CAN YOU SUE SOMEONE FOR NEGLIGENT ADVICE THAT CAUSES FINANCIAL LOSS?
People make important financial decisions every day based on advice received from professionals, consultants, advisers and persons who hold themselves out as having specialised knowledge.
A prospective investor may rely on a financial adviser before committing millions of naira to a business. A purchaser may act on a professional report before acquiring property. A company may depend on an accountant's figures when entering a commercial transaction. A client may also rely on advice from a lawyer, banker, engineer, surveyor, valuer or other professional.
But what happens where the advice turns out to have been given carelessly and the person who relied on it suffers substantial financial loss?
The answer, in appropriate circumstances, is yes: negligent advice may give rise to a legal claim for compensation.
However, suffering financial loss alone does not automatically entitle a person to damages. The claimant must establish certain important legal elements.
1. WHAT IS NEGLIGENT ADVICE?
Negligent advice generally arises where a person who owes another a duty to exercise reasonable care provides information, an opinion, recommendation or professional advice without exercising the degree of care reasonably expected in the circumstances.
The issue is not simply whether the advice eventually turned out to be wrong. Professionals are not necessarily guarantors that every prediction, recommendation or opinion they give will prove correct.
The critical question is whether the adviser exercised the level of skill, care and diligence reasonably expected of a person in that position.
For example, liability may potentially arise where a professional:
Gives advice without making enquiries that a reasonably competent professional should have made
Makes material statements without verifying readily available facts
Provides advice outside his or her area of competence without appropriate qualification or warning
Omits important information which ought reasonably to have been disclosed
Fails to identify an obvious and material risk
Carelessly interprets documents, financial records, title documents, valuations or technical information
Makes a representation knowing that another person will probably rely on it when making an important financial decision.
2. THE LAW RECOGNISES LIABILITY FOR NEGLIGENT STATEMENTS
Negligence is not confined to careless physical acts. In appropriate circumstances, liability may also arise from careless words or statements.
A major common-law authority on this principle is Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] AC 465.
The case established the important principle that a person may owe a duty of care when providing information or advice where there exists a sufficiently close or “special relationship” and the adviser knows, or ought reasonably to know, that the recipient is likely to rely upon the information.
The courts therefore distinguish casual opinions from advice given in circumstances where responsibility has effectively been assumed.
The principle is particularly important where the loss suffered is what lawyers describe as pure economic loss financial loss which does not necessarily arise from physical injury or physical damage to property.
3. WHAT MUST A CLAIMANT PROVE?
A person seeking damages for negligent advice will ordinarily need to establish the essential elements of negligence.
A. A Duty of Care
The claimant must first show that the adviser owed him or her a legal duty to exercise reasonable care.
This may be relatively straightforward where there is a recognised professional relationship, such as:
Lawyer and client
Accountant and client
Financial adviser and investor
Surveyor or valuer and client
Engineer and client
Consultant and client
Other professional and customer relationships.
A contractual relationship may strengthen the case, but liability for negligent advice is not necessarily restricted to situations where there is a formal contract. The relevant question may include whether the adviser assumed responsibility and whether reliance by the claimant was reasonably foreseeable.
B. Breach of the Duty of Care
The claimant must establish that the advice fell below the standard reasonably expected from a competent person performing that function.
Merely proving that the advice resulted in a bad outcome is insufficient.
For example, an investment may fail despite competent professional advice because commercial investments naturally carry risks.
The claimant must instead demonstrate that the adviser acted or failed to act in a manner that was objectively unreasonable or professionally deficient.
C. Reliance on the Advice
There must generally be evidence that the claimant actually relied upon the advice.
Suppose an accountant incorrectly states that a company has substantial assets, but the investor proceeds with the transaction for entirely unrelated reasons and admits that the accountant's report played no part in the decision. Establishing causation may become difficult.
The advice must therefore have materially influenced the claimant's decision.
