Professional Negligence Claims Between Businesses

When one business relies on the expertise of another - for example an accountant, solicitor, surveyor, architect or financial adviser - things can go wrong. If that professional service falls below the standard reasonably expected, and the business suffers loss as a result, it may be possible to bring a professional negligence claim. This type of claim is a core aspect of commercial litigation and reflects the fact that professionals owe a duty to exercise reasonable care and skill in the services they provide.

This article explains what professional negligence is, how it applies between businesses in England and Wales, the legal criteria for bringing a claim, the steps involved, time limits, practical considerations, common outcomes and frequent questions that arise in these disputes.

What Is Professional Negligence?

Professional negligence arises where a professional person or firm fails to perform their services to the required standard and, in doing so, causes financial loss to their client. Professionals are expected to demonstrate the level of skill and care that would be expected from a reasonably competent practitioner in their field.

Professionals may include: accountants, architects, surveyors, solicitors, brokers, financial advisers and many others who advise or provide specialist services to other businesses.

Legal Basis for Professional Negligence Claims

Duty of Care

In a professional relationship, a duty of care arises where a business engages a professional to provide services or advice. That duty may arise in contract (express or implied) and in tort (negligence). The client must show that the professional owed them this duty, which is often assumed where services are provided in exchange for payment.

Breach of Duty

To succeed in a claim, the claimant must show that the professional breached the duty of care - that the service provided was below the standard expected of a reasonably competent professional in the same field. Courts may use expert evidence to determine whether the conduct fell below that standard.

Causation and Loss

It is not sufficient to show that the professional made a mistake - the mistake must have caused a foreseeable financial loss to the claimant business. The claimant must demonstrate that if the professional had acted properly, the loss would not have occurred.

Common Commercial Professional Negligence Scenarios

Claims between businesses often arise in commercial contexts that depend heavily on expert advice. Examples include:

• Accounting negligence: incorrect tax advice, miscalculated returns or poor financial reporting leading to penalties or loss.
• Solicitors' negligence: failure to file court documents in time, poor contractual drafting, missed litigation deadlines or flawed advice on corporate matters.
• Surveyor and valuer negligence: failure to identify defects in property surveys, inaccurate valuations or errors in reporting that lead to financial loss in property transactions.
• Architect and engineer negligence: design flaws, planning errors or certification failures resulting in cost overruns or delays.
• Financial adviser or broker negligence: giving flawed investment, insurance or financing advice that leads to economic loss.

These types of failures can have serious commercial consequences and frequently lead to professional negligence claims.

How to Bring a Professional Negligence Claim

Step 1: Establish the Relationship and Duty

Confirm that there was a professional relationship or contract with the adviser. In most business‑to‑business situations, a written engagement letter or contract will exist. Even if not, a duty may arise by virtue of the services provided, especially where they require specialised knowledge.

Step 2: Identify the Breach of Duty

Carefully review correspondence, reports, advice and other documentation to identify how the professional's actions (or omissions) departed from reasonable standards. Independent expert evidence may be needed to show that the conduct was below the required professional benchmark.

Step 3: Demonstrate Causation and Loss

You must link the breach to the financial loss suffered. This can include direct losses (e.g. costs to rectify errors), consequential losses (e.g. lost profits) and sometimes compensation for lost business opportunities. Quantifying these losses accurately and reasonably is essential.

Step 4: Consider Alternative Dispute Resolution

Many professional negligence disputes are resolved by negotiation, mediation or settlement before formal court proceedings. Early resolution may save time, cost and preserve business relationships.

Step 5: Issue Proceedings

If negotiation fails, a claim can be brought in the County Court or High Court depending on the value and complexity. Proceedings involve filing a claim form and particulars of claim, setting out the legal and factual basis for the claim.

Time Limits for Bringing a Claim

Under the Limitation Act 1980, most professional negligence claims must be started within six years from the date the negligent act or omission took place. However, if the loss was discovered later, the claimant may have up to three years from the date they knew (or ought to have known) about the negligence. Acting promptly helps ensure the claim is not barred by time limits.

Remedies and Potential Outcomes

Damages

The primary remedy in professional negligence claims is damages - monetary compensation to place the claimant in the position they would have been in if the negligence had not occurred. The calculation will take into account direct and sometimes consequential losses.

Settlement

Many claims settle outside court. Settlement negotiations, often facilitated by solicitors for both sides, can result in compensation without the need for a full trial.

Costs and Interest

Courts may award interest on damages and, subject to costs rules, the successful party's legal costs. For complex commercial claims, costs can be significant and are a factor both parties must manage.

Practical Considerations and Risks

Professional Indemnity Insurance

Most professionals are required by regulation or industry practice to hold professional indemnity insurance, which can cover claims for negligence. This means that even if the professional firm cannot pay, the insurer may provide compensation.

Expert Evidence

Professional negligence cases often hinge on expert evidence to show whether the standard of care fell below the required benchmark. This can add cost and complexity but is usually essential.

Business Relationships

Claims can strain ongoing commercial relationships. Attempting resolution through negotiation or mediation before litigation can preserve business ties where possible.

Reputational and Financial Risk

Defending or pursuing complex negligence claims can involve legal costs, reputational exposure and operational disruption. Businesses should weigh the benefit of a claim against these risks and consider strategic timing and funding options (such as conditional fee agreements) where available.

Common Questions from our Readers

Can one business sue another for professional negligence?
Yes. Where one business has acted as a professional adviser to another and provided sub‑standard services resulting in loss, a business can bring a professional negligence claim in the courts.

Is professional negligence only a contractual claim?
Not necessarily. Professional negligence can be based on contractual obligations, tort duty of care or both, and the claimant may pursue either or both depending on the relationship and terms of engagement.

What happens if the professional goes out of business?
If the professional no longer operates, it may still be possible to pursue a claim against their professional indemnity insurer, which typically covers negligence claims even after a firm has ceased trading.

Final Thoughts

Professional negligence claims between businesses in England and Wales arise when a professional's advice or services fall below the expected standard and cause financial loss. To bring a successful claim, a business must establish duty, breach, causation and loss, and act within statutory time limits. Remedies usually involve damages or negotiated settlements, and expert evidence plays a central role in determining whether the professional's conduct was negligent. Early assessment, detailed evidence and consideration of alternative resolution methods can improve outcomes and manage the costs and risks associated with these complex commercial disputes.