Supreme Court Changes To The Assessment Of Loss In Professional Negligence Claims

• Published date: 24 June 2021
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation, Professional Negligence
• Law Firm: Reynolds Porter Chamberlain
• Author: Mr Nick Bird and Bryony Howe

On 18 June 2021 the Supreme Court handed down two judgments in cases examining the application of the SAAMCo principles. These are principles that have dominated the law of professional liability since 1997 and limited the recovery of damages by claimants against professionals. In these judgments the Supreme Court significantly alters the tests for determining whether a particular loss falls within the scope of duty of the professional.

The first of the two cases¹ concerned whether accountants were liable for the costs of a building society extricating itself from interest rate swap contracts. It entered into those swaps in reliance on incorrect advice that its accounts could be prepared according to the "hedge accounting" method. This led to a position where it developed insufficient regulatory capital. In order to remedy that situation it paid '32m to extricate itself from the swaps. The court at first instance and the Court of Appeal held that those costs were not recoverable. The Supreme Court held that they were.

The second of the two cases² was a wrongful birth claim in which the defendant medical expert had failed to diagnose that the mother was a haemophiliac. The child was diagnosed as having both haemophilia and autism. It was not in dispute that the defendant was liable for the costs of bringing up the child attributable to his haemophilia. The dispute was whether the defendant was also liable for the costs associated with his autism. The Supreme Court held that it was not.

The cases were heard by the same panel of the Supreme Court and the lead judgment in each was given by Lord Hodge and Lord Sales with Lord Reed, Lady Black and Lord Kitchin agreeing. Lord Burrows and Lord Leggatt each gave a concurring judgment. The court directed that the judgments in both cases were to be read together.

The majority [at 6] started (in Manchester) by analysing the place of the scope of duty principle in the context of six questions that arise in any claim when a claimant seeks damages from a defendant in the tort of negligence. Those are set out in full at paragraph 6 of Manchester. The questions relating to the scope of duty issue are at 2 and 5:

". (2) What are the risks of harm to the claimant against which the law imposes on the defendant a duty to take care? (the scope of duty question)
.

(5) Is there a sufficient nexus between a particular element of the harm for which the claimant seeks damages and the subject matter of the defendant's duty of...