How did the Supreme Court solve the SAAMCO problem?

BPE Solicitors v Hughes-Holland [2017] UKSC 21

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Somewhat sooner than anticipated, the Supreme Court has released its judgment in BPE Solicitors v Hughes-Holland (also known as Gabriel v Little).  In this postscript to his recent talk, Tim Polli briefly explains how the Supreme Court’s judgment and decision reflect the criticisms that have been made of the way in which SAAMCO has been interpreted and implemented in several cases.  SAAMCO itself, however, has not only survived unscathed, but has been clarified and re-affirmed.

On 15 February 2017, at Tanfield’s Professional Negligence seminar, I considered the case of BPE Solicitors v Hughes-Holland and asked how one could solve a problem like SAAMCO. I set out various criticisms of SAAMCO and the way in which it has been applied over the years and speculated as to what the Supreme Court might do. The time for speculation is over; the Supreme Court's decision was handed down on Wednesday 22 March 2017. This short note sets out what the Supreme Court did, and where we now stand.

Lord Sumption delivered the unanimous decision of the Supreme Court. He accepted that the distinction, drawn by Lord Hoffman in SAAMCO, between the provision of advice and the provision of information has caused confusion. He maintained, however, that the substantive distinction was valid and the confusion is simply caused by the labels.

He explained that when Lord Hoffman referred to the provision of advice, he had in mind the situation where it was for the professional adviser to decide what factors were relevant to a particular decision, to assess those factors and then to present the client with a recommendation. If the adviser negligently assesses or overlooks one or more factors, and that proves to be critical to the decision whether or not to enter into the transaction, then, in principle, the adviser will be liable to the client for all the losses flowing from the transaction against which he should have protected his client.

In contrast, when Lord Hoffman referred to the provision of information he had in mind the situation where the professional adviser is merely providing the client with one of a number of pieces of information or advice, from the totality of which the client will decide whether or not to enter into the transaction himself. In such circumstances, if the information or advice is provided negligently, and even that information or advice is considered by the client to be crucial to his decision, the adviser will not be liable for all the consequences of entering into the transaction. It was not the adviser's decision or recommendation to do so; the decision was the client's. The only consequences for which the professional adviser will be liable are the consequences of the information being wrong. Accordingly, whilst the advice / information labels have gone, the fundamental distinction at the heart of SAAMCO remains.

Lord Sumption also accepted that cases such as Steggles Palmer and Portman Building Society v Bevan Ashford [2000] PNLR 344 are inconsistent with SAAMCO because they are based upon "No Transaction" reasoning – reasoning which is relevant to causation, but not to an assessment of the scope of the defendant’s duty (or the extent of his liability). He could have recognised the inconsistency whilst at the same time pragmatically respecting the extent to which they soften SAAMCO in circumstances where the client would have discovered either that other party to the proposed transaction was a fraudster or that the transaction was completely unviable. He did not, however, do so. The Supreme Court confirmed SAAMCO in its purest form. The distinction between Steggles Palmer-type cases and Colin Bishop-type cases has gone. Steggles Palmer has been overruled, as has Bevan Ashford. Every case in which the client was making the decision based upon input from various sources, including the solicitor, is now a Colin Bishop-type case and the SAAMCO cap applies.

Lord Sumption further held that the SAAMCO cap has nothing to do with causation. In a "No transaction" case, all the foreseeable losses flowing from the transaction have been caused by the defendant’s actions; but the liability of the defendant is nevertheless limited by the nature of the duty that he owed. Where his duty was just to provide some of the materials from which the client made his own decision, he is only liable for the consequences of the information being wrong. Accordingly, losses which would still have been suffered even if matters had been as advised by the negligent solicitor, are not losses for which the negligent solicitor should be liable.

Finally, the Supreme Court confirmed that it is for the claimant in any given case to plead and to prove that he was owed a relevant duty; or, to put it another way, that the losses caused by the transaction - and therefore by the defendant's negligence - fell within the scope of the defendant's duty and are therefore losses for which the defendant is liable.

Obviously, the Supreme Court's decision is unhelpful to claimants and helpful to defendant insurers. On a practical level, cases of solicitors' negligence in conveyancing transactions will inevitably be much simplified and many more will be settled at the protocol stage, much as the overwhelming majority of valuers' overvaluation cases now are.

Those who attended the seminar will recall that I asked whether it would, or should, make a difference to the case of the mountaineer and his negligent doctor if the mountaineer had informed his doctor that, if the doctor passed the knee fit, he would go on the expedition, but that if the knee was not fit, he would not. It appears from Lord Sumption's judgement that it would make no difference. That is because, in my example, the decision to give the doctor's assessment of the knee paramount importance is the mountaineer's decision. He decided either that there are no other relevant factors or that none of the other factors have sufficient weight to displace the doctor's assessment of his knee. In those circumstances, Lord Sumption would, I am sure, conclude that the doctor should be liable for no more than the consequences of his assessment of the knee being wrong.

To use the language of the moment, the Supreme Court has given us "hard" SAAMCO.