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Expectation Losses, Negligent Omissions and the Tortious Duty of Care

Published online by Cambridge University Press:  16 January 2009

John Murphy
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Extract

In English law, the recovery of pure economic loss falls mainly within the province of the law of contract. Only in very limited circumstances does the law of tort provide for the recovery of such losses. As Cardozo C.J. explained in Ultramares Corporation v. Touched, tort is concerned not to permit “liability in an indeterminate amount, for an indeterminate time to an indeterminate class”. Notwithstanding this reticence, their Lordships' speeches, though not the final decision, in the seminal case of Hedley Byrne & Co. Ltd. v. Heller and Partners Ltd. provided a notable inroad into the rigidity of this stance. Since Hedley Byrne, the question has become, instead, how far, not if, pure economic loss is and should be recoverable in the law of negligence.

Type
Shorter Articles
Information
The Cambridge Law Journal , Volume 55 , Issue 1 , March 1996 , pp. 43 - 55
Copyright
Copyright © Cambridge Law Journal and Contributors 1996

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References

1 (1931)Google Scholar 174N.E.441.

2 Ibid., at 444.

3 [1964] A.C. 465.

4 [1987] A.C. 241.

5 [1993] 3 All E.R. 448.

6 See further on this matter Murphy, J., “An Accident Waiting to Happen?” (1994) 2 Ton Law Review 77Google Scholar.

7 [1995] 2 A.C. 207.

8 [1995] 2 A.C. 145.

9 Why there should have been doubt about this matter in the first place is difficult to comprehend. Both Lord Devlin and Lord Morris clearly envisaged that the “assumption of responsibility coupled with reliance” principle could be applied equally to negligent acts: Hedley Byrne, note 3 above, at 502–503 and 528–529 (respectively).

10 [1995] 2 AC. 296.

11 But note that negligent omissions by solicitors had already been judicially considered to be within the scope of the principle. In Henderson v. Merrett Syndicates Ltd., note 8 above, Lord Goff asserted (at 181) that: “an assumption of responsibility by, for example, a professional man may give rise to liability in respect of negligent omissions as much as negligent acts of commission, as for example when a solicitor assumes responsibility for business on behalf of his client and omits to take a certain step”.

12 White v. Jones, note 7 above, at 272.

13 Ibid., at 288.

14 [1988] A.C. 175.

15 Ibid., at 192.

16 See e.g., Home Office v. Dorset Yacht Company [1970]Google Scholar A.C. 1004 and Hudson v. Ridge Manufacturing [1957]Google Scholar 2 Q.B. 348. But cf Topp v. London Country Bus (South West) Ltd. (note 5 above) and Smith v. Littlewoods Organisation Ltd. (note 4 above).

17 See e.g., Goldman v. Hargrove [1967]Google Scholar 1 A.C. 645 and Haynes v. Harwood [1935]Google Scholar 1 K.B. 146.

18 See e.g., Stansbie v. Troman [1948]Google Scholar 2 K.B. 48.

19 See e.g., Mercer v. South Eastern and Chatham Railway Company's Management Committee [1922]Google Scholar 2 K.B. 549.

20 Caparo Industries v. Dickman plc. [1990]Google Scholar 2 A.C. 605.

21 [1977] A.C. 774.

22 Ibid., at 845. Although the Albazero principle was extended in St. Martin's Property Corporation Ltd v. Robert McAlpine Ltd. [1994]Google Scholar 1 AC. 85, it was still incapable of dealing with the problem in White v. Jones since the contract would still need to be enforced by the original promisee (who was, of course, dead at the time the loss occurred). As Lord Browne–Wilkinson observed in the St. Martin's case (at 115): “In such a case, it seems to me proper … to treat the parties as having entered into the contract on the footing that [the promisee] would be entitled to enforce contractual rights for the benefit of those who suffered from defective performance but who, under the terms of the contract could not acquire any right to hold [the defendant] liable for any breach”.

