NOVEL DUTY SITUATIONS – PURE ECONOMIC LOSS, NEGLIGENT MISSTATEMENT AND NERVOUS SHOCK Table
TOPIC 2: NOVEL DUTY SITUATIONS – COMPLETE SUMMARY TABLE
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.
| Area | What Students Must Apply | Key Cases / Statutes | Exam Trigger |
|---|---|---|---|
| Novel duty situations | Court is being asked to recognise duty in unusual/new circumstances. Policy matters heavily. | Caparo v Dickman | Question involves unusual duty, economic loss, nervous shock, advice, public policy. |
| Policy concerns | Courts restrict duty to avoid unlimited liability. | Caparo; Alcock; Spartan Steel | Floodgates, too many claimants, unfair burden, public interest. |
| Main novel duty areas | Pure economic loss, negligent misstatement, nervous shock/psychiatric injury. | Spartan Steel; Hedley Byrne; Alcock | Topic asks about special duty situations. |
PURE ECONOMIC LOSS
| Area | What Students Must Apply | Key Cases | Exam Trigger |
|---|---|---|---|
| Pure economic loss meaning | Financial loss not caused by physical injury or property damage. | Spartan Steel | Loss of profit, investment loss, reduced value, repair cost of defect itself. |
| General rule | Pure economic loss is generally not recoverable in negligence. | Spartan Steel; Murphy | Claimant only lost money. |
| Consequential economic loss | Financial loss caused by physical injury/property damage is usually recoverable. | Spartan Steel | Damaged property leads to profit loss. |
| Defective product/building | Cost of fixing defective item itself is usually pure economic loss. | Murphy; D & F Estates | Defective building/property/product with no further damage. |
| Rare exception | Very close relationship may exceptionally allow recovery. | Junior Books | Specialist contractor directly relied upon. |
| Policy reason | Courts fear floodgates and indeterminate liability. | Spartan Steel; Caparo | One act causes many financial losses. |
PURE ECONOMIC LOSS EXAM METHOD
| Step | What To Ask | Likely Result |
|---|---|---|
| 1 | Is the loss financial only? | If yes, likely pure economic loss. |
| 2 | Is there personal injury? | If yes, related financial loss may be recoverable. |
| 3 | Is there property damage? | If yes, related profit loss may be recoverable. |
| 4 | Is the loss only repair/replacement of defective item? | Usually not recoverable. |
| 5 | Was there advice or statement relied upon? | Check negligent misstatement exception. |
| 6 | Are policy concerns strong? | Duty likely denied. |
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.
NEGLIGENT MISSTATEMENT
| Area | What Students Must Apply | Key Cases / Statutes | Exam Trigger |
|---|---|---|---|
| Meaning | Careless statement/advice causing financial loss through reliance. | Hedley Byrne | Bad advice, wrong report, inaccurate accounts, careless valuation. |
| Exception to pure economic loss rule | Pure economic loss may be recoverable where special relationship exists. | Hedley Byrne | Financial loss caused by statement, not physical damage. |
| Statement/advice | There must be information, advice, report or representation. | Hedley Byrne | Professional or serious advice given. |
| Special skill | Defendant has or claims expertise. | Hedley Byrne; Chaudhry | Accountant, solicitor, surveyor, bank, friend with expertise. |
| Assumption of responsibility | Defendant undertakes responsibility for accuracy of statement. | Hedley Byrne; Henderson | Advice given for claimant to rely on. |
| Reasonable reliance | Claimant must actually and reasonably rely. | Smith v Eric S Bush | Claimant acts on advice/report. |
| Known purpose | Statement must be used for purpose intended or known. | Caparo; JEB Fasteners | Claimant uses accounts/report for unexpected purpose. |
| Disclaimer | Valid disclaimer may defeat duty. | Hedley Byrne; UCTA 1977 | “Without responsibility” / exclusion clause. |
| Limitation | Defendant not liable to the world at large. | Caparo | Auditors, public accounts, unknown investors. |
NEGLIGENT MISSTATEMENT EXAM METHOD
| Step | What To Ask | Case |
|---|---|---|
| 1 | Was there a statement/advice/report? | Hedley Byrne |
| 2 | Was the statement made carelessly? | Hedley Byrne |
| 3 | Did defendant have special skill? | Hedley Byrne |
