Many clients might assume if they consult a professional about entering into a transaction or some other course of action, then proceed with that transaction or course of action on the basis of wrong information supplied by the professional, and it works out badly, that the professional will then be responsible for all the financial consequences.

Any punishment should fit the crime but we perhaps have a tendency to hold our professionals up to a standard that the law does not impose.

Is there a legal distinction between “information” and “advice” and what is the significance?

In substance, yes there is a distinction.

If a professional is providing you with information only, together with information you may be receiving from others, about a course of action you are considering then they are responsible to ensure that the details they give you are correct. In these circumstances however the responsibility for all the consequences of deciding to proceed is yours and based presumably, at least in part, on the information provided.

If a professional is advising you that you should take a particular course of action, then they are responsible for considering all relevant matters to be taken into account in deciding whether you should do so. The professional’s responsibility extends to the consequences of the decision itself.

A professional’s responsibility, in particular a solicitor, will generally be defined by what they have agreed to do for you, usually contained in the terms of the contract you receive. The law says this (generally) sets out the scope of their duty toward you. This matters because what they are responsible for dictates the amount you can recover in compensation from them for “getting it wrong”.

Where a professional provides information as part of your own consideration as to whether you proceed with a course of action and they give you inaccurate information, you can only be compensated for the financial consequences (if any) resulting from the wrong information given.  

Where they are telling you you should proceed with a course of action and they ignore or misjudge a matter relevant as to whether to proceed, then you may be compensated by them for all the financial consequences of proceeding as advised.

This may seem simple but the law has had great difficulty with this. The reason for the difficulty is because in some “information” cases, claimants have thought it was sufficient, to cover all the financial consequences of having proceeded with the course of action, to prove the following points:

  1. Duty – provide correct information about transaction/course of action,
  2. Breach – provided incorrect information about transaction/course of action,
  3. Causation, loss and damage – as a result of incorrect information claimant decided to proceed with transaction/course of action which they would not have done but for the incorrect information and the transaction/course of action has resulted in financial harm.

Claimants often pursue claims based upon potentially being able to prove only point 3. However, you must always start with point 1, duty. What is the professional obliged to do? If it forms no part of the professional advisor’s responsibility to tell you whether you should enter into the transaction/proceed with the course of action then you cannot claim compensation for the financial consequences of having done so if it works out badly, even if you would not in fact have proceeded if they had given you correct information about it.

It is the claimant’s burden first to prove he has suffered a loss, and, secondly, to establish that the loss fell within the scope of the duty he was owed.

The facts of a recent Supreme Court case illustrate this point.

The case of BPE Solicitors and another v Hughes-Holland [2017] UKSC 21

Mr. Peter Little, a builder and developer, wished to borrow £200,000 from his friend Mr. Gabriel in connection with a building called 'Building 428' for which planning permission had been granted for development as offices. He put forward a figure of about £200,000 for development costs, which Mr. Gabriel accepted at face value. Mr. Gabriel assumed the £200,000 would be used to finance the development although this was never actually said. 

Mr. Gabriel visited the building and thought it was worth about £150,000 and that once developed it would be worth more than £400,000. He decided to instruct his solicitor at BPE solicitors to draw up a facility letter for the loan and charge over the building.

His solicitor did so and the letter, containing mistakes because it used a template from a previous matter, contained statements to the effect that the loan monies “will be made available as a contribution to the costs of the development of the property” and that “the purpose of the loan was to assist with the costs of the development”. Mr. Gabriel signed it and loaned the money on this basis.

Mr Little actually used the loan money to discharge a bank’s prior charge over the building and he himself had little or no capital to use.

The transaction failed and Mr. Gabriel lost all of his money. The repayment date under the loan agreement came and went with no significant construction work having been carried out and no attempt made to develop the property in accordance with planning permission.

The building was ultimately sold at auction and fetched £13,000, which was entirely exhausted by the expenses of sale.

Mr. Gabriel sued his solicitors in negligence. It was found that his solicitors were negligent in allowing statements to appear in the loan documentation which was misleading, but he was not entitled to any compensation.

The reasons for this were twofold. First the evidence showed that had the solicitors been right and the £200,000 had been spent on the building, Mr. Gabriel would have lost his money anyway because the expenditure would not have enhanced the value of the building. The development would have been left incomplete, the loan unpaid and the property substantially worthless. The loss was down therefore to commercial misjudgement about the viability of the development project.

The question therefore was whether Mr. Gabriel’s Solicitors assumed responsibility for his decision to lend the money. It was clear they did not. Their instructions were to draw up the facility agreement and the charge, nothing more. They knew nothing of the nature of the development, likely cost, financial capacity of Mr. Little etc. and it was no concern of theirs.

What can we learn from the BPE case decision?

Clients may well wish to check the terms of the contract being offered by professionals so they know exactly what they are offering to do because, if instructed, it is only the financial harm for failing to do that thing which may be recoverable. Clients for this reason may seek to broaden the scope of what professionals are willing to agree to.

Professionals, and in particular solicitors, may wish to draft their retainers as tight as possible! 

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Ben McCosker is a Solicitor based in our Weoley Castle office. You can telephone him on 0121 685 1109 or email him at b.mccosker@qsdavisons.com.

If you need help in pursuing a claim against a professional or, if you are a professional needing help defending a claim, QualitySolicitors Davisons’ civil litigation team can assist. Please call on: 0121 685 1248.