All rights reserved. Donoghue v Stevenson. This principle was confirmed in AB Ventures Limited v Siemens Limited, which followed the decision of Lillicrap. The first was the indeterminacy issue that,  "holding contracting parties delictually liable for harm suffered by strangers, flowing from the repudiation of their contracts, would raise the spectre of indeterminate liability to a multiplicity of potential claimants". 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. 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. Thereafter Country Cloud instituted damages action against the department. 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. As such the law places significant limits on the recovery of pure economic losses. No, it is not generally delict. criterion to determine the legal duty with regards to pure economic loss, Consolidates exclusionary rule: duty of care designed for personal injury and damage to property- PEL doesn't fall under these. Now, however, patrimonial loss also includes monetary loss resulting from injury to the nervous system and pure economic loss. Damages in delict are divided into: patrimonial/special damages (including medical costs, loss of income and the cost of repairs); non-patrimonial damages/general damages (including pain and suffering, disfigurement, loss of amenities and injury to personality); pure economic harm (not connected to any physical injury or damage to property). Take your favorite fandoms with you and never miss a beat. 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. 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". Economic damage however, is far less easy to quantify, can grow out of proportion very quickly. In this case, Scott and his company instituted action against the Minister for payment of damages arising from the alleged unlawful arrest and detention of Scott. 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. 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. 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. 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. Therefore, in general, if pure economic loss is the only damage suffered it is not recoverable. The Aquilian action has reached its end development in South African law, where compensation for negligent misrepresentation may be claimed ex lege Aquilia. The SCC majority acknowledged the three categories of pure economic loss that it had previously narrowed in Deloitte & Touche v. Livent Inc. (Receiver of) 3: 1) negligent misrepresentation or performance of a service; 2) negligent supply of shoddy goods or structures; and 3) relational economic loss. 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. Recoverable pure economic loss. 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. 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. "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. What is pure economic loss? 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". This is because a duty of care must be consistent with an assumption of responsibility. Prior results do not guarantee a similar outcome. 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. Quickly memorize the terms, phrases and much more. Then Judge Brand went on to deal with the policy considerations militating against the imposition of an extension to delictual liability in the matter. 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. Shareholders cannot sue for the diminution in the value of their shares because any wrong can only be committed against the company and not a shareholder. Other civil wrongs include breach of contract and breach of trust. The general rule is that a defendant does not owe any duty of care to a claimant not to cause pure economic loss. It is apparent that our courts have consistently adopted a cautious approach and rightly so having regard to the facts of each particular case weighed against policy considerations. Scott, Johan, Delictual Liability for Disturbing the Airwaves – The Law of Delict Moving into the 21st Century. Liability for negligently caused economic loss - Delict at Cram.com. 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. The department, however, cancelled the Ilima contract because of the eventual liquidation of Ilima. 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". 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. 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. 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 must be determined in each case whether, according to the circumstances, there was a legal duty to avoid pure economic loss. Prior to the decision, the notion that a party may owe another a duty of care for statements made in reliance had been rejected,[1] with the only remedy for such losses being in contract law. In order to comply with its obligations under the construction contract Ilima had borrowed R12 million from Country Cloud (plaintiff). Terms in this set (17) exclusionary rule. The Roman-Dutch law attempts an extension to this action, to every kind of loss sustained by a person in consequence of wrongful acts of another. This is determined by reference to certain policy factors, the history of which will be dealt with below. 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 … 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. financial damage suffered as the result of the negligent act of another party which is not accompanied by any physical damage to a person or property pure economic loss not recoverable under delict. The court was asked to determine liability in delict for so called pure economic loss resulting from a negligent design by structural engineers. 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. In applying the boni mores. The recoverability of pure economic loss in tort largely depends on which category of pure economic loss the loss falls in … 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. Obviously for a plaintiff to successfully prove a delictual action, the elements of delict should be proven. 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. Pure economic loss may comprise patrimonial loss that does not result from damage to property or impairment of personality. However there are some cases where this can apply. … Generally, pure economic loss is aptly referred to as financial loss. Related Studylists. © 2020 Hogan Lovells. Summary: Delict — wrongfulness — pure economic loss — intentional interference with contractual relations — relevance of intention in wrongfulness enquiry — norm of state accountability — vulnerability to risk — existing contractual relations 2 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. Economic loss generally refers to financial detriment that can be seen on a balance sheet but not physically. [2] 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. These two losses are known as "pure economic loss". The SCA disallowed the appeal. 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. 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). Delict Notes (Term 1) 12. In Country Cloud and Scott one can argue that even though the approach was cautious, it is apparent that our courts will readily abandon the bright line of limitation if the circumstances so dictate. PURE ECONOMIC LOSS Aquilian action is in principle available to claim damages for pure economic loss. In the final analysis, the court took into account two policy considerations that weighed against the imposition of delictual liability. This means that shareholders are not entitled to recover any such losses. The specific topics covered will vary on a year-by-year basis as the course aims to examine issues of topical interest. The appellant’s cause of action was founded in delict and was for pure economic loss. In Lillicrap the court concluded that delictual action does not fit comfortably in a setting where professional services are rendered pursuant to a contract. Preview text 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.". 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. 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. In essence, it is a loss that is purely financial. 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.

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