The recent case of Credit & Mercantile plc v Nabarro (a firm) [2014] EWCH 2819 (Ch) is a first instance decision in which the court applied the principles of South Australia Asset Management Corp v York Montague Limited (1997) (SAAMCO) when considering the correct measure of damages following a solicitor’s failure to notify their lender client of issues relating to planning permission. The court rejected the claimant’s argument that, had they known about the planning issues, they would not have lent at all and should therefore be entitled to their entire shortfall. The court held that the claimant’s loss was limited to the difference between the actual value of the property without valid planning permission and the value with valid planning permission.


Credit & Mercantile plc (C&A) are a short term mortgage lender who provide bridging finance. A prospective purchaser approached C&A for funding to complete a purchase. C&A instructed Nabarro to act on their behalf. A previous owner of the property had demolished an existing dilapidated building and obtained planning permission to erect a new dwelling. The planning permission was granted in respect of the property and a neighbouring property together. The planning permission could not be implemented in respect of one of the properties alone. Nabarro failed to identify these planning issues and provided a report on title to C&A. C&A advanced a loan of £1.65 million to its borrower, who subsequently defaulted.

Nabarro defending, sought a declaration from the Court that any loss was limited to the difference in value of the property with the planning deficiencies and the value without planning deficiencies. C&A argued that the planning issues went to the viability of the whole transaction and not just to the property’s value, so Nabarro should be liable for the entire loss.


The court provided the relief sought by Nabarro applying the principles of SAAMCO i.e. that a person under a duty to advise someone as to what course of action to take, would be liable for all the foreseeable consequences of the action taken in reliance on that advice if it was negligent, whereas a person under a duty to provide information for the purpose of enabling someone to decide on a course of action, would be liable for the consequences of the information being wrong, and not all of the consequences of reliance. Portman Building Society v Bevan Ashford [2000] Lloyd's Rep. Bank. 96 was distinguished as this case related to failure to provide information as to the Borrower’s ability to repay the loan, a matter which went to the heart of the transaction. Lloyds Bank Plc v Burd Pearse [2001] EWCA Civ 366, [2001] Lloyd's Rep. P.N. 452 followed, involving a failure by a solicitor to notify their lender client of a restrictive covenant which significantly reduced the value of the land.


The case shows the willingness of the court to apply the principles of SAAMCO in a wide range of claims against professionals. Lenders have traditionally sought to argue that in circumstances such as those found here, where the value of a security property would be significantly lower as a result of planning deficiencies,  they would not have proceeded to lend and the solicitor should be held liable for the entire loss flowing from the transaction.

Whether or not the SAAMCO principles apply is likely to be dependant on the nature of the failings of the solicitor. If the failings relate to the heart of the transaction then it is possible i.e. in cases of mortgage fraud, it is likely that the solicitor will be liable for the entirety of the loss.

In respect of planning issues specifically, a common scenario encountered is where a building has been erected in contravention of planning permission and/or which is the subject of enforcement action by the local authority, and the value of the property is significantly reduced. It remains to be seen whether that scenario would be distinguished from the decision in Credit & Mercantile plc v Nabarro. However, this decision confirms that in relation to many of the common failings of solicitors in residential conveyancing transactions, their liability will be limited to the reduction of value caused by their actions.