Law of Torts
Professional Negligence Outside Medicine: Advocates, Architects, Accountants, and Liability for Negligent Misstatement
The standard is the same for every calling that professes a special skill: the ordinary competent member of that profession. What differs between them is not the test but the content of the skill and the scope of the duty. The distinctive problem outside medicine is that professional negligence usually causes pure economic loss rather than physical injury, and that the loss is often suffered by a third party who read the advice rather than by the client who paid for it. Hedley Byrne v. Heller supplied the answer: a duty arises where the defendant assumes responsibility and the plaintiff reasonably relies, and Caparo confined it by reference to the purpose for which the statement was made.
The professions, the Hedley Byrne requirements, and negligence against misconduct
1. The Professional Standard
- The test is the ordinary competent member of that profession, exercising and professing to have that special skill.
- Not the most eminent practitioner. A professional is not negligent merely because a more distinguished colleague would have done better.
- Not the ordinary man either. A person who does not profess the skill is judged by what a reasonable person would do; one who professes it is judged by what a competent practitioner would do.
- Inexperience is no defence, because the professional holds himself out as competent, and the client is entitled to expect competence.
- A specialist is judged by the standard of a specialist in that field.
- Bolam applies outside medicine, and so does Bolitho: the practice relied on must withstand logical analysis, and compliance with a professional code is evidence of reasonable care and not conclusive of it.
2. The Professions
The profession | The duty, and its limits |
Advocates | Reasonable care and skill in advising and in the conduct of the matter. Missing a limitation period, failing to plead an available case, or failing to advise on an obvious point may be negligent. An error of judgment on a difficult question of law is not. Advocacy in court has historically attracted a degree of immunity |
Architects | Reasonable care and skill in design and in supervision of the works. Compliance with the building regulations and codes of practice is evidence of care, not a complete answer. The duty may extend to the ultimate occupier where the defect creates a danger |
Engineers | The same, applied to the discipline in question, with a higher standard where the work involves public safety |
Chartered accountants | A duty to the client in contract and in tort, in the preparation of accounts, in tax advice and in the conduct of the engagement |
Auditors | A duty to the company, and to third parties only where responsibility is assumed. Caparo confines it sharply |
Surveyors and valuers | A duty to the person for whose guidance the valuation was prepared, and to a person the valuer knew would rely on it for the transaction in question |
3. Negligent Misstatement
📖 Hedley Byrne and Co. Ltd. v. Heller and Partners Ltd. [1964] AC 465 Facts The appellants were advertising agents. They proposed to place substantial advertising orders on behalf of a client company, on terms that made them personally liable. Through their own bankers they asked the respondent bank, the client's bankers, for a reference as to the client's creditworthiness. The respondents gave a favourable reply, expressly headed "without responsibility on the part of this bank or its officials". The client went into liquidation and the appellants lost over seventeen thousand pounds. Held The respondents were not liable, because of the disclaimer. Ratio Notwithstanding the outcome, the House of Lords established that a duty of care may arise in respect of a negligent misstatement causing purely economic loss, independently of contract and of any fiduciary relationship. It arises where there is a special relationship between the parties, where the maker of the statement assumes responsibility for its accuracy, and where the recipient reasonably relies on it. An effective disclaimer negatives the assumption of responsibility and so prevents the duty from arising. |
The requirement | What it means |
A special relationship | The maker of the statement must be in a position where it is reasonable for the recipient to rely on his skill and judgment |
Assumption of responsibility | Judged objectively: what the defendant's conduct conveyed, not what he privately intended. A disclaimer may negative it |
Reasonable reliance | The recipient must in fact have relied, and it must have been reasonable for him to do so |
Knowledge of the purpose | The defendant must have known the purpose for which the statement was sought and that it would be acted on for that purpose |
A determinate class | The statement must have been made to the plaintiff or to a class of which he was a member, and not to the world at large |
4. How Caparo Confined It
📖 Caparo Industries plc v. Dickman [1990] 2 AC 605 Facts The plaintiffs bought shares in a company, relying on its audited accounts, and then made a successful takeover bid. They alleged that the accounts were inaccurate, showing a profit where there had been a loss, and that the auditors had been negligent. They claimed both as existing shareholders who bought more shares and as outside investors. Held No duty of care was owed, either to existing shareholders buying further shares or to members of the investing public. Ratio The auditors' statutory duty is owed to the company, for the purpose of enabling the shareholders as a body to exercise informed control over the company. It is not owed for the purpose of guiding investment decisions by individual shareholders or by the public. The controlling question in negligent misstatement is the purpose for which the statement was made and communicated, and whether the defendant knew that this plaintiff would rely on it for that purpose. |
5. Why Economic Loss Is Treated Cautiously
- Words travel further than acts. A careless act injures those physically present; a careless statement may be repeated, forwarded and relied on indefinitely.
