Can You Claim for Pure Economic Loss in Negligence?
Can you claim for pure economic loss in negligence? Learn the general rule, when negligent advice may create liability, and how physical damage changes the answer.
Usually, no. In negligence, you generally cannot claim for pure economic loss: financial loss that does not result from physical injury to a person or damage to property. But there are exceptions, particularly where someone negligently gives advice or information to a person who reasonably relies on it.
The General Rule
A financial loss caused by physical damage is different from pure economic loss. If a driver negligently damages your delivery van, you may be able to claim both the cost of repairs and income lost while the van is being repaired. The lost income follows from damage to your property.
By contrast, if the driver blocks the road without damaging your van and you miss a delivery, the lost income is pure economic loss. It will not normally be recoverable in negligence.
Negligent Advice
A claim may succeed where the defendant assumed responsibility for giving advice or information, the claimant reasonably relied on it, and that reliance caused financial loss. This principle comes from Hedley Byrne & Co Ltd v Heller & Partners Ltd. The claimant did not succeed in that case because the advice was given with a disclaimer of responsibility.
For example, suppose an accountant gives a client a careless financial report for a decision the accountant knows the client will make. If the client reasonably relies on the report and loses money, a negligence claim may be possible even though nothing was physically damaged. Whether it succeeds depends on the facts, including whether the accountant owed that client a duty of care.
Exam mistake to avoid: Do not say that all financial loss is unrecoverable. First ask whether it follows from physical damage. If it does not, identify why a duty of care for pure economic loss might nevertheless arise.
