Q#1

Issues in the question relates with pure economic losses that whether loss suffered by Hassan is defect
or damages. If loss faced by Hassan is defect or damages and are they recoverable in Tort.

Advice to Devla by her friend Edward, does create relationship to be able to claim for loss.

Joy UK audit report is whether Negligent misstatement or negligent act and are they recoverable.

Economic losses can be of two types. Losses incurred due to property damage or physical injury which
are consequential losses are always recoverable in law of Tort. If a person face damages with physical
injury or property damage then he is able to recover damages in the law of tort. But the difficult
question arise in the context of losses which are pure economic losses, economic losses which are not
due to the physical injury or property damages. A defect is not damages and hence not recoverable in
law as it does not arise from the damage to person or property.

The first issue we will discuss on the behalf of Hassan. Hassan invested his money in a country house
which was built on insecure foundation and was then subjected to defect. Ass per Law of Tort only
damages are recoverable in law and not a defect. In the case of Hassan this was a defect. Previously in
case of Anns v Merton London council, it was decided that It was held that the council may be liable in
negligence, but in limited circumstances. The relevant legislative provisions with regard to inspection did
not place a duty on the council to inspect the walls, but did allow it the power to, if it considered
inspection necessary. Therefore, failing to inspect would not render the council liable unless it was
considered that it had failed to properly exercise its discretion to inspect and that they had failed to
ensure proper compliance with building regulations. Later in the case of Murphy v Brentwood, in which
the House of Lords held that as the damage suffered by the claimant was neither material nor physical
but purely economic, the defendant was not liable in negligence. It was decided that to allow the
claimant to recover damages for the money which he had lost on the sale of the property, or for the cost
of repairing it, would result in an unacceptably wide liability which would effectively amount to judicial
legislation introducing product liability and transmissible warranties for defective buildings.

Now we will come to the issue in the case of Devla. Devla decided to invest her money in share and she
was advised by her friend Edward who was financial advisor. Financial losses which result from negligent
statement is recoverable but to the strict criteria. According to the set criteria in Derry v Peek 1889, if a
person rely on someone advice, and the defendant either knew or reckless that he is saying was false,
then a person can claim under the law of deceit. But this case was came to an end by Hedly Burne V
Heller, The court found that H&P’s disclaimer was sufficient to protect them from liability and Hedley
Byrne’s claim failed. However, the House of Lords ruled that damage for pure economic loss could arise
in situations where the following four conditions were met a) a fiduciary relationship of trust &
confidence arises/exists between the parties (b) The party preparing the advice/information has
voluntarily assumed the risk c) there has been reliance on the advice/info by the other party d) and such
reliance was reasonable in the circumstances.

The speaker has to give advice in a serious business or professional context. They may be in the business
or may serious on the subject in context, it is unusual for the duty to arise between friend and relatively
social context.
The third issue is that Devla looked for Audit report of Joy UK Company. After investment she faced loss.
To be able for claim for pure economic losses Devla a must show the relationship between her and Joy
UK company. A best authority which relates to this issue is the case of Caparo. In its decision house of
lord held that It was found that three factors had to exist for there to be a duty of care which where:
Proximity, Knowledge of who the report would have been communicated to and for what purposes it
would have been used.

The House of Lords in Caparo identified a three-part test which has to be satisfied if a negligence claim is
to succeed, namely (a) damage must be reasonably foreseeable as a result of the defendant’s conduct,
(b) the parties must be in a relationship of proximity or neighborhood, and (c) it must be fair, just and
reasonable to impose liability on the defendant.

To conclude. In Hassan case there was no liability on Council and he was not able to claim for any losses
because the Law of Tort only allow claim for damages. And in Hassan case there was a defect, as it was
not a consequential of property damages or personal injury

In Devla case Edward which was her friend is responsible to advice because of his profession. Advice in
the context of family, friend etc. is not capable of being claimed but Edward was also his financial
advisor along with being a friend. As according to the Hedley Burne principle, there need to be a special
relationship between the claimant and defendant. Because Devla based on Edward profession. Because
it was his profession to give advice. But Devla did not rely on the Information of Edward and so she
looked for the Audit report before making an investment. So this does not fulfill the requirement of
special relationship and so Edward cannot be sued upon his advice.

In the third, according to the Caparo test, the losses was foreseeable as it was result of the defendant
conduct. The parties Devla and Ponsonby were in relationship of proximity and it is also fair, just and
reasonable to impose liability on the defendant because he made the audit report negligently and he
was dismissed from company.

Q#2.

This question concerned with injury suffered by someone as a result of negligence or any other tort is
purely economic loss or psychological. Psychological harm that is a result of physical injury are also
recoverable. Psychological harm are then decided into three distinct categories.

