Law of Negligence: Compensation for Physical Injuries, Damages and Purely Economic Losses - Coursework Example

?Law of Negligence: Compensation for Physical Injuries, Damages and Purely Economic Losses Simon v. Universal Construction plc The general perceptionis that injuries or damages suffered by individuals through acts or omissions of another are subject to restitution. Would this premise support Simon in his action against Universal Construction plc (Universal) for physical injuries and damage to property when the wall of his house collapsed? In Simon’s claim, these facts are drawn—Universal’s half-finished construction project in Oldtown has a poorly excavated foundation. This resulted in subsidence in Simon’s house which caused the collapse of a wall of the house. Simon was injured when the wall collapsed which necessitated a month of hospitalization resulting to a loss of ?20,000 in potential earnings. Will Simon’s claim for monetary compensation prosper? The answer is in the affirmative under the duty of care principle however it is imperative to analyse its common law application from its original legal contemplation to subsequent pronouncements if precedents are still relevant. The landmark case of Donoghue v. Stevenson (1932) imposed upon every person the legal duty to accord everyone his due and to undertake the necessary steps not to inflict injury or damage to others otherwise the aggrieved party can claim for damages for breach of that duty. This overturned earlier rulings where contractual or special relationship must be shown at first glance to invoke tortious liability or when fraud is committed. The Donoghue edict established the elements of tortious acts or omissions, namely: duty of care owed by the defendant to the plaintiff; failure to meet the requisite standard of care; and damage directly attributable to the defendant. Thus, it must be presented that the offending party failed to show caution, prudence or diligence in the exercise of an obligation or duty which must be rectified by way of damages. The test of determining whether duty of care is owed was elucidated by Lord Atkins in his who is my neighbour disquisition. The neighbour principle analogy encompasses reasonably foreseeable acts or omissions which affect not only ones neighbour. It brings under its umbrella all persons who are directly affected by another person’s act thus duty is owed to prevent reasonably foreseeable injury or damage to all who may come in contact with such person. The Donoghue principle was later abandoned as the neighbour principle failed to consider acts which may have been committed by or against third party. This is illustrated in Home Office v. Dorset Yatch (1970) where duty of care was imposed upon public authorities when they failed to protect the interest of nearby property owners when the boys under their care escaped custody. There is no direct relationship between the public authorities and the property owners since the act or omission was perpetuated by the boys who were under their care. The ruling is anchored on the foreseeable loss against the property owners within the vicinity which excluded other property owners situated farther from the training camp. The subsequent ruling in Anns v. London Borough of Merton (1977) recognized two components to disprove negligence—the act so performed must be just and reasonable. This resulted in confusing and somewhat volatile rulings where the standards were equally evolving depending on the factual presentation thus its expansive coverage were modified. The decision in Caparo Industries v. Dickman (1990) laid down the yardsticks to determine duty of care—the injury or damage sustained by the aggrieved party was reasonably foreseeable; sufficient proximity or relationship between the parties; and it is fair, just and reasonable to impose liability. It is not sufficient that the damage is foreseeable and a duty of care exists, the circumstances giving rise to tortious acts must equally be fair, just and reasonable to impose duty. With the foregoing precedents, Simon’s claim for damages is proper as Universal failed to exercise due diligence to prevent personal injury and damage to property. Universal breached its duty of care when it carried out a poorly excavated foundation in complete disregard of the people and properties within its proximity. The half-finished project with its poor foundation resulted in serious subsidence in Simon’s house which is the proximate cause of the damage and personal injury which is reasonably foreseeable. Universal was negligent in performing its statutory responsibilities pursuant to “The Construction Design and Management Regulations of 2007 No. 320” (Parliament of the United Kingdom, 2007 and hereafter referred to as Regulations, 2007), when it did not correct any malfeasance or misfeasance of its