Introduction to tort law - Types of loss in tort

Learning Outcomes

This article outlines the main categories of loss recoverable in the tort of negligence: physical damage, economic loss, and psychiatric harm. For the SQE1 assessments, you will need to distinguish between these types of loss and understand the specific legal principles governing their recoverability. This includes differentiating between consequential and pure economic loss, and between primary and secondary victims in psychiatric harm cases. Your understanding will enable you to apply these rules to SQE1-style single best answer questions.

SQE1 Syllabus

For SQE1, you must understand how different types of loss are categorised and treated within the tort of negligence. This knowledge is fundamental for advising clients on the potential recoverability of damages.

Pay particular attention in your revision to:

• The distinction between physical damage to person or property and other forms of loss.
• The difference between consequential economic loss (generally recoverable) and pure economic loss (generally irrecoverable, subject to exceptions).
• The specific requirements for establishing liability for psychiatric harm, including the distinction between primary and secondary victims and the relevant control mechanisms.
• How these principles apply in practice to factual scenarios.

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.

1. Which type of loss is generally NOT recoverable in the tort of negligence?
   1. Personal injury.
   2. Damage to the claimant's property.
   3. Pure economic loss.
   4. Consequential economic loss.
2. A claimant suffers psychiatric harm after witnessing a horrific accident caused by the defendant's negligence but was not themselves in any physical danger. Which category of victim are they likely to be classified as?
   1. Primary victim.
   2. Secondary victim.
   3. Bystander victim (not a legal category).
   4. Consequential victim.

3. True or false? Financial loss directly resulting from physical damage to the claimant's property is classified as pure economic loss.

Introduction

In the tort of negligence, establishing that the defendant owed a duty of care, breached that duty, and caused damage is essential. However, not all types of damage or loss suffered by a claimant are treated equally by the law. The courts have developed distinct rules based on the type of loss sustained. For the SQE1 assessment, you need to identify the type of loss presented in a scenario and apply the correct legal principles to determine recoverability.

The main categories of loss are:

1. Physical damage (to the person or property).
2. Economic loss (financial loss).
3. Psychiatric harm (recognised mental injury).

This article explores each category, highlighting the key rules and distinctions essential for your exam preparation.

Physical Damage

This is the most straightforward type of loss. It encompasses:

• Personal Injury: Physical harm to the claimant's body, ranging from minor injuries to serious disablement or death. This includes consequential financial losses like lost earnings or medical expenses.
• Property Damage: Damage to or destruction of the claimant's tangible property (e.g., car, house, goods). This includes consequential financial losses, such as the cost of repairs or lost profits resulting directly from the property damage.

Generally, if a claimant suffers physical damage due to the defendant's negligence, and the requirements of duty, breach, and causation are met, the loss is recoverable, subject to the rules on remoteness (The Wagon Mound (No 1) [1961] AC 388).

Economic Loss

Economic loss refers to financial detriment suffered by the claimant. Tort law draws a key distinction between consequential economic loss and pure economic loss.

Consequential Economic Loss

This is financial loss that is a direct consequence of physical damage to the claimant's person or property.

Key Term: Consequential Economic Loss Financial loss that results directly from physical injury to the claimant or physical damage to the claimant’s property.

Examples include lost earnings due to personal injury, or lost profits because a damaged machine cannot operate. Consequential economic loss is generally recoverable in negligence, provided it is not too remote.

Pure Economic Loss

This is financial loss that is not consequent upon physical damage to the claimant's own person or property.

Key Term: Pure Economic Loss Financial loss suffered by a claimant that does not flow directly from physical injury to their own person or physical damage to their own property.

Pure economic loss includes:

• Loss caused by damage to the property of a third party (e.g., loss of profit due to power cut caused by damage to a cable owned by the electricity company - Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1973] QB 27).
• Loss arising from acquiring a defective product or property (e.g., the cost of repairing a defective item itself, or the reduction in its value - Murphy v Brentwood District Council [1991] 1 AC 398).
• Other financial loss unrelated to physical damage (e.g., loss on an investment made after relying on negligent advice).

General Rule: Pure economic loss is generally not recoverable in negligence. The courts restrict liability to avoid imposing potentially "crushing liability" on defendants (Caparo Industries plc v Dickman [1990] 2 AC 605).

Exceptions: There are limited exceptions where a duty of care may be owed in respect of pure economic loss, primarily:

• Negligent Misstatement: Where there is a "special relationship" between the claimant and defendant involving an assumption of responsibility by the defendant and reasonable reliance by the claimant (Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465).
• Negligent Provision of Services: Extended from negligent misstatement, where professionals providing services assume responsibility towards those foreseeably relying on their work (e.g., Henderson v Merrett Syndicates Ltd [1995] 2 AC 145; White v Jones [1995] 2 AC 207).

