Recoverability of economic loss under construction law in Malaysia : A critical analysis

Abstract

The recoverability of economic loss under construction law in Malaysia is still an unsettled area of the law. Economic loss has generally not been recoverable in Malaysia. The concept of pure economic loss draws its origin from English law. Even then, the English common law decisions on pure economic loss, for the past sixty years or so, have been swaying from one end of the equilibrium to the other. The English law established a general principle, the neighbour principle, for determining when a duty of care exists. It imposed a duty of care on manufacturers not to cause personal injury or physical damage to property through defects in their manufactured chattels. However, any defect in the chattel is considered pure economic loss and has traditionally not been recoverable in tort. It is as consequence of the defect in it, the chattel inflicts injury on a person or causes damage to property other than itself, the manufacturer would be liable in negligence. The position in Malaysia appears to be no different. This study will analyze the nature, history, concept and development of pure economic loss; and the development on pure economic loss in England, Malaysia and other Commonwealth jurisdiction. The study will then consider the correct jurisprudential approach on the recoverability of economic loss in Malaysia; whether it is recoverable or not; and whether it should be recoverable or not. In ascertaining the correct jurisprudential approach on the recoverability of economic loss from the Malaysian perspective, this study hopes to offer its own theory on the concept of pure economic loss, and will attempt to offer some suggestions to overcome the problems relating to the application of the law on pure economic loss in the construction industry.