January 18, 2019
Most businesses rely at one point or another on the services of a professional advisor, such as an accountant, solicitor, financial advisor, or insurance broker. A trusted advisor provides a great benefit to a business, but it is an unfortunate fact of life that sometimes things go wrong. This article provides some points to consider when a professional has made a mistake or provided some bad advice, and that has caused a financial loss.
The law of professional negligence is broad and complex, but the fundamental issues are:
Does the professional owe a duty – this can be established either because there is a contract to provide services, and/or because there is an advisor/client relationship.
Even where there is no formal relationship between the parties, a professional may assume responsibility for advice given to someone who relies on that advice. For example, a duty of care has been found to exist in circumstances where a professional has, on the face of it, merely tried to help out a friend without any payment.
What is the duty, or standard of care, and has it been breached – a contract to provide services will automatically involve a duty to provide those services with reasonable care and skill. In negligence, the required standard is to act as a reasonably competent practitioner would. If the professional holds themselves out as an expert in a particular field, they will be judged by the standards of other professionals with that expertise.
Professionals are not expected to be perfect, and not every mistake will constitute a breach of duty. Each case is dependent on its facts, and a number of factors will need to be taken into account.
Has the breach caused a loss – a claimant would need to establish that, if the contract had been performed with reasonable care and skill, they would not have suffered a loss. Or, that they would not have suffered a loss but for the professional’s negligent act or omission.
The losses also need to be of the kind that the parties would have contemplated at the time of making the contract or could have reasonably foreseen at the time the negligence occurred.
If it appears that there is a potential professional negligence claim, then there are a number of things to consider:
Can a simple and straightforward discussion resolve the problem – sometimes an open and frank conversation can address issues and clear up misunderstandings that, if they are not confronted, can cause more serious disputes to develop. This can take place on a ‘without prejudice’ basis so that if the issues are not resolved the contents of the discussions cannot be referred to at any later trial.
If an agreement is reached, then it is always advisable that there is a record of it. This may be as simple as an exchange of emails to confirm what has been agreed, but sometimes a more formal settlement agreement will be appropriate.
Are there any unpaid fees – a client that (justifiably or not) feels aggrieved with the service provided will often withhold payment of fees. This can sometimes lead to a professional negligence claim being brought in response to a claim for unpaid fees. It is usually better to be proactive in a dispute so this aspect should be considered and properly managed.
Is the professional insured and have the insurers been notified – it is in everyone’s interests that the professional takes all appropriate steps to notify their insurers of a claim or a potential claim so that the ability to make a claim against the policy will not be affected.
Has all relevant evidence been secured – ensuring that all relevant documents are preserved is an essential step to take at an early stage of any dispute?
Is there a complaint procedure or dispute resolution mechanism – many firms will have a complaints procedure, and there may also be a low-cost dispute resolution procedure available, for example, the Financial Services Ombudsman, or Legal Ombudsman.
What are the next steps – if the dispute cannot be resolved then the first stage is a detailed Letter of Claim under the Pre-action Protocol for Professional Negligence (“the Protocol”). Although this is a more formal step, and an important document in any claim, it does not mean that a long drawn out claim is inevitable. The Protocol encourages the parties to exchange information early, avoid unnecessary costs, and to reach a settlement. There are a number of ways a settlement may be facilitated, but in a relatively recent development, the Protocol specifically requires the claimant to indicate whether or not they wish to refer the dispute to adjudication.
Adjudication is the process whereby the parties submit their evidence to an independent expert, who provides a binding decision, usually without the need for a hearing. The process is likely to be much cheaper and quicker than court proceedings, and of particular benefit in lower value claims.
This article is not intended to be relied on as legal advice, but if you are affected by any of the issues referred to, we would be happy to have an initial discussion about your specific circumstances at no charge. Please feel free to call us on 0161 667 3686 or send an email to email@example.com.