How damages are calculated in professional negligence cases

The case governing the rules for calculating damages in professional negligence cases were set down in the SAAMCO case. Lord Hoffman said that claimants had to identify firstly whether the professional provided information to their client or secondly, whether they advised their clients to take a course of action, which would have an effect upon the calculation of damages. 

The calculation of damages for professional negligence claims in each type of case, is decided differently:

• In cases where a professional provided information to a client, damages would be calculated to compensate the client for the consequences of being given wrong information.
• In cases where advice to take a course of action was given, the damages would be calculated to cover all of the client's losses which were reasonably foreseeable as a result of the mistakes in the advice.

In cases where wrong information was given to a client by a professional, a limit was placed upon the potential damages which could be recovered, known as the “SAAMCO cap”. This means that the court would consider whether the same loss would have been incurred, if the information given by the professionals had been correct. Effectively, the court has to decide whether it made any difference that the client followed advice that was technically wrong. If it would have made no difference, the loss would not have been recoverable from the professional.

Since these principles were set down in the SAAMCO cases, they have proved to be problematic in subsequent cases.

The cases of Manchester Building Society v Grant Thornton (which related to advice given by Grant Thornton about interest rate swaps) and Khan v Meadows followed the SAAMCO decision.

Rather than overturn the SAAMCO decision, the Court considered the scope of a professional's duty to their clients, in the wider context of the tort of negligence. 

As a result, where a claimant seeks damages from a defendant for professional negligence, a series of six questions must be considered, in order to establish whether there is a viable claim:

1. Is the harm which is the subject matter of the claim actionable in negligence?
2. What are the risks of harm to the claimant against which the law imposes a duty of care upon the defendant?
3. Did the defendant breach their duty of care to their client, as a result of their negligent act or omission?
4. Is the loss for which the claimant seeks damages the consequence of the defendant’s act or omission, or has the loss been caused by some other factor?
5. Is there sufficient nexus or connection between the harm caused and the scope of the defendant’s duty of care?
6. Is the defendant legally responsible for the harm caused, or has the claimant failed to mitigate their losses.

Time will tell how the Court will apply this series of six questions to the calculation of damages in professional negligence cases, but on the face of it, it could be argued that the Supreme Court has replaced the fairly simple SAAMCO test, with a test which is somewhat more complicated. 

Professional negligence cases always tend to be complicated, not least because of the case law surrounding the calculation of damages. If you have been let down by a professional, whether it's a solicitor, barrister, accountant, surveyor, or anyone else who owes you a duty of care, you should take legal advice as quickly as possible. 

In professional negligence claims against solicitors where you have been let down by a solicitor, we will be able to take over the underlying case and finish it off for you, before suing your solicitor for the losses you have suffered, if the case has not yet come to an end. In other cases involving professionals, we will be able to advise you about obtaining appropriate expert advice to support your case. 

Samuels has decades of experience dealing with professional negligence cases and we have recovered significant compensation for hundreds of clients. Contact us today to find out how we can help you bring a claim against a professional.