Professional Advice Can Be Taxing - Don't Sweat It

Author:Mr Graeme Watson
Profession:Clyde & Co

When a professional provides negligent advice they may be liable for consequent loss. But is the professional liable for the distress caused by their negligent advice? Clark v Turnbull [2017] CSOH 4 says that they're not. Distress is only a valid head of claim where the purpose of a contract was to provide pleasure or peace of mind.

The pursuers in this case are brothers. They sought the advice of the defenders, a firm of chartered accountants, on their capital gains tax liabilities arising from the sale of flats. They were incorrectly advised the CGT would be between £40,000 and £50,000. They sold the flats. In fact the CGT liability was around £150,000.

The brothers sought damages for the losses suffered. This included the increased CGT incurred; transaction fees; and late payment surcharges. They also sought damages for the distress they suffered when they discovered they faced a larger tax bill.

Lord Tyre dismissed one brother's claim for excess CGT and their claim for overpayment of tax in subsequent year: these claims had prescribed. This was a straight application of Morrison v ICL Plastics 2014 SC (UKSC) 222. But of more interest is how his lordship addressed their claim for distress.

Lord Tyre noted that the general rule is that a claim for distress is not a valid head of claim in a case for breach of contract. An exception to this rule was affirmed by the House of Lords in Farley v Skinner [2002] 2 AC 732. Where a contract is aimed at procuring peace or pleasure, then, if as a result of the breach of contract the expected pleasure is not realised...

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