Most professional people in Australia give sound advice to their clients however there are times when things go wrong and the client suffers a serious financial loss due to inaccurate and negligent advice. Professional negligence solicitors in Australia deal with compensation claims for financial loss sustained as a result of inadequate professional services provided by professionally qualified people including lawyers, barristers, solicitors, valuers, auditors, engineers, tax consultants, accountants, architects, financial advisors, banker, surveyors, architects and all manner of other professionally qualified individuals. To prove a professional negligence compensation, claim in Australia it is necessary to show that the person giving the advice owed a duty of care to the claimant which is usually satisfied by the existence of a contractual agreement. A professional negligence solicitor must then show that the negligent professional person breached that duty by failing to use reasonable skill and care. The breach is proven by showing that other reasonably skilled professional people would not have given the same advice and that by following the negligent advice the client suffered a financial loss. Negligence has been defined in many ways however one of the oldest definitions from litigation in 1856 is as follows:-
“Negligence is the omission to do something which a reasonable person guided by those considerations which ordinarily regulate the conduct of human affairs would do or doing something which a prudent and reasonable person would not do.”
Professional Indemnity Insurance
Most professional people are insured against negligence and by paying a premium to the indemnity insurance company; they do not have to personally pay out any money if they are found liable in negligence. In this event the indemnity insurers take over conduct of the claim on behalf of the negligent professional and settle the claim directly with the claimant’s lawyers. Lawyers, barristers, solicitors, valuers, auditors, engineers, tax consultants, accountants, architects, financial advisors, banker, surveyors, architects and most other professionally qualified individuals are inevitably insured. Whilst this does mean that the claimant who proves a case in negligence against a defendant will get paid for financial losses it also means that the negligent professional person has the backing of an insurer who will employ specialist lawyers to attempt to defend any professional negligence compensation claim that is brought against one of their policy holders. Almost without exception an insurer will defend a professional negligence compensation claim in anticipation that better settlement terms may be available rather than admitting liability at an early stage. In those circumstances a claimant should ensure that their representation is of the highest calibre. It is not advisable to ask your local High Street solicitor to represent you unless you are certain of their expertise in professional negligence compensation claims.
In many cases clients are dissatisfied with their professional representative for matters other than negligence. Specialist professional negligence solicitors only deal in financial compensation claims where there is a quantifiable loss caused by professional negligence. They do not deal with complaints about poor service, bad attitudes, truculent behaviour, inadequate procedures, abusive language or any other matter not involving direct financial losses caused by negligence. If your complaint is other than financial, it is advisable that you make complaint to the professional body that governs the behavior of that particular profession.
A professional negligence claim against an accountant is similar to all other profession negligence claims in so far as it is necessary to show that the negligent accountant has failed to exercise a reasonable degree of skill and car when compared to other accountants carrying out the same or similar work. The requirements on negligence are that the accountant must owe the client a duty of care which exists by virtue of the accountant agreeing to carry out work on behalf of the client, that duty must have been breached by the accountant failing to carry out the work with a reasonable degree of skill and care and the breach must have caused a direct financial loss.
Almost all cases of professional negligence require a team of experts working towards the goal of proving that a negligent accountant failed to exercise reasonable skill and care. Some compensation claims for substantial financial awards as a result of accountant’s negligence may require evidence to be provided by an independent forensic accountant in order to prove liability.
Professional negligence solicitors deal with a wide range of issues, one of the most serious of which involves negligent financial advisors, agents or consultants with losses frequently affecting lifestyle, retirement plans and family income. The fact that the value of an investment goes down does not necessarily mean that a financial advisor has been negligent however they are expected to give advice to their clients with a reasonable degree of skill and care and must stay within statutory guidelines. In regard to negligence the most common error by a professional financial advisor relates to a failure to obtain sufficient personal details including taking note of the investors attitude to risk before advising on an unsuitable investment.
The ordinary rules of negligence apply in regards to financial consultants, advisors, agents, or brokers and it is necessary to show that the negligent financial consultant owed a duty of care to the client which is established once the financial consultant agrees to advise and/or represent the client, thereafter it must be shown that the duty has been breached by the financial consultant failing to exercise a reasonable degree of skill and care when compared to others in the same field and finally it must be proved that the losses sustained are as a direct result of the client acting on the erroneous advice.
