As any fule kno, a person under a duty to take reasonable care to provide information on which someone else will de-cide upon a course of action is, if negligent, not generally regarded as responsible for all the consequences of that course of action. He is responsible only for the consequenc-es of the information being wrong. A duty of care which im-poses upon the informant responsibility for losses which would have occurred even if the information which he gave had been correct is not fair and reasonable as between the parties.  

Ever since Lord Hoffmann said as much in South Australia Asset Management Corp v York Montague Ltd [1997] AC 171 the courts (and we poor practitioners) have been chew-ing over how to apply this principle in practice. The facts of Clack v Wrigleys Solicitors LLP [2013] EWHC 413 (Ch) illus-trate the difficulty nicely.  

Mr Clack was acquainted – though not very well, it turned out – with Mr Brudenell. He agreed to lend Mr Brudenell £600,000 for 6 months at a succulent 33.3% p.a. gross rate of interest. His security for the loan was to be a charge over 30/100 issued shares in a private company, CPDL.  

Mr Brudenell initially told Mr Clack that he owned all the shares in CPDL. In fact he did not: the shares were held 50/50 between another company which Mr Brudenell did own, and a third party. The true position having become ap-parent Mr Clack instructed Wrigleys to prepare the paper-work necessary to ensure that he would have an effective charge over the shares following their transfer to Mr Brudenell.

Mr Brudenell also told Mr Clack that CPDL was worth £4m. Although he was shown a number of documents supporting that claim Mr Clack didn’t conduct a full financial due dili-gence exercise, assuming that it would be too expensive.

Wrigleys failed to advise Mr Clack that the provision by Mr Brudenell of a share certificate and a copy of the register of members showing that he was a shareholder in CPDL were important requirements of the charge, and that to proceed without them would run the risk of the security being ineffective.

Mr Clack - without sight of the crucial documents - duly lent the money, and Mr Brudenell duly omitted to repay it (save for a bit of interest). Since the shares in CPDL had not been transferred from their original owners the charge provided by Mr Brudenell (by now incidentally a bankrupt) was unenforceable and Mr Clack had no means of recovering his loan.

The judge (Nicholas Strauss QC) held that Wrigleys had been negligent, and that if they had given the proper ad-vice Mr Clack would not have lent a penny to Mr Bruden-ell. When it came to assessing quantum he reviewed SAAMCo and other cases and noted the now familiar distinction between giving advice (or information) as to a particular feature of a proposed transaction and giving advice (or information) as to whether to take the overall decision to proceed with it. Finding that the instant case fell into the former category, the judge went on to consid-er what loss Mr Clack had suffered as a result of having no security over the CPDL shares, and held that the as-sessment must proceed on the fictional basis that he would have made the loan with an effective charge. Un-fortunately the shares had no value anyway (CPDL, it turned out, was in a parlous financial state) so that Mr Clack would have suffered the entirety of his loss even with an effective charge, and that meant that Wrigleys could not have been responsible for the loss: to find oth-erwise would have been to impose upon them "responsibility for losses which would have occurred even if the information [or advice] had been correct". The judge therefore sent Mr Clack home with noth-ing except for £30,000 on account of some directors’ fees that he might have earned pursuant to a deed of undertaking if the security had been effective.

The judge’s reasoning produced a result that may have been fair – the solicitors had been acting un-der extreme time pressure, and Mr Clack was more sedulous in parting with his money than in seeing that it was going to a good home – but was it right? Consider this: Mr Clack did not ask accountants to value the shares in CPDL. But suppose he had, and suppose that the accountants had themselves negligently advised Mr Clack that the shares were sufficiently valuable to meet the repayment of the loan. If Mr Clack had sued the accountants, what would have stopped them raising exactly the same defence as Wrigleys, only in reverse? Why could they not have argued that they were only liable for such part of Mr Clack's loss as resulted from the fact that the security was valueless, and that since the shares did not belong to Mr Brudenell anyway and the loss would have arisen even if the security had been as valuable as they said it was, they could not be held responsible for any of that loss on SAAMCo principles?

To have exonerated both professionals on those hypothetical facts would have been absurd, and suggests that the judge may have gone wrong. He might have done better to regard Lord Hoffmann's point about not imposing responsibility for loss that would have occurred even if the information (or advice) had been correct as more an illustration of the underlying principle (that a person is only liable for loss attributable to the failure which made him negligent) than a statement of the principle itself. If he had kept his eye trained on the core notion of attribution, he might have seen that all the loss which Mr Clack suffered was attributable both to the inefficacy of the security and to the worthlessness of the shares: there were, in other words, concurrent causes of the same loss. In the hypothetical case, where Mr Clack’s state of ignorance regarding both those matters had been the result of the negligence of separate firms of professionals, each professional ought to have been liable for the whole of the loss as a several (though not a joint) tortfeasor. Since on the real facts of the case only one firm was involved, the correct approach should perhaps have been to find that firm liable for the entire loss, but subject to an appropriate percentage deduction to reflect Mr Clack's contributory negligence in failing to satisfy himself that the shares offered as security had intrinsic value.