Study Flashcards On 3. There is a fundamental distinction between pure economic loss and consequential economic loss, as pure economic loss occurs independent of any physical damage to the person or property of the victim. pure economic loss not recoverable under delict. In Lillicrap the court concluded that delictual action does not fit comfortably in a setting where professional services are rendered pursuant to a contract. Donoghue v Stevenson. Generally, pure economic loss is aptly referred to as financial loss. For it to be a delict there needs to be a factor beyond the mere occurrence of the loss and that its occurrence was foreseeable (Murphy v Brentwood). Whilst Hedley were not successful in this case, the court did accept the possibility that if a special relationship, akin to a contract existed and the defender knew their advice would be used in such a manner, then there is the possibility of a valid claim. As established in cases like Murphy v Brentwood district council, it is established where A performs a contract with B to a substandard level (such as say, laying foundation) and B sells the property on to C, C has no claim to A for the pure economic loss. As such the law places significant limits on the recovery of pure economic losses. © 2020 Hogan Lovells. They are generally not recoverable in negligence. The appellant’s cause of action was founded in delict and was for pure economic loss. According to Country Cloud, the department had incurred liability because it had unjustifiably cancelled the Ilima contract with the intent to repudiate it in circumstances in which it had foreseen the damages Country Cloud would suffer in consequence. A claim for pure economic loss is based on the negligence of the insured and often happens when the insured denied a third party access to something that the third party utilised to generate an income, or breach of an undertaking that caused financial loss. This is the so-called Hedley Byrne principle following the case ofHedley Byrne & Co Ltd v Heller & Partners Ltd [1964] … Whether to extend delictual liability for pure economic loss has been a thorny issue for our courts since the landmark judgement of Administrator, Natal v Trust Bank van Afrika. Whilst the most straightforward course of action would be for Juniour to sue Ogilvie, and Olgilvie to in turn sue Veitchi (both in contract) ; however a duty of care was found to prevent loss to Junior Books. However, since the causing of pure economic loss is prima facie lawful (while positive conduct causing physical harm to person or property is prima facie wrongful), an important caveat in relation to pure economic loss is that the element of wrongfulness must be the function of the balancing exercise contemplated by the boni mores test, where the risk of indeterminate liability or the anti-circumvention … This was examined further in Caparo v Dickman where shareholders who relied upon a faulty audit in their investment decisions attempted to sue the auditor. In deciding the issue, the court delved in detail into the historical jurisprudence for extension of delictual liability by examining decided cases. If a claimant suffers personal injury or damage to his property this may lead to economic losses, such as loss of income or cost of hiring a substitute, such losses are categorised as consequential economic loss. Then the question arises, what does the future hold for delictual liability for pure economic loss? As a starting point, it is imperative to give a genesis of this phenomenon in our law. The House of Lords furthered this by saying a person can make a claim for pure economic loss as a result of negligent misstatements – providing there is a special relationship between the parties involved. In Hedley Byrne and Co v Heller and Partners, the courts were asked to examine a case where Hedley Byrne did business with a third party company on the basis of a positive reference from Heller and Partners. It appears from the two recent cases that our courts have adopted a somewhat cautious approach bordering on restriction to delictual liability for pure economic loss, and these cases seem to have joined the long line of South African judgments grappling with this notion in our law. because ‘the negligent causation of pure economic loss is prima facie not wrongful in the delictual sense and does not give rise to liability for damages unless policy considerations require that the plaintiff should be recompensed 1 Telematrix (Pty) Ltd t/a Matrix Vehicle Tracking v … Recovery for pure economic loss in English law, arising from negligence, has traditionally been limited. In 1688782 Ontario Inc. v. Maple Leaf Foods Inc. (Maple Leaf Foods), 1 the Supreme Court of Canada (SCC) revisited the ability to recover for claims constituting pure economic loss.. Pure economic loss may also refer to financial loss that does flow from the damage to prop or impairment to personality, but which doesn’t involve the Pl’s prop or person. Avizandum is a FANDOM Lifestyle Community. It was found not to be fair and reasonable to impose a duty of care on the auditor to everyone (even though it was foreseeable that their advice would be used that way) due to the lack of any special (contract like) relationship between the shareholders and the auditor; it might however be imposed if the auditor knew the report would be communicated and knew it would be for that purpose. Economic damage however, is far less easy to quantify, can grow out of proportion very quickly. Therefore the approach taken by our courts in interpreting delictual liability for pure economic loss to an insured has implications to the formulation and extent of the cover both for the insured and the insurer. Scott, Johan, Delictual Liability for Disturbing the Airwaves – The Law of Delict Moving into the 21st Century. In general terms, "Pure economic loss" is not considered an actionable injury in delict, that is to say if a purchased item is faulty, but the fault cases no further