Negligence: The blame game

Something has gone wrong, a financial loss or injury of some kind has arisen, and you are looking for someone to take the blame as clearly this has nothing to do with your own conduct and is not simply a case of bad luck, or ‘buyer beware’. This scenario plays out across the land all year round, where parties are looking to gain financial resolution to matters that have gone awry by pointing the figure at a doctor, a surgeon, an architect, a lawyer, an accountant (the list goes on) for failing to carry out their work to a standard expected of a typically qualified, experienced professional.

In a nutshell, these types of incidents become the start of professional negligence cases.

The initial hurdle any potential claimant, alleging professional negligence, needs to get over is to establish and prove a duty of care - without that underlying premise any negligence claim will find itself on wobbly ground. Did the accused lawyer, accountant, architect etc owe a duty of care to the claimant, was that duty breached, and can that breach be quantified - the bar for proving professional negligence, when considering these hurdles, is naturally a high one.

The initial duty of care concept finds it roots in 19th century law, in the 1854 case of Hadley & Anor -v- Baxendale & Ors. A replacement crank shaft was not delivered on time and the business claimed that because of the supplier’s negligence in its provision of the part that it suffered business interruption and a loss of profit; however it was established on appeal that the defendant company had no way of knowing that its late delivery would have a financial impact on the claimant and, as such, there was no duty of care in that respect, only in respect of the part delivered being of good working order and fit for purpose. If no duty of care exists, any negligence claim will struggle to win the judge’s favour.

The level of neglect in any matter will also have the capacity to widely vary, contrast a domestic matter where the parent goes out to the pub leaving a young child on its own at home (wilful neglect) with a parent who gets momentarily distracted leaving their child briefly exposed to potential danger (unintentional neglect). At the outset of any claim, the person claiming needs to establish what level of neglect has taken place, assuming a duty of care has already been proven. What action has taken place that breached this duty, over what period did it take place, is there a direct cause and effect relationship between the negligent breach and the defendant, and what are the financial implications?

For the defending professional, it can be many months or even years after advice or a service has been provided that they learn they are being accused of professional negligence and financial redress is being sought.

A defendant’s typical reaction will be to:

• consider what insurance it has in place for the claim and whether their policy is suitable to meet any successful claim.
• review the nature of the allegation.
• establish who worked on the matter.
• undertake an initial review of the facts.
• instruct legal counsel to assist in drafting a defence.

The first line of interest for any defence will be whether a duty of care has been established, and can the losses now claimed be linked directly to the work the professional undertook. It will also be important that clear terms of engagement can be evidenced, as this may support a defence for carrying out the work or providing the service it was instructed to, and not to go beyond that agreed scope.

A current case in the public eye where voices have rightly been growing louder is the case of the Post Office sub postmasters, whose case has now been brought to the public’s wider attention (the writer’s attention having been alerted by providing initial forensic assistance to Lee Castleton, one of the sub postmasters that brought the original group action, at the very early stages of his legal battle in the mid-2000’s).

One matter that has not particularly been in the headlines of that case though is whether anyone who reviewed those systems acted negligently. It was, after all, the Horizon system that underpinned the whole of the Post Office accounting system and would have been expected to form a mandatory part of any systems review programme.

Hypothetically, in that case, should any causal link and duty of care be initially established, the next stage of contention would be the level of quantum and the most appropriate method of quantifying the claim, this is where the role of forensic expert witnesses comes into play.

They would typically opine on:

1. whether the procedures expected of a reasonably competent accountant (or auditor) had been followed.
2. the accounting mechanism for calculating losses arising from the actions of the lawyer, the architect etc.

At Crowe, an example of (1) above occurred regarding a firm of solicitors, where the senior partner had for a number of years diverted funds away from client accounts for their own benefit; the partner had been above suspicion as they held a senior post within the law firm and had close connections with the church, the fraud was uncovered and the partner finished with a spell in jail but, in the process, the spotlight was turned onto the practice’s internal auditors as to why their work had not uncovered the wrong doing at a much earlier point; had they in fact been negligent. Our instructions were to review the work the auditors had undertaken across a number of historic periods and to give a view as to whether there was anything they should have been able to do at that time to prevent the monies being diverted for criminal purpose, or rather did their working papers and dealings with management include everything that might have been expected to be covered, and effectively the crime was devised so as to avoid the reach of any external review.

For (2) above, a recent case involved a relatively small law firm assisting their client with a significant government contract which, for a number of reasons, never properly got off the ground, with the contractual parties falling out on its provisions, with the end result being the contract was effectively torn up; the losses flowing from this dispute were initially claimed against one of the intermediaries to the contract, but this proved unsuccessful; as a result, the claimant turned their focus onto the lawyers for their alleged negligence in not reviewing the contract provisions efficiently. It was not for us to opine on that specific matter (as we are not lawyers) but what we were able to opine on, should the case of negligence be proven, was to assist in the defence of the lawyers in the calculation of the £multi-million (and ultimately we proved to be highly inflated) claim. What started out as a claim well in excess of £100 million was ultimately reduced to less than £10 million.

What is not in doubt is that professional negligence claims will continue to be made wherever financial loss, or crime, has taken place and a professional has been involved in some aspect of the business, creating a need for all professionals to ensure their teams follow due process, and best practice, to mitigate any claims arising.

How Crowe can help

The Crowe Forensic Team work on a significant number of forensic cases, of varying sizes; we always happy to have an initial no obligation discussion on any matters where we can add value and advice. For more information, please contact Martin Chapman.

This article was first published in the Expert Witness Journal April 2024.