23 While v. Jones, note 7 above, at 260.

24 Ibid. at 268 (emphasis supplied).

25 On which see Barker, K., “Are we up to Expectations? Solicitors, Beneficiaries and the Tort/Contract Divide” (1994) 14 Oxford Journal of Legal Studies 137CrossRefGoogle Scholar.

26 Marc Rich & Co. A–G v. Bishop Rock Marine Co. Ltd., The Nicholas H [1995]Google Scholar 3 W.L.R. 227.

27 White v. Jones, note 7 above, at 271.

28 Ibid., at 251.

29 Note 20 above.

30 White v. Jones, note 7 above, at 274.

31 Ibid.

32 Ibid., at 274. For an example of involvement in the plaintiff's affairs, see Henderson v. Merrelt Syndicates Ltd, note 8 above.

33 Ibid. For an example of liability on the basis of a negligent misstatement see, e.g., Smith v. Eric S. Bush (a firm), note 4 above.

34 See further Barker, K.. “Unreliable Assumptions in the Modern Law of Negligence” (1993) 109 L.Q.R.461Google Scholar.

35 White v. Jones, at 283.

36 Ibid., at 287.

37 Ibid., at 291.

38 This requirement was first introduced as a pre–condition of duty in Governors of the Peabody Donalian Fund v. Sir Lindsay Parkinson & Co. Ltd. [1985]Google Scholar A.C. 210 per Lord Keith at 241. It was technically only approved by three of their Lordships in Caparo: by Lord Jauncey (note 20 above, at 655); by Lord Bridge who recast it as a requirement of being “fair, just and reasonable” (at 618) and by Lord Oliver who merely transposed the word order to insist that it be “just and reasonable” to impose a duty (at 633). The test's significance cannot now be doubted following X v. Bedfordshire County Council [1995] 2 A.C. 633Google Scholar where it was central to the House of Lords' decision.

39 The tripartite Caparo test received recent House of Lords endorsement in Marc Rich & Co. A–G v. Bishop Rock, Marine Co. Ltd., The Nicholas H, note 26 above. There, however, Lord Steyn went slightly further to hold (at 246) that all three limbs of the Caparo duty formula must be demonstrated in all negligence cases (and not merely those concerned with economic loss). Lords Keith, Jauncey and Browne–Wilkinson concurred with this speech.

40 [1932] A.C. 562. The centrality of the Atkinian notion of proximity has been recognised overseas in relation the negligent infliction of psychiatric harm. In Rhodes v. Canadian National Railway (1990) 75 D.L.R. (4th) 248Google Scholar, for example, Taylor J.A. observed (at 298) that: “someone who suffers psychological injury as a result of being informed of the death of a relative, or of ruminating on the circumstances of the relative's death, or of visiting the scene same days later cannot… be said to have been closely and directly affected by the negligence”. See also Beecham v. Hughes (1988) 52 D.L.R. (4th) 625Google Scholar, which turned upon the fact that the plaintiff's suffering was only indirectly attributable to the defendant's negligence.

41 Ibid., at 580.

42 In Murphy v. Brentwood District Council [1991] 2 A.C. 398Google Scholar Lord Keith stated (at 461) his approval of the approach advocated by Brennan J. in Council of the Shire of Sutherland v. Heyman (1985)Google Scholar 157 C.L.R. 424 that, “the law should develop novel categories of negligence incrementally and by analogy with established categories, rather than by a massive extension of prima facie duty of care restrained only by indefinable considerations” (at 481). This approach received further endorsement in Caparo, note 20 above.

43 Note 8 above.

44 See note 1 above, and associated text.

45 For an analogy, see Simaan Contracting Co. v. Pilkington Glass [1988]Google Scholar Q.B. 758.

46 As to the virtues of streamlining duty, see Murphy, J., “Negligently Inflicted Psychiatric Harm:A Re–appraisal” (1995) 15 Legal Studies 414CrossRefGoogle Scholar.