Supreme Court clarifies approach to SAAMCo Cap in professional negligence claims

Courts have misapplied the approach to solicitors’ liability in negligence claims, according to a Supreme Court ruling which clarifies the law.

The case concerned two men who obtained legal advice from BPE Solicitors on a loan agreement between the pair.

One loaned £200,000 to the other. There was then a dispute over the use of the funds and the transferor sued the transferee and the law firm, ultimately failing at the Court of Appeal.

In his judgment, Lord Sumption ruled that the Court of Appeal was correct in finding that the law firm was not liable for the losses. Lords Neuberger, Mance, Clarke and Hodge agreed with the ruling.

The ruling provides further clarification of the application of the “SAAMCo Cap”, which was established in South Australia Asset Management Corp (SAAMCo) v York Montague Ltd in 1996.

Lord Sumption said: “The decision in SAAMCO has often been misunderstood, not least by the writers who have criticised it.”

That decision establishes that a professional providing part of the information on which someone is basing a decision can only be held liable for the consequences of that piece of information being wrong. Professionals cannot be held liable for loss that would still have been suffered even if the erroneous information had been true.