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Unformatted text preview: c losses incurred by a steel mill where contractors had negligently cut the power source to the mill. This compelled the mill owners to pour hot metal out of the caldrons immediately lest the metal cool inside a
cause great damage. The material damages were awarded, along with the loss of profit associated with the downgraded quality of the metal in the aborted first pour, but th resulting loss of profits from potential additional pours in normal operation were he
irrecoverable, despite being foreseeable.
[I]f claims for economic loss were permitted for this particular hazard, there would be no end of
claims. S o m e might be genuine, but many might be inflated, or even false. A machine might not
have been in use anyway, but it w ould be easy to put it down to the cut in supply. It would be
well-nigh impossible to check the claims. If there w as economic loss on one day, did the claimant
do his best to mitigate it b y working harder next day? A n d so forth. Rather than expose claimants
to such temptation and defendants to such hard labour - on comparatively small claims - it is 67 E dmund-Davies L J (in dissent) Spartan Steel & Alloys v Martin & Co. (Contractors) Ltd. (1973) 1 Q.B.
Spartan Steel & Alloys Ltd. v Martin & co. (Contractors) Ltd. (1973) 1 Q . B. 27 at 37. 255 better to disallow economic loss altogether, at any rate w hen i stands alone, independent of any
physical damage.69 Lord Denning's fears were unjustified. The High Court of Australia refused to follow this
logic in 1976 in Caltex Oil (Australia) Pty. Ltd. v The Dredge "Willemstad"™ where a
refinery claimed the economic losses arising from the negligent operation of a dredge
which resulted in the cutting of an underwater pipeline supplying its refinery with
material. The court awarded the economic losses of the severed pipeline to the plaintiff
based on apparent notions of proximity and the knowledge which the defendant
possessed which imposes sufficient duty to avoid the damage which would inflict the
very loss claimed. Mason and Stephen JJ, in separate judgments, noted the dissenting
judgment of Edmund-Davies LJ in Spartan Steel where His Honour deprecated the
judicial distinction between proprietary and contractual interests and called for a
resolution of the matter.71 The tension which was promulgated by the courts in the cases above shows a striking
similarity to the tension erected between awards of opportunity costs associated with
property and money sums, examined in Chapter Four. Where defendants interfered with
property, economic losses were awarded as part of those damages. Where defendants interfered with economic interests, and material injury to the plaintiffs property or pers
was lacking in the plaintiffs case, no economic losses were awarded. 69 (1973) 1 Q. B. 27 at 38 per Lord Denning M . R.
(1976) 136 C.L.R. 529.
Edmund-Davies LJ uncontrovertibly expressed dissatisfaction with the prohibitory rule which, he
thought presented "a problem regarding which differing judicial and academic views have been expressed
and which i high time should befinallysolved." (1973) 2 Q.B. 27 at 37.
70 256 It is probably to be expected that the courts would have taken this restrictive stance
towards litigants seeking recovery of economic losses only. If economic losses were to
have been awarded prior to the Caltex Oil case above, the basis upon which to deny
opportunity costs to plaintiffs for overdue sums would have been severely eroded more
quickly. Since the courts did not comprehensively address the classification dilemma
until 1989 in Hungerfords v Walker, it would have been surprising to see an earlier
dissolution of the refusal to award pure economic losses without physical injury. The
double standard would not have escaped notice of counsel in subsequent cases and the
bench would have been fully informed of the anomaly in any related case. For the courts
to have classified interest awards in the damages as simply more damage would have been to completely undermine the artificial distinction which supported this prohibitio
against pure economic loss recovery in the common law. If the common law distinction
between recoverable damages associated with physical damage to property or person had
been resolved earlier than the 1970's in Australia, it is reasonable to assert that the
classification dilemma promulgated by Lord Tenterden in 1829 and resolved in
Hungerfords v Walker in 1989 would also have been resolved sooner. What is curious is
that after Caltex Oil, in 1976, it was still 13 years before a case arose which had the
necessary factual circumstances which enabled the High Court of Australia to complete the transferral from the previous curial platform, restriction of recovery of economic l
to the current curial platform, recovery upon proof of breach of duty, and proof of
economic loss. Damages of a purely economic nature, inflicted at the hands of a defendant, obviously inflict an economic loss. For the precedent to have long continued within the Australian Subject, of course, to the other mitigating circumstances and rules of law. 257 court system, where an economic loss was inflicted, a nd an interest component recovered
by the plaintiff for the...
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