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The law of torts
Economic or financial loss
The case of Donoghue v Stevenson established that an action could be taken if
physical damage was suffered. However, prior to 1964, the law did not recognise
any action if only economic or financial loss was suffered. Therefore, if negligent
advice was relied upon and as a result of that advice a loss (other than a physical
one) was suffered, no claim could be made.
The case of Hedley Byrne v Heller modernised the law in this area. The House of
Lords refined the neighbour principle by acknowledging that a claim for financial loss
suffered could be made if a “special relationship” existed between the claimant and
defendant (see part 3).
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