Pure Economic Loss
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PURE ECONOMIC LOSS: THE PROBLEM OF TIMING
Robert Walker
Occasionally the English Court of Appeal has cited to it a decision of the
Supreme Court (or, until recently, the House of Lords) which it finds almost completely incomprehensible. It has a tactful way of signalling this. It does so by taking the unusual course of itself granting permission to appeal, rather than leaving it to the higher court to decide. The clear message is “Try again, and try harder this time.”
For present purposes the decision that the Court of Appeal found so much difficulty with was that of the House of Lords in 2006 in the case of Law
Society v Sephton & Co.1 The case in which the Court of Appeal said
“Try again” was Axa Insurance Ltd v Akther & Darby2. Both were claims for pure economic loss caused by breach of professional duty.
The defendants in the first case were a firm of accountants, and in the second case several firms of solicitors. In each case the essential issue, on appeal, was whether the defendants had a good limitation defence.
That depended on when the cause of action arose, and that in turn depended – since the cause of action relied on was negligence – on when the plaintiff sustained damage.
These two recent English decisions provide a way into the problems that I want to discuss. I shall be referring mainly to Australian authority, including some Queensland authority, that Dominic O’Sullivan has very kindly drawn to my attention. I hardly need say that my observations on
1
[2006] 2 AC 543
the Australian cases are offered with due deference and an awareness of what may happen where angels fear to tread.
The Sephton case was concerned with the part that accountants play in the regulation of the solicitors’ profession by the Law Society. Rules made under statutory powers require every solicitor in sole practice to obtain an annual accountants’ report certifying that
PURE ECONOMIC LOSS: THE PROBLEM OF TIMING
Robert Walker
Occasionally the English Court of Appeal has cited to it a decision of the
Supreme Court (or, until recently, the House of Lords) which it finds almost completely incomprehensible. It has a tactful way of signalling this. It does so by taking the unusual course of itself granting permission to appeal, rather than leaving it to the higher court to decide. The clear message is “Try again, and try harder this time.”
For present purposes the decision that the Court of Appeal found so much difficulty with was that of the House of Lords in 2006 in the case of Law
Society v Sephton & Co.1 The case in which the Court of Appeal said
“Try again” was Axa Insurance Ltd v Akther & Darby2. Both were claims for pure economic loss caused by breach of professional duty.
The defendants in the first case were a firm of accountants, and in the second case several firms of solicitors. In each case the essential issue, on appeal, was whether the defendants had a good limitation defence.
That depended on when the cause of action arose, and that in turn depended – since the cause of action relied on was negligence – on when the plaintiff sustained damage.
These two recent English decisions provide a way into the problems that I want to discuss. I shall be referring mainly to Australian authority, including some Queensland authority, that Dominic O’Sullivan has very kindly drawn to my attention. I hardly need say that my observations on
1
[2006] 2 AC 543
the Australian cases are offered with due deference and an awareness of what may happen where angels fear to tread.
The Sephton case was concerned with the part that accountants play in the regulation of the solicitors’ profession by the Law Society. Rules made under statutory powers require every solicitor in sole practice to obtain an annual accountants’ report certifying that