South Australia Asset Management Corp v York Montague Ltd [1997] AC 191, universally known as SAAMCO, established a principle that runs through every profession's negligence claims. A negligent adviser is not automatically liable for every loss that would not have happened but for the advice. Liability is confined to the consequences of the information being wrong - the loss that falls within the scope of the duty the adviser undertook.
Lord Hoffmann drew a distinction between a professional who provides information to help a client make a decision, and one who advises on what course of action to take. The information provider is responsible for the consequences of the information being inaccurate, not for the entire decision. The adviser who guides the whole decision may carry a wider responsibility. A valuer or accountant who supplies a figure usually falls into the information category.
The classic SAAMCO analysis asks how much of the claimant's loss is attributable to the specific respect in which the professional was negligent, rather than to market movements or business risks the professional never assumed. A valuation that is too high by a set margin caps the recoverable loss at that margin, even if the lender's total loss is far greater.
The Supreme Court revisited SAAMCO in Manchester Building Society v Grant Thornton [2021] and BPE Solicitors v Hughes-Holland [2017], reframing the analysis around the purpose for which the advice was given. The counterfactual remains a cross-check rather than the governing test, but the core principle - liability tracks the scope of the duty - is undisturbed.
SAAMCO is often the difference between a modest claim and a catastrophic one. An accountant who negligently states a figure may face a claim for the whole of a failed investment, but SAAMCO frequently confines recovery to the consequences of that figure being wrong. Understanding where a firm's work sits on the information-advice spectrum informs the limit of indemnity it should carry. Apex explores this on the accountants PI guide, and the principle originates in the surveyors valuation context.
Suppose an accountant negligently overstates a target company's profits, and a buyer proceeds with an acquisition it would have completed anyway, though at a lower price had it known the true figures. If the accountant supplied information rather than advising on the whole transaction, SAAMCO tends to confine recoverable loss to the difference attributable to the overstatement - broadly, the amount by which the buyer overpaid because the profit figure was wrong. Losses caused by a later downturn in the acquired business, or by integration failures, generally fall outside the scope of the accountant's duty because they were not consequences of the specific error.
The dividing line between information and advice is rarely clean, and much litigation turns on it. An accountant who not only supplies figures but recommends a course of action may find the courts treating the engagement as advice, widening the recoverable loss. This is one reason engagement letters that describe the work precisely are so valuable: they help fix which side of the SAAMCO line the firm sits on before a dispute arises.
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.