What is professional negligence?
Professional negligence is a term that is readily mentioned by individuals in a dispute or contemplated litigation, but what exactly is it, and how can it be successfully established?
In the first of my series of blogs about professional negligence, I will be writing about the relationship between a professional and another person and how to establish a claim.
In seeking to make a claim, there are four key elements as follows:
1. Duty of care;
2. Breach of Duty;
3. Causation; and
4. Loss or damage.
The first hurdle to overcome is in establishing that a duty of care exists and that it has been breached by that professional. Without passing this first ‘hurdle’, the claim cannot proceed any further.
Who or what is a Professional?
Unhelpfully, “professional” isn’t defined in law for professional negligence but is understood to mean a person with a special skill. That person should use that special skill to the same reasonable standard as another professional with the same skill. In other words, an accountant would be expected to adhere to the same reasonable standard as another competent accountant. A professional negligence claim is very rarely contemplated at the outset when engaging a professional to carry out work or to provide advice. Unfortunately, there are many instances when professionals such as accountants, financial advisors, solicitors, valuers, licensed conveyancers and others provide advice or services that, as a result of an act or omission, cause the customer or client to suffer a loss, which is usually financial.
Professional negligence claims can often be complex and may also require expert evidence.
How to establish a professional negligence claim
The first stage of any professional negligence claim is to establish that a duty of care exists between the professional and the other party. This can either be a contractual duty of care or a duty of care in tort (non-contractual). Usually for regulated professionals such as solicitors and accountants, there will always be a duty of care to their client.
Contractual Duty of Care
When a party enters into a contractual agreement with a professional, the initial letter of engagement or contractual agreement will include a term either expressly stated within the agreement, or implied, that the professional person will use all reasonable care and skill generally and when undertaking the work they have been instructed to carry out.
The limitation period in which to bring a claim for professional negligence in contract or tort is six years from the date of the cause of action. In a contractual relationship, this may be a disadvantage where it does not become apparent that there has been negligence until after the six-year contractual limitation period expires. However, alternatively, under a tort claim, the limitation period is also three years from the date that the party first knew or could reasonably have known of the negligence.
This blog will focus on tortious professional negligence claims.
Once a duty of care has been established, the next step is to consider whether there has been a breach of that duty of care.
How is breach of duty established?
The party or Claimant to the dispute is required to establish that the professional did not comply with the standard of care owed. There is a long-established legal test known as the Bolam Test, which was established in the case of Bolam v Friern Hospital Management Committee. The test is whether the professional exercised the reasonable care and skill of a competent professional in that specialist field, e.g. as an accountant, solicitor or financial advisor.
If the professional has adopted practices that other professionals in their field would also have done, then that professional may not be negligent.
What is the scope of the duty?
The issue of the scope of duty of the professional was considered in detail by the Supreme Court in the joint decisions of Manchester Building Society v. Grant Thorton UK LLP UKSC and Khan v. Meadows 2021 UKSC. In other words, what was the professional person actually engaged to do – and whether this engagement included the act or omission in dispute.
The Supreme Court stated that in considering the scope of the duty, there are six key questions to consider, as follows:
- Is the harm (loss, injury and damage) which is the subject matter of the claim actionable in negligence? (the actionability question).
- 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).
- Did the defendant breach his or her duty by his or her act or omission? (the breach question).
- Is the loss for which the claimant seeks damages the consequence of the defendant’s act or omission? (the factual causation question).
- 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 care as analysed at stage 2 above? (the duty nexus question).
- Is a particular element of the harm for which the claimant seeks damages irrecoverable because it is too remote, or because there is a different effective cause (including novus actus interveniens) in relation to it or because the claimant has mitigated his or her loss or has failed to avoid loss which he or she could reasonably have been expected to avoid? (the legal responsibility question).
What did the UK Supreme Court decide?
The court wanted to simplify the test and focused on two key points of the six above, namely points 2 and 5 above:
- “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 purpose for which the advice is being given”; and
- “(I)n 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 look to see whether the loss suffered represented the fruition of that risk.”
The scope of duty of care was summarised as being to ascertain why the advice was being given.
Causation
Once a duty of care has been established and it can be shown there is a breach of that duty, the next stage of a professional negligence claim is to establish causation.
This means ascertaining a causal link between the act or omission by the professional and the loss. For example, was there a break in the chain of events so that the loss was caused by another intervening factor?
The legal test for causation is the ‘but for’ test, which is a detailed account of what happened. The question asked is whether the loss would have been suffered ‘but for’ the professional advisor's act or omission. Conversely, would the loss have occurred ‘but for’ the professional advisor failing to warn of the risk of following certain steps?
For example, would an individual have incurred a financial loss on the purchase of a penthouse apartment, but for the conveyancing solicitor failing to conduct the correct pre-purchase checks on the property? Or would a company have incurred a loss of a million pounds but for the tax accountant failing to correctly advise the directors of the correct tax position?
In the second of my series of blogs, I will look at causation in more detail. Establishing a causal link between the act or omission and the loss can be complex.
What is the loss or damage?
Once the other factors are met, the next question is what is the loss or damage suffered? Is there in fact a loss arising from the negligent act or omission?
The loss is calculated in financial terms, and there may be a variety of elements that will form part of a claim for loss or damage, and not all of the loss suffered by a party will be recoverable.
A party to litigation also has a duty to mitigate their losses, i.e. they should take reasonable steps to limit their losses so far as possible.
In assessing the loss a party has suffered, the Court will also look at contributory negligence or fault and review whether the loss or damage suffered was partly due to the person's own fault. If so, the Court will take this into account and reduce the amount of damages awarded to reflect this, taking all of the circumstances of the dispute into consideration.
JMW’s London Commercial Litigation Team is regularly instructed on claims of professional negligence. If you have any questions, please contact our Team.
The majority of our work is privately paying and we will typically require a payment on account of our fees before commencing work. We do not do legally aided work.