Client Protection or Compensation Culture? An Introduction to Professional Negligence Law
About the Author
Samantha Love read Law at Merton College, Oxford, and is currently following the BCL course.
If you depend on a professional, they do not take the usual standard of care for their profession and it causes you a loss, it seems almost obvious that you should be able to sue them to recover that loss.
Negligence law requires a relationship of proximity and foreseeability of harm, amongst other things, and both seem to be satisfied here – you have depended on them after all, often with something important such as your health or finances. In line with that we do allow claimants to recover in many cases of professional negligence, in an increasing number of situations that were before considered to be unsuitable for liability. However, that is not to say that the law in this area is entirely settled, satisfactory or coherent. There are so many public policy questions involved, so many complex cases and so many pockets of inconsistent liability that if we were to draw up these laws from scratch they almost certainly would not match the current law! And yet it is interesting to see how the courts deal with such complex cases, and the limits they put on liability in an attempt to keep the ‘floodgates’ of litigation shut against the ‘compensation culture’ so many are worried about.
The argument for professional negligence law
As hinted above, we rely on professionals to perform services or carry out activities which we know little to nothing about. We rely on their expertise, often in situations which could cause us lots of money, hassle or physical or even psychiatric harm. Accountants, lawyers, doctors and car mechanics among many others have the potential to cause us very many difficulties because we trust them with our property or health (or both, in the case of car mechanics!). Businesses rely on one another too, such as when one company hires lawyers or accountants when acquiring another business – they depend on those professionals for a smooth sale and an accurate valuation of the company they are buying. Even when you are a professional yourself, therefore, you will still need to rely on another’s knowledge in a certain area.
Professional negligence law recognises the close relationship of the two parties and the potential for the professional to cause the client some form of loss, which (roughly speaking) is the justification for the duty not to act negligently and cause loss to another. This does, however, need to be balanced with the fact that negligence law is not usually concerned with ‘pure’ economic loss, which will be discussed below.
There is also an argument that professional negligence law will make professionals more cautious, encourage them to take out insurance against such claims and then simply charge all customers slightly more to cover the cost of this insurance, which will pay out if there is a case of negligence. We might also think that it will encourage professions to organise themselves to ensure that standards are upheld and individuals do not give the profession a bad name by regularly being sued. It is a good way to hold those we trust to account, in short, because if we rely solely on contractual provisions we may find that they do not put enough duties on the professional to be fair to the client.
Arguments against professional liability
On the other hand, we can ask whether a duty to act with due care might leave a professional in a difficult position of choosing between his or her professional obligations and the desire to avoid being sued by a client. To meet this concern, Hunter (1) says that a case cannot be brought when it would undermine the finality of judicial proceedings, so that it is unlikely that a criminal barrister would be sued for inadequately representing a client if that client had been found guilty. The concern that because a barrister’s duty is to the court they should not be subject to negligence lawsuits is at least partly met by this limitation on cases. Similarly we might say that doctors should not be found to be acting negligently when they act in accordance with their professional obligations, to make sure that their professional code of conduct is upheld no matter what a patient might ask for.
We still might be concerned, however, that professionals might become overly cautious in their work because of the fear of being sued. This could cause extra costs due to extra time spent on unnecessary work, or extra tests done to check a patient’s health, which in the case of public professionals will be coming from taxpayer’s money but in private cases will simply be passed on to every client through higher fees. Whether or not such practices result from the possibility of negligence actions might be doubted, but it is at least worth considering as a relevant concern.
It is also worth considering whether people might be put off entering a profession in the first place if insurance premiums for liability cover are high and there is a significant chance of ending up in court at least once during your career to defend your work. There is a public interest in encouraging strong candidates to enter professions. Even though these professionals need to be trusted, we also need to ask whether negligence law is the best way to achieve this. As mentioned above, regulatory bodies can achieve quite a lot. Criminal and contract law are also relevant in some serious cases. Negligence law is far from the only option. We can also wonder whether a judge is best placed to decide if a professional has been negligent at all; perhaps a regulatory body can better decide whether a course of action was up to professional standards.
