Exceptions and Special Situations

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Special situations

• Pure economic loss

• Psychiatric Injury

• Omissions

• Third party acts

 The period of great expansion
(1960s and 70s): Novel situations

Lord Wilberforce in Anns v. Merton:

"Through the trilogy of cases in this House,
Donoghue v. Stevenson, Hedley Byrne & Co. ltd.
v. Heller & Parmers ltd. and Home Office v.
Dorset Yacht Co. ltd. the position has now been
reached that in order to establish that a duty of
care arises in a particular situation, it is not
necessary to bring the facts of that situation
within those of previous situations in which a
duty of care has been held to exist. Rather the
question has to be approached in two stages."
(A) Pure Economic Loss
• Meaning: Loss independent of physical damage to person or property (as opposed to
consequential loss): For instance, loss of profit or financial gain

• Illustration: Spartan Steel v Martin (1972)

• General rule (Negligent acts)

• Expansion: Anns v. Merton (1977)

• Contraction: Murphy v Brentwood (1991)

• Policy reasons: Spartan Steel v Martin (1972)

• Exception to the general rule (Negligent misstatements)

• Hedley Byrne v Heller (1964)

Spartan Steel v
Martin (1972)
Lord Denning: Policy Reasons

“At bottom, I think the question of recovering

economic loss is one of policy. Whenever the
courts draw a line to mark out the bounds of
duty, they do it as a matter of policy so as to
limit the responsibility of the defendant.
Whenever the courts set bounds to the damages
recoverable - saying that they are, or are not,
too remote - they do it as matter of policy so as
to limit the liability of the defendant."
Lord Denning
"If claims for economic loss were permitted for this particular hazard,
there would be no end of claims. Some might be genuine, but many might
be inflated, or even false. A machine might not have been in use anyway,
but it would be easy to put it down to the cut in supply. It would be well-
nigh impossible to check the claims. If there was economic loss on one
day, did the claimant do his best to mitigate it by working harder next day?
and so forth. Rather than expose claimants to such temptation and
defendants to such hard labour - on comparatively small claims - it is
better to disallow economic loss altogether, at any rate when it stands
alone, independent of any physical damage."
General Rule: No liability for PEL

• Recognition in Anns v. Merton (1977)

• Denial in Murphy v Brentwood (1991)
• Policy reasons for denial in Spartan Steel v Martin (1972)
Lord Oliver in Murphy v Brentwood (1991)
"Lord Atkin's test, though a useful guide to characteristics which will be found to exist
in conduct and relationships giving rise to a legal duty of care, is manifestly false if
misused as a universal; and Lord Reid, in the course of his speech in the same case,
recognised that the statement of principle enshrined in that test necessarily required
qualification in cases where the only loss caused by the defendant's conduct was
economic. The infliction of physical injury to the person or property of another
universally requires to be justified. The causing of economic loss does not. If it is to be
categorized as wrongful it is necessary to find some factor beyond the mere occurrence
of the loss and the fact that its occurrence could be foreseen"
Negligent
Misstatements:
Hedley Byrne v
Heller (1964)
Lord Reid

"‘A reasonable man, knowing that he was being trusted or that his skill and
judgment were being relied on, would . . . be held to have accepted some
responsibility for his answer being given carefully, or to have accepted a
relationship with the inquirer which requires him to exercise such care as
the circumstances require’"
Lord Morris
"I consider that it follows and that it should now be regarded as
settled that if someone possessing special skill undertakes, quite
irrespective of contract, to apply that skill for the assistance of
another person who relies upon such skill, a duty of care will
arise. The fact that the service is to be given by means of or by
the instrumentality of words can make no difference.
Furthermore, if in a sphere in which a person is so placed that
others could reasonably rely upon his judgment or his skill or
upon his ability to make careful inquiry, a person takes it upon
himself to give information or advice to, or allows his
information or advice to be passed on to, another person who,
as he knows or should know, will place reliance upon it, then a
duty of care will arise. ."
Lord Morris
"..in my judgment, the bank in the present case, by the words which they
employed, effectively disclaimed any assumption of a duty of care. They
stated that they only responded to the inquiry on the basis that their
reply was without responsibility. If the inquirers chose to receive and act
upon the reply they cannot disregard the definite terms upon which it was
given. They cannot accept a reply given with a stipulation and then reject
the stipulation. Furthermore, within accepted principles... the words
employed were apt to exclude any liability for negligence."
Hedley's principles:

• A ‘special relationship’ between the parties:

• Voluntary assumption of responsibility by the party giving the advice

• Reliance on that advice by the party receiving it

• It must be reasonable for that party to have relied on the advice

A. ‘Special relationship’ between the parties

Lord Reid: "...where it is plain that the party seeking information or

advice was trusting the other to exercise such a degree of care as the
circumstances required, where it was reasonable for him to do that, and
where the other gave the information or advice when he knew or ought to
have known that the enquirer was relying on him."
Special relationship

"Quite careful people often express definite opinions on social or informal

occasions even when they see that others are likely to be influenced by
them; and they often do that without taking that care which they would
take if asked for their opinion professionally or in a business connection.
.... there can be no duty of care on such occasions"
B. Voluntary assumption of responsibility
Lord Reid: "A reasonable man, knowing that he was being trusted or that his skill and
judgment were being relied on, would, I think, have three courses open to him. He could keep
silent or decline to give the information or advice sought: or he could give an answer with a
clear qualification that he accepted no responsibility for it or that it was given without that
reflection or enquiry which a careful answer would require: or he could simply answer without
any such qualification. If he chooses to adopt the last course he must, I think, be held to have
accepted some responsibility for his answer being given carefully, or to have accepted a
relationship with the enquirer which requires him to exercise such care as the circumstances
require."
C. Reliance and its reasonability
• Caparo v Dickman (1990) (Lord Bridge)
Distinction between situations where ‘the defendant giving advice or information
was fully aware of the nature of the transaction which the claimant had in
contemplation’ and those in which ‘a statement is put into more or less general
circulation and may foreseeably be relied upon by strangers to the maker of the
statement, for any one of a variety of purposes which the maker of the statement
has no specific reason to contemplate’.
Liability for omission and liability for the
acts of third parties
• General rule: No liability
• Omission: Generally, no duty to perform actions to help someone or to
prevent their injury
• Exceptions:
•Existence of relationship of proximity: Liability where the defendant had a right or
responsibility to control the third party/dangerous situation
•Additional element for liability related to third party actions: Claimant was at a
particular risk of damage
Lord Hoffmann in Stovin v. Wise (1996)
Political consideration: Invasion of freedom

"There are sound reasons why omissions require different treatment from
positive conduct. (…) One can put the matter in political, moral or
economic terms. In political terms it is less of an invasion of an
individual’s freedom for the law to require him to consider the safety of
others in his actions than to impose upon him a duty to rescue or
protect."
"A moral version of this point may be called the “Why pick on me?”
argument. A duty to prevent harm to others or to render assistance to a
person in danger or distress may apply to a large and indeterminate class
of people who happen to be able to do something. Why should one be
held liable rather than the other?"
Economic consideration: Economic inefficiency

"In economic terms, the efficient allocation of resources usually requires an activity
should bear its own costs. If it benefits from being able to impose some of its costs on
other people (what economists call ‘externalities’) the market is distorted because the
activity appears cheaper than it really is. So liability to pay compensation for loss caused
by negligent conduct acts as a deterrent against increasing the cost of the activity to the
community and reduces externalities. But there is no similar justification for requiring
a person who is not doing anything to spend money on behalf of someone else."
Home Office v Dorset Yacht Co Ltd [1970] UKHL 2