personnel tasked in the design, planning and preparation of its project to comply with the general principles of prevention when it became apparent that injury or damage may ensue or did it rectify any error during the construction phase to ensure that the general principles of prevention are properly implemented (Regulation 7, Regulations, 2007). Regulation 13 (Regulations, 2007) ascribes fault upon the party who possesses the ability and authority to oversee that the standards of safety are complied with but overlooked to do so. Universal is the party who has the ability, expertise and overall responsibility to manage and to administer prevention procedures over the construction site and its surroundings. For failing to implement corrective procedures, Universal is accountable for any resulting accidents due to its negligence. It may be argued that the Regulation does not contemplate absolute warranty to prevent all safety hazards and this acceptable however Universal cannot escape liability as it failed to implement reasonable and practicable prevention procedures—its poor excavation work is sufficient proof of its negligence. By the nature of its business, Universal possesses the competence to perform the task diligently and responsibility of the “poorly excavated foundation” squarely falls within the ambit of its obligation thus any accident which may have accrued is solely attributable to Universal. Regulation 28 (Regulations, 2007) further highlights the responsibility of every contractor to plan, manage and monitor construction work to ensure under reasonable circumstances that the work is carried out without risk to health and safety. Thus, contractors must ensure that the lives and limbs of people are protected from the dangers posed by resulting structural defects considering the strains of the construction work. Contractors must take notice that the on-going constructions may create instability hence it must institute adequate measures to prevent construction or structural collapse. It is evident that Universal did not employ practicable steps to substantially comply with its statutory duty to avoid accidents and prevent personal injuries as it continued with the construction despite its poorly excavated foundation. In fact, Universal is half-way through its construction and has not shown any move or attempt to strengthen its structural foundation. Assuming that Simon’s property is outside the construction perimeter, still Universal’s obligation to protect extends to the property of Simon as Regulation 31 explicitly prohibits that any material a side or roof of, or adjacent to any excavation is dislodged or fails (Regulations, 2007). In view of this, Universal is liable not only for the collapse of Simon’s wall but also for the personal injuries he sustained. It was readily established that the injury and damage sustained by Simon reasonably foreseeable when Universal failed to institute any corrective or preventive measure to avert or avoid accidents. There is sufficient proximity between the parties since Simon is directly affected by the failures and neglect of Universal. The imposition of liability is fair, just and reasonable for the blatant failure of Universal to comply with its statutory duty to minimize or prevent accidents. The lack of foresight in inexcusable since Universal did not reasonably implement any measure to reduce the threat thus, it must compensate—who is a victim of a breach that resulted in his personal injury and damage to property—based on the failure of Universal to observe the standard degree of care to prevent injury and damage. Charlie and Maria vs. Chambers and Co. Negligence is founded on acts or omissions which results in physical injury or damage however if the claim arose from purely economic losses, would negligence attach? This is the situation confronting Charlie and Maria based on the following—Chambers and Co. (Chambers) audited the accounts of Universal Construction plc (Universal). It published a report showing a profit of ?10 Million in the current financial year including a praiseworthy description of Universal’s performance over the past years. Based on the findings of Chambers, Charlie already an investor of Universal Construction decided to increase his shares by 10,000 more and induced his wife, Maria to purchase another 1,000 shares. It was later revealed that Chamber’s report was very inaccurate and in reality, Universal is actually losing money. The revelation caused the value of the shares of stocks of Universal to fall making Charlie and Maria lose a lot of money. Charlie and Maria are now claiming compensation from Chambers to recover their losses. The Charlie and Maria cases are intertwined thus the matter shall be discussed together. The recovery of purely economic loss cannot be sustained since it is not allowed in this