PROFESSIONAL NEGLIGENCE PROFESSIONAL SUICIDE: HOW TO AVOID THIS CATASTROPHE !!

WHAT IS PROFESSIONAL NEGLIGENCE ? NEGLIGENT ADVICE NEGLIGENT MISSTATEMENT LINK TO “WROMGFUL ADVICE

FUNCTIONS OF THE PROFESSIONALS PRIMARY FUNCTION IS TO GIVE ADVICE ALSO TO CARRY OUT INSTRUCTIONS THE ADVISER OWES A ‘duty of care’ to clients and to others affected

What is ‘Advice’? Covers a wide range of activity, primarily leading to the providing information and presenting options to be chosen by the client Examples – plans (of buildings), reports, analyses, audits, business opportunities

What is incorrect advice ? Wrong information Incomplete information Incorrect analysis Advice that is inappropriate due to misunderstanding the client’s objectives

Consequence of incorrect advice For the client – financial loss And the right to bring a claim for compensation against the adviser For the professional adviser – damage to professional reputation and loss of clients Compensation for client’s loss is covered by professional indemnity insurance premium

Extent of professional indemnity cover For mistakes made so extends to civil liability ONLY Accountants: professional misconduct is punished and is a personal liability Cover does not extend to advice assisting the client to avoid criminal charges

Extent of liability for ’Negligent Misstatement Caparo v Dickman 1990 shows that to bring a successful claim against an adviser three elements must be proved:  proximity between claimant and defendant  Foreseeability of loss  That it is just and reasonable for the defendant to be liable  NB each claim is looked at accounting to its own material facts

Examples of negligent advice accountants: Caparo v Dickman 1990 shows who can rely on the advice solicitors :Ross v Caunters 1980 shows obligation to advise a client where failure to give advice results in loss

Examples of negligent advice Solicitors: liability extended to persons who were NOT CLIENTS by  White v Jones 1993 failure to carry out instructions; solicitors knew (i.e. should have been aware) that failure would result in loss to the beneficiaries)  Solicitors: limit on extended liability for professional advisers decided in: Hennens v Wilson Browne 1993