damage except to the item itself, there is no action in delict (there may however be a claim in contract), as such the duty of care in such cases is found not to have a duty of care for such claims. It would be interesting to note under which circumstances our courts will abandon the bright line of limitation and whether the policy of the insured will respond to such instances or fall under the exclusion as provided in the cover. Then Judge Brand went on to deal with the policy considerations militating against the imposition of an extension to delictual liability in the matter. Therefore, in general, if pure economic loss is the only damage suffered it is not recoverable. Only the owner of the property damaged is usually able to sue, in Dynamo v Holland and Hannen and Cubitts, the owner of a factory who lost income due to a power cut caused by an excavator was unable to sue as there was no duty of care. This coursebuilds upon the introduction to Delict provided in LS2025 and LS1536 examines a number of aspects of the law of delict in greater detail. This course builds upon the introduction to Delict provided in LS2025 and LS1536 examines a number of aspects of the law of delict in greater detail. Hot on the heels of Country Cloud and another case dealing with imposition of delictual action for pure economic loss was Minister for Safety & Security v Scott & Another. In an article entitled “The contribution of Louis Harms in the sphere of Aquilian liability for pure economic loss” published in Essays in honour of Louis Harms 2013 THRHR 57–69, Brand JA takes issue with our statement in Neethling and Potgieter Neethling-Potgieter-Visser Law of delict (2010) 78 that “since Telematrix [ (Pty) Ltd v Advertising Standards Authority SA 2006 1 SA 461 (SCA)] the Supreme Court of Appeal … Topics will be discussed in a comparative, historical and/or theoretical context. This means that shareholders are not entitled to recover any such losses. Pure economic loss arises where a third party suffers a loss without there being injury or damage. Economic Loss is a potential injury that may arise in Delict cases. This included a claim by Scott's company for loss of contractual profits as a result for being arrested and then a certain contract being cancelled. He stated that "in the case of pure economic loss, wrongfulness performs the function of a safety valve, a control measure, a long stop which enables the court to curb liability where despite the presence of all other elements of the Aquilian action, right minded people will regard the imposition of liability as untenable". The general rule is that a defendant does not owe any duty of care to a claimant not to cause pure economic loss. This is determined by reference to certain policy factors, the history of which will be dealt with below. Prior to Administrator, Natal v Trust Bank van Afrika delictual liability was limited as a general rule, to loss resulting from physical injury to a person or property. Briefly, the facts were as follows: The department (defendant) had contracted with a third party (Ilima) for the latter to complete a hospital. Delict is a term in civil law jurisdictions for a civil wrong consisting of an intentional or negligent breach of duty of care that inflicts loss or harm and which triggers legal liability for the wrongdoer; however, its meaning varies from one jurisdiction to another. In the Trust Bank case, when extending liability for pure economic loss, the court realised the danger of ‘limitless liability’ inherent in the extension and concluded that the ‘instrument of control to prevent limitless liability’ is the delictual element of wrongfulness. Ebotswana (Pty) Ltd v Sentech (Pty) Ltd (November 30, 2014). Before dealing with policy considerations, Brand JA dealt with the significance of wrongfulness as one of the elements of delict that has to be proven for the extension of delictual liability for pure economic loss. Thereafter Country Cloud instituted damages action against the department. Now, however, patrimonial loss also includes monetary loss resulting from injury to the nervous system and pure economic loss. Delict: A delict is an act of a person, which in a wrongful & culpable way causes harm to another. Quickly memorize the terms, phrases and much more. In doing so, the court will ordinarily establish whether a legal duty exists and it will be guided by examining several policy factors. This proposition will be explored by examining two recent Supreme Court of Appeal judgements in the cases of Country Cloud Trading CC v MEC, Department of Infrastructure Development and Minister for Safety and Security v Scott & Another delivered in March and May this year. The recoverability of pure economic loss in tort largely depends on which category of pure economic loss the loss falls in … • Patrimonial loss that does not result from damage to property or impairment of personality – Eg, X suffered pure economic loss because Z, an insurance broker, omitted to nominate her as beneficiary of a policy – Eg, X suffered pure economic loss as a result of an incorrect decision by Z, the City Council, that prevented him from continuing with his development project for a … [2] In the context of a delict, claims for pure economic (financial) loss, with no accompanying harm to an individual's person or property, are only available in limited circumstances. 