NOVEL DUTY SITUATIONS – PURE ECONOMIC LOSS, NEGLIGENT MISSTATEMENT AND NERVOUS SHOCK Cases and Statues
TOPIC 2: NOVEL DUTY SITUATIONS – MAJOR CASES AND STATUTES
Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.
1. PURE ECONOMIC LOSS CASES
| Case | Facts | Principle | Exam Use |
|---|---|---|---|
| Spartan Steel & Alloys Ltd v Martin & Co Ltd (1973) | Contractors negligently damaged an electricity cable. Factory lost power and suffered financial loss. | Pure economic loss is generally not recoverable. Consequential economic loss linked to physical damage may be recoverable. | Use as the main case for distinguishing pure economic loss from consequential economic loss. |
| Murphy v Brentwood District Council (1991) | Defective building foundations caused economic loss when property value dropped. | Cost of repairing a defective product/building is usually pure economic loss and not recoverable in negligence. | Use for defective buildings/property value loss. |
| D & F Estates Ltd v Church Commissioners (1989) | Defective plastering caused no damage to other property. | Cost of repairing defect itself is pure economic loss. | Use where only the defective item itself needs repair. |
| Junior Books Ltd v Veitchi Co Ltd (1983) | Specialist flooring contractor installed defective floor; claimant suffered economic loss. | Duty allowed due to very close relationship, but this case is treated as exceptional. | Mention only as a rare exception. Do not rely on it as the general rule. |
2. PURE ECONOMIC LOSS – EXAM RULE TABLE
| Type of Loss | Recoverable? | Case |
|---|---|---|
| Personal injury causing loss of earnings | Yes | Ordinary negligence principles |
| Property damage causing profit loss | Yes | Spartan Steel |
| Loss of profit with no physical damage | Usually no | Spartan Steel |
| Cost of repairing defective item itself | Usually no | Murphy; D & F Estates |
| Financial loss caused by negligent advice | Possible exception | Hedley Byrne |
3. NEGLIGENT MISSTATEMENT CASES
| Case | Facts | Principle | Exam Use |
|---|---|---|---|
| Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964) | Bank gave careless credit reference. Claim failed because of disclaimer. | Duty of care may exist for negligent statements causing financial loss where there is a special relationship and reliance. | Main case for negligent misstatement. Use for special relationship, assumption of responsibility, and reasonable reliance. |
| Smith v Eric S Bush (1990) | Buyer relied on surveyor’s valuation report. Property had serious defects. | Surveyor owed duty to buyer despite disclaimer. | Use where professional report is relied upon by a claimant. |
| Caparo Industries plc v Dickman (1990) | Investors relied on audited accounts when buying shares. | No duty owed to individual investors; duty not owed to world at large. | Use to limit negligent misstatement liability. |
| JEB Fasteners Ltd v Marks Bloom & Co (1983) | Claimant relied on accounts when buying company. | Reliance must be for the purpose for which the statement was made. | Use for purpose of reliance. |
| Chaudhry v Prabhakar (1989) | Friend gave careless advice about buying a car. | Duty may arise even in informal situations if reliance is reasonable and advice is given seriously. | Use where advice is informal but claimant clearly relies on defendant’s skill. |
| White v Jones (1995) | Solicitor delayed preparing will; intended beneficiaries lost inheritance. | Duty may be owed to third parties where professional negligence causes foreseeable financial loss. | Use for professional assumption of responsibility beyond direct client. |
| Henderson v Merrett Syndicates Ltd (1995) | Lloyd’s managing agents owed duties to investors. | Assumption of responsibility may create liability for economic loss. | Use for assumption of responsibility in professional relationships. |
Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.
