In the recent case of BPE Solicitors v Hughes-Holland [2017] UKSC 21, the Supreme Court unanimously re-affirmed and clarified the principle established by the House of Lords in South Australian Asset Management Corporation v York Montague [1996] UKHL 10 (the “SAAMCO principle”). This article explains the clarification and the practical consequences it has for those seeking professional advice.

The SAAMCO principle

The problem that the SAAMCO principle was established to address was colourfully illustrated by Lord Hoffman in the SAAMCO case itself. He asked during the course of argument what the liability of the doctor should be in the following hypothetical scenario:

A mountaineer about to undertake a difficult climb is concerned about the fitness of his knee. He goes to a doctor who negligently makes a superficial examination and pronounces the knee fit. The climber goes on the expedition, which he would not have undertaken if the doctor had told him the true state of his knee. He suffers an injury which is an entirely foreseeable consequence of mountaineering but has nothing to do with his knee.

In legal terms, the issue is what damages are recoverable in a case where (i) but for the negligence of a professional adviser his client would not have embarked on some course of action, but (ii) part or all of the loss which he suffered by doing so arose from risks which it was no part of the adviser’s duty to protect his client against.

In SAAMCO the House of Lords held that in order to answer this question one must first determine the scope of the advisor’s duty. Lord Hoffmann drew a distinction between two types of cases. In ‘information’ cases a professional provides only part of the material to be relied on by the client in making his own decision on whether to proceed. In these circumstances the adviser is not held responsible for all the consequences of his advice, but only the consequence of the information being wrong.

By contrast, in ‘advice’ cases it is for the professional to identify and consider all relevant matters that need to be taken into account when deciding whether or not to proceed. The adviser is responsible for guiding the whole decision making process, and becomes responsible for the decision itself. Accordingly, the professional will be liable for all the foreseeable consequences of a transaction entered into upon negligent advice, such as a rise or fall in the relevant market.

Lord Hoffman explained that his mountaineer hypothetical was an example of an ‘information’ case. The doctor was not advising the patient on whether to undertake the climb, but was instead providing a discrete piece of information to the mountaineer to factor into his own decision making process. The mountaineer was ultimately responsible for the consequences of his decision to go mountaineering.

Subsequent cases have struggled with the application of Lord Hoffman’s distinction between information and advice cases, leading to unprincipled judgments and inconsistent decisions. The Supreme Court took the opportunity in BPE Solicitors v Hughes-Holland to clarify the position.


The defendant solicitors (“BPE”) had acted for Mr Gabriel when he made a loan to his friend Mr Little. Mr Gabriel was subsequently adjudicated bankrupt and his trustee in bankruptcy (Mr Hughes-Holland) took his place in the litigation.

The loan was made in connection with the development of a building owned by one of Mr Little’s companies (High Tech). Mr Gabriel understood that the proceeds of the loan would be used to pay the costs of the development. In fact, Mr Little intended to, and did, utilise the main part of the proceeds to enable one of his companies (Whiteshore) to purchase the property from High Tech, enabling the latter to discharge an existing secured loan. The balance was used to discharge an existing VAT liability of High Tech. The development did not proceed. In due course the building was sold, but Mr Gabriel recovered nothing on the sale (because the proceeds did not cover the costs) and lost his entire advance less only a modest payment made by Mr Little.

The loan documentation drafted by BPE (a facility letter and a charge) was based on a draft prepared for an earlier transaction and stated that the loan would be “made available as a contribution to the costs of the development of the property” and that the purpose of the loan was to “assist with the costs of the development of the property.” This reflected Mr Gabriel’s understanding but not Mr Little’s intention. The trial judge found that Mr Gabriel would not have made the loan if he had known of Mr Little’s intention.

A curious feature of the case was that BPE’s instructions to act for Mr Gabriel had been provided by Mr Little, who left a voice mail message for the solicitor involved informing him that he intended to sell the property to Whiteshore and that Mr Gabriel would lend him the money. The loan documentation as drafted did not, therefore, reflect Mr Little’s actual intentions or the instructions he had provided to BPE (which BPE had not in fact confirmed with Mr Gabriel, their client).

Mr Gabriel sued everyone involved, but his claims against Mr Little, High Tech and Whiteshore were dismissed at trial, as was a claim against BPE for dishonest assistance. Mr Gabriel also advanced a claim against BPE for negligence. That claim succeeded at trial and gave rise to the subsequent appeals.

The basis of the claim in negligence was that BPE should have explained to Mr Gabriel how the funds were in fact going to be applied. Instead of doing so, it negligently drafted the loan documentation in a manner which did not reflect Mr Little’s intentions, and thereby misled Mr Gabriel into believing that the funds would be utilised in accordance with his understanding. Mr Gabriel claimed the whole of his lost advance.

At trial, BPE argued that the development had never been viable, meaning that Mr Gabriel would have lost the whole of his loan even if the proceeds had been used as he intended. The trial judge agreed with BPE that if the development was “unviable and bound to fail so that Mr Gabriel would never have recovered his loan” then BPE would not be liable for the losses claimed. He nonetheless went on to say that he did not “think it would be right for me to conclude that this was necessarily going to be a doomed venture for Mr Gabriel from the outset.” Having held that BPE had acted negligently he gave judgment in favour of Mr Gabriel.

However, the Court of Appeal overturned this finding and held that, even if the loan had been used to develop the property, it would not have been improved in value and Mr Gabriel would have suffered the same amount of losses in any event. In the face of this finding, Mr Gabriel argued that, nonetheless, had he been informed of how the third party intended to use the loan, he would have appreciated the transaction was not viable and not made any loan to the third party. On this basis, he argued he was entitled to all his losses from the transaction.

