Introduction
The tort of negligence provides a remedy for individuals who have suffered harm as a result of another person's carelessness. It is a key area of civil law, imposing a duty on individuals to act with reasonable care to avoid harming others. A specific application of this tort is professional negligence, which deals with situations where a person suffers loss due to the substandard service of a professional, such as an accountant, doctor, or solicitor. The question provides a scenario where a client has suffered financial loss after relying on an accountant's careless advice.
This essay will explain the legal principles applicable to this scenario. It will first outline the general concept of negligence in tort law, detailing the core elements a claimant must prove to succeed. It will then focus specifically on the elements required to establish a claim for professional negligence, explaining how the general principles are adapted for professionals and supporting the explanation with relevant case law.
a) The Concept of Negligence in Tort Law
Negligence in tort is not about the state of mind of the defendant, but about their conduct. It is established when a defendant's actions fall below the legally required standard of care, causing harm to a claimant. To succeed in a claim for negligence, a claimant must prove three key elements on the balance of probabilities: the defendant owed them a legal duty of care; the defendant breached that duty; and this breach caused the claimant to suffer damage that was not too remote.
1. Duty of Care
The first step is for the claimant to establish that the defendant owed them a duty of care. The modern concept of the duty of care originates from the landmark case of Donoghue v Stevenson [1932] AC 562. In this case, Lord Atkin formulated the 'neighbour principle', stating: “You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour.” A neighbour was defined as someone "so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected."
While the neighbour principle was a foundational starting point, the test for establishing a duty of care has been refined over time. The current leading authority is Caparo Industries plc v Dickman [1990] 2 AC 605. The House of Lords set out a three-stage test to determine if a duty of care exists in a novel situation:
- Reasonable foreseeability: Was it reasonably foreseeable that the defendant’s actions or omissions would cause harm to the claimant?
- Proximity: Was there a sufficiently proximate relationship between the claimant and the defendant? This can mean physical closeness but also extends to other relationships, such as economic or professional ones.
- Fair, just and reasonable: Is it fair, just and reasonable in all the circumstances for the law to impose a duty of care on the defendant? This allows courts to consider wider public policy implications before imposing a new duty.
If the claimant cannot satisfy all three stages, a duty of care will not be established, and the negligence claim will fail at the first hurdle.
2. Breach of Duty
Once a duty of care is established, the claimant must prove that the defendant breached it. The standard test for breach is objective and was set out in Blyth v Birmingham Waterworks Co (1856) 11 Exch 781, which defined negligence as the "omission to do something which a reasonable man, guided upon those considerations which ordinarily regulate the conduct of human affairs, would do, or doing something which a prudent and reasonable man would not do."
The defendant’s conduct is therefore judged against the benchmark of the 'reasonable person'. The court is not concerned with the particular defendant's own abilities; a learner driver, for example, is held to the standard of a reasonably competent and experienced driver (Nettleship v Weston [1971] 2 QB 691). The court will also consider factors such as the likelihood of harm, the seriousness of potential harm, and the cost of taking precautions to determine if the defendant’s actions fell below the required standard.
3. Causation and Remoteness of Damage
Finally, the claimant must demonstrate that the defendant's breach of duty caused the damage they have suffered. This involves two aspects: factual causation and legal causation (or remoteness).
Factual causation is determined using the 'but for' test. The court asks: 'but for' the defendant's breach of duty, would the claimant have suffered the harm? If the harm would have occurred anyway, then the defendant's breach was not the factual cause. A clear example is Barnett v Chelsea & Kensington Hospital Management Committee [1969] 1 QB 428, where a man died from arsenic poisoning after a hospital doctor negligently sent him home. The claim failed because evidence showed he would have died even if he had been correctly diagnosed and treated.
Even if factual causation is established, the claim may fail if the damage is considered too 'remote'. This is a principle of legal causation that limits a defendant’s liability to damage that is of a reasonably foreseeable type. In The Wagon Mound (No. 1) [1961] AC 388, the defendants negligently caused an oil spill in Sydney Harbour. The oil was ignited by sparks from welding work, causing a fire that damaged the claimant's wharf. The court held that while some damage from the oil spill was foreseeable (e.g., pollution), damage by fire was not. Therefore, the defendants were not liable for the fire damage as it was too remote a consequence of their breach.
b) The Elements Required to Establish Professional Negligence
Professional negligence is not a separate tort but a specific application of the general principles of negligence to a professional context. In the scenario, the client who relied on the accountant's advice must establish the same three elements of duty, breach, and causation. However, the content of these elements is adapted to reflect the special skills and responsibilities associated with professionals.
