Earlier this month, we looked at how the Court will assess the recoverability of a claimant’s loss in a professional negligence claim. We look at the recent case of BPE Solicitors v Hughes-Holland  UKSC 21 which clarifies the SAAMCO concept.
Facts of the dispute
The case concerned an agreement between two friends: Mr Gabriel and Mr Little. Mr Gabriel loaned to Mr Little the sum of £200,000.00. The basis of the loan was that the money would be used to develop a property which was owned by Mr Little’s company.
Mr Little however did not use the money for this purpose. Instead, he used the money towards the purchase of another property through his company and also to pay off a bank loan.
Mr Gabriel instructed BPE Solicitors to prepare the paperwork in connection with the loan to Mr Little. BPE were aware that the money was being used towards the purchase of a different property and to pay off a bank loan. However, they did not inform Mr Gabriel of this. Further, the documentation they prepared was misleading in that it suggested that the money was being used for development purposes.
Mr Gabriel eventually became aware that the property had not been developed and that the money had not been used for the purpose he believed it to be for. He forced the sale of the property but he only recovered a small amount of money from Mr Little.
Mr Gabriel brought a claim against BPE for negligently failing to advise about the loan and its proper purpose. He looked to recover the loan amount.
The court found in Mr Gabriel’s favour. It found that BPE had acted negligently in failing to advise Mr Gabriel that the loan monies would be used for Mr Little’s benefit in discharging the bank loan secured over the property. This had the result that Mr Little was not really contributing anything to the project. The judge also found that, had Mr Gabriel known the true position, he would not have made the loan.
Court of Appeal
BPE were unhappy with the court’s decision and appealed to the Court of Appeal. The Court of Appeal overturned the original decision and found in BPE’s favour. The court found that even if the money had been applied as Mr Gabriel had believed it would, it could not be shown that he would have recovered the loaned amount. The court highlighted that the burden of proof was on Mr Gabriel to show that he would have been able to recover the loan if it had been used in the agreed way.
The case was appealed again to the Supreme Court. The Supreme Court judges agreed unanimously with the decision of the Court of Appeal.
The Supreme Court held that BPE were not involved in the arrangement of the loan; their only involvement was to prepare the paperwork in relation to it. Therefore, advising on the terms of and implementation of the loan was outside of the scope of BPE’s instruction. Further Mr Gabriel’s mistaken understanding had no impact upon the loss he suffered. The Court noted that he would have suffered a loss even if the loan had been applied as he had thought was agreed.
As we saw in our previous article, the difference between advice and information is important when it comes to professional negligence cases. The category under which your professional was acting can make a difference to your claim.