Professional Negligence

Professional negligence is when a professional has failed to perform their services and responsibilities to the required standard.

This type of claim can be made against many different professionals such as solicitors, accountants, auditors, solicitors, independent financial advisers, surveyors and insurance brokers.

Claims in professional negligence are based on one or more of the following legal causes of action:

• Breach of contract;

• Breach of duty of care in tort of negligence;

• Breach of fiduciary duty; and/or

• Breach of statutory duty.

Establishing negligence alone is not enough to bring a claim. It is crucial to show that the professional’s negligence caused you a loss, generally financial.

Every professional negligence claim has 3 essential ingredients which must be proved:

1. Duty of Care. The professional owed you a duty of care;

2. Breach of duty. The professional breached the duty owed; and

3. Causation. The loss was caused as a result of that breach and, but for the professional’s negligence, you would not have suffered that loss.

It is vital that all 3 ingredients are established for there to be a viable claim. If one is missing, then a successful claim will not be possible.

It is necessary to establish that there was a relationship that was sufficiently close to establish or impose a legal obligation upon the professional.

A duty of care is usually created once a professional has been formally instructed. The duty and level of service expected is generally specified via the professionals’ terms of business or an engagement letter.

In addition to express contractual terms, professionals are also under a general duty to act with reasonable care and expertise within their chosen industry. There is often an already recognised duty in the case of many professionals.

For example, if you instruct an independent financial adviser in respect of financial products, they may owe a duty of care to ensure that those products are suitable for your needs, and that you understand the risks associated with such products.

There may also be occasions where a professionals’ duty of care extends to third party non-clients.

The test for breach of duty is to show that the professional did not comply with the standard owed.

A professional will be deemed to have breached their duty of care to you if the professional has made an error which no reasonable member of that profession would have made.

This means that a simple error or poor service by the professional does not necessarily mean they have been negligent. For example, a solicitor will only have breached their duty if they fall below the standard of a reasonably competent solicitor.

This is one of the most important, but often overlooked, elements of a professional negligence claim. A professional may have acted negligently, but if his actions or advice did not cause your loss, the claim will not succeed. The courts will look at this very closely.

Often the starting point for establishing causation is the ‘but for’ test, which outlines that the professional will only be responsible for the loss of the claimant if their loss would not have occurred ‘but for’ the negligence of the professional. If the loss would have occurred in any event, then the breach cannot be said to have caused the loss. Usually you will need to show that you relied on the professional’s advice and would have done something different had you been advised correctly.

Other factors may also need to be considered. For example, there may be an intervening act by you or by a third party which ‘breaks the chain of causation’. Similarly, the loss may have a number of causes and it will be necessary to demonstrate that the professional’s negligence was the main cause of the loss in order for the claim to be successful.

As claimant, the burden of proving a negligence claim against the professional will fall to you on the balance of probabilities. i.e. more likely than not. You will need to establish the duty of care, the breach of that duty and that your loss was caused as a result of the breach.

Invariably this will involve obtaining a copy of the professional’s file of papers, including any retainer, terms and conditions, emails, letters or other documentation setting out the arrangements in place with the professional. If there were attendances, you may need to look back to the dates of any meetings which took place and recall of what was discussed and advised at those meetings.

It will also be necessary to collect evidence such as correspondence, documents or photographs showing the loss caused.

Expert evidence is usually required in professional negligence claims. For example, an expert accountant is necessary in a claim against an accountant to give their opinion on the standards of what a reasonably competent accountant should have properly advised.

Once a potential claim has been investigated and it appears to be worthwhile pursuing, you are required to comply with a procedure known as the ‘Professional Negligence Pre-Action Protocol.

The purpose of the Protocol is to ensure an early exchange of information and hopefully a resolution of the dispute without the necessity for proceedings.

The central steps to the Protocol are as follows:

1. Preliminary Notice. As soon as there is a reasonable chance that a claim will be brought, the claimant should notify the professional in writing with a brief outline of the grievance and an indication of the financial value of the claim. The professional should acknowledge this letter within 21 days.

2. Letter of claim. Once the potential claim has been investigated, the claimant should send out a Letter of Claim to the professional. This is a detailed letter setting out the facts upon which the claim is based, the allegations against the professional, how this caused the alleged loss and how the loss is calculated.

The professional should acknowledge receipt of the Letter of Claim within 21 days of receiving it. The professional will then have three months from this date to investigate the claim and respond.

3. Letter of Response. Once the investigations have been completed, the professional or their insurers should send a Letter of Response. The Letter of Response should set out the professional’s answer to the allegations. It should make clear whether the claim, or parts of the claim, are admitted or denied. The professional should identify any further information which is requires of the claimant.

If the claim is denied in its entirety of there is no offer of settlement, it is open for the claimant to commence court proceedings. Usually further correspondence and negotiations will follow between the parties as they are expected and encouraged to consider whether the claim can be resolved out of court.

The Protocol means that the average timescale for resolving a claim can generally take anywhere from 4-10 months from the sending of the Letter of Claim to receiving a Letter of Response and engaging in settlement negotiations.

If a claim succeeds then the negligent professional will be ordered to pay compensation.

The correct measure of loss is linked to issues of causation and can be a complex issue. The aim is to put you in the position you would have been in had the professional negligence not occurred.

For example, if you purchase a property in reliance of a surveyor who overvalues the property, the starting point to calculate the loss is likely to be the overvaluation price paid less the true market value at the time.

You also have a duty to mitigate losses. You cannot recover damages for losses which could have been avoided by taking reasonable steps.

The professional may also seek to argue that you have caused or contributed to the losses suffered. This is referred to as the defence of contributory negligence. That can result in the amount of compensation being reduced to reflect the relative share of blame.