‘Information' Or ‘Advice'? Construction Professionals Beware!

The Supreme Court recently provided guidance on the operation of the 'SAAMCO' cap in the landmark case of BPE Solicitors & Anor vs Hughes-Holland (in substitution for Gabriel) [2017] UKSC 21 ('BPE Solicitors v Hughes- Holland'). Beale & Company Solicitors LLP acted on behalf of BPE Solicitors. A full summary of the background and judgment can be found here.

This article considers the key points of the judgment and its potential impact on construction professionals (which has recently been the subject of much comment and hypothesis from practitioners). However, the recent decision in Bank of Ireland and another v Watts Group Plc [2017] EWHC 1667 (TCC), considered below, goes some way to clarifying the principles set out in SAAMCO and BPE Solicitors v Hughes-Holland and their application to construction professionals.

Background

By way of a reminder, the principle developed by the House of Lords in South Australia Asset Management v York Montague Ltd [1997] A.C. 191 ('SAAMCO') was that a distinction must be drawn between: (1) a duty to provide information to enable someone to decide on a course of action; and (2) a duty to advise someone as to what course of action to take. It was held that the negligent adviser would be responsible for all the foreseeable loss consequent upon the advised course of action; in contrast, the negligent supplier of information would be responsible for all the foreseeable consequences of that information being wrong only.

In BPE Solicitors vs Hughes-Holland, the Court drew a distinction between: (1) 'advice' cases, i.e. where it is the adviser's duty to consider what matters should be taken into account in deciding whether to enter into a transaction; and (2) 'information' cases, i.e. where the supplier of information contributes only a limited part of the material on which the client relies in deciding whether to enter into a transaction.

It was held that, in the event that a party's duty is to consider all relevant matters, and one of those matters is considered negligently, it will be liable for all losses flowing from the client's decision to enter into the transaction. The Court considered that this comprised an 'advice' case. Conversely, in circumstances where a party's contribution is to simply supply material for the client to take into account in coming to a decision on the basis of a broader assessment of the risks as to whether to enter into a transaction, it cannot be liable for the consequences of the...