The court was asked what damages are recoverable in a case where (i) but for the negligence of a professional adviser his client would not have embarked on some course of action, but (ii) part or all of the loss which he suffered by doing so arose from risks which it was no part of the adviser’s duty to protect his client against.
Held: The appeal failed. The whole loss was attributable to Mr Gabriel’s misjudgements and reduced the damages to nil. They also held, for largely overlapping reasons, that had there been any recoverable loss, it would have been reduced by 75% for contributory negligence.
‘There was no positive evidence to the effect that, if pounds 200,000 had been spent on developing the property, its value would have been such as to ensure recovery of Mr Gabriel’s loan or, in other words, that the transaction was viable. On the contrary, such evidence as was before the judge suggested that expenditure in such amount would not have increased the value of the property. As Mr Stewart submitted, the judge, in my view wrongly, reversed the burden of proof by finding that the defendants had not persuaded him that no development was possible. That the value of the developed property, by the utilisation of funds of pounds 200,000, would have been such as to ensure recovery of Mr Gabriel’s loan was a matter for Mr Gabriel to allege and to prove.’
Lord Sumption JSC highlighted the distinction drawn by Lord Hoffman in SAAMCO between ‘advice’ cases and ‘information’ cases but acknowledged that such distinction could be confusing. In a case falling within the ‘information’ category a professional adviser would contribute a limited part of the material on which the client will rely in deciding whether to enter a particular transaction but the process of identifying and assessing the other risks would remain with the client. In such circumstances, the adviser is only liable for the financial consequences of the information being wrong and not for all the financial consequences of the claimant entering into the transaction so far as these are greater. The defendant does not become the underwriter of the entire transaction by virtue of having assumed a duty of care in relation to just one element of the decision.
‘The principle laid down in SAAMCO depends for its application on the award of loss which is within the scope of the defendant’s duty, not on the exclusion of loss which is outside it. In a simple case, they may amount to the same thing. It may, for example, be possible in a valuation case to strip out the effect of the fall in the market if that is the only extraneous source of loss. Even there, however, the exercise will be complicated by the common practice of lenders to allow a margin or ‘cushion’ between the loan and the value of the property to allow for contingencies including some adverse market movement. Where the loss arises from a variety of commercial factors which it was for the claimant to identify and assess, it will commonly be difficult or impossible as well as unnecessary to quantify and strip out the financial impact of each one of them. ‘
Lord Neuberger, President, Lord Mance, Lord Clarke, Lord Sumption, Lord Hodge
171 Con LR 46, [2017] UKSC 21, [2017] 2 WLR 1029, [2017] PNLR 23, [2017] WLR(D) 199, [2017] 3 All ER 969, UKSC 2014/0026
Bailii, WLRD, SC, SC Summary Video
England and Wales
Citing:
Cited – South Australia Asset Management Corporation v York Montague Ltd etc HL 24-Jun-1996
Limits of Damages for Negligent Valuations
Damages for negligent valuations are limited to the foreseeable consequences of advice, and do not include losses arising from a general fall in values. Valuation is seldom an exact science, and within a band of figures valuers may differ without . .
Appeal from – Gabriel v Little and Others CA 22-Nov-2013
The claimant sought repayment of sums loaned to the defendant by them under a facility letter supported by a legal charge. The charge had been enforced but the sums realised had been insufficient. . .
Cited – Stapley v Gypsum Mines Ltd HL 25-Jun-1953
Plaintiff to take own responsibility for damage
The question was whether the fault of the deceased’s fellow workman, they both having disobeyed their foreman’s instructions, was to be regarded as having contributed to the accident.
Held: A plaintiff must ‘share in the responsibility for the . .
Cited – Roe v Ministry of Health CA 1954
The plaintiff complained that he had developed a spastic paraplegia following a lumbar puncture.
Held: An inference of negligence was rebutted. However the hospital authority was held to be vicariously liable for the acts or omissions of the . .
Cited – Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd (The Wagon Mound No 1) PC 18-Jan-1961
Foreseeability Standard to Establish Negligence
Complaint was made that oil had been discharged into Sydney Harbour causing damage. The court differentiated damage by fire from other types of physical damage to property for the purposes of liability in tort, saying ‘We have come back to the plain . .
Cited – Koch Marine Inc v D’Amica Societa Di Navigazione ARL (The Elena d’Amico) QBD 1980
The ship owners wrongfully repudiated a charterparty in March 1973, 14 months after its inception. The charterers did not hire a substitute but claimed damages for the loss of profits they would have made between January and April 1974, during which . .
Cited – Banque Bruxelles Lambert Sa v Eagle Star Insurance Co Ltd and Others CA 24-Feb-1995
The plaintiffs were mortgagees. The defendants were valuers. The defendants negligently over-valued properties and the plaintiffs then accepted mortgages of the properties. Later the property market collapsed and the various borrowers defaulted and . .
