In the instance that a claim in professional negligence is sought, there are three major elements that need to be satisfied. However, due to the issue of causation, a loss can be difficult to prove when claiming damages. Also, professionals tend to have professional indemnity insurance policies to protect them from errors that may have caused a loss to a client.
The most experienced accountants, surveyors, financial advisers and lawyers all make mistakes from time to time. The consequences of their professional negligence can be financially devastating for their clients so inevitably claims for professional negligence follow.
Generally speaking, perhaps financial advisors are the professionals most exposed to negligence claims at the time of writing due to the constantly changing regulatory and tax environment in which they operate; that said, providers of professional services and suppliers of goods are always exposed to claims for defective work. Scrutiny over financial advice related to tax avoidance schemes is likely to become more intense over the coming months as HM Revenue and Customs issue advanced payment notices and follower notices under the latest incarnation of the Finance Act, 2014.
In general terms, trends in professional negligence claims are not encouraging for professionals as a wider group. Despite a slight fall in the numbers of professional negligence claims in 2010 following the onset of recession in 2009, the overall numbers of claims have been rising dramatically in recent years.
In any potential claim for professional negligence, the law of torts requires that three basic elements must be established in order for it to succeed. Firstly, to establish a claim for negligence the claimant must prove that the professional owes them a duty of care. This element of the test is usually simple for a claimant to demonstrate where it can be shown that there is a formal engagement of the professional by the client. Generally, if a professional is engaged to provide services, it is likely that they owe a duty of care.
The second element of the test for professional negligence requires that the professional must have breached that duty of care. The duty of care for professionals is set higher than that of an ordinary person since professionals hold themselves out as having specialist skills, abilities and expertise. Liability is gauged by an objective assessment of whether the professional fell below the standards of a reasonably competent professional in that profession.
The final element for establishing professional negligence requires that the claimant prove the loss was caused as a direct result of the negligent act. A claimant can only be compensated for a loss which would not have been suffered but for the negligence or omission of the professional. Proving this element, known as causation, can be difficult in many cases which is why defences often focus their arguments in this area.
There are many cases that demonstrate the difficulties of securing compensation where negligence exists but where there is a failure to prove that it caused the claimant’s loss. The case of Hirtenstein & Anor v Hill Dickinson LLP [2014] is a recent example in which negligence was admitted by the defendant law firm but the claim for damages still failed for lack of causation.
Typically professionals have professional indemnity policies in place to protect themselves against legal claims for errors or omissions that cause losses to clients. This is because in regulated sectors professionals are required to have professional indemnity insurance policies in place, under which any claims will usually be dealt with. Without this it may not be advisable to pursue a claim if the professional or their firm does not have adequate assets.
Claims for professional negligence generally have a limitation period of six years otherwise they are statute-barred under the Limitation Act 1980. If a claim is to be pursued, there are specific guidelines known as Pre-Action Protocols for certain types of civil actions, one of which relates to professional negligence claims. It is important that these are considered from the start as failure to do so may have cost implications later on.
For expert advice from our professional negligence claims lawyers in London to make or defend professional negligence claims please contact David Wheeler.