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Provision of advice or information? Crucial distinction for professional negligence claims

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28/09/2017

We reported recently on BPE Solicitors v Hughes-Holland [1], in which the Supreme Court confirmed that the SAAMCO [2] principle distinguishes between cases where a professional is under a duty to provide information to enable someone to decide upon a course or action; and where a professional is under a duty to advise someone as to what course of action to take. Accordingly, a negligent adviser may be liable for all foreseeable loss consequent upon the advised course of action; whereas a negligent information provider may be liable only for the foreseeable consequences of that information being wrong.

Halsall & Ors v Champion Consulting & Ors [3] was a professional negligence claim brought against accountants and is the first case to have applied the Supreme Court’s advice/information distinction.

Different profession, same rule

In the Halsall case, the claimants instructed the defendant accountants to advise them in relation to tax planning/mitigation.  Following alleged losses thereafter, the claimants pursued a claim in negligence.

The claimants argued that the defendants had taken it upon themselves to analyse and evaluate all the advantages and disadvantages of a particular tax mitigation scheme and, as a result of that analysis, had positively advised the claimants to participate. The claimants therefore argued that the defendants had gone beyond the mere provision of information which would enable the claimants to decide upon a course of action and had, instead, proffered positive “advice”, as per the Supreme Court’s test in BPE.

The defendants countered that the ‘advice’ provided by them to the claimants amounted merely to “information” under BPE (and that any liability was therefore limited under SAAMCO).

In a fully reasoned application of the BPE advice/information rule, the court rejected the defendant’s submissions.  The High Court reiterated that whether a professional’s advice amounts to “advice” or “information” under BPE depends on whether the professional is responsible for guiding the client’s whole decision-making process (as opposed to merely contributing a limited part of the material on which the client relies when making its decision).  The judge referred back to Lord Hoffman in SAAMCO, who explained that the difference lies “between a duty to provide information for the purpose of enabling someone else to decide upon a course of action and a duty to advise someone as to what course of action he should take”.

The defendants had also raised a concern that a finding of “advice” in this case would result in the general categorisation of tax planning as “advice”, but it is clear from the judgment that whether a professional provides advice or information depends on the individual facts and circumstances of the case and, crucially, on the nature of the assistance provided (not the type of professional advisor).

WM Comment

The Halsall case is helpful because it is a fully worked example of how the court will approach and apply the BPE test in practice – and in a case where the assistance given by the professional fell squarely between the two extremes of “advice” and “information”.

Additional practice points…

As a brief aside, professional negligence practitioners may be interested to note that, despite some to-ing and fro-ing between the parties as to the applicable standard of care expected of the tax planner [4], no mention was made in this case to the relatively recent case of O’Hare v Coutts and the ‘Montgomery‘ test [5] which, as our previous briefing explains, place some emphasis on the client’s own responsibility for making decisions following receipt of professional advice.  It is interesting to speculate whether, had the defendants relied on O’Hare, the main focus of the case, and potentially even the outcome, may have been different.

Finally, it bears noting that the victory for the claimants in this case was a Pyrrhic one. Regardless of the claimants’ success on certainly the majority of the legal merits, it turned out that the claim had not been brought within the relevant limitation period, and it therefore failed overall.  It is outside the scope of this article to consider the limitation issue in any detail but, for those who are interested, paragraphs 220 – 272 of the judgment comprise a comprehensive practical illustration of how the courts will decide whether a claim has been brought in time, under sections 2 or 14A of the Limitation Act 1980.

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[1] [2017] UKSC 21
[2] South Australia Asset Management Corporation v York Montague [1996] UKHL 10.  In SAAMCO the House of Lords held that surveyors who provide negligent overvaluations are only liable for loss caused by the negligent valuation itself, and not for loss caused by any extraneous factor[s] –the SAAMCO principle or ‘cap’.  In BPE Solicitors v Hughes-Holland, the Supreme Court confirmed the applicability of the SAAMCO cap to solicitors’ negligence cases.
[3] [2017] EWHC 1079 (QB)
[4] Ibid paras. 108 – 113 incl.

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