Economic Loss Tort Essay

In Malaysia, the Federal Court in Majlis Perbandaran Ampang v Steven Phoa Cheng Loon [2006] 2 AMR 563 followed the decision in Caparo Industries v Dickman [1990] UKHL 2 where it held; pure economic loss is claimable if 1) the damage was foreseeable, 2) the relationship between the parties was one of sufficient proximity, and 3) it is fair, just and reasonable to impose a duty of care on the defendant. Cardozo of the New York Court of Appeals famously described pure economic loss as "liability in an indeterminate amount, for an indeterminate time, to an indeterminate class".

The rule may also be traced back to Roger Traynor's decision in the California case Seely v. (1965), and was later adopted by the Supreme Court of the United States in East River Steamship Corp V Transamerica Delaval Inc. A few state supreme courts in the United States have departed from the majority rule and authorized recovery for pure economic loss through tort causes of action (usually negligence).

Up until Hedley Byrne was decided, pure economic loss was thought to be entirely within the realm of contract law.

From that point on, in jurisdictions following the English common law, it has been possible to recover for some pure economic loss in negligence; however, because purely economic loss can usually be anticipated and allocated differently by contract, the party seeking to be compensated for such loss must demonstrate a compelling reason to change the contractual allocation through tort liability.

However, La Forest J, writing for a unanimous court, declined to impose liability on the auditors for policy reasons, citing Justice Cardozo's concerns over indeterminate liability.

Pure economic loss was not recoverable in negligence until 1963 and the decision of the House of Lords in Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964).To learn more or modify/prevent the use of cookies, see our Cookie Policy and Privacy Policy.which refers to financial loss and damage suffered by a person such as can be seen only on a balance sheet rather than as physical injury to the person or destruction of property.Within this framework, some new hypotheses on the comparative law and economics of pure economic loss will be discussed.Introduction'Pure economic loss' and the possible approaches Although there is no common definition of 'pure economic loss', it is generally understood to deal with matters of tortious liability for loss that is neither consequential upon death and personal injury of the claiming victim nor upon the infringement of the victim's property.By continuing to use this site, you consent to the use of cookies.We use cookies to offer you a better experience, personalize content, tailor advertising, provide social media features, and better understand the use of our services.Recovery at law for pure economic loss is restricted under some circumstances in some jurisdictions, in particular in tort in common law jurisdictions, for fear that it is potentially unlimited and could represent a "crushing liability" against which parties would find it impossible to insure.Justice Cardozo's indeterminacy concerns were relied on by the Supreme Court of Canada to restrict imposing liability on a corporation's auditors for negligently auditing the corporation's financial statements.Traditional economic theory is grounded on the divide between social and private loss and is employed in formulating policy recommendations for an efficient outcome.However, it fails to explain why pure economic loss cases are treated differently in different legal systems.

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