Pure economic loss in English law


Recovery for pure economic loss in English law, arising from negligence, has traditionally been limited. Notably, recovery for losses that are "purely economic" arise under the Fatal Accidents Act 1976; and for negligent misstatements, as stated in Hedley Byrne v. Heller. Economic loss generally refers to financial detriment that can be seen on a balance sheet but not physically. Economic loss is then divided into "consequential economic loss" - that which arises directly from some physical damage or injury and "pure economic loss", which is everything else.
The fear behind allowing claims for "pure economic loss" is that potentially unlimited claims could flood in. The risks may be unknowable, and parties would find it impossible to insure. The U.S. judge Benjamin N. Cardozo famously described it as, "liability in an indeterminate amount, for an indeterminate time, to an indeterminate class".
Examples of pure economic loss include:
The latter case is exemplified by the case of Spartan Steel and Alloys Ltd v. Martin & Co. Ltd. Similar losses are also restricted in German law though not in French law.

Complex structure theory

The complex structure theory is an argument which has been put forward in pure economic loss cases which suggests that a large chattel may be considered to consist of several parts and so damage to other "property" for the purpose of applying Donoghue v Stevenson principles. This theory as a normative doctrine has been rejected by Lord Bridge in Murphy v Brentwood.

Key cases