4. NEGLIGENT MISSTATEMENT – EXAM RULE TABLE
| Requirement | Meaning | Case |
|---|---|---|
| Statement/advice | Defendant gives information, advice, report or representation. | Hedley Byrne |
| Special skill | Defendant has or claims expertise. | Hedley Byrne |
| Assumption of responsibility | Defendant undertakes responsibility for accuracy. | Hedley Byrne; Henderson |
| Reasonable reliance | Claimant relies on statement in a reasonable way. | Smith v Eric S Bush |
| Known purpose | Statement must be used for intended purpose. | Caparo; JEB Fasteners |
| No effective disclaimer | Disclaimer may defeat claim unless unreasonable. | Hedley Byrne; Smith v Eric S Bush |
5. DISCLAIMERS AND STATUTES
| Statute | Rule | Exam Use |
|---|---|---|
| Unfair Contract Terms Act 1977 | Exclusion of liability for negligence causing death or personal injury is not allowed. For other loss, exclusion must be reasonable. | Use where defendant relies on a disclaimer to avoid negligent misstatement liability. |
| UCTA 1977, s2(1) | Cannot exclude liability for death or personal injury caused by negligence. | Use for personal injury exclusion clauses. |
| UCTA 1977, s2(2) | Liability for other negligence loss may be excluded only if reasonable. | Use for financial loss disclaimers. |
| UCTA 1977, s11 | Reasonableness test. | Use to assess whether disclaimer is valid. |
6. NERVOUS SHOCK / PSYCHIATRIC INJURY CASES
| Case | Facts | Principle | Exam Use |
|---|---|---|---|
| Dulieu v White & Sons (1901) | Horse-drawn van crashed into pub; pregnant woman feared for her safety. | Psychiatric injury claim allowed where claimant feared for own safety. | Early recognition of nervous shock. |
| Hinz v Berry (1970) | Claimant witnessed husband killed in accident and suffered psychiatric illness. | Ordinary grief is not enough; recognised psychiatric illness is required. | Use for distinction between grief and psychiatric injury. |
| McLoughlin v O’Brian (1983) | Claimant saw injured family members at hospital shortly after accident. | Immediate aftermath may satisfy proximity. | Use for secondary victim proximity. |
| Alcock v Chief Constable of South Yorkshire Police (1992) | Relatives of Hillsborough victims suffered psychiatric illness. Most claims failed. | Established control mechanisms for secondary victims. | Main case for secondary victims. |
| Page v Smith (1996) | Claimant involved in car crash suffered psychiatric illness. | Primary victim only needs physical injury to be foreseeable. | Main case for primary victims. |
| White v Chief Constable of South Yorkshire Police / Frost (1999) | Police officers involved in Hillsborough claimed psychiatric injury. | Rescuers have no special status unless primary/secondary victim rules are satisfied. | Use for rescuers. |
| Chadwick v British Railways Board (1967) | Claimant helped rescue victims after train crash and suffered psychiatric illness. | Earlier generous approach to rescuers. | Use carefully; modern law limited by White/Frost. |
| Sion v Hampstead Health Authority (1994) | Father watched son deteriorate over time in hospital. | Gradual grief/stress is not sudden shock. | Use for sudden shock requirement. |
| North Glamorgan NHS Trust v Walters (2002) | Mother witnessed traumatic events over 36 hours involving her baby. | A series of events may count as one horrifying event. | Use to soften the sudden shock rule. |
| Taylor v A Novo (UK) Ltd (2013) | Daughter saw mother collapse and die weeks after accident. | Secondary victim must be proximate to accident or immediate aftermath, not later consequences. | Use to restrict proximity. |
Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.