There are numerous ways in which a financial advisor, agent, consultant or broker can be held to account and be required to pay compensation. The list below contains just some of the potential reasons for making a compensation claim against a financial advisor based on negligence if an investment loses value or fails to achieve expectations or returns: –
- offering guarantees of returns
- failing to consider more suitable options
- failure to explain investment and/or risk factors
- failure to explain investment was long term
- failure to outline risk of losses
- failure to explain return depended on stock market performance
- reinvesting money for no good reason (churning)
- failure to discuss fees and confirm in writing
- not advising about conflict of interest
- advisor reiterating negligent advice received elsewhere
- failure to establish clients view of risk
- no consideration of the effect of retirement
- failure to adequately transmit information to the client
- failing to meet deadlines
- failing to refer to other professionals where essential
An estate agent must get it right or there may be a claim for compensation for professional negligence. If an estate agent puts a domestic or commercial land or property on the books too cheap or too expensive, there may be a financial loss to the seller. Professional negligence solicitors deal with compensation claims against estate agents, valuers and letting agents for both domestic and commercial, land and property. Most Australian solicitors offer free initial advice with no further obligation and if, after speaking to that lawyer, you wish to proceed no further they should not bother you again.
If an estate agent views a property and advises on value which is below market expectations and reliant on that advice a seller then offers the property for sale, there is an opportunity for the seller to sue the negligent estate agent for financial loss if the sale price ultimately achieved is below market value.
If a negligent estate agent over values a property which is then offered for sale it may well be that there would have been prospective buyers who are lost because the price is above market value. In addition, if the seller is bearing the cost of advertising it may be a waste of advertising costs if the property does not sell because of overvalue. Furthermore, if the seller is paying interest on a loan secured on the property, the over value may result in losses of interest on capital.
An estate agent must be aware of changing market conditions and if appropriate should give further advice to sellers if the market has improved or declined in order that the seller may consider an appropriate alteration in price.
If an estate agent also acts as a letting agent then overvalue or undervalue of rent, may result in losses to a lessor for the same reasons as outlined above. Letting agents often do not appreciate the risk they are taking to affect a quick lease of substantial commercial property where the lease may run for 30 years with annual losses being multiplied year on year.
Most Architects in Australia are regulated by a professional body which will deal with complaints of a professional nature but do not deal with the award of compensation for professional negligence. Most architects are employed on projects from the very early stages starting with the study of viability right through to completion and signing the project off to the client to enable the release of finance to finalise payment to a builder. In the event of a problem at any stage of the building process or after completion of the project we are able to take legal action for professional negligence against a negligent architect in the following circumstances:-
- negligent advice by an architect
- inadequate plans and drawings
- incorrect technical or engineering calculations
- inadequate project preparation work
- inappropriate contractual requirements
- negligent supervision of building works
The main issue with architect negligence is that whilst it doesn’t happen often and is relatively rare, when it does happen it can involve serious consequences costing large sums of money to correct. Whilst the architect’s professional associations do have complaints procedures most architect’s negligence claims inevitable end up in a court of law. Arbitration is one alternative dispute resolution process that may be worth considering. Most architects carry professional negligence insurance and whilst payment will always be forth coming in the event of liability being established it also means that the deep pockets of the insurers will pay for the very best legal representation to defend the claim.
Most policies of insurance are dealt with by an insurance broker who is an intermediary between the insured and the insurance company. Historically the job of an Insurance broker was to act as the agent of the insured to obtain the best possible quotation after researching all of the available policies, but an insurance broker may also be the agent of the insurance company. The lines are blurred however the bottom line is that the insurance broker owes the insured client a duty of care and can be sued for financial losses in the event of negligence. [There are some clients who go direct and some insurance companies that will not take business through brokers.]
To succeed in a claim of professional negligence against an insurance broker it is necessary to show that the insurance broker owed the insured a duty of care which is proven by the agreement between them, thereafter it must be shown that the insurance broker has breached the duty by failing to act with skill and care, when compared to other reasonably skilled brokers, which has in due course caused direct losses to the insured.
There are a number of common errors that a negligent insurance broker can make that may result in a professional negligence compensation claim. The most obvious is the failure to renew annual cover upon expiry however there are also more subtle errors such as under value or over value of insured assets.