In any case, we might ask whether it is not just inevitable that there are some risks in life, especially with such significant transactions, and say that we should find another way to deal with these cases without dragging a professional’s name through the mud by having to state that they acted negligently. In the case of economic losses, we could ask whether these are just part of the risk-taking process and whether a high level of negligence ought to be necessary in order to justify an obligation to pay compensation. We cause others monetary loss all the time, such as by companies being better than their competitors and taking their customers. The situations we will be considering are usually contractual ones, so perhaps we could leave questions of what happens when things go wrong to the parties, especially when both are businesses who can bargain for the deal they want. As for medical treatments going wrong, we might just ask whether we should adopt New Zealand’s no-fault compensation scheme or something like it. Everyone needs the treatment whether the accident was due to negligence or bad luck, so why not avoid the court case?
Professional negligence law in action – a patchwork of liability
The policy arguments have been laid out first in an attempt to show why this case law is so difficult to explain simply; there are lots of background principles which influence the law. Judges are often clear about these arguments in their judgments, and do take them seriously. Professional liability has developed incrementally as a result of this, and so can be seen in terms of ‘pockets’ of liability that have grown as the courts have convinced themselves that liability is not going to damage a particular profession.
The following section briefly outlines some of the key distinctions and cases in professional negligence law. It is only an outline, and should not be taken as a full explanation of the law in this area. Not only is it complex, it is constantly developing and affects each profession uniquely. If you wish to know this area in depth, consult a textbook (which will direct you to the relevant cases) and the case law.
(1) The existence of a duty of care
The first hurdle in any negligence case is proving that the defendant owed the claimant a duty of care. In the case of medical negligence cases (the most common professional negligence case where physical injury is caused) this is usually straightforward: by offering to treat the patient the doctor is in a relationship with the patient where they ought to think about the consequences of their diagnosis or treatment on the patient. There is a clear danger of physical harm if the doctor makes a mistake.
More controversial are cases in other professions where the harm is what is known as ‘pure’ economic loss; the professional only causes a loss of money, not damage to property or physical injury. A surveyor might negligently give an incorrect value on a property for instance, so a client spends £200,000 on a house worth £150,000 because the surveyor did not notice a structural fault. The surveyor didn’t damage the property – it was already damaged – he just failed to notice the problem and so prevent the claimant from wasting her money. It is only possible to recover compensation for negligently inflicted pure economic loss in specific situations, which are roughly split between activity and statement cases.
Where the professional has provided services/ undertaken an activity, such as overseeing the building of a (defective) house (Murphy)(2) or providing a (defective) product, then there is generally no recovery of pure economic loss. In Muirhead (3) a defective air pump caused the death of the lobsters the claimant was keeping in a tank. He could recover for the loss of the lobsters since this was property damage, but the cost of the pump could only be reclaimed in contract law since it was only an economic loss – it was simply that the claimant had wasted his money on a defective product. Before deciding that these two cases are too harsh, however, it is important to note that there are now statutory schemes that ensure recovery of losses caused by defective premises (4) and of defective products for consumers (5). The Sale of Goods Act also implies a term into most sale contracts whereby the seller warrants the quality of the goods, and the seller will have to pay damages or return the buyer’s money if the goods are faulty (6). In addition, there is an exception to this general rule against recovery in that negligent failure to change wills before a testator dies has been the subject of successful claims (7). This is a particularly significant exception since failure to execute a will properly cannot be altered once the testator is dead.
In contrast, liability for statements depends upon the professional having ‘assumed responsibility’ towards the claimant as regards the subject of the statement (8). Although this case law is generally restricted to business rather than social situations, it covers anyone who ‘holds himself out as having a special skill or knowledge’ (9). Note that you do not have actually have to be a trained professional! Reliance on the statement must be foreseeable and have actually taken place, and the cases show a reluctance to impose liability where the defendant could not see that the claimant would be relying on the information, or could not foresee how many would be likely to rely on it (10). Specific statements to a particular individual for a known purpose and where the defendant knows the claimant will be likely to rely on it (and can reasonably expected to do so) are the main focus. For example, in Smith v Eric Bush (11) it was significant that the claimant, who relied upon a surveyor’s report carried out by the bank instead of paying for her own separate one, was buying a small house and was not likely to have the money or justification to commission an expensive survey herself.
