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Pure Economic Loss & Negligent Misstatements in United Kingdom and Malaysia 2
Pure Economic Loss & Negligent Misstatements in United Kingdom and Malaysia 2
Pure Economic Loss & Negligent Misstatements in United Kingdom and Malaysia 2
INTRODUCTION
Until the middle of the twentieth century the tort of negligence was very largely
concerned with careless conduct resulting in personal injuries or damage to property. This
essay explores ways to study the major growth areas of the last 50 years. As a matter of fact,
the tort of negligence is often quite difficult for the following reasons. Firstly, there is a large
volume of new case law. Secondly, there are conflicting policy aims and objectives. Thirdly,
we need to remember that this is a policy device and different judges would take different
view at different time. So, the cases are always totally consistent.
In this essay, we will also be looking at duty of care for pure economic loss and
negligent misstatement. It is important to make sure for us to understand the law in this area
and policy that drives it. In addition, we need to understand various situations under which
pure economic loss might arise and we need also try to appreciate any cause for reform.
This essay will proceed in nine parts. Part I explores briefly on historical view of
negligent misstatements and pure economic loss. Part II explores the meaning of pure
economic loss. Part III explores the recovery of pure economic loss in policy consideration
context. Part IV analyses the economic loss cases on negligent misstatements. Part V explains
economic loss cases on performance of a service. Part VI explains economic loss cases on
damage to anothers property. Part VII explains the current test in Malaysia in determining for
negligent misstatement as a comparison with United Kingdom (hereinafter known as UK).
Part VIII explores any possible reforms in UK and Malaysia. And, lastly Part IX is a
conclusion.
purely financial loss. As like in Hedley Byrne v Heller10 where bad investment of
ii)
The second form of pure economic loss is lost profit in a shutdown as can be seen clearly
in Spartan Steels case.13 Moreover, the loss for pure economic loss is the cost of repairing
inherently defective property or reduction in value when we discover that we have inherently
defective property.
This is the result in the case of Murphy v Brentwood District Council 14 facts that
overruled Anns v London Borough of Merton15. Lord Bridge at this point who said in his
speech;
hard to calculate
hard to verify
open to floodgates
open to fraudulent exaggerated claims
11
14
44 In this case, the defendant was a specialist flooring contractor who laid the
floor badly in the claimants premises. The claimant did not have a direct contract
with the defendant instead the claimant had a contract with the main contractor
who sub-contracted to the defendant. The cost of replacing the inherently
defective flooring and the loss of profit while the factory shutdown to enable that
to happen, are pure economic loss. Normally, it is recoverable.
45 A relationship of sufficient proximity between the claimant and the defendant, where
in this Junior Book describes as a unique out of ordinary relationship. Contrasting with
Spartan Steel one, where the parties did not know each other, never met each other,
but were thrown together by the accident. In Muirhead v Industrial Tank Specialities
[1985] 3 All ER 705, the courts talked about the need of some reliance by the claimant on
the defendant.
47 But the third requirement, that there being no policy reasons to preclude
recovery, have led the courts to make substantial inroad and limitations on
Junior Books.
48 Leigh & Sillavan Ltd v Aliakmon Shipping Corporation [1986] AC 785 (HL).
49 Candlewood Navigation v Mitsui OK Lines [1986] AC 1 (PC).
50 Junior (n 47).
15
57 Murphy (n 14).
58 (1997) 3 MLJ 546 (HC). Where it was presided by Judge James Foong (as he
was) after reviewed the position of other common law countries such as Canada,
New Zealand, Australia and Singapore in relation to pure economic loss.
17
62 [2006] 4 All ER 256 (HL). In this case, the commissioners seek damages for the loss
which they claim to have suffered as a result of Barclays negligence in authorizing the
payments after being notified of Mareva injuction order. Where it was assumed that the
respondents owed a duty of care to the commissioners. Judge Colman held that they did
not ([2004] 2 All ER 789 HC), but the Court of Appeal held that they did ([2005] 3 All ER
852 CA).
19
PRIMARY SOURCES
21
785
Anns v London Borough of Merton [1977] 2 All ER 492
Caparo v Dickman [1990] 1 All ER 568
Candlewood Navigation Co. [1986] AC 1
Chaudry v Prabhakar [1988] 3 All ER 718
Customs and Excise Commissioners v Barclays Bank plc [2006] 4 All ER 256
Derry v Peek [1886-90] All ER Rep 1
Donoghue v Stevenson [1932] AC 562
Esso Petroleum Co v Mardon [1976] 2 All ER 5
Hedley Byrne v Heller [1963] 2 All ER 575
Henderson v Merret Syndicate Ltd [1994] 3 All ER 506
Junior Books Ltd v Veitchi Co Ltd [1983] 1 AC 520
Leigh & Sillavan Ltd v Aliakmon Shipping Corporation [1986] AC 785
Ministry of Housing v Sharp [1970] 1 All ER 1009
Muirhead v Industrial Tank Specialities [1985] 3 All ER 705
Murphy v Brentwood District Council [1990] 2 All ER 908
Mutual Life & Citizens Assurance Co Ltd v Evatt [1971] 1 All ER 150
Ross v Caunters [1980] Ch 297
Simaan General Contracting Co v Pilkington Glass [1988] 1 All ER 791
Smith v Eric Bush [1989] 2 All ER 514
Spartan Steel and Alloys Ltd v Martin and Company (Contractors) Ltd [1973]
QB 27
Spring v Guardian Assurance Plc [1994] 3 All ER 129
Weller v Food and Mouth Disease Research Institute [1965] 3 All ER 560
White v Jones [1995] 2 AC 207
Yianni v Edwin Evans & Sons [1982] 3 All ER 592
Malaysia:
Dr Abdul Hamid Abdul Rashid v Jurusan Malaysia Consultants (1997) 3
MLJ 546
22
Majlis Perbandaran Ampang Jaya v Stephen Phoa Cheng Loon & Ors (2006)
2 MLJ 389
Stephen Phoa Cheng Loon & Ors v Highland Properties Sdn Bhd & Anor
(2000) 4 MLJ
The Co-Operative Central Bank Ltd v KGV & Associates Sdn Bhd (2008) 2
MLJ 233
Canada:
Ultramares Corp v Touche (1932) 174 NE 441
SECONDARY SOURCES
BOOKS:
Rogers W V H, Winfield and Jolowicz on Tort (18th edn, Sweet and Maxwell 2010)
Lunney M, Tort Law: Text and Materials (4th edn, OUP 2010)
Murphy J, Street on Torts (13th edn, OUP 2012)
Markesinis and Deakin, Tort Law (6th edn, OUP 2008)
Weir T A, Casebook on Tort (10th edn, Sweet and Maxwell 2004)
Barker K, Wielding Occams Razor: Pruning Strategies for Economic Loss 26 OJLS
289
Frame S, Pure Economic Loss (2011) 22 Cons Law 26
23
Malaysia
24