1. The Professional's Duty of Care
In most professional negligence cases, the existence of a duty of care is straightforward. When a client formally engages a professional like an accountant, a contractual relationship is formed. This contract creates an explicit duty for the professional to exercise reasonable care and skill.
Moreover, a duty of care can also arise in tort, independent of any contract. This is particularly important where advice is given that causes pure economic loss. The case of Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 established that a person can be liable for loss caused by a negligent misstatement if there is a 'special relationship' between the parties. This relationship exists where one party has a special skill, gives advice in the knowledge that the other party will rely on it, and the other party does in fact rely on it to their detriment. An accountant giving financial advice to a client clearly falls into this category, meaning a duty of care to avoid causing financial loss is established through this assumption of responsibility.
2. Breach of the Professional Standard of Care
The most significant difference in professional negligence claims lies in the determination of breach of duty. The standard of care is not that of the 'reasonable man in the street'. Instead, it is the standard of the reasonably competent professional practicing in that specific field.
The key test for determining this standard comes from Bolam v Friern Hospital Management Committee [1957] 1 WLR 582. In this case, concerning a doctor's failure to use relaxant drugs during electro-convulsive therapy, the court held that a professional is not in breach of their duty "if he has acted in accordance with a practice accepted as proper by a responsible body of medical men skilled in that particular art." This is known as the Bolam test.
This means that if an accountant can show that their advice, even if it turned out to be wrong, was consistent with a practice supported by a responsible body of other accountants, they will not be found negligent. It acknowledges that there can be different schools of thought within a profession. However, this test was later qualified by the House of Lords in Bolitho v City and Hackney Health Authority [1998] AC 232. The court in Bolitho stated that the professional opinion relied upon must be capable of withstanding logical analysis. A court can reject an opinion as not being 'responsible' or 'reasonable' if it is illogical or has no rational basis. Therefore, an accountant could not escape liability by finding a small number of 'rogue' experts to support a clearly flawed piece of advice.
3. Causation and Damage in a Professional Context
As in general negligence, the client must prove that the accountant's breach caused their loss. Applying the 'but for' test, the client must show that, but for the negligent advice, they would not have suffered the financial loss. This can be a significant hurdle. For instance, the accountant might argue that the client would have proceeded with the same risky investment even if they had received competent advice, or that the loss was caused by an unexpected downturn in the market rather than the advice itself.
The courts have also recently considered the scope of a professional's duty when assessing losses. In Meadows v Khan [2021] UKSC 21, the Supreme Court confirmed that a professional is generally only liable for losses that fall within the scope of the duty they undertook. The court asks what risk the professional was asked to advise on. In the accountant scenario, if the accountant was advising on the tax implications of an investment, they would likely be liable for any unexpected tax liabilities that arose from their negligent advice, but not necessarily for the loss if the investment itself failed for separate commercial reasons. This principle helps to ensure that a professional's liability is not unfairly extensive. The client in the question must therefore prove that their financial loss was a direct and foreseeable consequence of the specific carelessness in the accountant's advice.
Conclusion
In summary, the tort of negligence is built on the three pillars of duty of care, breach of that duty, and causation of damage. These same principles are required to establish a claim for professional negligence. For the client in the given scenario to succeed against the accountant, they would need to prove each element.
The existence of a duty of care would likely be straightforward, arising from the accountant's assumption of responsibility upon being instructed. The key question would be whether the advice given fell below the standard of a reasonably competent accountant, as defined by the Bolam test and qualified by Bolitho. Finally, the client would have to demonstrate, on the balance of probabilities, that 'but for' this substandard advice, they would have acted differently and avoided the financial loss they suffered. The success of their claim would depend entirely on their ability to provide evidence to satisfy each of these legal requirements.
References
Cases:
- Barnett v Chelsea & Kensington Hospital Management Committee [1969] 1 QB 428
- Blyth v Birmingham Waterworks Co (1856) 11 Exch 781
- Bolam v Friern Hospital Management Committee [1957] 1 WLR 582
- Bolitho v City and Hackney Health Authority [1998] AC 232
- Caparo Industries plc v Dickman [1990] 2 AC 605
- Donoghue v Stevenson [1932] AC 562
- Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465
- Meadows v Khan [2021] UKSC 21
- Nettleship v Weston [1971] 2 QB 691
- The Wagon Mound (No. 1) [1961] AC 388
Books:
- Horsey, K. and Rackley, E. (2021) Tort Law. 7th edn. Oxford University Press.
- Mullis, A. and Oliphant, K. (2021) Torts. 5th edn. Palgrave.
