Professional Liability Guide

PROFESSIONAL LIABILITY GUIDE

More recently, the plaintiff in Loumbos v Gray as a named partner of ClarkeKann gifted his de facto partner a deposit on a property. 54 After the relationship soured, the plaintiff alleged that the solicitors retained by his de facto partner were also acting for him in the transaction or owed him duties as a third party. The Court noted that ‘ an exception to the general principle [that a solicitor does not owe a duty to a third party] arises where the client’s interests and a third party’s interest coincide . ..’ 55 In this instance, the Court found that the plaintiff’s interests were opposed to that of his de facto partner, and there was nothing to suggest that the plaintiff, who was represented by his own solicitor, was vulnerable. Pure economic loss The High Court in Caltex Oil (Australia) Pty Ltd v The Dredge ‘Willemstad ’ 56 authoritatively described the term ‘pure economic loss’ as damage that is distinct from, and not consequent upon, ordinarily physical injury to person or property. ƒ diminution in value of a building because of defective construction; 57 ƒ loss of funds invested by a developer who relied on a State planning authority’s development plan, which the authority later abandoned; 58 ƒ financial loss suffered when a residential property fell into disrepair because of a solicitor’s failure to notify the executor and beneficiary under a will of the death of the testatrix; 59 or ƒ financial loss sustained by a financier in connection with the erroneous auditing of a borrower’s accounts. 60 A distinction needs to be drawn for some of the examples from Sutherland Shire Council v Heyman 61 and Hawkins v Clayton , 62 which do, in a sense, involve an element of physical property damage. Although that might be the case, such loss has nonetheless been held to be pure economic loss. The majority in Bryan v Maloney aptly described the distinction in the following terms: ‘the distinction is between ordinary physical damage to a house by some external cause andmere economic loss in the formof diminution in value of a house when the inadequacy of its footings first becomes manifest by consequent damage to its fabric.’ 63 The field of liability for pure economic loss is a comparatively new and developing area of the law of negligence. Its key feature is that courts have been reluctant to impose a duty of care to avoid pure economic loss, even if the loss is foreseeable. The rationale is that if reasonable foreseeability of a risk of economic harm were sufficient, there would be a real risk in many cases of creating ‘liability in an indeterminate amount for an indeterminate time to an indeterminate class.’ 64 57 Sutherland Shire Council v Heyman (1985) 157 CLR 424. The same type of pure economic loss subsequent arose in Bryan v Maloney (1995) 182 CLR 609 and Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515. 58 San Sebastian Pty Ltd & Anor v Minister Administering the Environmental Planning and Assessment Act 1979 & Anor (1986) 162 CLR 340. 59 Hawkins v Clayton (1988) 164 CLR 539. 60 Esanda Finance Corp Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241. 61 (1985) 157 CLR 424. 62 (1988) 164 CLR 539. 63 (1995) 182 CLR 609, 623. 64 Caltex Oil (Australia) Pty Ltd v The Dredge ‘Willemstad’ (1976) 136 CLR 529, 568; Ultramares Corporation v Touche (1931) 174 NE 441. Pure economic loss can take myriad forms. As exemplified by several High Court decisions, it can encompass: 54 [2021] NSWSC 1579. 55 Ibid [84]. 56 (1976) 136 CLR 529.

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