Learning Outcomes
After reading this article, you will be able to identify and explain the main defences available to a defendant facing a claim for pure economic loss in tort. You will understand how contributory negligence, voluntary assumption of risk, and illegality operate in this context, and be able to apply these defences to realistic SQE1-style scenarios.
SQE1 Syllabus
For SQE1, you are required to understand the defences that may be raised in response to a claim for pure economic loss in negligence. In your revision, focus on:
- the application of contributory negligence to pure economic loss claims
- the requirements for the defence of voluntary assumption of risk (volenti non fit injuria)
- the operation of the illegality defence (ex turpi causa non oritur actio) in economic loss situations
- how these defences may reduce or bar a claimant’s recovery for pure economic loss.
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
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Which defence, if successful, will completely bar a claim for pure economic loss?
- contributory negligence
- voluntary assumption of risk
- illegality
- all of the above
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In a claim for pure economic loss, what is the effect of a finding of contributory negligence?
- The claim is barred entirely
- The claimant’s damages are reduced
- The defendant is not liable at all
- The court ignores contributory negligence
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What must a defendant show to rely on the defence of voluntary assumption of risk in a pure economic loss claim?
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True or false? The defence of illegality will always apply if the claimant has committed any unlawful act.
Introduction
Defences play a key role in limiting or excluding liability for pure economic loss in tort. Even where a claimant establishes a duty of care, breach, and causation, a defendant may avoid or reduce liability by successfully raising a defence. The main defences relevant to pure economic loss are contributory negligence, voluntary assumption of risk, and illegality. This article explains each defence, their requirements, and how they apply in practice.
Defences to Pure Economic Loss Claims
Contributory Negligence
A defendant may argue that the claimant’s own lack of care contributed to their economic loss. If established, this defence will reduce the damages recoverable by the claimant to the extent the court considers just and equitable.
Key Term: contributory negligence Contributory negligence is the partial defence that applies where the claimant’s own carelessness has contributed to their loss. The court reduces damages proportionally to the claimant’s share in the responsibility.
Worked Example 1.1
A business owner relies on negligent financial advice from an accountant but fails to check basic facts that would have revealed the risk. The business suffers a financial loss. Can the accountant argue contributory negligence?
Answer: Yes. If the business owner’s failure to check the facts contributed to the loss, the court may reduce the damages awarded for pure economic loss to reflect the claimant’s share of responsibility.
Voluntary Assumption of Risk (Volenti Non Fit Injuria)
This complete defence applies where the claimant freely and knowingly accepted the risk of loss. The defendant must prove both knowledge and voluntary acceptance.
Key Term: voluntary assumption of risk Also known as volenti non fit injuria, this is a complete defence where the claimant knew of the risk and voluntarily accepted it, barring recovery for the loss.
Worked Example 1.2
An investor is warned by a financial adviser that a particular investment is high risk. The investor proceeds anyway and loses money. Can the adviser rely on voluntary assumption of risk?
Answer: Possibly. If the adviser can show the investor fully understood and accepted the risk, the defence may bar the claim. However, courts are cautious and require clear evidence of informed and voluntary acceptance.
Illegality (Ex Turpi Causa Non Oritur Actio)
If the claimant’s loss is connected to their own unlawful conduct, the defendant may raise the defence of illegality. The court will consider whether denying the claim is proportionate and justified by public policy.
Key Term: illegality Also known as ex turpi causa non oritur actio, this is a complete defence where the claim arises from the claimant’s own illegal or immoral act, and the court refuses to assist.
Worked Example 1.3
A company enters into a contract for an illegal purpose and suffers financial loss due to the negligence of its professional adviser. Can the company recover its loss?
Answer: Likely not. If the loss is directly linked to the illegal purpose, the defence of illegality may bar the claim for pure economic loss. The court will assess whether denying the claim is proportionate and justified.
Exam Warning
The defence of illegality is not automatic. The court will consider the purpose of the breached law, relevant public policy, and whether denying the claim is a proportionate response. Not every unlawful act will trigger the defence.
Summary
Defences are a key part of any claim for pure economic loss. Contributory negligence may reduce damages, while voluntary assumption of risk and illegality can bar recovery entirely. The court will examine the facts closely to determine if the requirements for each defence are met.
Key Point Checklist
This article has covered the following key knowledge points:
- Contributory negligence reduces damages if the claimant’s own carelessness contributed to their pure economic loss.
- Voluntary assumption of risk (volenti) is a complete defence if the claimant knowingly and freely accepted the risk of loss.
- Illegality (ex turpi causa) is a complete defence if the claim arises from the claimant’s own unlawful conduct, but is only applied where justified by public policy.
- The court will assess the facts and public policy before applying these defences to pure economic loss claims.
Key Terms and Concepts
- contributory negligence
- voluntary assumption of risk
- illegality
