Professional Negligence: Understanding Types of Loss

In order for a professional to be legally liable for an error, there are four essential characteristics which need to be established to succeed in a claim for professional negligence against the professional:

Duty of Care
Breach of Duty
Causation
Actual loss or damage

Even if it is established that a professional owed an individual a duty of care and that duty was breached, if there is no loss, the claim will fail.

In contrast, in a breach of contract, a breach can exist even if no loss is suffered. In that instance, a court may award nominal damages to recognise the breach.

If it is established that the breach has caused an individual loss, only recognised forms of actual loss are recoverable.

Direct Financial Loss

Direct financial loss is a loss that flows directly from the negligent act or advice, such as losing a claim or paying more than necessary (for example, tax, the purchase price of a property, or damages). These types of loss are recoverable against the professional.

Consequential Loss

If secondary losses are foreseeable and not too remote, those losses are also potentially recoverable, such as additional professional or legal fees to rectify the error, remedial or rectification costs, and loss of profits or income which have arisen as a result of the professional’s negligence.

If the claim for losses is not foreseeable and/or the losses are too remote, it is unlikely that a court would award such losses. For example, in a situation where a conveyancer fails to report a planning irregularity, the recoverable, foreseeable loss would be the costs of resolving the planning issue or a reduction in the property value.

If the buyer claims for additional consequential losses, such as the loss of a separate business deal because the buyer’s funds were tied up in the property purchase, this loss would be unforeseeable if the solicitor was not advised of this dependency and, as a consequence, would not be awarded to the claimant by the court.

Loss of Chance

Another type of loss which can be claimed against a professional is where negligence causes the loss of a real and substantial opportunity, such as lost litigation prospects by missing a limitation date. These losses are only recoverable where the chance is more than speculative, and the court would assess the level of damages based on the percentage prospect of success.

If a court considered that the underlying claim had a 55% prospect of success, any damages awarded would be reduced by the prospects of success of that claim. For instance, in the above example, an award of damages of £100,000 would be reduced to £55,000 to take into account the prospects of success of the underlying claim, which the claimant lost the opportunity to progress because of the professional’s negligence.

Wasted Expenditure

If losses have been caused in reliance on a professional’s advice, these losses can be claimed if linked to that negligent advice, such as abortive transaction costs or fees and expenses which have been wasted.

Costs of Mitigation

A claimant is under a duty to take reasonable steps to reduce or avoid further loss. These costs include emergency corrective work and professional fees incurred to limit damage. These costs of mitigation are recoverable.

Non-financial Loss

Generally, claims for loss in relation to distress, inconvenience, and anxiety are not recoverable in professional negligence. However, in claims for breach of contract, nominal damages for distress, inconvenience, and anxiety are sometimes awarded.

Calculation of Loss

Loss is calculated by comparing the claimant’s actual position with the position the claimant would have been in but for the professional’s negligence. In transactional cases, for instance, the loss would be assessed as the difference between the value received and the value that should have been received, such as overpaying for property, entering a contract on worse terms, or paying avoidable tax.

If the negligence was linked to a bad decision, loss would be assessed on the basis of the financial consequences of the decision taken minus the financial outcome of the decision that would have been taken with competent advice.

In order to prove loss caused by negligence, the claimant must be able to show that they would have acted differently with competent advice and that the alternative course would have avoided the loss.

Defences to Loss Claims

A defendant will seek to avoid or reduce any loss claimed by a claimant in a professional negligence claim. For instance, a defendant may argue that, even if there was negligence, the claimant ended up no worse off. Another argument is that, with competent advice, the claimant would have done the same thing.

Another argument put forward by a defendant would be that the claimant’s loss was caused by something else and not the defendant’s alleged negligence.

Defendants will also argue that a claimant’s loss was not a foreseeable consequence of the breach. A further argument put forward by a defendant would be that the claimant contributed to their own loss, such as by ignoring advice or by providing incomplete information to the professional.

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