Claims Against Advisers, Accountants and Valuers in Victoria: How a Professional Negligence Case Is Built, Proved and Resolved

The advisers this covers

Professional advisers are engaged for judgement the client does not hold. The arrangement only works because the client trusts the adviser to apply that judgement carefully. When the adviser is careless and a measurable loss follows, the law allows that loss to be recovered. The principles are the same across the professions, but the way negligence shows up differs from one field to the next.

Accountants and tax advisers

An accountant or tax adviser can be negligent in advice on structuring, in the preparation of financial statements, in an audit, or in the handling of a tax position. A flawed structure can expose a client to a liability that careful advice would have avoided. An error in a return or an assessment can lead to penalties and interest that were never necessary. The loss is often quantifiable to the dollar, which is one reason these claims tend to turn on accounting evidence.

Financial advisers and planners

A financial adviser or planner can be negligent by recommending a product or strategy that was not suitable for the client, by failing to warn of a risk the client should have understood, or by acting outside the scope of a sensible mandate. Where advice was also misleading, the conduct may engage the prohibition on misleading or deceptive conduct in section 18 of the Australian Consumer Law, in addition to the law of negligence. The two are not mutually exclusive, and a financial adviser matter is often framed in the alternative.

Valuers and surveyors

A valuer or surveyor can be negligent by producing a figure or a survey that a competent practitioner would not have reached, where a lender, a buyer or a seller relied on it to their cost. An inflated valuation can leave a lender exposed when security is realised. An understated one can cost a vendor on sale. Because the output is a number, the standard is usually tested against the range a careful valuer could reasonably have reached at the time, not against hindsight.

Other professional advisers

The same logic reaches conveyancers, insurance brokers, engineers and other skilled advisers. What unites these claims is a measurable financial consequence that can be traced back to a failure to take reasonable care, rather than to ordinary commercial risk that the engagement always carried.

Building the claim: the evidence that matters

A claim against an adviser is assembled from the record, not from recollection. Before any view is taken on prospects, the file is read closely. Three categories of material carry most of the weight.

The retainer or engagement. The engagement letter, the terms of business, and any scope document define what the adviser agreed to do. They mark the boundary of the duty. A great deal of a negligence matter is decided by what the adviser was actually engaged to address, and what fell outside it. That said, the scope of a professional's duty is not always confined to the strict letter of the instructions, and can extend further where a real and foreseeable risk of loss arises (Hawkins v Clayton (1988) 164 CLR 539).

The advice or work actually provided. The advice given, the report produced, the return lodged, or the valuation delivered is the conduct that will be judged. It is compared against what a careful practitioner should have done with the same information at the same time.

The file and the correspondence. Attendance notes, emails, instructions received, and warnings given or not given often decide the matter. They show what the adviser knew, what the client asked, and what was said in response. Contemporaneous records made close to the events carry more weight than later reconstruction.

On top of the documents sits independent expert evidence. A practitioner in the same field gives an opinion on what a careful professional should have done, and where the work departed from that. These claims are won on the file and the expert report, not on assertion, and the assessment of whether a claim exists is made before any significant cost is committed to running it.

Proving the standard

The central question in most of these claims is whether the adviser met the standard their field required. The standard is not perfection. It is the standard of a reasonably competent professional exercising ordinary skill, and for those holding themselves out as having particular expertise, it is assessed against responsible practice among their peers.

In Victoria this is framed by section 59 of the Wrongs Act 1958 (Vic). A professional is not negligent if they acted in a way that, at the time, was widely accepted in Australia by a significant number of respected practitioners in the field as competent professional practice, unless the court considers that opinion unreasonable. The practical consequence is that expert evidence usually decides the case. Where a respected body of opinion in the field would have done what the adviser did, the claim is difficult. Where no careful practitioner would have done so, the breach is established.

This is why an honest difference of professional opinion, or a reasonable choice between accepted approaches, does not amount to negligence. It also explains why the expert who speaks to the standard is so important. The dispute is often less about the facts, which the file records, than about whether the adviser's conduct sat within the range a careful professional could reasonably have adopted.

Proving and measuring the loss

Breach alone recovers nothing. The claimant has to show that the breach caused a loss, in the sense that the loss would not have been suffered but for the failure, and that the loss is not too remote a consequence of it. The professional may also owe duties in both contract and tort at the same time, which can matter to how the claim is framed (Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1).

Damages in these claims are compensatory. The aim is to put the client, so far as money can, in the position they would have held had the adviser met their duty. In practice that is the difference between the client's actual financial position and the position they would have occupied but for the negligence, together with consequential losses that flow from it and are not too remote.

Measuring that difference is rarely a matter of assertion. It is usually established through its own expert evidence. An accountant may reconstruct what a correctly structured transaction would have yielded. A valuer may give evidence on what the asset was truly worth against the negligent figure. The quantification of the loss is frequently a contest in its own right, separate from the contest over the standard, and it is prepared with the same discipline.

When more than one adviser is at fault

A single loss is often the product of more than one failure. An accountant and a valuer may each have contributed to a transaction that should never have proceeded. A financial adviser and a product issuer may share responsibility for an unsuitable recommendation. How the law divides that responsibility has a direct effect on what the client recovers.

In Victoria, a claim for economic loss or property damage arising from a failure to take reasonable care is an apportionable claim under Part IVAA of the Wrongs Act 1958 (Vic). Section 24AF defines the apportionable claim, and section 24AI allows a court to limit each concurrent wrongdoer's liability to the share of the loss that the court considers just, rather than holding any one of them liable for the whole. The same regime can apply where the loss arises from misleading or deceptive conduct.

The practical lesson is to identify every responsible party at the outset. Under a proportionate liability regime, a defendant who is found responsible for, say, sixty per cent of the loss is liable for that share and no more. If another concurrent wrongdoer was not joined, or cannot meet a judgement, the unrecovered share can fall on the client rather than on the remaining defendant. Mapping the full cast of responsible parties early, and assessing the prospects of recovery against each, is part of building the claim properly rather than an afterthought.

How these claims resolve

Most claims against advisers resolve without a trial. Carefully prepared pre action correspondence, supported by the right expert evidence, is often what creates the conditions for a sensible commercial resolution. Negotiation and mediation are the usual path, and because most professional advisers carry professional indemnity insurance, the insurer is frequently part of the settlement discussion. The insurer's involvement tends to focus the matter on the merits and the numbers, which suits a claim that has been built on evidence.

Litigation is one path rather than the starting point. Proceedings are generally pursued where the claim cannot be resolved on acceptable terms, where the conduct in question needs to be tested, or where a limitation deadline forces a claim to be issued to protect the client's position. The timing of that deadline is itself a strategic consideration, and the subject of our companion insight on time limits. When proceedings are necessary, the same disciplined preparation that supports a negotiated outcome is what carries the matter through the appropriate court, with costs ordinarily following the event.

This article provides general information about the law in Victoria as at the date of publication. It is not legal advice. Whether a particular adviser, accountant or valuer was negligent, when any limitation period began, and how responsibility should be divided, all turn on the facts of the matter and the evidence available. We recommend obtaining tailored advice from a qualified lawyer before making decisions that may affect your interests.