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Sometimes you have to take responsibility for your own bad investment decisions

One of the difficult questions in claims against professional advisers is the extent to which a client can say that he relied on his professional advisers to “see all ends” and to warn him of every potential pitfall in a proposed deal.  There have been several cases over the years in which the courts have sought to make it clear just what a professional adviser is, and is not responsible for warning a client about.

The last time the scope of liability was considered by the House of Lords (as it then was) was in 1997, in a case so well known that it is referred to by the acronym of the claimant – SAAMCo.  The House of Lords held, in SAAMCo, that a professional adviser is liable not for the whole loss suffered by his client, but only that part of the loss that relates to the information that was wrong.  In SAAMCo, it was the over-valuation of a property that was the wrong piece of information; and the valuer was responsible only for the losses that flowed from that wrong information, and not the whole of the loss, most of which was caused by a collapse in the property market.

Yesterday’s case concerned a firm of solicitors who had advised a Mr Gabriel over a £200,000 loan he wanted to make to a friend who was a property investor. Mr Gabriel had understood the loan to be secured on a property destined to be converted into offices, but his friend instead used it to pay off another loan secured on the same property. When the friend defaulted and Mr Gabriel repossessed the property, it was found to be worth only £13,000. Gabriel sued BPE on the basis of documentation the firm had drawn up, claiming his full losses from the doomed venture. He won at first instance, but the Court of Appeal (with whom the Supreme Court yesterday agreed) said that Mr Gabriel’s losses were not the solicitors’ fault, but his own, for deciding to invest in a project that was doomed from the start and for failing to get valuation evidence, or to insist on staged loan payments as the renovation progressed. The Supreme Court held that Mr Gabriel’s solicitors were obliged to give him information about the deal, but not advice about the deal and so their liability was limited to the correctness of the information they gave him.

There are still circumstances in which a disappointed client could sue his professional advisers for his whole loss. A solicitor’s liability may be limited to providing correct information, but if that piece of information goes right to the heart of the deal, then in my view that would be a sound basis on which to claim  the whole loss suffered.

For more information on the issues raised in the blog please contact Catherine Fisher, Head of Dispute Resolution on 01483 215357 or email [email protected].


Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.

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