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Unformatted text preview: acterised economic loss, subsequently decrementally affecting the difference
between the legal classification of interest on damages awards, and the economic
classification of opportunity losses. This translated into a subtle but growing awareness
that there may be little difference between interest on damages and interest as damages. The difficulty for the courts in deciding this issue stems from the historic considerations
examined in Chapters Three and Five. The restrictive common law forms of action did
not allow recovery of damages for purely economic losses in the absence of a duty on the part of the defendant toward the plaintiff. Causes of action in tort were categorised by th courts according to the classification of plaintiffs interest. If the plaintiff incurred an
injury to an interest which was proprietary, such as to the actual person or tangible
property of the plaintiff, the damages were subsequently recoverable.54 In contrast, if the
plaintiffs damaged interest was purely economic in nature,55 such as a loss arising from
a contract which could not be profitably completed because of the defendant's 51 (1988) A C . 395 at 425.
The cases examined in this section do not have elements of deceit or fraud in them. Cases which
contained elements of fraud or deceit were treated differently from those where the tort did not involve
malice or criminally culpable elements, and are not considered.
Hedley Byrne & Co. Ltd. v Heller & Partners Ltd.  A.C. 465;  2 All E.R. 575.
Gibbs J , in Caltex Oil (Australia) Pty. Ltd. v the Dredge "Willemstad\ opined from the early cases
a possessory title to a ship may have been enough to found a cause of action. See online edition at
http://www.austlii.edu.au/au/cases/cth/high ct/136C.L.R.529.html paragraph 22. A s stated in Chapter six,
the classification of the facts of each case will influence the choice of rules to dispose of the case.
52 251 negligence, this type o f interest w as not recoverable.56 This should not be surprising,
since the classification dilemma examined in Chapter Four succinctly stated the same principle with respect to recovery of opportunity cost and the difference in the postur recovery that the courts exhibited between the lost use of land (mesne profits), and the
lost use of money (usury). The classification dilemma argued that the courts allowed
recovery of the economic damage done to a plaintiff when it was associated with land,
i.e. physical property, but did not allow recovery of the economic damage when the
economic damage (expressed as the opportunity cost) arose from another economic
damage (expressed as an overdue capital sum). The fact that the courts maintained the
same dichotomy when purely economic losses were incurred highlights the attempts by
judges to maintain consistency in the common law. This attitude toward consistency
informs the policy of certainty and predictability which is examined in Chapter Eight. The rule against recovery of pure economic loss was recognised to have begun later than
the classification dilemma, starting in the 1875 case of Cattle v Stockton Waterworks
CI Co., w here a contractor, working o n a pipe, failed to recover for loss of contractual
profits when the defendants negligently caused the area where he was working to be
flooded, causing extra time and expense in the performance of his contract with another party. This case stood for the proposition that pure economic loss, in the absence of so
culpably inflicted physical damage, was irrecoverable. The cases prior to 1964 are not uniform in the refusal to award purely economic loss, though, for some courts interprete 55 T he contractual interest in this section is not to be confused with the plaintiff and defendant being in a
Chargeurs Reuni Compagnie Fancaise de Navigation a Vapeur v English and American Shipping Co.
(1921) 9 L I L R 4 6 4 ; Caltex Oil (Australia) Pty. Ltd. v The Dredge Willemstad(1976) 136 C.L.R. 529.
(1875) L R 10 Q B 453 at 457 per Blackburn J.; Caltex Oil (Australia) Pty. Ltd. v The Dredge
"Willemstad" (1976) 136 C.L.R. 5 29 at 546 per Gibbs J.; Spartan Steel & Alloys Ltd. v Martin & Co.
(Contractors) Ltd.  Q.B. 27 at 35 per Denning LJ., at 4 8 per Lawson LJ. 252 the issue as one relating to the remoteness o f the d amage, 58 a nd others as an issue of whether the loss resulted from a breach of duty on the part of the tortfeasor.59 It seems
clear that in the absence of any contractual relationship between the parties, the
recoverable losses had to relate to a cause of action which needed a duty of care upon which to prove breach and subsequent loss, for litigants in contractual relationship wer
bound by the rule in Hadley v Baxendale (1854), examined in Chapter Six. Litigants
seeking recovery of economic losses for an injury, economic or otherwise, could only succeed if they could fit the claim into one of the established forms of action, or else prove a breach of duty of care and negligence on the part of the defendant towards them. If the duty of care otherwise needed to found the action in tort could not b...
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