Professional negligence

How BC law treats it

A professional owes a client a duty of care in tort and, usually, an implied contractual duty to perform with reasonable skill. In Central Trust Co v Rafuse, [1986] 2 SCR 147, the Supreme Court held that a client can sue in both contract and tort concurrently unless the contract limits the tort duty. The standard is that of a reasonably competent practitioner in the same field, not perfection, and the court usually needs expert evidence to set it. Liability can extend beyond clients. Negligent misrepresentation requires a special relationship, an untrue or misleading statement made negligently, reasonable reliance and resulting loss (Queen v Cognos Inc, [1993] 1 SCR 87). Some advisors also owe fiduciary duties where the client relies on them for independent advice, as with the financial advisor in Hodgkinson v Simms, [1994] 3 SCR 377. Under the Limitation Act, SBC 2012, c 13, a claim must generally be started within two years of the day the client discovered, or reasonably should have discovered, the loss and that it was caused by the professional (ss. 6 and 8), and no later than 15 years after the act or omission (s. 21). If the client was also careless, the Negligence Act, RSBC 1996, c 333 reduces damages by its share of fault. Most regulated professionals carry mandatory liability insurance. Claims against BC lawyers are handled by the Lawyers Indemnity Fund. Engagement letters often contain limitation of liability clauses, which courts will generally enforce if clear and not unconscionable.

What it means for your business

Businesses rely on lawyers, accountants, engineers, architects and appraisers for decisions worth far more than their fees. When advice goes wrong, a professional negligence claim may be the only way to recover the loss. The two year limitation period often starts before the full loss is known, so delay can be fatal. On the other side, professional firms and consultants should use clear engagement letters that define scope, exclude unrelated work and cap liability where appropriate. Example: A Kelowna company relies on its accountant's advice to structure a share sale and is later reassessed for a large tax bill the advice failed to anticipate. The company may sue the accountant in negligence and contract, but must start its claim within two years of discovering the problem.

Risks and common mistakes

Waiting for a tax appeal or related lawsuit to finish before suing, and missing the two year limitation period. Assuming any bad outcome is negligence, when the test is what a reasonably competent professional would have done. Starting a claim without an expert opinion on the standard of care. Signing engagement letters without reading the scope and limitation of liability clauses. Confusing a fee dispute with a negligence claim, which have different procedures and proof.