There is also the question of miss-selling where an insurance broker deliberately or negligently sells a client a policy that is not suitable or sells a policy merely to claim the commission that may be available. In addition, there is the practice known as ‘churning’ where a broker will recommend a change of policy in the knowledge that the client will lose money but the insurance broker will collect a commission.
The vast majority of solicitors and other professional people are honest and work completely in accordance with their clients instructions however there are dishonest professionals who do not tell the truth, who steal money, submit fraudulent documentation and who lie to the court for financial advantage. It’s not just solicitors who are dishonest, but it extends to surveyors, valuers, bankers, accountants, estate agents, financial advisors, building society managers and all manner of professional people. There are many ways that dishonest professional people operate but the result is to gain access to funds and eventually steal assets.
One of the most common forms of dishonesty in the professions which necessarily involves a dishonest solicitor and several other dishonest professionals relates to mortgage fraud. This offence would not be possible without the collusion of several different disciplines and typically mortgage fraud involves a solicitor, an estate agent and a valuer together with one or other means of finance which can include a banker or an independent financial advisor or a building society manager.
The typical modus operandi for mortgage fraud is for an estate agent to find a property, for a valuer to enhance its value and a solicitor to carry out the conveyancing after having financed the loan for an over value perhaps with the collusion of a banker or independent financial advisor or building society manager. The property is then purchased in a false name however the mortgage loan is based on the enhanced value of the property. The gang pockets the difference and abandons the property. When the property is eventually sold after the lender forecloses on the loan there will not be enough from the sale proceeds to discharge the mortgage.
An alternative mortgage fraud involves selling a property that is vastly over valued to an unsuspecting purchaser who innocently relies on an enhanced professional valuation when applying for a mortgage. The gang split the resulting profit and the defrauded purchaser is well into negative equity when an accurate valuation is carried out later. This second type of mortgage fraud may go undetected in times of raging inflation as the inflationary increase in value takes care of the overvalue and any potential negative equity.
Professional negligence solicitors represent clients who have been the victim of inadequate professional services that have been carried out negligently thereby causing financial losses. Most professional bodies require their membership to take out indemnity insurance to cover them against professional negligence and some professional bodies also pay losses from a compensation fund in the event of dishonesty.
For a successful professional negligence claim against a solicitor it is necessary to prove that there was a duty of care that existed between the solicitor and the client. A duty of care will exist in almost all cases where someone has held themselves out as a professional advisor and has accepted instructions from a potential client. The professional negligence solicitor must be able to show that the mistake made by the negligent solicitor was one which no competent solicitor would have made. This is determined by comparison with work carried out by other solicitors in a similar situation. Finally it must be shown that the breach of the duty of care lead directly to financial loss.
Valuers and Surveyors
Negligent Surveyors and negligent valuers whilst carrying out different professional duties are often to be found in the same office with dual qualification. A surveyor’s job is to identify defects be it in real property, vehicles, boats or any other item whereas a valuers job is to place a market value on the same items which often depends on condition which may require consideration of a surveyors report. Most valuations provided by valuers are qualified in that the value usually relates only to a visual inspection and a more accurate valuation may only be obtained after a detailed survey is carried out. For example most estate agents will value a property and the report is qualified to the extent that the estate agent will not have inspected the property further than can be seen without disturbing the fabric of the property whereas the buyer may require a detailed structural survey in order to assist a valuer to provide a definite valuation.
In order to prove liability against a surveyor or valuer it is necessary to show that they owed the client a duty of care which is proved by the existence of a contract/agreement (written or verbal), that the duty of care was breached by the surveyor or valuer failing to exercise a reasonable degree of skill and care when compared to other valuers and that direct financial loss was the result
Valuers can be negligent in several respects, the most obvious of which are undervaluations or overvaluations both of which have the capacity to cause losses to the client. An undervaluation can cause direct loss to the seller and an overvaluation can cause delay which may result in loss to the seller.
A surveyors report is often limited and qualified and members of the public who instruct a surveyor should ensure that they ask for exactly what they want. In most cases surveyors are instructed by commercial entities to provide a survey to be used as a basis for a valuation. Surveyors can and often do make mistakes in this very wide ranging topic, the most obvious of which is to simply not notice a serious defect which is covered by the scope of the retainer. This may result in an overvaluation which causes subsequent losses often to a financial institution that are providing funding for purchase.