What Happens When A Professional Gets It Wrong?

• Author: Mrs Jennifer Rhind
• Law Firm: Wright Hassall
• Published date: 11 July 2023

How the law relating to professional negligence is changing

Professionals provide vital guidance to us and enable us to make decisions with confidence on many important matters. But what if that advice or guidance turns out to be wrong? What is the extent of a professional's duty to us, and are we able to recover any losses that we suffer because of professional negligence?

The key principles which need to be proved in all claims of negligence, including those involving professional advisors, were set out by the English courts decades ago, and applied for many years. But in certain cases they caused difficulties, and often limited what could be recovered in a case of professional negligence. In recent years the UK Supreme Court has restated these historic principles, and significantly changed how the scope of a professional's duty is assessed. This offers hope for more success in claims for loss as a result of bad professional advice.

The law as it was: the SAAMCo Principle

The SAAMCo Principle was established by the House of Lords in 1997 in the case of South Australia Asset Management Corp v York Montague Ltd¹. This concerned a negligent over-valuation of a property by a surveyor. The lender who had agreed a mortgage based on this valuation, sold the property when the borrowers defaulted. But, as the actual value of the property was substantially less than the given valuation, and the market price had also fallen, the lender sustained an enormous loss. The Court decided that the surveyor was only liable for losses within the scope of the duty of care that he owed to the lender. This meant that the lender could recover the loss caused by the over-valuation, but not the additional loss because of the...