Economic loss refers to financial damage suffered due to an event. It is categorised into pure economic loss and consequential economic loss, each with distinct characteristics and legal considerations.

What is Economic Loss?

Economic loss can be identified as an event causing financial damage and loss. There are two main types:

• Pure Economic Loss
  This type of loss involves financial damage not directly linked to any physical harm to person or property. It arises when negligent conduct by the defendant directly causes economic harm to the plaintiff.
• Consequential Economic Loss

 
Also known as secondary loss, this occurs when financial harm results as a consequence of the defendant’s actions. Examples include loss of goodwill, reputational damage to a business and losses related to defective products.

Pure Economic Loss

Pure economic loss refers to financial damage and loss not consequential upon physical damage to person or property. It arises when the defendant has engaged in negligent conduct which directly causes economic harm to the plaintiff’s person or property.

Key points

• Pure economic loss does not involve physical damage.
• It directly results from the defendant’s negligent conduct.

Consequential Economic Loss

Consequential loss, or secondary loss, occurs when a person suffers financial harm as a consequence of the defendant’s conduct. It includes loss of goodwill, reputational harm to a business and any loss associated with a defective product.

Key points

• It involves financial harm that follows a primary incident.
• Examples include loss of business reputation and defective product losses.

Negligent Conduct and Duty of Care

Negligent conduct by a defendant can only be found if a duty of care was owed to the plaintiff. This determination is made by the court based on the circumstances of the case. For a duty of care to be established, the risk to the plaintiff or a class of people to which the plaintiff belongs must have been reasonably foreseeable.

Statutory Limits on Damages

In Queensland, the Civil Liability Act 2003 (Qld) limits the amount of damages for loss of earnings to an amount equal to ‘3 times average weekly earnings per week for each week of the period of loss of earnings’.

Example
If a plaintiff’s earnings were interrupted by an injury, the compensation is capped as per the statutory limit.

Past Economic Loss

Past economic loss is calculated from the date of injury up to the anticipated settlement or judgment. If the plaintiff was employed at the time of injury, the past economic loss is based on their weekly earnings. If not employed, the court considers the injury’s impact on the plaintiff’s ability to return to work and may award compensation.

Example
A worker injured on the job can claim for lost wages from the injury date to the settlement.

Future Economic Loss

At common law, damages are payable to compensate a person for a loss of future earning capacity due to an injury caused by the defendant’s negligence. Even if a plaintiff was predisposed to the injury, it does not reduce the damages payable.

Example

A plaintiff who cannot work in the future due to an injury can claim for lost future earnings.

Contingencies and Vicissitudes

Courts consider factors that might affect the plaintiff’s future earning capacity, which could reduce the damages awarded. This consideration includes factors like ill health, unemployment, and other life uncertainties.

Key Points

• A customary discount for contingencies is about 15%.
• Factors include ill health, unemployment and changes in industry

Action

To address economic loss claims effectively:

• Document Your Losses

Keep detailed records of financial losses, including past and potential future impacts.

• Seek Legal Advice

Engage a qualified lawyer to evaluate the merits of your case and guide you through the legal process.

• Understand Statutory Limits

 
Be aware of statutory limits on damages, such as those outlined in the Civil Liability Act 2003 (Qld).

Case

Arthur Robinson (Grafton) Pty Ltd v Carter (1968) 122 CLR 649

• In this landmark case, the High Court of Australia addressed the issue of assessing future economic loss and the necessity of considering contingencies and vicissitudes of life. The court emphasised that in calculating damages for loss of earning capacity, it is imperative to account for various factors that might naturally impact an individual’s future earnings, such as ill health, unemployment, accidents and broader economic changes.

Seeking Advice

If you believe you have a claim for economic loss, Fox Piper can provide expert legal advice and assistance. Our experienced team is ready to help you understand your legal rights and options, ensuring you receive the compensation you deserve. We offer comprehensive support throughout the legal process.

Conclusion

Economic loss encompasses both pure and consequential financial damages. Understanding the distinctions between these types of loss and the legal principles involved is crucial for effectively managing claims. By documenting losses, seeking professional advice, and understanding statutory limitations, you can navigate the complexities of economic loss claims with confidence. Fox Piper is here to assist you every step of the way, ensuring your rights are protected and your claims are handled professionally.