Cited – Sutherland Shire Council v Heyman 4-Jul-1985
(High Court of Australia) The court considered a possible extension of the law of negligence.
Brennan J said: ‘the law should develop novel categories of negligence incrementally and by analogy with established categories. ‘
Dean J said: . .
Cited – Caparo Industries Plc v Dickman and others HL 8-Feb-1990
Limitation of Loss from Negligent Mis-statement
The plaintiffs sought damages from accountants for negligence. They had acquired shares in a target company and, relying upon the published and audited accounts which overstated the company’s earnings, they purchased further shares.
Held: The . .
Cited – Galoo Ltd and Others v Bright Grahame Murray CA 21-Dec-1993
It is for the Court to decide whether the breach of duty was the cause of a loss or simply the occasion for it by the application of common sense. A breach of contract, to found recovery, must be shown to have been ‘an ‘effective’ or ‘dominant’ . .
Cited – Banque Bruxelles Lambert Sa v Eagle Star Ins Co Ltd and Others QBD 7-Mar-1994
A negligent valuer was liable for the loss arising from an overvaluation, but the valuer was not liable for that proportion of the lender’s loss on the loan which was attributable to the fall in the market after the valuation date, even though (i) . .
Cited – Baxter v Gapp (FW) and Co Ltd CA 1939
Where there would have been no transaction (loan) but for the valuers’ negligence, it was held that the plaintiff was entitled to recover the actual loss suffered, rather than the difference between the real value of the property at the date of . .
Cited – Swingcastle Ltd v Alastair Gibson HL 1991
A lender made a claim against a surveyor after a negligent survey. the lender would have made no loan at all, there would have been no transaction, if it had known the true position. At first instance and in the Court of Appeal the Claimant’s loss . .
Cited – Banque Keyser Ullmann SA v Skandia (UK) Insurance Co Ltd HL 1991
Banks had made loans against property which the borrower had said was valuable, and, also insurance policies against any shortfall on the realisation of the property. The borrower was a swindler and the property worthless. The insurers relied upon a . .
Cited – Liverpool (Owners) v Ousel (Owners), (The Liverpool No 2) CA 1963
The Ousel and the Liverpool collided in the Port at Liverpool and the Ousel sank. The owners of the Liverpool admitted liability. The Mersey Docks and Harbour Board took the wreck under statutory powers and claimed the expenses of clearing the wreck . .
Cited – Nykredit Mortgage Bank Plc v Edward Erdman Group Ltd (No 2) HL 27-Nov-1997
A surveyor’s negligent valuation had led to the plaintiff obtaining what turned out to be inadequate security for his loan. A cause of action against a valuer for his negligent valuation arises when a relevant and measurable loss is first recorded. . .
Cited – Platform Home Loans Ltd v Oyston Shipways Ltd and others HL 18-Feb-1999
The plaintiffs had lent about 1 million pounds on the security of property negligently valued at 1.5 million pounds. The property was sold for much less than that and the plaintiffs suffered a loss of 680,000 pounds. The judge found that the . .
Limited to the particular facts – Aneco Reinsurance Underwriting Limited (In Liquidation) (a Body Incorporate Under the Laws of Bermuda) v Johnson and Higgins Limited HL 18-Oct-2001
Brokers contracted to obtain re-insurance of risks undertaken by the claimants. They negligently failed to obtain full cover. The question at issue was whether they were liable for the full loss, or whether their duty was limited to obtaining . .
Cited – Haugesund Kommune and Another v Depfa ACS Bank and Another CA 28-Jan-2011
Lawyers had negligently advised that a Norwegian local authority had legal capacity to enter into a loan agreement, when it did not. A local authority’s legal capacity to borrow might fairly be thought fundamental to any decision to lend it money, . .
Cited – Bristol and West Building Society v Fancy and Jackson and similar ChD 1-Jul-1997
The solicitor defendants (and others) had acted for both the lender and the borrower. Under their retainer they were required to notify the lender of any matters which might prejudice its security. The solicitors failed in one case to report that . .
Criticised – Portman Building Society v Bevan Ashford (a firm) CA 2000
The lender alleged negligence in the defendant solicitors.
Held: Otton LJ, delivering the leading judgment, declined to ask himself whether the scope of the solicitor’s duty extended to the lender’s decision or only to the material which the . .
Cited – Haugesund Kommune and Another v Depfa Acs Bank CA 27-May-2010
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Cited by:
Cited – Meadows v Khan QBD 23-Nov-2017
Claim for the additional costs of raising the claimant’s son, A, who suffered from both haemophilia and autism. It is admitted that, but for the defendant’s negligence, A would not have been born because his mother would have discovered during her . .
Lists of cited by and citing cases may be incomplete.
Professional Negligence, Damages
Updated: 18 December 2021; Ref: scu.581025