How To Make A Professional Negligence Claim
As business becomes more complex, decision-makers have come to rely heavily on professional advice. This has led to a spike in professional negligence claims over the past decade. And with thousands, if not millions of pounds at stake, those planning on claiming professional negligence must rely on expert legal advice themselves to have the best chance of success.
In a recent case, Tiuta International Limited (in liquidation) v De Villiers Surveyors Limited the Supreme Court overturned a Court of Appeal judgment which allowed a lender the right to recover the amount of a refinancing loan in its entirety, after it had been granted following reliance on a negligent property valuation.
The dispute revolved around a partially complete residential property development. De Villers, a surveyor’s firm, was asked to value the property for a lender in February 2011. The professional surveyors stated that the development was worth £3.25 million in its partially completed state and, once finished, would be valued at £4.9 million. Relying on this valuation, the lender, Tiuta, lent the developer £2.5 million.
Nine months later, the developer requested additional funds from Tiuta, bringing the amount of the loan to just over £3 million, and asked for this to be based on the same security. Tiuta agreed after approaching De Villars to provide a valuation. However, the lender chose to refinance the entire load rather than varying the original contract.
The developer defaulted on the loan to the tune of £2.85 million. When Tiuta sold the development to recover its losses, it only fetched £2.1 million.
Tiuta claimed De Villars was negligent in making the second valuation, which the lender had relied on when granting the second round of funds. However, it did not challenge the first valuation on the grounds of negligence. De Villars stated Tiata would have lost money regardless, because, if the first loan had not been paid back by the second loan, the developer would have defaulted on the original amount.
The High Court found for De Villars, stating any negligence by the surveyor when performing the second valuation could not be linked to any loss from the original loan. The Court of Appeal disagreed, stating the two loans should be treated as independent of one another and the full value of the refinancing loan was recoverable.
The Supreme Court reinstated the High Court’s decision. Lord Sumpton, on delivering the judgment stated:
“The basic measure of damages is that which is required to restore the claimant as nearly as possible to the position that he would have been in if he had not sustained the wrong”.
“If the valuers had not been negligent in reporting the value of the property for the purpose of the second faculty, the lenders would not have entered into the second faculty, but they would still have entered the first….There being no allegation of negligence in relation to the first facility…the lender’s loss is limited to the new money advanced under the second facility”.
However, Lord Fletcher went on to add that the case turned on its facts.
“Indeed, the Supreme Court expressly recognises in its judgment that the decision is fact-sensitive and that different considerations might arise were it to be alleged that valuers were negligent in relation to both loans”.
As you can see from this recent judgment, professional negligence cases are often high-stakes claims where success depends on the particular circumstances involved.
What is a ‘professional’?
There is no clean and tidy definition of a ‘professional’ for the purposes of professional negligence claims. However, the general consensus is that a professional is someone who professes to have a certain skill and therefore is obliged to practice that skill with due care and competence.
Examples of professionals include:
The case of Bolam v Friern Hospital Management Committee  1 WLR 582 set out the standard of care test in professional negligence claims, known as the ‘Bolam Test’ which is essentially: “If a doctor (any other professional can be substitutes) reaches the standard of a responsible body of medical opinion, he is not negligent”. Industry practice and opinion will often be examined to discover what ‘reasonable care and skill’ mean in any given profession. For example, a commercial solicitor has a duty to comply with the standards of a reasonably competent commercial solicitor. Whether the professional is newly qualified or has decades of experience does not affect this standard.
To be successful in a professional negligence claim, you must be able to prove, on the balance of probabilities that:
- the professional owed you a duty of care,
- they breached that duty, and
- that breach resulted in you suffering loss
The first requirement is usually easy to establish. If you undertake to rely on a professional’s advice, then they have a duty to exercise their responsibilities with ‘due care and skill’. However, even where a breach of duty has been established (i.e. ‘due care and skill’ was not exercised), claimants must still overcome the third requirement – proving the negligence actually caused the loss (causation) and if it did, how much of that loss should the defendant be liable for (remoteness of damage).
In addition, damages may be reduced if the professional can show that there has been contributory negligence on behalf of the claimant.
It is also important to note that there is a strict time limit of six years from the date of the negligence in which a claimant may bring a professional negligence claim. This can be extended by up to three years if the negligence only becomes apparent at a later date.
Alternative dispute resolution
Court proceedings are expensive and stressful. Thankfully, most professional negligence cases are settled prior to the matter ever reaching the steps of the courthouse.
If a professional negligence claim has been examined and deemed pursuable, your solicitor will follow the Professional Negligence Pre-Action Protocol. This is a framework for parties to state the grievance and responses to the allegations, exchange information, control costs, and to attempt to settle the dispute through negotiating, adjudication and/or mediation.
If the disputes cannot be resolved by following the Pre-action Protocol, the claimant will need to issue court proceedings if they wish to recover damages. This comes with risk, for example, if you lose the claim, you may be ordered to pay the defendants costs. Your solicitor can advise you on taking out ‘After The Event’ Insurance to protect you against this eventuality.
A professional who gives negligent advice can cost your business dearly. If you wish to recover damages, you will need to instruct an experienced civil litigation solicitor to help you work through the Pre-action Protocol, or, should a settlement not be reached through this framework, issue formal litigation proceedings.
Saracens Solicitors is a multi-service law firm based in London’s West End. We have dedicated and highly experienced civil litigation solicitors who have an in-depth understanding of professional negligence claims and defences. For more information, please call our office on 020 3588 3500.
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