Can we really say that it is coherent to keep these two areas (services and statements) separate? There will inevitably be cases where it is difficult to draw a line between the two, and it makes for some interesting anomalies. Can we really say that a lawyer who forgets a crucial clause in a sale agreement for a company, losing it money through not acquiring certain rights, and an auditor who overvalues that company and provides a wrong statement to that effect, have done completely different things?
(2) Breach of duty
A professional has a duty to act as a reasonable person of that particular skill or knowledge would do. Experience isn’t relevant, however – junior doctors must work to the same standards as their seniors from their first day in hospital (12).
This sounds harsh, but it is in fact difficult to prove that a professional duty has been breached. In line with the earlier concern that a judge may not be able to decide what is required of a professional, Bolam (13) sets down that if a ‘responsible body of [professional] opinion’ would say that the defendant’s actions were reasonable then there will be no breach. This might only be a few people, and yet this is enough. The principle has been slightly limited in that if the judge decides there is ‘no logical basis’ for the supported practice then she can ignore those practitioners (14) but this is clearly meant to be rare. Whilst this ensures more certainty for professionals, can we say it is right to say that if a few members of the profession support certain actions that the courts should leave well enough alone? That the profession can essentially set its own standards? Since disputes will probably largely be in developing scientific areas such as medicine we might see this as acceptable, but it is worth thinking about.
In many cases it will not be too difficult to prove that the professional’s negligence caused the loss. However, in medical cases proving that the negligent treatment actually caused the harm is sometimes incredibly difficult. A negligent failure to diagnose or treat when it is not clear that a correct diagnosis would make a difference – so that all you are claiming for is the loss of a chance to try the remedy – is particularly difficult, and indeed recovery is banned (15). Is it right to invest so much time and effort into answering these questions to which we just don’t know the answer, when in any case a patient who is worse off due to negligent treatment will still get free healthcare to help deal with their condition, disability benefits if they cannot work, and any additional compensation is only being taken out of the funds which the NHS so clearly needs at the moment? Not to mention the money that was spent on the trial! In cases against barristers, too, one would need to show that without the barrister’s negligence the party would have won the case. Yet how would you prove this, without a retrial and therefore questioning an existing judicial decision?
This discussion of professional negligence law has not split out the duties of those who can do physical harm from those more at risk of causing economic harm, as the textbooks probably would. It’s important to recognise, however, that the likelihood of a professional being sued will in large part be dependent on the type of work he is performing. Whether you think the differing approaches for each profession are justified will in part depend on how different you think they all are. Public policy is important, such as the limited nature of the NHS budget (should we be paying out large amounts to individuals, or questioning doctors’ allocation decisions?) or barristers’ duty to serve the court and justice rather than purely the interests of their client, an argument that gave barristers an immunity from negligence suits until relatively recently (16). The inclusion of such important public policy arguments mixed with the incremental reasoning method of the common law is what makes the law so responsive to particular circumstances, but also so complex. Yet for a professional this might only be the tip of the iceberg as far as potential liability is concerned. Contract, criminal law – for particularly serious cases – and the regulatory regime of the profession (if there is one) may all be relevant to some extent or another. This is not the most simple of areas to get a bird’s eye view of, but it is clear that any professional worth his or her salt will be aware of all their obligations, and, crucially, keep their insurance policy up to date.
(1) Hunter v Chief Commissioner of the West Midlands Police  AC 529
(2) Murphy v Brentwood District Council  1 AC 398
(3) Muirhead v Industrial Tank Specialist Ltd  QB 507
(4) Defective Premises Act 1972
(5) Consumer Protection Act 1987
(6) Sale of Goods Act section 14
(7) White v Jones  2 AC 207
(8) Hedley Byrne & Co v Heller & Partners Ltd  AC 465
(9) Bolam v Friern Hospital Management Committee (1957) 1 WLR 582
(10) See Caparo v Dickman  UKHL 2, where the negligent figures were being used for purposes different to their original one and the accountants could not expect such a use.
(11) Smith v Eric S Bush (1990) UKHL 1
(12) Wilsher v Essex Area Health Authority  QB 730
(13) Bolam v Friern Hospital Management Committee (1957) 1 WLR 582
(14) Bolitho v City & Hackney Health Authority (1997) 3 WLR 1151
(15) Hotson v East Berkshire Area Health Authority (1987) 2 All ER 909
(16) Arthur J S Hall and Co v Simons (2000) 3 AER 673