SAAMCO v York Montague [1996] 3 All ER 365

KEY POINTS

• To recover damages for negligent advice, the plaintiff must prove:

  • That he has suffered loss, and

  • That the loss fell within the scope of the duty.

• Under the SAAMCO principle:

  • A person providing advice on whether or not a course of action should be taken is responsible for all the foreseeable loss which is a consequence of that course of action having been taken.

  • A person whose duty is only to supply information upon which another will rely in choosing a course of action is responsible only for the consequences of the information being wrong.

FACTS

• SAAMCO was a financial institution providing finance for property development and investment. York Montague was a firm of chartered surveyors who were hired by a borrower to provide a valuation of a property for the purpose of securing a loan from SAAMCO.

• The surveyors provided an over-optimistic valuation of the property, significantly inflating its value, which induced SAAMCO to lend a larger amount than they otherwise would have.

• The borrower subsequently defaulted on the loan, and the property's actual value was significantly lower than the valuation provided by the surveyors.

• SAAMCO sued the surveyors, claiming that they were liable for the entire amount of the loan that they would not have extended had the valuation been accurate.

JUDGEMENT

• Appeal allowed.

COMMENTARY

• The SAAMCO case clarified the principle that professionals are only liable for losses that are a direct result of their negligence within the scope of their duty.

• This principle helps define and clarify the boundaries of professional liability, preventing professionals from being held accountable for losses that are not a direct result of their negligence.

• It underscores the importance of clear communication and engagement terms between professionals and their clients, as well as the need for professionals to consider the potential consequences of their actions and advice.