Lecture 12
The Tort of Negligence 2
Duty of care -financial loss and negligent statements
Breach of Duty
Duty of care :- financial loss
 The courts have not usually regarded it as just and
reasonable to impose a duty of care when the
damage is PURE ECONOMIC LOSS , only
exceptionally allowing it where there is a high
degree of proximity. They are more likely to impose
a duty for CONSEQUENTAL ECONOMIC LOSS
 MIURHEAD v INDUSTRIAL TANK SPECIALTIES
Ltd [1986] QB 507
 The claimant ran a lobster farm and was supplied
with oxygen pumps manufactured by the defendant
through a contract with a third party. The pumps
were not compatible with the UK electricity system
and kept cutting out
 The claimants lobsters died and he was unable to
restock for a substantial period of time while he
attempted to work out what was wrong.
 HELD the claimant was entitled to recover the
consequential cost of restocking the lobsters and
for the loss of profit on those that died.
 He was not entitled to recover profits lost during the
time the lobster production was suspended or the
cost of replacing the pumps as these were pure
economic loss only
rationale
 Pure economic loss is usually derived from goods
being defective and can often be dealt with under
contract
 Consequential economic loss is the knock on costs
of the damage caused by the defendants
negligence
So ……
 This case shows that a business mistake can result
in legal liability under contract and /or tort and as
employers are vicariously liable for the acts of their
employees during the course of their employment ,
the need to meet professional business standards
of behaviour is imperative
negligent statements
 There is considered to be no difference between
liability arising from negligent statements and from
negligent acts
 If a job involves giving professional advice there
may be liability for what is done AND what is said
as a duty of care is owed to clients
e.g.
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Lawyers
Accountants
Auditors
Valuers and surveyors
etc
 HEDLEY BYRNE v HELLER[1963]AC 465
 An advertising agency was given a reference from
a clients bank which incorrectly stated that the
client was creditworthy and in reliance on this
mounted a campaign for the defendant who then
went into liquidation without paying
 HELD there is a duty not to make careless
statements which cause economic loss provided a
special relationship of close proximity “akin to
contract” exists between the parties
 ( though in this case a disclaimer prevented such a
relationship existing)
 It must be : Reasonable for the claimant to rely on the
statement
 Reasonably foreseeable to the defendant that
reliance would be placed
criteria for reliance - considerations
 Defendants ability to give reliable advice i.e.
qualifications/expertise
 The circumstances in which the advice was given
i.e. business / social
 Use of a disclaimer may make reliance
unreasonable and unforeseeable
remember
 Professionally you are liable for what you do AND
what you say
 Don’t hold yourself out as possessing knowledge
that you don’t have
 If you don’t know, say so !
2) BREACH OF DUTY
 After establishing a duty of care , the claimant must
show that this duty has been broken (breached) by
the defendant
test for breach of duty
 Whether the defendant has failed to do what a
‘reasonable person’ would have done or has done
what a reasonable person would not have done.
 Whether the defendants conduct amounts to a
breach of duty depends on the circumstances of
the case
considerations
 a) The likelihood that damage or injury will be
incurred
 b) The seriousness of any damage or injury
 c) The cost and ease of taking precautions
 d) The social need for the activity
a) likelihood of damage/injury
 The greater the likelihood of an accident the more
care the defendant may need to take
 BOULTON V STONE [1951] AC 850
 the claimant was injured by a cricket ball hit from
the defendant clubs grounds .The fence was 17
feet high and the ball travelled over 80 yards .
 HELD the hit was a rare occurrence . The
defendant was not liable as reasonable care had
been taken to reduce the risk
b) The seriousness of any
damage/injury
 The greater the extent of the likely damage the
more the defendant is expected to do to reduce its
risk.
 PARIS v STEPNEY COUNCIL [1951] AC 367 : the claimant was employed by the defendant. He
only had one eye and was blinded in his other eye
in an accident at work
 HELD the defendant failed to act with reasonable
care by failing to supply goggles as the
consequence of injury to the claimants eyes was
much more serious than to other employees
c) cost/ease of precautions
 The courts seek to impose a standard of care that
gives reasonable protection to the claimant while
not unduly burdening the defendant
 This is described as a risk benefit analysis
 A risk free environment can never be guaranteed
 WITHERS V PERRY CHAIN Ltd [1961] 1 WLR
1314
 The claimant was employed in a factory where
contact with grease was necessary. She became
allergic to the grease and developed a skin
condition and was moved to the most grease free
position possible but the allergy persisted
 HELD the defendant had done all that was
reasonably expected to prevent harm to the
claimant and therefore was not in breach of duty
and the claimant’s case failed
d) social need
 The court may assess the social utility of the
defendants conduct in determining whether he was
negligent
 DABORN V BATH TRAMWAYS [1946] 2 All ER
333:- the issue was whether the driver in war time
of a left hand drive ambulance had been negligent
in turning left without a signal
 HELD the duty of care had not been broken as the
purpose to be served in using the ambulances
justified the assumption of abnormal risk
burden of proof
 The burden of proving that the defendant did not
act reasonably lies with the claimant
 But if the situation is such that the only or most
likely explanation of the accident is that the
defendant was negligent the claimant may claim
“res ipsa loquitur”
res ipsa loquitur
 This means “the facts speak for themselves”
 This has the effect of placing the burden of proof
on the defendant who must show either how the
accident occurred or that he has not been
negligent
conditions of res ipsa loquitur
 The event which caused the accident must have
been in the defendants control and
 The accident must be of such a nature that it would
not have occurred if proper care had been taken by
the defendant
 CASSIDY V MINISTER OF HEALTH [1951] 1 All
ER 574
 The claimant went into hospital for treatment of 2
stiff fingers but left with 4 stiff fingers
 HELD res ipsa loquitur applied
3) CONSEQUENTIAL DAMAGE
 This will be covered in the next lecture
References:-
Adams, A. (2014) ‘Law For Business Students’. 8th
Edn. In SAM Core Reading Volume Two. 2nd Edn. ed.
By Jeffree, D. Harlow: Palgrave, 205-266