Stuart Nevin, associate at A&L Goodbody in Belfast, comments on a UK Supreme Court judgment clarifying the liability of professional advisors following negligent advice.

The judgment concerned a claim brought by a Mr Gabriel against BPE solicitors for negligent advice regarding a loan of £200,000 he made to Mr Little, a developer.

The loan related to an investment in a development site, requiring a company loan to be discharged and the subsequent building out of the site. However, following drawdown of the funds, Mr Little failed to develop the site and the majority of the loan monies were never repaid to Mr Gabriel.

Mr Gabriel argued that he was entitled to damages representing the entire loss he suffered by entering into the transaction, saying that he would not have done so had he not been misled by BPE about how his loan would be used.

The judge ruled that BPE had no duty to advise Mr Gabriel about the commercial risk associated with the project, but held that BPE should have explained to him that his loan would have applied to paying down a separate company loan. Therefore, it was held that BPE negligently misled Mr Gabriel in respect of the statements recorded in the loan documentation.

However, BPE argued that, regardless of the advice they gave Mr Gabriel, the development project was not viable – therefore they appealed this initial ruling at the Court of Appeal.

The Court of Appeal allowed BPE Law’s appeal on the basis that there was no positive evidence to confirm an investment of £200,000 in the development would have sufficiently ensured recovery of Mr Gabriel’s loan. Therefore, it was held that the whole loss was attributable to Mr Gabriel’s misjudgements, not BPE’s, and the damages were reduced to nil.

When Mr Gabriel then appealed this decision further at the Supreme Court, the judge referred to the ‘SAAMCO principle’ in ruling that BPE had provided Mr Gabriel with ‘information’ and not ‘advice’. That is, BPE’s contribution formed only a limited part of the material that Mr Gabriel should have considered before agreeing to lend Mr Little the money.

Therefore, BPE was held responsible only for the financial consequences of their wrongdoing, and not the consequences flowing from the losses of the entire transaction.

The Supreme Court’s ruling in this case brings welcome clarification to a much litigated area of law and its application towards the potential liability of professional advisers.

It should be noted that each case is entirely dependent on its own facts. The ‘advice’ versus ‘information’ distinction is in place to prevent a professional advisor effectively underwriting the entirety of the risk in a transaction where he or she has only advised on a single element of the deal.