Psychiatric & economic loss
Psychiatric injury and pure economic loss are areas where the courts restrict the ordinary duty of care through control mechanisms. You must classify the claimant and the loss correctly to know whether a duty exists.
What "Psychiatric & economic loss" covers
- Only a recognised psychiatric illness is actionable — mere grief, distress or anxiety is not.
- A primary victim (in the zone of physical danger) can recover if physical injury was foreseeable, even if only psychiatric harm results (Page v Smith).
- A secondary victim must satisfy the Alcock control mechanisms: close ties of love and affection, proximity in time and space to the event or its immediate aftermath, and perception by their own unaided senses.
- Following Paul v Royal Wolverhampton NHS Trust [2024] UKSC 1, a secondary victim must also have witnessed an external, accident-like event; secondary-victim claims arising from clinical negligence (where the injury manifests later, away from any accident) will generally now fail.
- Pure economic loss (financial loss not consequent on physical damage to the claimant's person or property) is generally irrecoverable in negligence.
- An exception exists for negligent misstatement where there is a special relationship and an assumption of responsibility (Hedley Byrne).
- Auditors and other advisers owe a duty only to those for whose benefit and purpose the statement was made (Caparo).
- Loss consequent on physical damage (e.g. lost profit from damaged machinery) is recoverable, but purely economic loss beyond it is not (Spartan Steel).
Key cases & statutes
The authorities and provisions most likely to matter for this subtopic:
How it's tested in SQE1
SQE1 uses single best answer questions: a short factual scenario, one precise question, and five options of which only one is the best answer on the law applied to the facts. For psychiatric & economic loss, expect to be asked what the correct legal position is, what a party may or must do, or which outcome follows — with more than one option looking arguable. Reading the facts carefully and eliminating the near-misses is the skill that earns the mark.
Where candidates lose marks
- Forgetting all the Alcock control mechanisms when the claimant is a secondary victim.
- Assuming a secondary-victim claim can arise from clinical/medical negligence — Paul v Royal Wolverhampton now generally excludes these.
- Failing to distinguish pure economic loss from economic loss consequent on physical damage.
- Assuming any negligent statement gives a remedy without a special relationship and reliance.
Learn this subtopic in the course
A video lesson, notes and exam-style practice on psychiatric & economic loss.
FAQ
Is psychiatric & economic loss tested on SQE1?
Yes — psychiatric & economic loss is part of the SQE1 Tort syllabus (FLK1) and can appear in single best answer questions.
How is psychiatric & economic loss examined in SQE1?
SQE1 tests it by application: you're given a realistic scenario and choose the single best answer from five options. The focus is on using the law correctly, not reciting it — knowing the leading authorities (Alcock v Chief Constable of South Yorkshire [1992], Paul v Royal Wolverhampton NHS Trust [2024]) helps.