Date: Thu, 16 Jun 2005 14:38:46 +0100

From: Adam Kramer

Subject: Esser v. Brown

The question that seems to be emerging is whether damage/destruction of a right to property should be treated differently to damage/destruction of property to which one has a right.

However I find the whole distinction between pure economic loss and property damage largely unnecessary. My view is that the real issue is best captured by the word 'directness'. Where, for harm to be caused, the claimant has to make assumptions or rely in ways that we think he shouldn't be automatically entitled to do (rely on a statement being true, a service being performed to standard, a third party's property not being damaged) then the law doesn't impose a duty of care unless there is something more (Hedley Byrne proximity: assumption of responsibility etc), whether or not the eventual damage is economic loss or property damage. Without the Hedley Byrne proximity the loss is too 'indirect', we might say. Where, for the loss to result, the claimant does not have to make assumptions or rely at all (damage to the claimant's property or person) or the assumptions or reliance are considered reasonable (a manufactured good is not dangerous) then there is no need for extra Hedley Byrne proximity in order for a duty of care to be imposed - the loss is sufficiently direct, we might say.

Much property damage is direct and much economic loss is not, but some property damage is indirect (e.g. resulting from reliance on a misstatement: Marc Rich & Co AG v Bishop Rock Marine Co Ltd (The Nicholas H) [1996] 1 AC 211 and Perrett v Collins [1998] 2 Lloyd's Rep 255) and so requires Hedley Byrne proximity, and there's no reason why economic loss can't be direct.

Esser v Brown could be a case of direct economic loss, but whatever the nature of the loss, it feels pretty direct (watch what the claimant has to do to suffer loss: not much).

This might not be the end of the matter (there is always pure policy) but I think it deals with quite a lot of the problems in this area without knotted brows over definitions of economic loss.

Regards to all,
Adam Kramer

P.S. These views are expressed more elaborately in (2003) 11(2) Tort Law Review 70-103, downloadable at http://www.kramer.me.uk/adam/research.htm.

-----Original Message-----
From: Jason Neyers
Sent: 16 June 2005 14:09
Subject: ODG: Esser v. Brown

Dear Jason,

Very interesting. In support of the dissent, my textbook on tort analyses Ministry of Housing v Sharp [1970] 2 QB 223 (negligent destruction of claimant's charge over land by failing to inform purchaser of land of existence of charge) as being a property damage/destruction case (see McBride & Bagshaw, Tort Law, 2nd ed (2005), 115-6). Of course, everywhere else Sharp is treated as a pure economic loss case and an anomalous exception to the normal requirement of Hedley Byrne proximity before a claim can be brought for pure economic loss in negligence.

Best wishes,

Nick McBride
Pembroke College
Cambridge

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