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Economic Loss Theory Notes

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Economic Loss Theory Notes. General Recovery of Pure Economic Loss?

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McLachlan J - Economic Loss Damages in Canada: Economic loss damages have not been an issue in Canada, concerns of unlimited recovery and uncertainty not materialised. There is an economic theory that says loss is inevitable result of socially valuable activities and the community taking benefit should accept burden of this, not individual Ds. BUT arguments to this effect fail: (0) floodgates problem??, (1) C being in best position predict economic loss consequent on an accident so as to insure - but not having to compensate encourages negligence and insurance policies don't cover lost profit, (2) Better to spread the risk (prevent bankruptcies) - but the C may suffer an equally large loss + if losses are spread between Cs and not D then we can expect more negligence, (3) Contract can allocate risks - but contracts aren't all economically efficient, parties don't have equal bargaining power, and fault is what is central to negligence. SO RECOVERY HAS BEEN OK.

Complex Structure.

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Lord Keith - Murphy: When C buys property with a physical defect it cannot count as physical damage. Loss occurs only in devaluation upon finding defect. Opening liability up here would need all pure economic loss to be recoverable. Only classified in 'parts' damages where different people built different parts of the property.

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Quill - Consumer Protection in Respect of Defective Buildings: To say a building is just a big product doesn't do justice to greater practical and economic significance that purchasing a building entails. Also argument overlooks that tort needn't protect faulty products as consumer protection legislation does this already. Simply not analogous. If a house buyer asked for these protections for latent defects the seller would simply refuse and wait for another to come along. Combination of insurance and statutory provisions may be considered sufficient.

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La Forest J - Canadian Supreme Court:

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