Supreme Court clarifies the basis of SAAMCO cap for liability of professional advisers

Published on 3rd May 2017

In a significant decision concerning the liability of professional advisors, the Supreme Court has clarified that negligent advisers who provide clients with information in connection with a particular transaction will only be liable for the financial consequences of that information being wrong, not the entire losses stemming from the transaction.

The Supreme Court has handed down its keenly anticipated decision in BPE Solicitors v Hughes-Holland.  This is the first time the landmark House of Lords’ decision of South Australia Asset Management Corp v York Montague Ltd (known as SAAMCO), which has received considerable academic criticism, has been considered by the Supreme Court.  At stake was the extent to which professional advisors could be held liable for their clients entering into loss-making transactions following negligent advice.

In the sole judgment, Lord Sumption upheld the principle in SAAMCO and in doing so provided some helpful clarification of this controversial case.


SAAMCO concerned claims by mortgage lenders against valuers following the negligent valuation of property.  In essence, SAAMCO established that a valuer’s liability for providing a negligent valuation is limited to the consequences of that valuation being wrong.  The valuer should not be held liable for all losses suffered by the lender if the borrower subsequently defaults and the lender repossesses the property, even if the lender could establish that it would not have advanced the money if the valuation had been accurate.  The House of Lords in SAAMCO made a distinction between:

  • advisors that owe a duty to a client to advise on the entire decision making process of entering into a transaction (‘advice cases’); and
  • advisors that merely provide information which forms part of the material that a client will take into account in deciding whether to enter into a particular transaction (‘information cases‘).

In advice cases, the advisor may be liable for all losses associated with entering into a transaction if they provided negligent advice.  In information cases, losses that were not brought about as a consequence of the information being wrong should be excluded.  What this meant in practical terms was that a lender could not recover more that the amount by which the valuer overvalued the property (often referred to as the “SAAMCO cap”).  Losses attributable to other factors, such as a fall in the property market, would not be the responsibility of the valuer and should be excluded.

BPE Solicitors

BPE Solicitors was a solicitor negligence case in which a solicitor provided incorrect information to his client concerning the intended use of money the client was proposing to invest in a property development.  The solicitors had negligently drafted the loan agreement such that it stated that the loan would be used solely to pay for the cost of developing the property.  In fact, as the solicitors were aware, the loan was to be used to discharge a pre-existing loan that the developer had used to purchase the property.  The claimant would not have advanced the money had he known this fact.

Applying the SAAMCO principle, the Supreme Court determined that this was an “information” case and as such the claimant needed to prove that not only did the defendant’s negligence cause the loss in accordance with normal legal principles of causation, but also that the losses would not have been suffered if the information provided by the professionals had been correct.   Based on the facts of the case, the court was confident in concluding that all of the losses claimed would still have been suffered even if the loan had been used solely to develop the property as the loan agreement had wrongly recorded.  Put simply, the investment was a bad one and the claimant would have lost his money in any event.  Consequently, the solicitors were not responsible for any of the losses claimed.

What does this mean for professionals?

The SAAMCO principle has been the subject of criticism, both in terms of its operation and its basis (whether it should be considered in terms of the scope of duty, causation or remoteness of damages).  There had also been doubt as to how or whether the principle would apply to a wider class of professional adviser than the field of property valuation, where the principle originated.

This case provides much-needed clarification on a number of aspects, in particular:

  • the continuing validity of the SAAMCO principle, which is now not in doubt;
  • the basis of the principle, which Lord Sumption explained should be considered in terms of the scope of duty owed, rather than causation or remoteness;
  • the evidential burden, which falls on the claimant. The claimant must prove that the claimed loss fell within the scope of the duty owed – or in other words that the SAAMCO principle should not apply – rather than the defendant having the burden to prove that the SAAMCO principle should apply; and
  • the application of the SAAMCO principle to a wider class of professional adviser, including lawyers (and therefore also accountants and other types of adviser).

This case provides useful clarification of the scope of the SAAMCO principle and will be welcomed by all professional advisors and their insurers.  Whilst academics may continue to debate it, it is clear that SAAMCO is here to stay.


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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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