Purely patrimonial loss

(a) The natural lawyers

Apart from their insistence on fault, the most characteristic feature of natural law theories concerning delictual liability was their readiness to provide compensation for purely patrimonial loss.^[5400] Both § 1295 ABGB and art.

(b) Germany (19th century)

Unlike in the case of fault, the pandectists did not follow suit, however. Nineteenth-century legal science predominantly advocated a return to the more limited scope of Aquilian liability in Roman law,^[5403] and it was this view which found expression in § 823 I BGB.^{[5404] [5405] A certain number of specific rights and interests are listed, and it is only by violating one of them that a person may become liable in delict. The list232 contains life, body, health, freedom, property and "any other right"; but there is unanimity that, whatever may be smuggled into § 823 I under cover of the "other right" clause,[5406] it does in any event not refer to the injured party's patrimony as such. Thus, to mention three notorious problem cases, there is no liability in delict for negligent statements,254 for the negligent interruption of an electricity supply255 or for negligence, on the part of a notary, in the execution of a will.256 The German approach is based on the fear of liability "in an indeterminate amount for an indeterminate time to an indeterminate class":257 the assumption being that refusal in principle to recover pure economic loss is the only effective means of preventing an appalling variety of claims by hosts of people which would stifle commercial activities and make ordinary life intolerable.258 "Just think", exclaimed Rudolf von Jhering,--"9}

"what it would lead to if everyone could be sued in tort for gross negligence [!] as well as fraud! Anything and everything — an unwitting utterance, carrying a tale, making a false report, giving bad advice...

was, in fact, intended to refer only to absolute rights similar to ownership (as, for example, patents, copyrights, trade marks, or the right to one's image).

~’^>A Unless, of course, there is a contract between the two parties concerned (in which case recovery for pure economic loss presents no problem), or unless the negligent statement leads to physical damage (for an instructive example, see Bristow v. Lycett 1971 (4) SA 223 (RAD), where the defendant's assurances relating to an elephant had turned out to be unduly sanguine).

"^ë In these cases, 5 ^ë23 I BGB leads to strange distinctions. It the interruption of the electricity supply merely brings to a halt the machines in a factory, the owner of the factory has no claim for the resulting loss of production (pure economic loss; but was there perhaps an infringement of the plaintiffs right to an established and operative business? No, say the courts: the interference was not "direct"; ef. e.g. HGHZ 66, 388 sqq.); but if it causes the incubators in a poultry farm to cool off with the result that all the eggs arc spoilt, the plaintiff may recover his loss (s.v. injury to property; ct. BGHZ 41. 123 sqq.). For a discussion of the cable cases ct. e.g. Gimter Hager, "Haftung bei Stoning der Energiezufuhr", 1979 Juristetizcitung 53 sqq.; Alfons Burge. "Die Kabclbruchfallc", 1981 Jurist ische Blatter 57 sqq.; Markesinis, op. cit., note 253, pp. 112 sqq., 125 sqq. The leading English cable case is Sparta» Steel & Alloys Ltd v. Martin & Co. (Contractors) Ltd. (1973] 1 QB Ò² (CA); for a comparative analysis, see Gerold Herrmann, Znni Nachteil des Vermogens (1978). pp. 23 sqq.; for South African law, see Coronation Brick (Ply.) Ltd. v. Strachan Construction Co.

^{2SA Reassessment", (1985) 37 Stanford LR 1513 sqq. and, more specifically on California, Justin Sweet, Deliklshaftung jur rcinen Vermb'gensschaden. Festschrift fur Max Keller (1989), pp. 129 sqq.}

^G~ Duty, breach and damage are the three essential requirements in English law for the tort of negligence; cf. e.g. Lord Atkin in the famous case of Donoghue v. Stevenson [1932] AC 562 (HL) at 579; Fleming, Tom, pp. 94 sqq. On the concept of duty of care, cf. the detailed (and critical) analysis by Smith, op. cit., note 8, pp. I sqq.

²⁶³ When "the horns of judicial valour'... were hastily withdrawn into their judicial shell" (Boberg, Delict, p. 92): cf. in particular. Mutual Life and Citizens' Assurance Co. Ltd. v. Clive Raleigh Evatt [1971] AC 793 (PC) and the comment by Fleming, Torts, p. 609. be likely to cause damage to [the other party]".²⁶⁴ It is then up to the injured party to point to some consideration which might reduce or negative this duty. This implies a remarkable shift of emphasis of judicial favour from the defendant to the plaintiff:²⁶⁵ recovery for pure economic loss is no longer refused, unless there is a good reason to ^{[5407] [5408]} allow it; rather it appears to be allowed unless special (secondary) policy considerations can be adduced to refuse it.^[5409]

(d) Germany (20th century)

This is exactly the approach that has recently been advocated, in the tradition of natural-law ideas, for the German law of delict. The fundamental precept, says Picker,^{[5410] [5411] [5412] is alterum non laedere. It applies, in principle, to physical damage as much as to pure economic loss. Secondary policy considerations do, however, require a limitation of liability, for unlimited liability would lead to socially unacceptable consequences.}

Traditionally, though, German lawyers have tended to adopt a different approach. Many of them, too, are dissatisfied with the way the line has been drawn in § 823 I BGB. Since, however, they still accept exclusion of delictual liability for pure economic loss as the (natural) principle, they have to try to identify certain criteria increasing the range and intensity of the duties owed by the defendant to the plaintiff in specific types of situations and thus, by way of exception, justifying the imposition of liability. The protection of reasonable reliance engendered by the plaintiff,²⁶* his specific professional qualifications,²⁶⁹ or some kind of "social contact"^[5413]" between the parties have been proposed as such criteria.^[5414] Apart from that, certain rather strained contractual constructions have been used — particularly by the courts—in order to overcome the all too narrow limitations of delictual liability.^[5415] But whatever the approach adopted, the tendency is clear: even in German law, pure economic loss has, within certain, hitherto rather ill-defined limits, become recoverable once again.

(e) Austria and South Africa

The same tendency, of course, prevails in other jurisdictions. Austria and South Africa are interesting cases in point.

South African law, too, has for some time succumbed to the temptation of abandoning the more liberal principles inherent in its historical heritage in favour of the more restrictive views propounded in a foreign legal system. The distinction between physical damage and pure economic loss as a method of limiting delictual liability appears to have crept in under the influence of English law.²⁷⁵ The "Hedley Byrne of South African law",²⁷⁶ in which recoverability of pure economic loss under Aquilian principles was ultimately authoritatively re-established, dates from only 1979. ~⁷⁷ Courts and legal writers are now engaged in ^{[5416] [5417] exploring the implications of this move278 and finding ways and means of containing this kind of liability within socially acceptable limits.279 Once again, therefore, the crucial issue has become one of confining, rather than expanding, delictual protection.280}

5.