A client who intends to bring a professional negligence claim told us recently:
It’s like this: when I take my car to the mechanic, I don’t know what’s wrong with it. He does. And it’s his job to sort it out.
We suspect most clients see the engagement of professionals in this way. They are entrusted with a job and it is their responsibility to ensure that job reaches a successful conclusion. If it does not, the professionals involved – or their insurers – should compensate the disappointed client for their failure to bring the job to a successful conclusion.
Unfortunately, this is not an accurate statement of the law in England and Wales.
A professional can only ever be liable for losses which fall within the scope of the duty undertaken by that professional. We find that this concept confuses clients most when faced with the possibility of a claim against a professional adviser but it is vital to get it right at the outset because it limits what claims can be made.
This is not a straightforward task because even judges disagree on how the concept of the scope of duty should be stated. The decision of the Supreme Court on this issue in Manchester Building Society v. Grant Thornton UK LLP [2021] UKSC 20 comprises 77 pages and three different judgments. While they all agreed on the outcome, the justices gave three different sets of reasons for that outcome. Legal academics and law students are likely to be reading it for some years to come.
The majority sets out a six-stage test for deciding whether a claimant can recover damages from a defendant in a negligence claim. The question of the duty undertaken is relevant to the second and fifth stages of that test. According to the majority:
the scope of the duty of care assumed by a professional adviser is governed by the purpose of the duty, judged on an objective basis by reference to the reason why the advice is being given
and
in the case of negligent advice given by a professional adviser one looks to see what risk the duty was supposed to guard against and then looks to see whether the loss suffered represented the fruition of that risk.
The Supreme Court has also made it clear that there is no longer understood to be a distinction between “advice” and “information” cases.
An “advice” case was one where the professional was understood to have taken responsibility for the whole transaction at hand (such as our client’s example of the mechanic).
An “information” case was one where the professional had simply given information in response to a request from the client which the client used in making its own decision. The professional could still be sued if the information was wrong (which is what happened to Grant Thornton in this case) but the liability was always limited to the consequences of the information being wrong. In practice, this was fertile ground for defendants and their insurers – as the history of the case shows. The Manchester Building Society lost this case before every judge in the Commercial Court and the Court of Appeal and had to come to the Supreme Court to recover any significant damages.
The Supreme Court was also keen to discourage lawyers from arguing too much about “counterfactual” scenarios. These are scenarios describing what would have happened if the correct advice had been given. Human ingenuity (and the desire of insurers to avoid paying out on claims) being what it is, a great deal of energy is normally devoted to such hypothetical questions – or (as the Supreme Court puts it) “litigation by way of contest between elaborately constructed worlds … increasingly untethered from reality”.
It remains to be seen whether (as it was no doubt intended) the Supreme Court’s decision will simplify the arguments arising on claims against professionals.
However, it is clear that:-
(1) All claims require an objective analysis of the duties undertaken before they can get off the ground.
(2) In most cases, that will involve expert opinion evidence on the relevant professional duties and standards.
(3) In every case, it will involve a legal analysis of the scope of the duty and how it fits into the six-stage test laid down by the Supreme Court.
As a firm, we have significant experience dealing with claims against professional advisers, including solicitors, accountants, surveyors and architects. If you have reason to complain about your professional adviser, please contact us to discuss the issues.