Business Law & Compliance

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A guide to professional negligence claims

3 Mins

The impact can be disproportionately severe on smaller companies yet resources may be limited in obtaining redress. Yet a lack of in-house legal team or cash or time need not prevent swift progress to putting things right.

Typical claims might be:

  • Badly drafted contracts, or leases, preventing termination when required (or allowing a third party to do the same when you don’t want them to!);
  • Company structure and tax advice that leaves an excessive bill or, worse, an accountant who misappropriates company money;
  • Development property purchases where, for example, essential rights of way are not obtained or covenants apply that were not mentioned to you when you bought the site;
  • A survey report that fails to identify serious defects on an investment property;
  • Investments, possibly pensions or unregulated collective investment schemes, that perform badly because they were higher risk than intended; and
  • An insurance policy that did not cover what was requested

All of these potentially allow a claim against the relevant professional.

Loss

First of all you need to calculate your loss. However bad the advice, if it did not result in a loss then no claim can be made. Loss might be the difference in value between the (defective) site purchased and the price paid; but it can also include the cost of putting it right, wasted management time and the lost opportunity of investing the company’s monies in more profitable projects. Interest can also be claimed.

Broadly, losses of less than £10,000 are not worth the costs invested into a legal claim and can be sought in the small claims court at little cost and risk. Anything above that could be worth pursuing.

Bad work

The other essentials that you need to show are:

  1. The professional owed you a duty of care, either because there is a contract between you and them, or because there was a particular relationship that gave rise to the need for that professional to be careful in their work. Usually if the business has retained a professional there will be a contract setting out what they agreed to do but, if not, a claim is still likely under general law; and
  2. The professional must have done a poor job by comparing what a reasonably competent professional in their position would have done. This is assessed by using an independent expert to review the work, although in many cases it is obvious.

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