Exam Warning

Be careful to distinguish between consequential economic loss (generally recoverable) and pure economic loss (generally irrecoverable). Identify whether the financial loss stems directly from damage to the claimant's own person or property. If not, it is likely pure economic loss, and recovery will depend on establishing an exception like negligent misstatement.

Psychiatric Harm

Psychiatric harm refers to medically recognised psychiatric illnesses (e.g., post-traumatic stress disorder (PTSD), pathological grief, severe depression) caused by the defendant's negligence. Mere grief, distress, or anxiety is generally not sufficient.

Key Term: Psychiatric Harm A medically recognised psychiatric illness sustained by the claimant as a result of the shock of an event caused by the defendant's negligence.

The law imposes strict control mechanisms to limit liability, primarily distinguishing between primary and secondary victims (Alcock v Chief Constable of South Yorkshire Police [1992] 1 AC 310).

Primary Victims

These are individuals directly involved in the incident caused by the defendant's negligence, who were within the zone of foreseeable physical danger (or reasonably believed themselves to be).

Key Term: Primary Victim A person who suffers psychiatric harm resulting from reasonable fear for their own physical safety caused by the defendant’s negligence, being within the zone of potential physical danger.

Rule: A primary victim can recover damages for psychiatric harm provided that physical injury was reasonably foreseeable, even if no physical injury actually occurred (Page v Smith [1996] AC 155). It is not necessary to show that psychiatric harm itself was foreseeable. The defendant must take the victim as they find them (eggshell skull rule applies).

Worked Example 1.1

Ahmed is involved in a minor car collision caused entirely by Ben's negligent driving. Ahmed is physically unharmed but, due to the shock of the near-miss, develops severe PTSD, diagnosed by a psychiatrist. Physical injury to Ahmed was reasonably foreseeable given the nature of the collision.

Can Ahmed claim for his PTSD?

Answer: Yes. Ahmed is a primary victim as he was directly involved and physical injury was foreseeable. Provided his PTSD is a medically recognised psychiatric illness caused by the shock of the incident, he can recover damages, even if psychiatric harm was not specifically foreseeable (Page v Smith).

Secondary Victims

These are individuals who suffer psychiatric harm as a result of witnessing harm to others or fearing for the safety of others, but who were not themselves within the zone of physical danger.

Key Term: Secondary Victim A person who suffers psychiatric harm as a result of witnessing injury to others or fearing for the safety of others, caused by the defendant’s negligence, but who was not within the zone of foreseeable physical danger themselves.

Rule: Recovery for secondary victims is tightly controlled by the Alcock criteria. The claimant must prove:

1. Foreseeability of Psychiatric Harm: It was reasonably foreseeable that a person of 'normal fortitude' would suffer psychiatric illness in the circumstances.
2. Proximity of Relationship: A close tie of love and affection with the immediate victim of the accident (presumed for spouses, parents/children; must be proven otherwise).
3. Proximity in Time and Space: Presence at the scene of the accident or its immediate aftermath.
4. Proximity of Perception: Witnessing the event or its aftermath with their own unaided senses (not via television, unless live broadcast of identifiable individuals in exceptional circumstances).

All four criteria must be met.

Worked Example 1.2

Chloe witnesses her sister being seriously injured in a horrific accident caused by David's negligence. Chloe was standing safely on the pavement across the street. She develops a recognised psychiatric illness as a result of the shock.

Can Chloe claim as a secondary victim?

Answer: Potentially. Chloe must satisfy the Alcock criteria. Psychiatric harm to a person of normal fortitude witnessing such an event is likely foreseeable. As sisters, a close tie of love and affection may need to be proven (it's not automatically presumed like parent/child). Chloe was present at the scene (proximity in time/space) and witnessed it with her own senses (proximity of perception). If she can prove the close tie, her claim may succeed.

Revision Tip

Remember the strict Alcock control mechanisms for secondary victims. In exam scenarios, check each element carefully: relationship proximity, time/space proximity, and perception proximity. Failure on any one point means the claim fails.

Key Point Checklist

This article has covered the following key knowledge points:

• Tort law distinguishes between different types of loss: physical damage, economic loss, and psychiatric harm.
• Physical damage includes personal injury and property damage, along with consequential financial losses.
• Economic loss is financial loss. Consequential economic loss (flowing from physical damage to the claimant's person/property) is generally recoverable. Pure economic loss (not flowing from such damage) is generally irrecoverable, barring exceptions like negligent misstatement.
• Psychiatric harm must be a medically recognised illness caused by sudden shock.
• Primary victims (in the zone of physical danger) can recover if physical injury was foreseeable.
• Secondary victims (witnesses not in danger) must satisfy the strict Alcock criteria relating to foreseeability of psychiatric harm and proximity (relationship, time/space, perception).

Key Terms and Concepts

• Consequential Economic Loss
• Pure Economic Loss
• Psychiatric Harm
• Primary Victim
• Secondary Victim