Law of Tort April 09 – Q5 Pure Economic Loss

Law of Tort April 09 – Q5 Pure Economic Loss

The issue here is that Carrie may be liable for a claim, by National Discounters, for pure economic loss. If she is found to be liable she will have to pay part or all of the loss Incurred by National Discounters as a result of the fire.

In Ireland restrictive rules on recovery of pure economic loss have traditionally been justified by the common law judges in terms of the floodgates fear of exposing a D to potentially indeterminate liability. An English example of this was in the case of Cattle v Stockton Waterworks Co. (1875). The defendant, a waterworks company, laid pipes under the claimant’s land.  Some time later the claimant sought to have a tunnel built through his land only to discover that the pipes laid were leaking causing delay to construction and making it more costly.  It was held that the claimant’s could not recover for their loss because the loss was too indeterminate and remote. Another objection is that contract law is a more appropriate forum for determination of recovery for pure economic loss. The UK case of D & F Estates Ltd. v Church Commissioners for England [1989] illustrates this point. On moving into a flat the P’s discovered that the plaster work was defective. They sued the D’s for the cost of the remedial work among other issues. One of the issues argued before the HOL was whether the loss sustained by the first P in renewing the plaster work was recoverable as damages in tort. P’s claim was that the plaster itself was defective and not that the defective plaster had caused damage to other property of the P or had caused personal injury, the claim, therefore, was for pure economic loss. Lord Bridge concluded that the damages in tort do not generally extend to the cost of repairing the defective product itself. Damages were recoverable in tort where the defective product caused personal injury or damaged other property of the P, but damages were not recoverable in compensate for correction of the defect in the product itself. That would be a contract law issue. Expanding recovery in tort for this type of loss would be to undermine the fundamental principles of contract law. Although Irish courts have had recourse to the contract argument, in Kennedy v Allied Irish Bank Plc [1998], as a general rule the Irish courts are not opposed to a blanket restriction on recovery for pure economic loss on this basis. This was confirmed in Glencar [2001] but was previously recognised by the Irish courts in Ward v McMaster [1987], for failure to arrange an inspection of property, and also in Siney [1980] for failure to provide a habitable house. In the Kennedy case the SC held that where the relationship between the parties is contractual, the duty of care expected is that which is appropriate to the performance of the contractual obligations. However, where in a contractual relationship, tortious obligations arise, these can not be greater than those found, expressly or by necessary implication, in the contract.

As in Glencar the loss must have been reasonably foreseeable, there must have been a duty of care owed; neighbourhood principle and it must be fair, just and reasonable. If we apply the Glencar test to this particular case we can see that Carrie owes National Discounters a duty of care not to affect their business. It can be reasonably foreseen that carelessness in a fast food outlet may lead to a fire, furthermore, if a fire was started in a shopping centre, it would be reasonably foreseen that it may cause fire to the surrounding units. Therefore Carrie would be liable for the damage caused by the heat to the paint work. However, it would be very difficult and I believe unreasonable and unjust to say that it was reasonably foreseeable that a fire would cause the whole shopping centre to close down on its busiest two days of the year. I believe this is too remote as in the Cattle v Stockton Waterworks Co. case. Ultimately it would be up to the court to decide whether this was reasonably foreseeable. There may be some stipulation in the contract Carrie has with the National Discounters and this matter may be better resolved in a contract law action as pointed out in the case of Kennedy v Allied Irish Bank Plc.

Another issue that should be looked at is the actual cause of the fire. How did it happen, who was careless/negligent, who should be liable. This may bring up the issue of vicarious liability which is:

“…legal responsibility imposed on an employer, although he is himself free from blame, for a tort committed by his employee in the course of his employment.”

as per Lord Steyn in Lister v Hesley Hall [2002].

Conclude