| 4 | Did defendant assume responsibility? | Hedley Byrne; Henderson |
| 5 | Did claimant reasonably rely? | Smith v Eric S Bush |
| 6 | Was reliance for the known/intended purpose? | Caparo; JEB Fasteners |
| 7 | Did claimant suffer financial loss? | Hedley Byrne |
| 8 | Was there a disclaimer? | Hedley Byrne; UCTA 1977 |
| 9 | Is liability fair, just and reasonable? | Caparo |
DISCLAIMER / EXCLUSION CLAUSE TABLE
| Issue | Rule | Authority |
|---|---|---|
| Disclaimer may prevent duty | Clear disclaimer can show no assumption of responsibility. | Hedley Byrne |
| Death/personal injury negligence | Cannot exclude liability. | UCTA 1977 s2(1) |
| Other negligence loss | Can exclude only if reasonable. | UCTA 1977 s2(2) |
| Reasonableness | Court assesses fairness and reasonableness of clause. | UCTA 1977 s11 |
| Surveyor disclaimer | May be unreasonable if ordinary buyer relied on report. | Smith v Eric S Bush |
NERVOUS SHOCK / PSYCHIATRIC INJURY
| Area | What Students Must Apply | Key Cases | Exam Trigger |
|---|---|---|---|
| Meaning | Recognised psychiatric illness caused by negligence. | Hinz v Berry | PTSD, clinical depression, psychiatric harm. |
| Not enough | Grief, sorrow, shock, fear, distress alone are not enough. | Hinz v Berry | Claimant is merely upset/sad. |
| Recognised illness required | Must be medically recognised. | Hinz v Berry | Medical diagnosis mentioned. |
| Courts restrict claims | Fear of floodgates, fraud, unlimited liability. | Alcock | Disaster with many affected people. |
| Primary victim | Directly involved or within range of foreseeable physical injury. | Page v Smith | Claimant was in accident/danger zone. |
| Secondary victim | Not directly endangered but witnesses injury/death/danger to another. | Alcock | Relative/friend witnesses accident. |
| Rescuers | No automatic special status. Must satisfy primary or secondary victim rules. | White/Frost | Police, firefighters, rescuers claiming psychiatric injury. |
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.
PRIMARY VICTIM TABLE
| Requirement | Rule | Key Case |
|---|---|---|
| Direct involvement | Claimant must be directly involved in accident/danger. | Page v Smith |
| Foreseeability | Physical injury must be foreseeable. Psychiatric injury itself need not be foreseeable. | Page v Smith |
| Recognised illness | Must suffer recognised psychiatric illness. | Hinz v Berry |
| Rescue situations | Rescuer must be personally exposed to danger to qualify as primary victim. | White/Frost |
SECONDARY VICTIM TABLE
| Alcock Requirement | Meaning | Key Cases |
|---|---|---|
| Recognised psychiatric illness | Grief/distress not enough. | Hinz v Berry |
| Close tie of love and affection | Presumed for spouses, parents and children; others must prove it. | Alcock |
| Proximity in time and space | Must be present at accident or immediate aftermath. | McLoughlin; Alcock |
| Direct perception | Must see/hear event or aftermath with own senses, not be told later. | Alcock |
| Sudden shock | Illness must be caused by sudden shocking event, not gradual stress. | Sion; Walters |
| Policy restriction | Rules prevent unlimited liability. | Alcock; White/Frost |
SECONDARY VICTIM EXAM METHOD
| Step | What To Ask | Result |
|---|---|---|
| 1 | Did claimant suffer recognised psychiatric illness? | If no, claim fails. |
| 2 | Was claimant directly involved/in danger? | If yes, primary victim. |
| 3 | If not directly involved, did claimant witness harm to another? | If yes, secondary victim analysis. |
| 4 | Is there close tie of love and affection? | If no, claim likely fails. |
| 5 | Was claimant present at accident/immediate aftermath? | If no, claim likely fails. |
| 6 | Did claimant directly perceive event through senses? | If only told later, claim likely fails. |
| 7 | Was there sudden shock? | If gradual grief, claim fails. |
| 8 | Do policy reasons restrict liability? | Court may deny duty. |
NERVOUS SHOCK CASE TABLE
| Case | Rule | Exam Use |
|---|---|---|
| Dulieu v White | Claim allowed where claimant feared for own safety. | Early primary victim case. |
| Hinz v Berry | Grief is not enough; recognised psychiatric illness required. | Use for illness requirement. |
