SAAMCO Cap Clarified

In BPE v Hughes-Holland (also known as Gabriel v Little), [2017] UKSC 21, handed down on 21 March 2017, the Supreme Court has given important clarification of the principle best known as deriving from South Australia Asset Management v York Montague [1997] AC 191 (“SAAMCO”, also known as BBL v Eagle Star). The single judgment was given by Lord Sumption, who as Jonathan Sumption Q.C. had been counsel for the successful defendant in SAAMCO. The overall effect is to confirm that SAAMCO represents an important general principle, to clarify its application and to overrule or confine cases which have gone the other way.

In SAAMCO, the House of Lords held that the liability of negligent valuers to a lender was limited to the difference between the valuation and the true value of the property. Since then, the precise application of the principle to other cases, especially in the field of professional negligence, has been a matter of some difficulty. For the application of principle to auditor’s liability, see Chapter 8 of Accountants’ Negligence and Liability. Repeatedly, the Court of Appeal has refused to decide scope of duty issues on strike out applications on the basis that the law is too uncertain and/or too fact sensitive.

The key features of the Supreme Court’s judgment in BPE are:

(i) The issue is defined in paragraph 1 of the judgment as being ‘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.’

(ii) In cases raising this issue ‘the defendant has no legal responsibility for [the claimant’s] decision.’

(iii) The principle is not about causation as ordinarily understood. The premise of its application is that the defendant’s breach caused the claimant’s loss. The SAAMCO principle asks whether the loss flows from the particular feature of the defendant’s conduct which made it wrongful.

(iv) Although ‘advice’ and ‘information’ are not the most helpful labels, there is an important distinction between (a) ‘advice’ cases, where the defendant advises the claimant whether to undertake a particular course of action, and (b) ‘information’ cases where the defendant provides certain information which is relevant to a broader decision made by the claimant. This is critical because very many cases of professional negligence will turn out, on analysis, to be information cases in this special sense.

(v) The Court of Appeal’s analysis in Haugesund v Depfa [2011] 3 All ER 655 was approved. The majority decision of the House of Lords in Aneco [2002] PNLR 8 (in which Lord Sumption had appeared as counsel for the unsuccessful defendant) was confined to its own particular factual context and the legal analysis in the dissenting judgment of Lord Millett was preferred to that of the majority. Several solicitors’ negligence cases which had not applied the SAAMCO principle were disapproved, most notably Portman Building Society v Bevan Ashford [2000] PNLR 344.

(vi) The claimant bears the burden of proof that he was owed a relevant duty. It is an essential part of the claimant’s case that the scope of the duty owed to him extended to the losses he claims.

It remains to be seen whether lower courts will see BPE as providing sufficient clarity to permit scope of duty issues to be determined summarily or if they will continue to repeat the mantra of a developing and fact sensitive area of the law.

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Simon Salzedo QC is one of the authors of Accountants' Negligence and Liability, published in September 2016. The book is also available on our online service.

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