PURE ECONOMIC LOSS: Negligent Acts

Two types 1. Negligent statements leading to pure economic loss 2. Negligent acts leading to pure economic loss. Legacy of proximity is that it remains in Pure Economic Loss. (with qualifications re McHugh in Apand)

2. NEGLIGENT ACT/OMISSION CAUSING PURE ECONOMIC LOSS (focus on 2. here) Pure economic loss is economic loss suffered by P that is not a result of damage to property which the plaintiff has a proprietary or possessory interest or personal injury to the plaintiff.

Mason J The Caltex Principle Liability arises when: A defendant can reasonably foresee that a specific individual as distinct from a general class of persons will suffer financial loss This approach eliminates the prospect that there will come into existence liability to an indeterminate class of persons . (at 593) There is no liability for pure economic loss where the person claiming is a member of an indeterminate class. The Dredge Willemstadt (general expression of the common ratio of Mason CJ, Gibbs and Stephen JJ). Refer to Masons statement . This is the same rule that applies to the economic loss when a defectively built house is purchased.

Duty statement: The Dredge Willemstadt (1976) Gibbs J (obiter): there are exceptional cases in which D has knowledge or means of knowledge that P individually, and not merely as a member of an unascertained class, will be likely to suffer economic loss as a consequence of his negligence, and owes P a duty to take care not to cause him such damage by his negligent act. A class is unascertained when the defendant is unable to identify the members as individuals or as a class. The Dredge Willemstadt: Gibbs J

Stephen J The Dredge Willemstadt His Honour described five features in this case involving sufficient proximity to give rise to a duty of care: 1. The Ds knowledge that the property damage was of a kind inherently likely, when damaged, to cause economic loss to those who directly rely on its use. 2. The Ds actual knowledge or means of knowledge (constructive) of the fact that the plaintiff was a user of the property at risk of damage. 3. The infliction of damage by D to the property of a third party (the owners of the property in use) as a result of conduct in breach of a duty of care to the third party. 4. The nature of the detriment suffered by the plaintiff ie the loss of use of the property.

5. The nature of the damages claimed, which reflect the loss of use. Not the projected profits of the venture but the actual direct consequence of the detriment suffered. Caltex was owed a duty of care because the infliction of damage by the defendant to the property of a third party . As a result of conduct in breach of a duty to that third party.

Indeterminacy McHugh J in Perres v Apand (1999) This case established that proximity was no longer applicable as the universal test of a duty of care in economic loss cases. Instead of proximity, reasonable foreseeability together with additional criteria such as the relationship between P and D will be used to determine whether a duty of care exists. The losses sustained by the Perres were a reasonably foreseeable consequence of Apands conduct in supplying the diseased seed. The Perres were members of a class who were ascertainable by Apand. Perres v Apand

Duty of care statement: Where D knows or ought to know that its conduct is likely to cause harm to the person or tangible property of P unless it takes reasonable care to avoid that harm, the law will prima facie impose a duty on D to take reasonable care to avoid that harm. McHugh J in Perre v Apand Establishing a duty of care Until a unifying principle emerges the best solution is to proceed incrementally from the established cases and principles. McHugh J in Perres v Apand The most helpful approach to a duty problem is to: McHugh J Perres v Apand 1. ascertain whether case comes within an established category? 2. If No - next question is was the harm suffered P a reasonably foreseeable result of Ds acts or omissions? No = no duty. 3. If Yes - are there analogous cases the courts have found a duty does or doesnt exist? 4. The law should be developed incrementally by reference to the material facts of why or why not a duty of care was found to exist, and by reference to the few general principles of general application that can be found in the duty cases. General principles to consider when determining whether a duty of care exists in all cases of liability for economic loss: 1. Reasonable foreseeability 2. Indeterminacy of liability Knowledge of harm to P is the minimum requirement. However liability can include a duty that is owed to members of a specific class whose identity could have been ascertained by D. (McHugh)

The reason that proximity can not be the touchstone of a duty of care is that it is a category of indeterminate reference par excellence. McHugh J Apand

3. Autonomy of the individual One of the central tenets of the common law is that an individual is legally responsible for his own choices. When is it not a legitimate protection or pursuit of ones own interests? Deceit, duress, or intentional acts prohibited by law. The line of legitimacy is crossed when the society cannot tolerate the conduct. McHugh J Apand 4. Vulnerability to the risk The vulnerability (where protection is not possible) of P to the harm from Ds conduct is ordinarily a prerequisite for imposing a duty. If P could have avoided harm no duty. If P could have avoided harm, induced not to by D duty. The salient question in determining whether a doc is owed is How vulnerable was P to incurring loss by reason of Ds conduct? (Perres could not protect themselves from the neg. consequences of Apands experiment) 5. Defendants knowledge of the risk and its magnitude What is the actual knowledge of D concerning the risk and magnitude? If indeterminate liability is not present the D should have the interests of those persons who are not protected against the losses D may cause P before embarking on that conduct. McHugh J Apand

Indeterminacy: Johns Period Furniture v Commonwealth Savings Bank (1980) (stolen cheques, no warning, cashed, no doc to warn, inaction no breach, no proximity, unforeseeability due to loss sustained by member of indeterminate class) Where a claim for damages due to economic loss involves members of an indeterminate class, the claim will fail. Johns Period Furniture

Failure to prove liability due to lack of title Christopher v Motor Vessel Fiji Gas (the losses sustained by crewmembers were not losses sustained from Ds negligence rather losses from wages owed by owners of the Antonia) Where the plaintiffs are members of an ascertainable class but are not known to the defendant, the imposition of liability for pure economic loss will fail.

Alternative Method Johnson Tiles v Esso Australia [2003] Aust Tort Reports 81-962 Guiding principles Gillard J: Action failed due to Plaintiffs awareness of no guaranteed supply. 1. Reasonable foreseeability of injury; 2. Whether there is a relationship of proximity; (matter of policy, Kirby Apand) and

3. Identification and consideration of competing salient features for and against the imposition of a DOC (whether the law should recognise a duty of care to avoid pure economic loss in the circumstances) The defendant produced gas and supplied it to a privatised government body who on sold it to retailers who further on sold it to the plaintiffs. Due to the defendant's negligence the supply of gas was interrupted for one week in 1998. The interruption caused economic loss to the plaintiffs. Held: 1. The proper approach to determining whether a duty of care exists to avoid purely economic loss in cases that give rise to novel factual situations is first, to determine whether the loss was reasonably foreseeable, secondly, to determine whether there is a relationship of proximity between those suffering loss and those who allegedly caused the loss and finally, to identify and then consider competing salient features for and against the imposition of a duty of care. Johnson Tiles v Esso Australia Kirby J adopted this test in the judgment of Perre v Apand (1999) and Callinan J's focus on the weighing of the various salient features in the same case was recently supported in Sullivan v Moody (2001) Proximity is to be understood in terms of the test as originally enunciated by Lord Atkin in Donoghue v Stevenson [1932], that is, divorced from policy considerations. It is to be noted that the concept of proximity is of little practical guidance in determining whether a duty of care exists in cases, such as the present, that do not give rise to facts analogous to cases in which a duty has been established.