jurisdiction based on public policy and the floodgates arguments (Spartan Steel and Alloys Ltd v. Martin & Co. Ltd,1973). For claims based on purely economic loss, the injury or damage does not emanate from physical injury or damage to property but on simple monetary loss (Murphy v. Brentwood District Council, 1990) thus, no compensation shall be allowed. However, a closer scrutiny in different cases of recovery for pure economic losses is necessary to distinguish it from monetary compensation resulting from physical injuries and damage to property. In Hedley Byrne & Co Ltd v. Heller & Partners Ltd (1964), it was held that a duty to care was created when Hedley requested for information from Heller regarding one of its clients—this establishes sufficient proximity. Heller is liable for any incorrect information provided since it is reasonably known that Hedley would rely on the information to arrive at a decision. Notwithstanding that the information turned out to be incorrect, Heller was absolved from liability since a disclaimer accompanied the information. In Smith v. Bush (1989), the court put premium on the reliance of the purchaser on the statement of the defendants-surveyors that the house sought to be purchased needed no significant repair. The accompanying liability waiver was declared unacceptable pursuant to the Unfair Contract Terms Act 1977. In Caparo Industries plc v. Dickman (1990), it was declared that no proximity of relationship between auditor Dickman and Caparo therefore Dickman owes no duty of care to the financial losses incurred by Caparo. The overstated account of a company's profitability albeit negligently done does not make Dickman liable since the contract for audit was between the company and Dickman, not Caparo. Therefore, no fair, just and reasonable grounds exist to make the auditor liable for the lost sums of money in the takeover. In White v Jones (1995), the failure of the solicitor to draw a new will prior to the death of the testator made him liable for negligence as the solicitor assumed a special relationship towards heirs thereby creating a duty of care. In the foregoing cases, it is apparent that special relationship between the parties exist warranting indemnity on purely economic losses and the reliance placed by the aggrieved party on the advice provided by the professional on matters within the purview of the professional. Applying this rule to spouses’ claim, there is no relationship between Chambers and them. The spouses are not privy to the relationship of Chamber and Universal thus even if Charlie and Maria relied on the report issued by Chambers it does not produce any liability as no duty of care was established. It would not be fair, just and reasonable to penalize Chamber for its report. Chamber could not have assumed accountability for the decision of Charlie and Maria to further invest based solely on its report. The elements of duty of care as enunciated and elucidated in the above cases were not satisfied thus no recovery of their monetary losses can be had. BIBLIOGRAPHY Anns v. London Borough of Merton [1977] 2 All ER 118, [1978] AC 728, [1977] UKHL 4, [online] Available at: [Accessed on November 24, 2011] Caparo Industries v. Dickman [1990] 1 All ER 568, [1990] UKHL 2, [1990] 2 AC 605, [online] Available at: [Accessed on November 24, 2011] Code of Practice for Construction and Demolition Sites, [online] Available at: [Accessed on November 24, 2011] Donoghue v. Stevenson [1932] All ER Rep 1; [1932] AC 562, [online] Available at: [Accessed on November 24, 2011] Hansard, L. (2004, May 17). Fraud Law Reform., [online] Available at: www.parliament.uk: [Accessed on November 24, 2011] Hedley Byrne & Co Ltd v. Heller & Partners Ltd [1964] AC 465, [online] Available at: [Accessed on November 24, 2011] Home Office v. Dorset Yatch [1970] UKHL 2, [1970] AC 1004, [online] Available at: [Accessed on November 24, 2011] Murphy v. Brentwood District Council [1990] 2 All ER 908, [online] Available at: [Accessed on November 24, 2011] Parliament of the United Kingdom. (2006). Fraud Act ., [online] Available at Legislation.gov.uk: [Accessed on November 24, 2011] Parliament of the United Kingdom. (2007). The Construction Design and Management Regulations of 2007 No. 320., [online] Available at legislation.gov.uk: [Accessed November 24, 2011] Parliament of the United Kingdom. (2006). UK Public General Acts., [online] Available at Legislation.gov.uk: [Accessed on November 24, 2011] Planning Policy Guidance Note 14, Development on Unstable Land, [online] Available at: [Accessed on November 24, 2011] Smith v. Bush [1990] UKHL 1, [1990] 1 AC 831, [online] Available at: [Accessed on November 24, 2011] Spartan Steel and Alloys Ltd v. Martin & Co. Ltd [1973] 1 QB 27 Structural Stability During Excavations, [online] Availale at: [Accessed on November 24, 2011] Read More