Two Supreme Court judgments provide guidance on the application of the scope of duty principle

Published: 31/8/2021

Two key judgments regarding professional negligence clarify the application of the SAAMCO principle. We look at the guidance the Supreme Court has provided regarding duty of care and extent of liability of professional advisers.

On 18 June 2021, the Supreme Court handed down two judgments which it directed be read together: Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20 (“MBS”) and Khan v Meadows [2021] UKSC 21 (“Khan”). These key judgments in the context of professional negligence clarify the application of the well-known SAAMCO or “scope of duty” principle.

The Supreme Court has provided guidance regarding the approach to determining the scope of duty of care and extent of liability of professional advisers in the tort of negligence. This article considers the key points made in these landmark judgments, as well as the possible practical implications of such.

Key points made in the majority judgments of MBS and Khan

Scope of duty principle - The scope of duty principle is that a defendant is only liable for losses which fall within the scope of their duty of care to the claimant. To ascertain the scope of the duty of care assumed by a professional adviser, the purpose of the duty is the key focus. The purpose is judged on an objective basis, referring to the reason why the advice is being provided. The risk the advice is intended to protect against must be considered, followed by whether the loss the claimant has suffered is a fruition of that risk. 

Six questions - A helpful model to analyse the place of the scope of duty principle within the scheme of the tort of negligence is to answer the following six questions in sequence:

  1. The actionability question:  Is the harm (loss, injury and damage) which is the subject matter of the claim actionable in negligence? 
  2. The scope of duty question:  What are the risks of harm to the claimant against which the law imposes on the defendant a duty to take care? 
  3. The breach question: Did the defendant breach his or her duty by his or her act or omission?
  4. The factual causation question: Is the loss for which the claimant seeks damages the consequence of the defendant’s act or omission? 
  5. The duty nexus question: Is there a sufficient nexus between a particular element of the harm for which the claimant seeks damages and the subject matter of the defendant’s duty of care as analysed at stage two above?
  6. The legal responsibility question: Is a particular element of the harm for which the claimant seeks damages irrecoverable because it is too remote, or because there is a different effective cause or because the claimant has mitigated his or her loss or has failed to avoid loss which he or she could reasonably have been expected to avoid? 

“Advice” versus “information” labels disposed of as terms of art - The distinction made in SAAMCO between “advice” cases versus “information” cases should no longer be treated as a rigid rule. Many cases are unlikely to fit neatly into one of these categories; instead they will lie somewhere on the spectrum. The use of these labels can be misleading and they should therefore be disposed of as terms of art. It is preferable to focus instead on the purpose of the professional’s duty. 

SAAMCO counterfactual demoted - The SAAMCO counterfactual (the test which asks what losses would have been suffered by the claimant if the information provided by the defendant had been correct) is now to be used only as a tool (and only in some cases) to cross-check the result arrived at following the analysis outlined above. The SAAMCO counterfactual is now subordinate to that analysis.  

Principle applicable to clinical negligence cases - The scope of duty principle applies to clinical negligence cases. There is no principled basis for clinical negligence claims being excluded from the scope of duty principle, or that the principle should be limited to pure economic loss in commercial transactions. 

Comments

  • Terms of engagements should be carefully considered – clients may want to include in the terms of engagement the reasons behind why they are seeking the advice of a professional and the precise risks they are hoping to avoid, so that in the event that one of the risks subsequently materialises, the client can point to the terms of engagement to try and limit the advisor’s ability to deny liability. This could, however, deter advisors from acting, due to them being unwilling to accept that should their advice be negligent they would be liable for the risks enunciated. Perhaps then, the battleground has now shifted to the terms of engagement, with clients and professionals having differing objectives as to what should be included.
  • While terms of engagement can be utilised in commercial cases, this is not usually the case in medical cases. Often, the only written record of why a patient is seeking advice is likely to be the medical professional’s own notes. In Khan, there was no dispute about the reason why the patient had been to her GP. However, it is not hard to imagine that there may be instances where it is the doctor’s word against the patient’s about the precise reasons the patient visited the doctor. This begs the question of how such disputes can be prevented. If patients were to be aware of this development in the case law, they may feel the need to start committing to writing the reasons why they are visiting their doctor, and providing such to the doctor before an appointment. Of course, this is perhaps unlikely to happen in practice. 
  • The use of the SAAMCO counterfactual previously meant that parties to the dispute would waste significant amounts of time hypothesising over imagined events, which the other side would then have to try and disprove. The change of emphasis on the counterfactual is therefore to be welcomed, as fixating over hypothetical scenarios does not assist parties in moving towards a resolution. 
  • Question five of the six questions aforementioned introduces the term “duty nexus”. The Supreme Court judgment does not explain the meaning of such further than the reference in question five to a “sufficient nexus” between the element of harm and the subject matter of the duty of care. This conceivably allows scope for disagreement between parties as to what constitutes “sufficient”. 

MBS and Khan provide valuable guidance for assessing the extent of a professional’s liability for negligence. However, it is likely that debate regarding the application of the scope of duty principle to any given set of facts will still continue. The cases that were relatively straightforward under the previous “advice” versus “information” distinction are likely to still be the most straightforward pursuant to the framework set out by the Supreme Court, with those that lie somewhere in between continuing to be hotly contested.

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