4 stiff fingers
HELD res ipsa loquitur applied

31. 3) CONSEQUENTIAL DAMAGE
This will be covered in the next lecture

32. References:-
Adams, A. (2014) ‘Law For Business Students’. 8th Edn. In SAM Core Reading Volume Two. 2nd Edn. ed. By Jeffree, D. Harlow: Palgrave,