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‘Implications across the board’: Supreme Court clarifies professional negligence rules in landmark BPE Solicitors case

City partners have reacted positively to a Supreme Court ruling which found a firm was not responsible for the entire costs of a client’s failed property transaction.

In the case, Peter Hughes-Holland, trustee on behalf of adjudicated bankrupt Richard Gabriel, claimed BPE Solicitors owed him damages amounting to roughly £200,000 for negligent advice for the purchase of a disused heating tower in Gloucestershire.

Supreme Court justices Lord Mance, Lord Clarke, Lord Sumption, Lord Hodge and Supreme Court president Lord Neuberger unanimously rejected an attempt to overturn a decision that the firm was not responsible for the entire costs of a disastrous property transaction because it provided allegedly erroneous information after a client had decided to embark upon the transaction.

Lord Sumption said: ‘BPE was only legally responsible for confirming Gabriel’s assumption about one of a number of factors in his assessment of the project.

‘If that assumption had been right, Gabriel would still have lost his money and so none of the loss he suffered was within the scope of BPE’s duty. It arose from commercial misjudgements which were no concern of theirs.’

RPC insurance partner Joe Bryant commented: ‘This judgment is a nice clarification. Even in situations where you’re reasonably heavily involved, you’re only one ingredient in a wider recipe. You don’t necessarily have all the facts.

He added that it was another bit of ammunition to use against claimants who argue on a ‘no transaction’ basis.

Bryant said: ‘There could be implications across the board. Looking at M&A transactions, you can see lawyers are not providing advice on the entire package. It’s always the client’s decision, we don’t make the decision for them.

‘It will definitely result in a toughening up of a defendant’s approach to these sorts of cases. Claimants are going to have to work a lot harder to recover their full losses.’

Clyde & Co professional liability partner James Preece added: ‘In the lending environment it gets rid of the idea that a conveyancing solicitor’s failure to report matters which go to a borrower’s integrity exposes the solicitor to the full extent of the lender’s loss, which is the position that has prevailed until now.

Preece (pictured) said: ‘It will therefore have a very dramatic impact upon those types of claim in future. It remains to be seen how far reaching the decision will be as regards other types of work by solicitors and indeed other professionals, but it is certainly very good news for insurers and their professional insurers.’

Roose + Partners represented Hughes-Holland in the case, and instructed David Halpern QC of 4 New Square and Three Stone’s Adam Chichester-Clark. Beale & Co acted for BPE Solicitors, instructing Roger Stewart QC and Scott Allen, both of 4 New Square.

Read the full decision here.