- The risk is of liability in an indeterminate amount, for an indeterminate time, to an indeterminate class, which is the classic formulation of the problem.
- The assumption of responsibility test is the device that keeps the class determinate, because it confines the duty to those the defendant knew would rely on the statement for the purpose for which it was given.
- A disclaimer is effective to negative the assumption, subject to any statutory control of unfair terms.
- And the caution is specific to pure economic loss. Where the negligent advice causes physical injury or property damage, the ordinary principles of negligence apply without this additional control.
6. Professional Negligence and Professional Misconduct
Professional negligence | Professional misconduct | |
What it is | A want of the reasonable care and skill the profession requires | A breach of the standards of conduct the profession sets |
Who complains | The client, or a third party who relied | A complainant, or the professional body of its own motion |
The forum | A civil court, or a consumer commission | The Bar Council, the Institute, the Medical Council or other professional body |
The object | Compensation for the loss | Discipline, to protect the public and the standing of the profession |
Is loss necessary | Yes. Damage is an essential element | No. Misconduct need cause no loss to anybody |
Is carelessness enough | Yes, if it falls below the standard | Not usually. Misconduct ordinarily imports something more than carelessness |
Effect of one on the other | None. The proceedings run independently, and a finding in one does not conclude the other |
- The separation is the same one confirmed for medicine in Kousik Pal v. B.M. Birla Heart Research Centre, 2025 INSC 1487, where the Supreme Court held that the power to grant compensation is separate and distinct from the disciplinary power of the State Medical Council.
- A single act may be both, or either, or neither, and each forum answers its own question.
7. The Practical Points
⚠ What decides these claims Three things decide most professional negligence claims outside medicine. The first is the scope of the retainer: a professional is liable for failing to do what he undertook to do, and not for failing to do something outside it, so the engagement letter is usually the first document read. The second is the purpose of the statement, which is what Caparo made decisive: a valuation prepared for a lender is not a valuation prepared for a purchaser, and a set of audited accounts prepared for the company is not prepared for an investor. The third is causation, which in economic loss cases is frequently the hardest issue: the plaintiff must show that he relied on the advice and would have acted differently without it, and a court will test that against what a commercial party would actually have done. |
8. The Position Stated Shortly
1. A professional is judged by the standard of the ordinary competent member of his profession, and inexperience is no defence.
2. Bolam and Bolitho apply outside medicine as within it, and compliance with a professional code is evidence of care and not conclusive.
3. An advocate owes reasonable care and skill in advising and in the conduct of the matter, and an error of judgment on a difficult point of law is not negligence.
4. An architect or engineer owes reasonable care in design and supervision, and the duty may extend to the ultimate occupier where a defect creates a danger.
5. An auditor owes his duty to the company, for informed control by the shareholders as a body, and not to the investing public: Caparo.
6. Hedley Byrne v. Heller established liability for negligent misstatement causing pure economic loss.
7. It requires a special relationship, an assumption of responsibility, and reasonable reliance, and an effective disclaimer negatives it.
8. Economic loss is treated cautiously because words travel further than acts, and the assumption of responsibility test keeps the class of claimants determinate.
9. Professional negligence and professional misconduct are different: the first requires loss and is compensated, the second does not and is punished.
10. The two proceedings run independently, and a finding in one does not conclude the other.