The House of Lords decision in South Australia Asset Management Corporation v York Montague Ltd [1996] UKHL 10 is the foundational authority for the scope-of-duty principle in professional indemnity claims. The case sits behind almost every modern argument about how far a professional's liability stretches when a negligent input contributes to a much larger loss, and any broker or claimant looking at a PI notification needs to understand the shape of it.
The facts were straightforward. A valuer had over-valued commercial properties. Lenders, relying on those valuations, advanced loans that they would not have made had the true value been disclosed. The property market then crashed, and the borrowers defaulted. The lenders' actual losses were far greater than the difference between the valuation and the true market value at the date of the report, because the collateral had since fallen further as a result of general market conditions. The lenders sought to recover the whole of their losses from the valuer.
Lord Hoffmann held that the valuer was not liable for the full transactional loss. The valuer's duty was to provide accurate information about the value of the security; it was not to advise the lender on whether to enter the transaction as a whole. The valuer is therefore liable only for the consequences of the information being wrong, which in SAAMCO was capped at the amount of the over-valuation. The further loss caused by the market crash was not within the scope of the duty the valuer had assumed, even though it was a foreseeable result of the lender having entered into the loan.
Lord Hoffmann drew a working distinction that has dominated the case law since. An information provider supplies one input among several that the client weighs before deciding what to do. The information provider is liable only for losses that flow from that input being incorrect. An advice giver, by contrast, takes responsibility for guiding the client through the whole decision. Where the duty extends to advising on the transaction, the professional may be liable for losses flowing from the transaction itself, not merely from the specific input being wrong.
The dividing line is rarely obvious in practice. Most professional engagements sit somewhere on a spectrum, and a contract that on its face describes a limited information role may in substance be advisory once the surrounding correspondence is read. That is why scope-of-duty arguments turn so heavily on engagement letters, scoping documents and the contemporaneous record.
SAAMCO has been revisited at the highest level twice in recent years. The Supreme Court in Hughes-Holland v BPE Solicitors [2017] UKSC 21 tightened the application of the principle, confirming that the information-versus-advice label is a guide rather than a rigid taxonomy, and that the courts must ask what risks the professional was being asked to take responsibility for. The court in Manchester Building Society v Grant Thornton [2021] UKSC 20 reframed the analysis around the purpose of the duty and the loss for which the law holds the professional responsible, moving away from the rigid information/advice dichotomy towards a more flexible test of scope.
The practical effect for professionals and their PI insurers is that SAAMCO remains the starting point, but the scope-of-duty argument is now run alongside a purposive analysis of what the retainer was actually for.
Scope-of-duty arguments appear in claims against valuers, surveyors, solicitors, accountants, auditors, financial advisers and consulting engineers. The principle is often the difference between a manageable PI claim and one that threatens the limit of indemnity. Apex sees the case cited in notifications across its book, including those falling within the surveyors' PI guide, the solicitors' PI guide and the accountants' PI guide. The principle can also surface in claims involving independent financial advisers and quantity surveyors.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.