| McLoughlin v O’Brian | Immediate aftermath can satisfy proximity. | Secondary victim proximity. |
| Alcock | Control mechanisms for secondary victims. | Main secondary victim case. |
| Page v Smith | Primary victim needs foreseeable physical injury only. | Main primary victim case. |
| White/Frost | Rescuers have no automatic special status. | Rescuer claims. |
| Chadwick | Earlier generous rescuer case. | Contrast with White/Frost. |
| Sion | Gradual deterioration is not sudden shock. | Sudden shock requirement. |
| Walters | Series of events may count as one horrifying event. | Flexible sudden shock argument. |
| Taylor v A Novo | Later consequence not enough; proximity must be to accident/immediate aftermath. | Restrict secondary victim claims. |
POLICY AND REFORM TABLE
| Area | Current Law | Criticism | Possible Reform |
|---|---|---|---|
| Pure economic loss | Generally not recoverable. | Harsh where financial loss is real. | Allow recovery in clearer reliance situations. |
| Negligent misstatement | Recoverable only with special relationship and reliance. | Boundaries uncertain. | Clearer statutory rules for professional advice. |
| Nervous shock | Strict control mechanisms. | Artificial and unfair to genuine victims. | Simplify rules for psychiatric injury. |
| Close ties | Presumed only for narrow relationships. | Excludes siblings/friends unless proven. | Broaden recognised relationships. |
| Proximity | Must be at accident/immediate aftermath. | Harsh for later discovery. | Relax time/space requirement. |
| Sudden shock | Gradual distress usually excluded. | Outdated understanding of psychiatric illness. | Focus on medical evidence instead. |
| Rescuers | No special status. | May discourage rescue/public service fairness. | Give limited special protection to rescuers. |
| Floodgates | Used to restrict claims. | May prioritise defendants over genuine claimants. | Balanced statutory eligibility rules. |
COMPLETE ONE-LINE MEMORY TABLE
| Issue | One-Line Rule |
|---|---|
| Novel duty | Use Caparo and policy. |
| Pure economic loss | Generally not recoverable. |
| Consequential economic loss | Recoverable if flowing from physical injury/property damage. |
| Negligent misstatement | Recoverable if special relationship, responsibility and reliance exist. |
| Disclaimer | Can defeat claim unless unreasonable under UCTA. |
| Primary victim | Directly involved; foreseeable physical injury enough. |
| Secondary victim | Must satisfy Alcock control mechanisms. |
| Recognised illness | Grief and distress are not enough. |
| Close tie | Presumed for spouses/parents/children, otherwise prove it. |
| Proximity | Accident or immediate aftermath required. |
| Direct perception | Must witness with own senses. |
| Sudden shock | Gradual distress usually fails. |
| Rescuers | Must qualify as primary or secondary victims. |
| Reform | Current law is controlled but often unfair and artificial. |
FINAL CASE AND STATUTE MEMORY TABLE
| Authority | 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 exceptional recovery for close relationship. |
| Hedley Byrne | Negligent misstatement duty possible with special relationship. |
| Smith v Eric S Bush | Surveyor liable where buyer reasonably relied. |
| Caparo | No duty to world at large; limits financial advice/account 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. |
| Henderson | Assumption of responsibility creates liability. |
| UCTA 1977 s2(1) | Cannot exclude negligence liability for death/personal injury. |
| UCTA 1977 s2(2) | Other negligence liability can be excluded only if reasonable. |
| UCTA 1977 s11 | Reasonableness test. |
| Dulieu v White | Claim allowed where claimant feared for own safety. |
| Hinz v Berry | Recognised psychiatric illness required. |
| McLoughlin v O’Brian | Immediate aftermath can satisfy proximity. |
| Alcock | Secondary victim control mechanisms. |
| Page v Smith | Primary victim only needs foreseeable physical injury. |
| White/Frost | Rescuers have no automatic special status. |
| Chadwick | Earlier generous rescuer case. |
| Sion | Gradual deterioration not sudden shock. |
| Walters | Series of events may count as one shocking event. |
| Taylor v A Novo | Later consequence not enough for 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.