A recent judgment on appeal from Trinidad and Tobago, Charles B Lawrence v Intercommercial Bank Limited  UKPC 30, shows the Privy Council applying the “scope of duty” principle, and is an example of a case where the “SAAMCO counterfactual” and the “SAAMCO cap” would not have given the correct answer. It is therefore a useful illustration of the proposition that the true way to establish the scope of the duty of care in each case is to ask what was the purpose of the advice given and hence what was the risk that was being guarded against.
The appeal concerned the measure of the loss attributable to the negligence of a valuer, in an unusual set of circumstances.
The respondent bank proposed to lend $3 million to a company, a loan which was to be secured by a guarantee, which in turn was to be secured by a mortgage over undeveloped land in San Fernando, Trinidad.
The appellant, a surveyor, was instructed by the guarantor to value the land for the purposes of the mortgage. He produced a report giving the land a valuation of $15 million, on the assumption that there would be permission for commercial development of the land. The borrower and the guarantor defaulted and the bank called on its security. But when it came to advertise the land for sale, the only interest it received was a bid of $2 million.
Then a further problem arose: the bank discovered that the guarantor did not in fact have title to the land. It therefore obtained no value at all from its security. It sued the conveyancing attorneys who had failed to investigate title properly, and obtained a settlement from them of $2.4 million.
The bank also sued the surveyor, saying that he had been negligent in two ways. First, he had negligently overvalued the land, because he had been wrong to treat the land as having permission for commercial development; assuming residential permission only, the land would have been worth only $2 million or so. Second, he had failed to give adequate notice of the presence of occupiers on the land, which could have presented an obstacle to the sale of the land with vacant possession. On both counts, said the bank, it would not have lent had the surveyor not given negligent advice.
The trial judge found that the surveyor had been negligent on both counts, and that the true value of the land as at the date of the loan was $2.375 million. She also found that, but for his negligent advice, the bank would not have lent the $3 million.
None of those findings were in issue on second appeal to the Privy Council. The issues concerned the way that the Court of Appeal had measured the loss attributable to the surveyor.
The Court of Appeal’s measure of damages was the amount of the loan, $3 million, plus interest to trial, then deducting from the total sum the $2.4 million received from the bank’s conveyancing attorneys. In other words the Court of Appeal held the surveyor liable for the whole of the bank’s loss.
The surveyor appealed, on the ground that this was the wrong measure of loss. Applying the scope of duty principle, he should not have been held liable for the loss of the value of the land (i.e. $2.375 million). That part of the bank’s loss was caused by the fact that the bank did not have title to the land. It was a loss attributable to the conveyancing attorneys and was not within the scope of the surveyor’s duty of care to the bank. He argued that he should have been held liable only for the difference between the amount of the loan ($3 million) and the value of the land ($2.375 million), i.e. $675,000, with interest to be calculated on that sum.
This distinction made a significant difference in practice, notwithstanding the recovery of $2.4 million from the conveyancing attorneys, because of the additional interest on damages, which was calculated at 12% on $3 million up to the date of judgment, some 5 years after the loan was made.
The Privy Council agreed with the surveyor. Citing the judgments of the Supreme Court in Manchester Building Society v Grant Thornton  UKSC 20 and Meadows v Khan  UKSC 21, the Board asked itself what was the scope of the surveyor’s duty, and found that it was clear that the bank was not looking to him to advise on title; that was a matter for a lawyer not a valuer.
The Board therefore said that it would seek to exclude, from the total loss factually caused to the bank by the surveyor’s negligence, the element of the loss that was outside the scope of his duty of care because it was attributable to the defect in title. Accordingly, the loss for which the surveyor was liable was $675,000, plus interest.
The Board also had some words for the application of the “SAAMCO” counterfactual test, i.e. the question, would the claimant have suffered the same loss if the defendant’s advice had been correct? As had been anticipated in Manchester Building Society v Grant Thornton and Meadows v Khan, this was one of those cases where the counterfactual test was not useful. Assuming good title, the bank would have lost nothing if the surveyor’s advice had been correct; but assuming no title it would still have lost everything even if the advice had been correct.
The present case, said the Board, served to reinforce the point made by the Supreme Court that the counterfactual was of second-order importance as regards establishing the scope of the duty, and was a helpful cross-check in most but not all cases.
In other words, the only reliable way of establishing the scope of the duty of care in each case is by asking what was the purpose of the advice (or information) given by the professional and hence the risk that was being guarded against.