Novel duty situations — FAQ

The Caparo test (foreseeability, proximity, fair, just and reasonable) is a framework, not a rigid rule. In novel situations, the courts are wary of creating wide new areas of liability. They prefer an 'incremental' approach, looking at existing case law and deciding if it's a small, logical step to impose a duty in the new circumstances. Policy considerations, like the 'floodgates' argument, often mean it is not deemed 'fair, just and reasonable' to impose a duty, even if the first two stages are met.

The key distinction is its connection to physical harm. 'Consequential' economic loss (e.g., lost wages after being run over) is recoverable because it flows directly from a physical injury for which a duty of care is well-established. 'Pure' economic loss (e.g., losing money because a factory you supply has its power cut by a negligent third party) is not linked to your own physical damage. The courts restrict claims for pure economic loss to avoid what they call 'liability in an indeterminate amount for an indeterminate time to an indeterminate class' – essentially, to prevent a single negligent act from leading to an endless cascade of claims.

This is based on the policy reasoning in Hill v Chief Constable of West Yorkshire. The courts held that the police do not owe a duty of care to individual members of the public for their general function of investigating and suppressing crime. The reasons are twofold: first, a lack of legal proximity between the police and every potential victim of crime. Second, imposing such a duty could lead to the police carrying out their duties in a defensive way, diverting resources from core functions to protect against lawsuits. It would also involve the courts judging operational and policy decisions, which they are reluctant to do.