Supreme Court provides guidance on new blueprint for professional negligence claims

The cases of Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20 and Khan v Meadows [2021] UKSC 21 arguably provide a new legal blueprint for professional negligence cases.  The landmark cases were heard together to “provide general guidance regarding the proper approach to determining the scope of duty and the extent of liability of professional advisers in the tort of negligence”.

Both cases prvoide a judicial re-examination of South Australia Asset Management Corporation v York Montague [1997] AC 191 (also known as the SAAMCO case), which held that claimants must establish that the loss they suffer is a result of the defendant’s breach of the duty of care owed to the claimant.  

However, rather than taking the approach of the judges in the SAAMCO case and focusing on causation, in these cases the judges placed more focus on identifying the scope of the defendant’s duty and its purpose.

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Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20

The case of Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20 involved professional advice that was given negligently and incorrectly by an accountancy firm (Grant Thornton) to a building society.  

The building society acted on the professional advice by preparing its accounts according to the “hedge accounting” method and entering into long-term interest rate swaps believing that doing so would provide an accurate representation of its financial position.

Grant Thornton then realised its mistake and that the advice provided led to the misstatement of the building society’s accounts, meaning that it had insufficient regulatory capital and reduced assets and that “hedge accounting” should not have been used in relation to the swaps. This forced the building society to close down its interest rate swap contracts early resulting in a loss of £32 million. The appeal therefore centered on whether the loss was recoverable as a result of Grant Thornton’s breach of duty in providing negligent advice which the building society acted on.

The Judgment

The Supreme Court allowed the appeal and ruled that the building society had suffered a loss that was recoverable as it fell within the scope of duty of care owed by Grant Thornton.  However, the damages were reduced by 50% on the basis of contributory negligence.

The judges focused on the scope of the duty of care rather than causation in the SAAMCO case and stated that:

“the scope of the duty of care assumed by a professional adviser is governed by the purpose of the duty, judged on an objective basis by reference to the reason why the advice is being given.” – Paragraph 13

Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20, paragraph 13

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Khan v Meadows [2021] UKSC 21

The case of Khan v Meadows [2021] UKSC 21 also concerned the scope of duty of care in the context of professional advice given by a medical expert.  It involved a woman who consulted her general practitioner (GP) to establish whether she carried the haemophilia gene or not.  The GP however conducted the test negligently and incorrectly informed the claimant that if she were to give birth to a child, the child would not be born with haemophilia.

As a result of this misdiagnosis, the claimant gave birth to a son with haemophilia as well as autism.  Had she been given the correct advice, she would have undergone foetal testing for haemophilia while pregnant and would have terminated the pregnancy upon finding out that her son had haemophilia.

The claimant sought to recover the costs for her son’s haemophilia and autism despite the two conditions being unlinked.  She argued that if her GP had diagnosed her correctly, her son would not have been born and she wanted her GP to be held liable for the costs of her son’s haemophilia and autism which equalled a total of £1.4 million.

The Judgment

The Supreme Court ruled that the costs of the child’s autism were not within the scope of the GP’s duty of care but the GP was held liable for his haemophilia due to the negligent medical advice provided to the claimant.  

Although the judges utilised a new approach of analysing the scope of the defendant’s duty of care in this case, it also demonstrates that the SAAMCO ruling will be considered in relation to clinical negligence cases as it was held that the claimant would not have suffered loss if she had been informed that she did carry the haemophilia gene.

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Supreme Court guidance on actionable negligence claims

1) “Is the harm (loss, injury and damage) which is the subject matter of the claim actionable in negligence? (the actionability question)

2) What are the risks of harm to the claimant against which the law imposes on the defendant a duty to take care? (the scope of duty question)

3) Did the defendant breach his or her duty by his or her act or omission? (the breach question)

4) Is the loss for which the claimant seeks damages the consequence of the defendant’s act or omission? (the factual causation question)

5) 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 2 above? (the duty nexus question)

6) 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 (including novus actus interveniens) in relation to it 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? (the legal responsibility question)”

Paragraph 6 of Manchester Building Society v Grant Thornton UK LLP [2021]

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