2020_SEMESTER 1 Delict PVL3703. In Country Cloud the court was called upon to decide whether such factors existed for the extension of delictual action for pure economic loss. Recoverable pure economic loss. Economic loss is a term of art which refers to financial loss and damage suffered by a person which is seen only on a balance sheet and not as physical injury to person or property. The court was reluctant to extend the scope of Aquilian action to new situations, especially from a contractual context unless there are positive considerations that favour such an extension. In 1963, the House of Lords held that a claim for pure economic loss could be permitted if the loss was a result of things the defendant had said or information the defendant had provided. This was on the basis that the defenders had a contract to lay the floor, knew that Junior would be relying on the floor, that their skills were being relied upon by the per suers, and that they must have known that this was the case, and that any defects would be at some time corrected at a financial cost. Preview text … In dismissing the claim for pure economic loss, JA Theron shared the sentiments expressed by JA Brand in Country Cloud in that imposition of liability on the Minister will have unmanageable consequences as it will open the door for indeterminable liability and it "would indeed be untenable to right minded people to hold the Minister liable to Scottco in the circumstances of this matter". Most importantly, the element of wrongfulness needs to be established in these type of cases. This is because a duty of care must be consistent with an assumption of responsibility. Whether or not a delictual action for pure economic loss will be allowed is dependent on whether or not the element of wrongfulness or, put differently, a legal duty, is established. The court was asked to determine liability in delict for so called pure economic loss resulting from a negligent design by structural engineers. South African law approaches the matter in a more cautious way, as I have indicated and does not extend the scope of Aquilian action to new situations unless there are positive policy considerations which favour such an extension.". Suggested Citation: Suggested Citation. The second factor was non-vulnerability, "that Country Cloud could have taken alternative steps to recover its loss, for example, by claiming repayment from Ilima in terms of the loan contract or taking cession of Ilima's claim against the department". To quote from JA Brand in Country Cloud case, "when we abolished the absolute exclusion of liability for pure economic loss, we abandoned the bright line of limitation". In the final analysis, the court took into account two policy considerations that weighed against the imposition of delictual liability. This duty only arises in a situation like this where there is a chain of contracts where the end contractor knows the head employer - otherwise as pure economic loss it is unclaimable. Consolidates exclusionary rule: duty of care designed for personal injury and damage to property- PEL doesn't fall under these. Prior results do not guarantee a similar outcome. Terms in this set (17) exclusionary rule. Economic Loss1. Take your favorite fandoms with you and never miss a beat. What is pure economic loss? In Henderson v Merrett Syndicates Ltd it was held that where a person voluntarily assumes responsibility for the economic interest of another, knowing that the other party is relying upon it, then the duty of care exists. Is pure economic loss a delict? In applying the boni mores. The specific topics covered will vary on a year-by-year basis as the course aims to examine issues of topical interest. Whilst the work was defective, it had caused no other harm, and thus seemed to come under the area of pure economic loss (the cost to correct the floor). The Aquilian action has reached its end development in South African law, where compensation for negligent misrepresentation may be claimed ex lege Aquilia. The department, however, cancelled the Ilima contract because of the eventual liquidation of Ilima. In Trust Bank the court accepted that compensation for pure economic loss could be awarded in certain cases and delictual action was extended beyond the Roman law boundary of damage to property or person. consider ahouse burning down … "Hogan Lovells" or the “firm” refers to the international legal practice that comprises Hogan Lovells International LLP, Hogan Lovells US LLP and their affiliated businesses, each of which is a separate legal entity. Cram.com makes it easy to get the grade you want! Related Studylists. It has also been … In general terms, "Pure economic loss" is not considered an actionable injury in delict, that is to say if a purchased item is faulty, but the fault cases no further damage except to the item itself, there is no action in delict (there may however be a claim in contract), as such the duty of care in such cases is found not to have a duty of care for such claims. The court was called upon to consider the imposition of delictual liability in circumstances that had never been imposed before, namely, where a stranger to a contract has suffered economic loss as a result of the intentional repudiation of the contract by one of the contracting parties. To quote the essence of Judge Grosskopf’s judgement: "I do not consider that policy considerations require that delictual liability be imposed for the negligent breach of a contract of professional employment of the sort with which we are here concerned. However there are some cases where this can apply. If a claimant suffers no personal injury or damage to property then his los… A claim for pure economic loss is based on the negligence of the insured and often happens when the insured denied a third party access to something that the third party utilised to generate an income, or breach of an undertaking that caused financial loss. In Junior books v Veitchi Co Lid, the court dealt with a situation where Juniour had contracted with a company called Ogilvie for some building work, who had then subcontracted the flooring work to Veitchi, who had laid it defectively. Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 is an English tort law case on pure economic loss, resulting from a negligent misrepresentation. It is evident from the cases discussed above that in order for there to be liability for pure financial loss in delict, there has to be a special relationship between the defendant and plaintiff. Attorney advertising. 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