Applying the SAAMCO principle, the Court of Appeal held that BPE only owed Mr Gabriel a duty to provide discrete information and advice to allow him to decide for himself whether to make a loan to the third party and not to advise on what course of action to take or as to the commercial risks of the relevant loan. Accordingly, BPE were only liable to the extent that loss was attributable to something wrong in their advice.

As Mr Gabriel would have suffered the same losses even if the loan had been used to develop the property, his losses were not attributable to BPE’s failure to report how the third party intended to use the loan but, instead, to his decision to make the loan. The claimant was prepared to risk the possibility that the third party would default and the property would not increase in value despite being developed and so could not recover damages from his solicitors for those risks eventuating. The claimant alone was responsible for the decision to make the loan.

Decision of the Supreme Court

Lord Sumption, giving the judgment of the Supreme Court, said that the SAAMCO decision had often been misunderstood. The misunderstanding arose from a tendency to overlook certain fundamental features of its reasoning.

He reiterated that where the professional supplies information which the client will take into account in making his own decision on the basis of a broader assessment of the risks, the professional has no legal responsibility for the decision because it falls outside the scope of his duty.

The principle has nothing to do with causation, as the term is usually understood. It is often accepted that the losses suffered by the client are, as a matter of causation, properly attributable to the adviser. That, however, is focusing on the wrong issue. Even if the client can prove that he would not have entered into a transaction but for receiving the negligent advice, that is insufficient to bring losses resulting from the transaction within the scope of the adviser’s duty.

Lord Sumption recognised that the distinction between advice and information cases had given rise to confusion because of the descriptive inadequacy of the labels. They were neither distinct or mutually exclusive categories. He explained that information given by a professional to a client is usually a specific form of advice, and most advice will involve conveying information. Instead of focusing on terminology, however, one should focus on the nature of the distinction, which he described as follows:

In cases falling within Lord Hoffmann’s “advice” category, it is left to the adviser to consider what matters should be taken into account in deciding whether to enter into the transaction. His duty is to consider all relevant matters and not only specific factors in the decision. If one of those matters is negligently ignored or misjudged, and this proves to be critical to the decision, the client will in principle be entitled to recover all loss flowing from the transaction which he should have protected his client against.

By comparison, in the “information” category, a professional adviser contributes a limited part of the material on which his client will rely in deciding whether to enter into a prospective transaction, but the process of identifying the other relevant considerations and the overall assessment of the commercial merits of the transaction are exclusively matters for the client.

The important point, on which the distinction had been blurred even at the appellate level, was that if an advisor gives information that he knows is critical to the client’s decision whether to enter into a transaction that does not transform an information case into an advice case. That would make the breach of duty more serious, and the argument on causation stronger, but would ignore the logically prior issue of the scope of the advisor’s duty.

Lord Sumption clarified that in information cases, the burden of proof is on the claimant to establish that the loss he is claiming was in fact caused by the falsity of the information provided. It is not sufficient for the claimant to prove that he sustained loss by entering into the transaction and to leave it to the professional to show that some or all of that loss was the consequence of other causes.

Application to the facts

Applying this analysis to the facts in BPE Solicitors, the first question was whether BPE had assumed responsibility for Mr Gabriel’s decision to lend money to Mr Little. Lord Sumption came to the clear view that they had not. He held that their instructions were to draw up the facility agreement and the charge, and nothing more. They did not know, and did not need to know, what had passed between Mr Gabriel and Mr Little, except that they had agreed upon a loan of £200,000 secured by a charge on property. They simply included in the draft facility agreement by oversight language which by an unhappy chance confirmed that assumption.

The Deputy Judge at first instance had been wrong to hold that the solicitors’ breach of duty “meant that Mr Gabriel was not able to know the true nature of the loan transaction into which he was entering.” That was not relevant to the scope of the BPE’s duty of care. Lord Sumption continued:

On the footing that BPE was not legally responsible for Mr Gabriel’s decision to lend the money, but only for confirming his assumption about one of a number of factors in his assessment of the project, the next question is what if any loss was attributable to that assumption being wrong. The answer is that if it had been right, Mr Gabriel would still have lost his money because the expenditure of £200,000 would not have enhanced the value of the property. The development would have been left incomplete, the loan unpaid and the property substantially worthless when it came to be sold into a depressed market. None of the loss which Mr Gabriel suffered was within the scope of BPE’s duty. None of it was loss against which BPE was duty bound to take reasonable care to protect him. It arose from commercial misjudgements which were no concern of theirs.”

On this basis the Supreme Court unanimously dismissed the appeal.

Practical lessons

The SAAMCO principle is important because it will enable a negligent professional to avoid liability for losses suffered by the client in certain circumstances. Each party to a professional relationship should be aware of the principle both at the time when the professional is acting and during any subsequent litigation.

In particular, to avoid potential disputes it is in both parties’ interests to clarify the terms of the retainer and any subsequent changes to it. This will not necessarily be determinative of the scope of the professional’s duty, but will go a good way towards reducing the scope for argument.

A client seeking advice as to whether or not to enter into a transaction should make this clear, and should be careful not to appear as seeking information only as to one or more aspects of it. A professional, on the other hand, should take care not to ‘over market’ the services he is providing so as to give the impression that he is providing advice as to the viability of the transaction when in fact he is merely providing information as to one aspect of it.

A claimant bringing a claim against a professional who has only provided information needs to be realistic about his ability to prove, as a necessary part of his case, that the loss was indeed a consequence of the relevant negligence, and not of entering into a transaction that was in any event flawed. This may involve proving a difficult negative. A professional defending a claim should seek clarification, as early as possible, as to exactly how the claimant intends to establish that the loss claimed was within the scope of the duty.