1 Torts LWB133 Week 6 Semester 2 ,2000 Part VI - Economic Loss
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Torts LWB133Week 6 Semester 2 ,2000
Part VI - Economic Loss
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PART VII - ECONOMIC LOSSPART VII - ECONOMIC LOSS
� SECTION 1– Negligent and Fraudulent Misrepresentation
� SECTION 2– Pure Economic Loss Other than by
Misrepresentation
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Novel Categories of Negligence
� cases not clearly covered by precedent– examples
• nervous shock• pure economic loss• public authorities• non-feasance
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Negligence Action
�Three elements– duty– breach– damage
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Duty of Care
�Courts are reluctant to find a duty of care owed by a defendant to a plaintiff if the damage suffered by the plaintiff is classified as pure economic loss
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What is pure economic loss?What is pure economic loss?
� it is not physical damage� it is not economic loss which is
consequential on physical damage
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POLICY CONSIDERATIONSPOLICY CONSIDERATIONS
� the fear of indeterminate liability� disproportion between defendant’s
blameworthiness and liability� interrelationship between liability in tort
and contract� the need for certainty� the effect of insurance
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Developing approach of the Developing approach of the High CourtHigh Court�Hill v Van Erp (1997)
– concept of proximity is no longer supported by a majority of the High Court as a general principle or unifying theme
– the term proximity is still used by some members of the High Court as an umbrella term
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Novel fact situationNovel fact situation
�was the loss reasonably foreseeable?�On a consideration of previously decided
cases– what additional factors over and above
reasonable foreseeability are required to establish the existence of a duty of care in the particular category of case
– are there any policy factors that weigh for or against the finding of a duty of care
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Perre v Apand (1999) 73 ALJR 1190
�Establishing a duty of care in case of pure economic loss– no majority view
• four possible approaches– the incremental
» McHugh, Hayne & Callinan JJ– the legally recognised rights
» Gaudron J– the protected interests - “salient features”
» Gleeson CJ & Gummow J– the three-stage Caparo
» Kirby J
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Categories of casesCategories of cases�A number of categories can be identified
from decided cases concerning recovery of pure economic loss– negligent misrepresentation– economic loss resulting from damage to
property of another– failure of a professional person to perform an
undertaking or service properly– economic loss resulting from defective
construction of buildings
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Continuing relevance of these categories
� Following the decision in Perre v Apand– High Court is moving towards synthesising
instances of pure economic loss– identification of factors which will determine
existence of duty of care• may replace approach adopted in past cases
– particularly cases of pure economic loss resulting from negligent acts
• emphasis on features of control and vulnerability
– no uniform approach by members of Court
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Negligent Misrepresentation
� First category of case involving pure economic loss in which the courts recognised the existence of a duty of care– pure economic loss resulting from negligent
words
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Hedley Byrne v Heller (1964)Hedley Byrne v Heller (1964)
� no need to establish a contractual or fiduciary relationship
� person giving the information must be possessed of special skill (or hold themselves out as having such skill)
� assumption of responsibility by the speaker� reasonable reliance by plaintiff� no disclaimer of responsibility
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Position in AustraliaPosition in Australia
�MLC v Evatt (High Court)� accepted that duty of care could arise
irrespective of contract or fiduciary relationship
�Barwick CJ identified features of special relationship which would give rise to duty of care
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FEATURES OF RELATIONSHIPFEATURES OF RELATIONSHIP
� speaker knows or ought to know:– trusted by recipient to give information recipient
believes speaker has capacity to give– the information is of a serious or business nature
� speaker knew or ought to have known that recipient intended to rely on the information
� reasonable for recipient to seek or accept and rely on speaker advice
� no need for recipient to actively seek the information or advice
� no requirement that speaker have special skill
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Appeal to Privy CouncilAppeal to Privy Council
� speaker must carry on business of giving advice or let it be known the claims to possess special skill in the field
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Subsequent High Court DecisionsSubsequent High Court Decisions
� Shaddock v Parramatta City Council (1981)– no requirement that speaker be possessed of special
skill (not necessary to decide in this case)� San Sebastian (1986)
– determined that reliance was the most significant element in establishing proximity
– no requirement that statements made in response to request for information or advice
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Esanda Finance Corporation Ltd v Esanda Finance Corporation Ltd v Peat Marwick HungerfordsPeat Marwick Hungerfords� 1997 High Court decision� confirms approach adopted in MLC v Evatt
and San Sebastian
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Impact of decision in Perre v Apand
� ? whether decision in Perre v Apand will impact on the factors relevant to the establishment of a duty of care for negligently inflicted pure economic loss resulting from negligent misstatement.
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Fraudulent Misrepresentation
�Comparison with negligently inflicted pure economic loss
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Five Elements
� a representation of fact� defendant knew representation was false or
recklessly indifferent� defendant intended plaintiff to rely on the
misrepresentation� plaintiff did rely on the representation� plaintiff suffered damage
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CBC v Brown
� misrepresentation of fact– defendant gave written advice that customer
financially stable� defendant knew representation was false
– question of fact� defendant intended plaintiff to rely on representation
– not relevant that statement made to intermediary acting on behalf of a class of persons
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� effect of disclaimer– cannot exclude liability for deceit
� did plaintiff rely on representation?– yes! they would have breached the contract
� did the plaintiff suffer damage in fact and law?– loss was direct and foreseeable consequence of
the fraudulent misrepresentation
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Krakowski v Eurolynx
�Krakowskis – plaintiffs/appellants
�Eurolynx– defendant/first respondent
�Mallesons (Eurolynx’s solicitors)– second respondent
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The representation
� an allegation that the disclosed instrument of lease was not the exhaustive contractual arrangement between E and the lessee
� falsity of the representation� inducement� fraud by Eurolynx
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Next Week
� Pure economic loss other than by representation– economic loss resulting from damage to
property of another– failure of a professional person to perform an
undertaking or service properly– economic loss resulting from defective
construction of buildings� Significance of decision in Perre v Apand