SAAMCO reinforced: Clients may bear the weight of their own commercial misjudgements

19 October 2017

The SAAMCO principle, derived from the case of South Australia Asset Management Corp v York Montague Ltd  [1997], established that for loss to be attributable to  a professional’s breach of duty  (and therefore recoverable), the loss must come within the scope of the duty of care owed.  The principle affirms that a professional will not be liable for all or part of a loss that arises from risks which are not within his duty to protect the client against.

The Supreme Court decision in BPE Solicitors v Hughes-Holland provided welcome clarification of the SAAMCO principle in distinguishing between ‘information’ and ‘advice’ cases and holding that professionals will not be liable for the commercial misjudgements of their clients which do not fall within their scope of duty to protect against. The principle was also applied recently in the case of Bank of Ireland v Watts Group Plc where a negligence claim against quantity surveyors was dismissed.

BPE Solicitors v. Hughes-Holland [2017] UKSC 21

The facts

Mr Gabriel provided a £200,000 loan to a friend’s company on the basis that the loan would be used to develop a property. However the friend, Mr Little, never intended to use the loan for property development purposes. In reality, the transaction served no real benefit to Mr Gabriel.  

Mr Gabriel instructed BPE Solicitors (“BPE”) to draw up a facility agreement. Mr Little had informed BPE that the purpose of the loan was to fund the purchase of a property. However, BPE failed to notify Mr Gabriel of this and clarify his instructions. The mistaken purpose of the loan, to finance development of the property, was therefore recorded in the facility agreement.  

The company was subsequently unable to repay the loan due to insolvency. Mr Gabriel successfully sued BPE for negligence at first instance for failing to advise that the loan would be used to discharge the debt on the property. The trial judge held that Mr Gabriel would not have made the loan if he had known the true position.

The Court of Appeal reversed the decision and held that BPE were not liable for Mr Gabriel’s loss. BPE had not been under a duty to advise on the course of action the client should take or advise on the commercial risks of providing the loan. The high risks of the loan were reflected in a high rate of interest due to be paid (28% p.a.). The court stressed that the burden of proof was on Mr Gabriel to show that he would have recovered the loan if the monies had been used for the development of the property. It was held that he had failed to discharge that burden.  

Mr Gabriel appealed the decision to the Supreme Court.

Appeal: dismissed

The Supreme Court dismissed the appeal. It was held that BPE had not assumed responsibility for Mr Gabriel’s decision to make the loan.  They were only instructed to prepare the loan documentation. Whilst BPE were responsible for confirming one of Mr Gabriel’s mistaken assumptions, that the loan would be used to develop the property, this was held to be just one of many factors Mr Gabriel had considered when deciding to provide the loan. The loan would not have increased the value of the property, so no loss was attributable to BPE for the misleading statements in the facility agreement. The loss arose from Mr Gabriel’s own commercial misjudgements, which BPE were not duty-bound to guard against. 

The distinction between information and advice

In reaching this decision, Lord Sumption reinforced an important distinction between “advice” cases and an “information” cases:


“Advice” case

“Information” case

What does this mean?

An "advice" case is where a professional is instructed to provide advice in relation to the whole decision-making process, not just specific factors that help determine a client’s decision.


The professional is responsible for the decision itself.

An information case is one in which a professional provides information which is only a limited part of the overall material which the client will rely on when making a decision.


The overall assessment of the commercial merits of the transaction is for the client itself, not the professional. 

Extent of liability?

The professional will be liable for all the foreseeable consequences of a course of action/transaction entered into upon negligent advice.

A professional will only be liable for the consequences of that information being wrong. 


Bank of Ireland (UK) Plc v Watts Group Plc [2017] EWHC 1667 (TCC)

In the recent decision of Bank of Ireland v Watts Group Plc, Mr Justice Coulson rejected the bank’s allegations of professional negligence against the quantity surveyors, Watts. Following the SAAMCO cap reiterated in BPE, the court held that the bank had failed to establish causation and that the losses claimed were not recoverable from Watts as a matter of law.

Watts were engaged to provide a report relating to a residential development in the heart of York. The developer, who borrowed money from the bank (“the Borrower”), went into liquidation and could not repay the loan, causing a £750,000 loss to the bank. It was the bank’s case that Watts’ Initial Appraisal Report was negligent and that, if it had been properly prepared, the bank would not have permitted the drawdown of the loan to the borrower.

Mr Justice Coulson held that Watts were engaged to provide information as the construction costs, but that was just a part of the material that the bank relied upon in deciding whether to allow the loan. A valuer is not liable for every foreseeable loss that his client may suffer if he enters into an agreement to lend money as a result of a negligent valuation. Watts would only be liable in law for the financial consequences of the construction costs being wrong and not for the financial consequences of the bank entering into the loan transaction. There were a number of other matters which were highly relevant to that decision which were nothing to do with the surveyors.


Professionals will undeniably welcome these decisions as helping to protect or limit their liability. In BPE,  Lord Sumption emphasised the need for fairness, stating that restricting a professional’s liability for an information-only case was essential as: ‘otherwise the defendant would become the underwriter of the financial fortunes of the whole transaction by virtue of having assumed a duty of care in relation to just one element of someone else’s decision’.

The scope of a professional’s duty will be scrutinised in determining which side of the information/advice line their matter falls. The stakes are high: while some professionals may be able to curtail their liability, others such as investment advisers who are likely to fall into the ‘advice’ category, will face the full flow of losses. 

This article was written by Jemma Brimblecombe.

Share insightLinkedIn Twitter Facebook Email to a friend Print

Email this page to a friend

We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

Leave a comment

You may also be interested in:

Close Load more

Skip to content Home About Us Insights Services Contact Accessibility