For those litigating on professional negligence claims, few will need a detailed explanation of how SAAMCO changed the landscape. A new decision from the Supreme Court may have a similar impact for those dealing with claims against solicitors in particular.
SAAMCO – advice or information?
In very broad terms, the House of Lords in SAAMCO sought to separate two types of relationship with professionals and therefore the damages recoverable in any subsequent claim. Firstly, there are “advice” cases where the professional was providing an overall view of the sense of a transaction or at least, it was understood, a view on such matters as were absolutely essential to the decision to proceed with it.
Secondly, there were those cases where the professional was only providing information for the client to take their own decision. Even if the information was incorrect then the professional would only be responsible for the consequences of that information being wrong, rather than the whole loss the client suffered.
In SAAMCO the House of Lords drew a distinction between a surveyor who provided a valuation for a property as opposed to one who carried out an all-embracing appraisal of the transaction. If the surveyor’s advice was limited to the incorrect valuation, then generally his responsibility would be limited to reimbursal of the difference between that valuation and the true value. If, however, the surveyor went on to advise on, for example, the marketability of the property or its suitability for redevelopment it could be argued that it fell into the “advice” category.
In numerous solicitor cases since then, claimants have argued the solicitor’s involvement was so fundamental that it fell into the advice category. Alternatively, they argue that even if the solicitor’s involvement only related to a specific task or tasks, those were so fundamental that but for the solicitor’s error, they would have not entered into the transaction. On that rationale, the solicitor was therefore responsible for the full loss, most often of a lender.
There was authority to support this from the English Court of Appeal in one of the conjoined decisions reported under Bristol & West Building Society v Fancy & Jackson and Portman Building Society v Bevan Ashford.
BPE Solicitors v Hughes Holland
The Supreme Court looked again at a case related to a loan by Mr Gabriel of £200,000 to Whiteshore Ltd, owned by his former friend Mr Little. Mr Gabriel thought the loan would be used to develop a property owned by Whiteshore but most of it was actually used to buy the property from another company, also owned by Mr Little. BPE were Mr Gabriel’s solicitors and failed to confirm with him what the purpose of the loan was and used documentation which suggested it would be used for re-development rather than the purchase of the site. Ultimately, Whiteshore was unable to carry out the development and the property was sold at auction for £13,000.
The Supreme Court’s guidance
The Supreme Court noted Mr Gabriel entered into the transaction as a result of the mistaken belief that the loan would be spent on redevelopment and BPE failed to correct that misunderstanding. However, no part of the loss he suffered was in fact attributable to that mistaken belief. Even if that full sum had been spent on redevelopment, it would still have been wasted.
Accordingly, all Mr Gabriel’s loss fell outwith the scope of BPE’s scope of duty.
The Supreme Court was very careful to draw the, often blurred, distinction between the scope of a solicitor’s duty and issues truly relative to causation. In doing so, the court overruled Bristol & West Building Society v Fancy & Jackson and Portman Building Society v Bevan Ashford. It also noted that the burden of proof rests with the claimant, to show the loss it incurred fell within the scope of the professional’s duty and would not have been suffered if the duty had been fulfilled.
As Lord Sumption, giving the Court’s unanimous decision, put it at paragraphs 41-42:
“… even if the material which the [professional] supplied is known to be critical to the decision to enter into the transaction he is liable only for the financial consequences of its being wrong and not for the financial consequences of the claimant entering into the transaction so far as these are greater. Otherwise the [professional] would become the underwriter of the financial fortunes of the whole transaction by virtue of having assumed a duty of care in relation to just one element of someone else’s decision.
What is clear that the fact material contributed by the [professional] is known to be critical to the claimant’s decision to enter into the transaction does not itself turn into an ‘advice’ case.”
Lord Sumption went on to consider conveyancers at paragraph 44:
“A valuer or a conveyancer, for example, will rarely supply more than a specific part of the material on which his client’s decision is based. He is generally no more than a provider of what Lord Hoffman called “information”.”
Impact in practice
There is great potential for this to affect solicitor claims in particular. It is of course possible for a solicitor to get one aspect of a transaction wrong and be responsible for the whole or much of the loss.
Where a solicitor, for example, fails to put in place a valid fixed security over a property they would be liable for the whole lost proceeds of sale but probably not the lender’s full loss if that were greater.
On the other hand, if a solicitor neglected to advise a lender that a property had been sold for £5,000 less a month prior to the transaction in question and the lender claimed it would not have entered into the transaction but for that failure, BPE Solicitors will support an argument that the losses flowing from the breach of duty is limited to that £5,000, not the subsequent losses arising from the borrower’s default.
While claims will always be fact dependent, the Supreme Court has provided a very useful weapon in the armoury to fight whole loss claims advanced on the basis that “but for” a solicitor’s breach of duty the lender would not have entered into the transaction. It is hard to see how a lender can expect their whole losses, tied up in the borrower’s covenant and all sorts of ancillary matters, to be recovered from solicitors.
Looking forward, will we now see amended CML terms throughout the UK seeking to impose contractual duties replacing the overruled cases? In a wider context, how will defenders of other professionals seek to use the useful commentary to constrain liabilities and even joint and several liability in suitable cases?