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The Supreme Court has handed down its judgments in Manchester Building Society v Grant Thornton  UKSC 20 (MBS) and Khan v Meadows  UKSC 21 (Khan). Both cases focussed on the way you assess a professional’s liability and clarified the Supreme Court’s position on a number of key cases, including South Australia Asset Management Corpn -v- York Montague Limited  AC 191 (SAAMCO). The decision also commented on Hughes-Holland –v- BPE Solicitors  UKSC 21 (BPE), which has been used by professionals to attempt to limit their liability.
In this article, we focus on the MBS decision as this has the greatest impact on lenders’ professional negligence claims. The decision on Khan is a clinical negligence matter.
In summary, we now have a new six part test for assessing damages and, potentially, a more favourable position for lenders who have suffered losses attributable (or partly attributable) to their professionals.
The cases were heard by a seven-Judge Supreme Court, demonstrating the importance of the issue. Although the outcomes were unanimous, the reasoning in each case was split into a majority judgment and two minority judgments – reflecting the complexity of the issue and underlying differences in view as to the nature of the SAAMCO principle.
The facts of MBS are complicated, but in a nutshell:
The SAAMCO principle on capping damages is no longer the appropriate test.
The Supreme Court has reformulated the test for assessing what damages are owed by professionals. The court set out a series of six questions, which should be answered when assessing loss.
The focus of those questions is to
The aim of the Supreme Court’s six questions is to provide the Courts with the mechanism to properly assess what damages a professional is responsible for. This is different from the SAAMCO principle, which often involved convoluted counter-factual scenarios and arriving at arbitrary caps.
This is not to say the SAAMCO counterfactual analysis (i.e. what would have happened had the professional’s advice been correct) is now redundant. Instead, this analysis should only be used as a cross-check on the resulting damages.
This decision will lead to opportunities to seek high damages in certain cases where lenders are able to demonstrate that the professional is responsible for a greater share of the loss.
The decision in particular expressly removes the arbitrary and unhelpful (as commented by the Supreme Court) distinction between “advice” and “information” cases, which has been applied rigidly by professionals post BPE. This should lead to a better, and earlier assessment of the losses caused by professionals.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at June 2021. Specific advice should be sought for specific cases. For more information see our terms & conditions
28 June 2021