7. PRIMARY VICTIM CASES
| Case | Rule | Exam Trigger |
|---|---|---|
| Dulieu v White | Claimant feared for own safety. | Claimant personally endangered. |
| Page v Smith | Physical injury need only be foreseeable. | Claimant directly involved in accident. |
| White/Frost | Rescuers need to qualify as primary victims by being exposed to danger. | Rescuer claims psychiatric injury. |
8. SECONDARY VICTIM CASES
| Case | Rule | Exam Trigger |
|---|---|---|
| McLoughlin v O’Brian | Immediate aftermath may be enough. | Claimant reaches hospital shortly after accident. |
| Alcock | Secondary victims must satisfy control mechanisms. | Claimant witnesses harm to another person. |
| Sion | Gradual deterioration is not sudden shock. | Psychiatric harm develops over time. |
| Walters | Series of events may be one horrifying event. | Traumatic events close together. |
| Taylor v A Novo | Later death/collapse is not enough if not proximate to accident. | Claimant sees later consequence, not accident. |
9. ALCOCK CONTROL MECHANISMS TABLE
| Requirement | Meaning | Case |
|---|---|---|
| Recognised psychiatric illness | Grief/distress not enough. | Hinz v Berry |
| Close tie of love and affection | Usually presumed for spouses, parents and children. Others must prove it. | Alcock |
| Proximity in time and space | Present at accident or immediate aftermath. | McLoughlin; Alcock |
| Direct perception | Must see/hear event with own senses, not merely be told. | Alcock |
| Sudden shock | Must be sudden shocking event, not gradual distress. | Sion; Walters |
10. POLICY CASES FOR NOVEL DUTY SITUATIONS
| Case | Policy Point | Exam Use |
|---|---|---|
| Caparo v Dickman | Avoid liability to unlimited claimants. | Negligent misstatement / duty restriction. |
| Spartan Steel | Pure economic loss restricted due to floodgates and economic policy. | Economic loss. |
| Alcock | Nervous shock claims restricted to prevent unlimited liability. | Secondary victims. |
| White/Frost | Rescuers not given automatic special protection. | Policy restrictions. |
| Hill v Chief Constable | Courts cautious where liability may cause defensive practices. | General policy discussion. |
11. LAW COMMISSION / REFORM POINTS
| Reform Area | Suggested Reform | Exam Use |
|---|---|---|
| Psychiatric injury | Simplify rules for secondary victims. | AO3 reform discussion. |
| Close relationship rules | Expand relationships beyond narrow categories. | Criticise Alcock. |
| Sudden shock rule | Remove or relax sudden shock requirement. | Criticise Sion and strict Alcock approach. |
| Medical evidence | Focus more on recognised psychiatric illness rather than technical proximity rules. | Reform argument. |
| Statutory reform | Replace common law complexity with clearer legislation. | Essay evaluation. |
12. FINAL CASE MEMORY TABLE
| Case | One-Line Rule |
|---|---|
| Spartan Steel | Pure economic loss generally not recoverable. |
| Murphy v Brentwood | Defective building repair cost is pure economic loss. |
| D & F Estates | Repairing defect itself is pure economic loss. |
| Junior Books | Rare exception; very close relationship. |
| Hedley Byrne | Negligent misstatement may be recoverable with special relationship. |
| Smith v Eric S Bush | Surveyor liable where buyer reasonably relied. |
| Caparo | No duty to world at large; limits adviser/auditor liability. |
| JEB Fasteners | Reliance must match statement’s purpose. |
| Chaudhry v Prabhakar | Informal advice may create duty if reliance reasonable. |
| White v Jones | Solicitor may owe duty to intended beneficiary. |
| Dulieu v White | Psychiatric injury allowed where claimant feared for own safety. |
| Hinz v Berry | Recognised psychiatric illness required; grief not enough. |
| McLoughlin v O’Brian | Immediate aftermath can satisfy proximity. |
| Alcock | Control mechanisms for secondary victims. |
| Page v Smith | Primary victim: foreseeable physical injury enough. |
| White/Frost | Rescuers have no automatic special status. |
| Chadwick | Earlier generous rescuer case. |
| Sion | Gradual distress is not sudden shock. |
| Walters | Series of events may count as one shocking event. |
| Taylor v A Novo | Later consequence not enough for proximity. |
13. FINAL STATUTE MEMORY TABLE
| Statute | Rule |
|---|---|
| Unfair Contract Terms Act 1977, s2(1) | Cannot exclude liability for death/personal injury caused by negligence. |
| Unfair Contract Terms Act 1977, s2(2) | Other negligence liability may be excluded only if reasonable. |
| Unfair Contract Terms Act 1977, s11 | Reasonableness test for exclusion clauses/disclaimers. |
Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.