Toby Redgrave on the approach to professional negligence.

Toby Redgrave is a professional negligence litigator at Allison & Humphreys.

In Saamco v York Montagu, the House of Lords has overturned the Court of Appeal's decision (in Banque Bruxelles Lambert SA v Eagle Star Insurance Company) that a mortgage lender, which would not have lent but for a negligent over-valuation of the property to be secured, could recover from the valuer all his foreseeable loss resulting from the transaction, including loss from a fall in property values between the valuation and the date of sale.

Lord Hoffmann reached a different conclusion. Only losses falling within the scope of the valuer' s duty were recoverable. An adviser whose duty was to take reasonable care to "provide information" to enable his client to decide upon a course of action "if he is negligent, will be responsible for all the foreseeable consequences of the information being wrong", namely that the lender had less security than he had thought. Accordingly, the lender could not recover more than the difference between the negligent valuation and a correct valuation.

The Court of Appeal would probably not have differed from the statement quoted above. It considered that where, as a consequence of the information being wrong, a plaintiff had run a foreseeable risk which he would not otherwise have run, the negligent defendant, unless there was a causal break, should bear that risk. But confronted with plaintiffs whose business was taking risks against the security of property, the House of Lords clearly felt that shifting the entire risk to the valuer was unfair.

But is Lord Hoffmann's approach generally fairer? The Appeal Court approach is arguably fairer where the risk is a one-off which, but for the negligence, the plaintiff would not have been exposed to at all. But this approach is not easy to apply.

Although it may be relatively straightforward where one adviser provides one piece of information in ready-quantified form, it will often create complexity and uncertainty. What if the error is not quantifiable, such as where a solicitor negligently fails to inform his lender client of a fact tending to discredit the borrower?

An assessment of the likely recovery from litigation is vital to the initial advice to the client with a potential claim. It will now be harder to make that assessment with a useful degree of precision.