Consequential loss, which a person suffer physical injury and result to psychological harm

Primary victims, they are in area where they are at risk of physical injury, manage to avoid this but suffer
psychiatric injury

Secondary victim, those who are not at risk themselves, bust suffer psychiatric harm as a result of what
they had listen, heard or see after incident.

The law draws a distinction between primary and secondary victims. A primary victim is someone who
has been directly involved in an accident, but a secondary victim who looked, heard the aftermath of the
distressing event and that he has not been directly involved in incident.  The best and easy example for
the clarification is that primary victim re like a driver and passenger who has hit by the driver and the
rest of the people who witness this incident are secondary victims. The primary victim see the incident
first hand and is horrifying scene for them and they face a serious nervous shock so that is why they are
allowed to be compensate for psychiatric injury they have faced. However, even with evidence that they
have suffered a psychiatric injury they will be viewed as a secondary victim and are unlikely to be
entitled to compensation without further connection to the incident. The driver and the passenger are
primary victims and can make a claim for both the physical and psychiatric injury they have suffered.

Despite the principles appearing simple, drawing the distinction between primary and secondary victims
who have been present at the scene of a major incident can be much more difficult. As in the case of the
bin lorry crash, situations can arise where individuals have been in close proximity to the accident but
not sustained physical injury. If they suffer psychiatric injury, the difficult question must then be asked of
whether this was a reasonably foreseeable consequence of the negligent act.  Where it is, such as where
an individual has been at risk and in fear of physical harm, then it is possible for a claim to be made as a
primary victim. Where it is not, the individual will generally be unable to succeed with a claim.

So where does this leave those who have suffered mentally after witnessing horrifying accidents? It is
certainly possible to think of situations where the lives of secondary victims are affected to the same
extent as those directly involved in an accident.

Secondary victim in most cases are not able to claim for psychiatric injury but there are some situation in
which they can claim for the compensation of injury they have undergone as in past incidents, such as
the Hillsborough disaster, have brought about a need for this to be addressed and have shaped the law
in this area.  In narrowly defined circumstances, a secondary victim can succeed with a claim for
damages. To do so, the criteria set out in Alcock v Chief Constable of South Yorkshire Police must be
satisfied. This requires it to be shown:

that the injury is caused by shock from the “sudden appreciation by sight or by sound of a horrifying
event, which violently agitates the mind”;

that there is a close tie of love and affection with the primary victim; and

that the pursuer was sufficiently proximate to the event, both in time and in location.

So the secondary victim can acclaim for the psychiatric harm they have undergone if their loved ones
have been in such a horrifying incident which cause them serious nervous shock after at the time or
immediately afterwards.

In 1992 the house of lord held the decision in the case of Alcock and its principles remain central to the
law. With the passage of 27 years, other cases have expanded upon what is meant by each of the
criteria, but the category of secondary victims who can claim damages remains broadly the same. This
means that the law will inevitably exclude from claiming compensation some who have suffered serious
injury due to what they have witnessed.

In the law there should be more restriction on that who would claim for the losses because in this
modern age there are a lot of accident around the world which are shown by the media without any
censorship and it causes alto of psychiatric harm to people watching the media, so a restriction and clear
list of people who can claim for psychiatric harm would be easy accessible to all people. It is plausible
that someone may be left distressed by a video showing a fatal accident, despite being hundreds of
miles away. Yet few would argue that it would be fair or proportionate for an individual or company to
be liable to compensate any number of viewers for the harm they have suffered. It is here that the
concept of reasonable foreseeability, and the Alcock criteria, appear sensible. There has always been an
element of public policy in the law, in that there is a need to keep the floodgates closed to loosely
connected claims, and this may be even more important today.

On the other hand, the same advances in technology can make it possible for the loved ones of a
primary victim to feel “proximate” to the horrifying event and to experience shock even if they are not
close by. It is not a stretch to accept there may be a difference between viewing a news report hours
after an accident has occurred and seeing an unedited video in real time or shortly after the event.
Increased understanding of psychiatric injury and the impact it may have on an individual, regardless of
whether they are a primary or secondary victim, may also be reason for reconsidering who should be
entitled to compensation. As technology and medical understanding continue to progress, we may
indeed see a change in the position of secondary victims, but it is likely that restrictions of some type
will always be required. The distinction between primary and secondary victims, and the decisions of the
courts in this respect, are therefore of continued significance.

It was also decided in the case of Greatorx v Gretorex that if a defendant caused himself serious injury
and the primary victim and defendant is same Person. He is not liable for his love one who witnessed
the after math and face psychiatric harm as a result.

To conclude, there is a very thin line between the primary and secondary Vitim of nervous shock. The
main distinction between them is that there is proximity in event and primary victim and in the context
of secondary victim they heard or look their aftermath after the incident. In primary the claimant only
has to prove proximity or foreseeability but the secondary victim has to show the Alcock criteria to be
compensated.