Beyond Bryan: Builders' liability and pure economic loss

In Bryan v Maloney, the High Court extended a builder’s duty of care to encompass a liability in negligence for the pure economic loss sustained by a subsequent purchaser of a residential dwelling as a result of latent defects in the building’s construction. Recently, in Woolcock Street Investments Pty Ltd v CDG Pty Ltd, the Court refused to extend this liability to defects in commercial premises. The decision therefore provides an opportunity to re-examine the rationale and policy behind current jurisprudence governing builders’ liability for pure economic loss. In doing so, this article considers the principles relevant to the determination of a duty of care generally and whether the differences between purchasers of residential and commercial properties are as great as the case law suggests

Foreseeability of pure economic loss and causation

In Bonny Glen Pty Ltd v Country Energy [2009] NSWCA 26 (24 February 2009) the New South Wales Court of Appeal held that the pure economic loss suffered by the appellant was recoverable. However, rather than arguments as to whether the appellant was vulnerable and a member of an ascertainable class, whether the respondent had knowledge of the risk to the appellant and was in a position of control and considerations as to indeterminate liability as in Perre v Apand Pty Ltd (1999) 198 CLR 180, the arguments raised related to the foreseeability of the loss and causation.

Compensation for lost services of an employee : pure economic loss and per quod action

Under the common law an employer may take action against a defendant for the loss of an employee’s services due to the act of the defendant (per quod servitium amisit - by reason of which the services were lost). The High Court has recently affirmed the existence of this ancient tort in Barclay v Penberthy [2012] HCA 40.

Vulnerability held not to be pre-requisite for establishing a duty of care in claims of pure economic Loss

Case note Apache Energy Ltd v Alcoa of Australia Ltd (No 2) [2013] In 2011, headlines were made when Alcoa sued Apache Energy and its partners for $158 million, a loss it claimed was a consequence of Apache Energy failing to adequately inspect and maintain the gas pipelines that supplied the gas used by Alcoa in its business. As the loss was not a consequence of any property damage or injury to Alcoa, the loss is characterised as pure economic loss...

Is the treatment of economic loss by the Australian courts in torts cases anomalous?

The well developed economic theory of tort liability has never been able to comfortably accommodate negligence cases causing pure economic loss as opposed to physical damage or injury. In fact, contrary to received opinion, Australian Courts at least, are increasingly allocating pure economic losses to achieve predominantly an efficiency objective, with corrective justice notions relegated into the background. Consequently, it is difficult to classify these cases as anomalous in the sense of falling outside the efficiency paradigm.

Evaluating multivariate volatility forecasts : how effective are statistical and economic loss functions?

Multivariate volatility forecasts are an important input in many financial applications, in particular portfolio optimisation problems. Given the number of models available and the range of loss functions to discriminate between them, it is obvious that selecting the optimal forecasting model is challenging. The aim of this thesis is to thoroughly investigate how effective many commonly used statistical (MSE and QLIKE) and economic (portfolio variance and portfolio utility) loss functions are at discriminating between competing multivariate volatility forecasts. An analytical investigation of the loss functions is performed to determine whether they identify the correct forecast as the best forecast. This is followed by an extensive simulation study examines the ability of the loss functions to consistently rank forecasts, and their statistical power within tests of predictive ability. For the tests of predictive ability, the model confidence set (MCS) approach of Hansen, Lunde and Nason (2003, 2011) is employed. As well, an empirical study investigates whether simulation findings hold in a realistic setting. In light of these earlier studies, a major empirical study seeks to identify the set of superior multivariate volatility forecasting models from 43 models that use either daily squared returns or realised volatility to generate forecasts. This study also assesses how the choice of volatility proxy affects the ability of the statistical loss functions to discriminate between forecasts. Analysis of the loss functions shows that QLIKE, MSE and portfolio variance can discriminate between multivariate volatility forecasts, while portfolio utility cannot. An examination of the effective loss functions shows that they all can identify the correct forecast at a point in time, however, their ability to discriminate between competing forecasts does vary. That is, QLIKE is identified as the most effective loss function, followed by portfolio variance which is then followed by MSE. The major empirical analysis reports that the optimal set of multivariate volatility forecasting models includes forecasts generated from daily squared returns and realised volatility. Furthermore, it finds that the volatility proxy affects the statistical loss functions’ ability to discriminate between forecasts in tests of predictive ability. These findings deepen our understanding of how to choose between competing multivariate volatility forecasts.

Full compensation no longer sacrosanct : reflections on the past and future economic loss ‘cap’ for high income earners

The civil liability provisions relating to the assessment of damages for past and future economic loss have abrogated the common law principle of full compensation by imposing restrictions on the damages award, most commonly by a “three times average weekly earnings” cap. This consideration of the impact of those provisions is informed by a case study of the Supreme Court of Victoria Court of Appeal decision, Tuohey v Freemasons Hospital (Tuohey) , which addressed the construction and arithmetic operation of the Victorian cap for high income earners. While conclusions as to operation of the cap outside of Victoria can be drawn from Tuohey, a number of issues await judicial determination. These issues, which include the impact of the damages caps on the calculation of damages for economic loss in the circumstances of fluctuating income; vicissitudes; contributory negligence; claims per quod servitum amisit; and claims by dependants, are identified and potential resolutions discussed.

Estimating water quality pollution impacts based on economic loss models in urbanization process in Xi'an；China

IEECAS SKLLQG

Estimating the economic loss of recent North Atlantic fisheries management

It is accepted that world’s fisheries are not generally exploited at their biological or their economic optimum. Most fisheries assessments focus on the biological capacity of fish stocks to respond to harvesting and few have attempted to estimate the economic efficiency at which ecosystems are exploited. The latter is important as fisheries contribute considerably to the economic development of many coastal communities. Here we estimate the overall potential economic rent for the fishing industry in the North Atlantic to be B€ 12.85, compared to current estimated profits of B€ 0.63. The difference between the potential and the net profits obtained from North Atlantic fisheries is therefore B€ 12.22. In order to increase the profits of North Atlantic fisheries to a maximum, total fish biomass would have to be rebuilt to 108 Mt (2.4 times more than present) by reducing current total fishing effort by 53%. Stochastic simulations were undertaken to estimate the uncertainty associated with the aggregate bioeconomic model that we use and we estimate the economic loss NA fisheries in a range of 2.5 and 32 billion of euro. We provide economic justification for maintaining or restoring fish stocks to above their MSY biomass levels. Our conclusions are consistent with similar global scale studies.