Supreme Court Lays Out New “Legal Roadmap” For Professional Negligence

Supreme Court Lays Out New “Legal Roadmap” For Professional Negligence

If you instruct an adviser to provide you with information and advice on entering a transaction, and your adviser is negligent, you could be eligible to claim all losses that arise from the transaction.

But, if the information you’re given is only a small part of your wider considerations before making the decision to enter the transaction, the adviser would only be liable for any losses that come from that specific piece of information.

Our professional negligence team are experienced in handling cases of this nature, and will discuss your options with you if you decide to take legal action. Call us now on 0808 164 0808 or request a call back to get in touch.

The SAAMCo ruling

SAAMCo, in principle, restricts losses which can be claimed in the context of incorrect information, meaning only those losses that are directly related to a breach of duty are recoverable. For it to be linked to a breach of duty, a loss must come within the scope of the duty owed.

Professional negligence lawyers will be well aware of the case of SAAMCo (South Australia Asset Management v York Montague Ltd [1997] AC 191). The recent result in Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20 provides significant development around the existing principles, which I’ll go into further detail about below.

Clarifying a “loss” from professional negligence in this context

Losses resulting from professional negligence are generally found by considering what the claimant’s position would be if there had been no breach of duty, and comparing it to the claimant’s actual position. It is common that without the negligent advice, the claimant would not have entered into the transaction in question. To calculate the claimant’s loss in such a case, a comparison must be made between the position of the claimant if they had not entered the transaction, and their actual position.

There is a key difference between the provision of information allowing someone else to decide on a course of action, and actually advising someone on what course of action to take. Reasonable care must be taken to consider all the potential consequences of that course of action, as there could be a risk of liability for all future losses.

If a loss is outside the scope of duty of the professional who gave inaccurate information, it will not usually be claimable under SAAMCo.

Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20

In the Manchester case, the purpose of any duty was to be looked at however, judged on an objective basis relating to the purpose of the advice being given. In effect, the context of advice needs to be looked at. It was explained that “information” and “advice” distinctions were not helpful, and focus should turn to the purpose to be served by any duty of care taken on by a defendant.

While not departing from SAMMCo, the test to determine where information is incorrect should only be used generally as a cross-check. The focus will still need to be on judging the scope of the duty of care and its context.

In practice, the Manchester decision is likely to give claimants more opportunities to successfully argue for losses arising in professional negligence claims that previously defendants might have argued were restricted or capped through SAAMCo. This is because the Court is likely to place greater weight on understanding the purpose and context in which a claimant may have taken advice, and the risks the claimant was seeking to mitigate. The approach is now set to be less rigid in terms of categorising “information” and “advice” cases. In short, there is likely to be more room for manoeuvre for claimants moving forward.

A further point to this is that defendants will likely want clarity on the parameters of their engagement and instructions (and hence duty) from the beginning. In turn, all parties will want to have kept proper records of exchanges, as there will likely be even more liability in litigation to show the context behind a transaction that is being investigated. This would mean that disclosure and witness statement processes will become even more crucial, and will potentially need more time and cost commitment to demonstrate any required context.

If you wish to discuss a potential professional negligence claim with our team, don’t hesitate to get in touch. You can call us free on 0808 164 0808 or request a call back, and one of our experts will call you.

About the Author

Michael Young

Michael Young

Legal Director - Professional Negligence