'Judges have been reluctant to allow economic losses to be claimed for in negligence, and have been careful to restrict the circumstances where such claims will be permitted' - Critically assess this statement.
Lancaster University
BA (Hons) Accounting & Finance
Year 2- 2002/2003
Law 231 Assignment
Assignment Title
‘Judges have been reluctant to allow economic losses to be claimed for in negligence, and have been careful to restrict the circumstances where such claims will be permitted’
Critically assess this statement with reference to the development of liability for economic loss in negligence. Support and illustrate your answer with reference to relevant case law and academic opinion.
Introduction
In this essay, I am going to discuss whether economic loss in negligence should constitute a cause of action. I will discuss this in three sections. First of all, I will explain briefly what the tort of negligence is and the development of the related law. Second of all, I will explain what the law relating to the recovery of economic losses is and what types of economic loss might be claimed under negligence. Final, I will bring forward my points of view on whether there is a duty to avoid causing foreseeable economic loss.
The tort of negligence is where someone’s carelessness, therefore, failure to exercise the degree of care considered reasonable under their circumstances, resulting in an unintended injury to another party.
In a normal tort case involving a claim of negligence, the claimant must prove three things. The onus is, therefore, on the claimant to prove the negligence of the defendant on the balance of probabilities.
- The existence of a duty to take care which was owed to him by the defendant.
- Breach of such duty by the defendant.
- Resulting damage to the claimant.
Donoghue v Stevenson [1932] AC 562 is a classical case in the modern tort of negligence. It effectively created the modern tort of negligence. Lord Atkin laid down a general applicable test to determine when a defendant would owe a duty of care. He stated: ‘You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injury your neighbour’. As can be seen from this statement, the whole statement is dominated by the concept of reasonableness and Lord Atkin actually defined a reasonable man as the man on the ‘Chapham omnibus’− a purely hypothetical observer imbued with simple reasoning faculties. In practice, of course, it is down to what the judges consider to be reasonable.
I totally agree with these two statements which I mentioned above. In many circumstances there should be no problems. For example, a motorist owes a duty of care to other road-users due to the fact that a motorist is foreseeable that his negligence may injury road-users. But what happens, for example, Anns v London Borough of Merton [1977] 2 ALL ER 492. In this case, the claimants held a lease of a block of flats built in 1962. Later, considerable settlement caused cracks and the tilting of floors. The claimants blamed the builders and also the local council because it was alleged that the council had not inspected the flats during building as the by-law required, so their shallow foundations were not detected. The Lordships found that the local authority had a duty of care to claimants and made general comments on the duty of care, and this new test was laid down. However, it is doubtful whether the local authority had foreseeability for the damages caused to the claimants. In addition, they have no sufficiently close relationship which would justify imposing s duty of care. In fact, the test from this case was rejected by the House of Lords in Caparo Industries plc v Dickman and Others [1990] 2 WLR 358, which decided that in the future the law should be developed ‘Incrementally’ and that in any new situation, there had to be: