ABSTRACT
As a general rule, no damages can be claimed for ‘pure’ economic loss in the law of torts.172 Pure economic loss is financial loss which is not consequent upon any physical damage to the person or property of the plaintiff. Economic loss which is consequent upon physical damage to the plaintiff or his property is compensable. A simple example may clarify the distinction: if D negligently runs down P, a fashion model, with his car, P can recover damages for loss of earnings, including such items as a lucrative modelling contract which P is prevented, by her injuries, from obtaining. But P’s agent, Q, who expected to earn a large commission from the modelling contract, cannot recover damages for his loss of earnings caused by the injuries to P, because his loss is not consequent upon any physical damage to him; it is consequent only upon damage to P. The leading case on this point is Spartan Steel and Alloys Ltd v Martin and Co Ltd,173 where it was held that a person who negligently damaged a cable belonging to the power authority, thereby cutting off the electricity supply to the plaintiffs’ nearby factory, was not liable to the plaintiffs for loss of profits arising from the stoppage of steel production during the power cut, because there was no duty to avoid causing purely economic loss. It is significant, however, that in this case the plaintiffs did recover for financial loss arising from damage to molten metal which was in their furnace at the time of the power cut, because this loss was consequent upon physical damage to the metal.
