Pure economic loss relating to construction defects - A comparative analysis of four common law jurisdictions

Abstract

The problem of whether pure economic loss should or should not be compensated has been a legal conundrum for many common law jurisdictions. The aim of this paper is to provide a comparative analysis of the state of law on pure economic loss resulting from construction defects in four common law jurisdictions, namely, England, USA (State of California), Australia and Singapore. The paper will show that whilst the English and American courts have regularly found pure economic loss problematic and have had the tendency to reject claims based on the belief that such losses are more difficult to foresee than ordinary losses, or that they would open the flood gates for a series of derivative claims, the courts in Australia and Singapore have taken a different path, showing their willingness to test each case on the merits so as to allow themselves to do justice in individual cases. This paper argues in favour of the liberal approach taken by the Australian and Singapore courts, primarily on the basis that, in claims for pure economic loss, although there is no physical injury to person or property of the victim, the very fact that an economic loss is caused to the victim as a result of the tortfeasor's action should be actionable in law. © RICS.