D. The Reliance Must Be Reasonable
Not every statement is reasonably capable of being relied upon.
There is an obvious difference between:
“I think this investment may do well.”
and a formal professional report prepared specifically to determine whether a client should invest ₦100 million.
The nature of the statement, the expertise of the adviser, the purpose for which the advice was given and the surrounding circumstances are all relevant.
E. The Advice Must Have Caused the Financial Loss
There must be a sufficient causal connection between the negligent advice and the loss complained of.
In other words, the claimant must be able to demonstrate that, but for the negligent advice, the financial loss would probably not have occurred or would not have occurred to the same extent.
F. The Loss Must Not Be Too Remote
Even after negligence and reliance have been established, a defendant will not ordinarily be responsible for every imaginable consequence.
The financial loss must be a reasonably foreseeable consequence of the negligent advice and sufficiently connected with the breach complained of.
4. WHO MAY POTENTIALLY BE LIABLE?
Claims involving negligent advice may arise against different categories of professionals and advisers.
Examples may include:
Lawyers who negligently advise clients concerning transactions, litigation, title, deadlines or legal obligations;
Accountants and auditors who carelessly prepare or certify financial information relied upon in transactions;
Financial advisers and investment consultants who negligently provide information or recommendations;
Estate surveyors and valuers whose negligent valuations influence purchases, lending or investment decisions;
Engineers and other technical consultants whose professional opinions are relied upon commercially;
Banks and financial institutions, depending on the circumstances in which information or representations are provided; and
Business consultants and other specialists who undertake to provide professional advice upon which clients are expected to rely.
Whether liability actually arises will always depend on the particular facts.
5. A WRONG OPINION IS NOT AUTOMATICALLY NEGLIGENCE
This distinction is particularly important.
The law does not ordinarily punish a professional simply because an opinion turns out to be mistaken.
Markets can collapse. Businesses can fail. Property prices can fall. Litigation may have unexpected outcomes. Government policies may change.
The proper question is therefore not:
“Was the advice wrong?”
but:
“Was reasonable professional skill and care exercised in arriving at and communicating the advice?”
That distinction protects professionals from becoming insurers against every adverse commercial outcome while still providing remedies where genuine professional carelessness causes loss.
6. WHAT IF THE ADVISER INCLUDED A DISCLAIMER?
A disclaimer may significantly affect liability.
In Hedley Byrne, although the House of Lords recognised that liability for negligent statements causing financial loss could arise, the defendant bank ultimately escaped liability because the relevant credit reference had been given with an express disclaimer of responsibility.
However, the mere presence of the words “no liability” or “for information only” does not necessarily resolve every case automatically.
The court may examine:
The precise wording of the disclaimer
Whether it was brought to the claimant's attention
When it was communicated
The relationship between the parties
The nature of the professional obligation involved
Whether applicable law permits responsibility to be excluded in the circumstances.
Accordingly, both advisers and recipients should take disclaimers seriously.
7. NEGLIGENT ADVICE AND BREACH OF CONTRACT MAY OVERLAP
Where professional advice is provided under a contract, the same conduct may potentially amount to both:
Breach of contract, because the adviser failed to perform contractual obligations with the required competence
Negligence, because the adviser breached an independent duty to exercise reasonable care.
The appropriate cause of action, remedies and limitation issues will depend on the circumstances and the terms governing the professional relationship.
8. WHAT DAMAGES MAY BE RECOVERABLE?
The purpose of damages is generally compensatory rather than punitive.
Where liability is established, the court may award damages intended to place the claimant, so far as money can reasonably do so, in the position the claimant would have occupied had the negligence not occurred.
Depending on the facts, recoverable losses may potentially include:
Money directly lost because of the transaction;
Additional expenditure incurred as a result of the negligent advice;
Certain consequential financial losses which are sufficiently foreseeable and provable
Other losses recognised by law as flowing from the defendant's breach.
The claimant must nevertheless prove the alleged loss with credible evidence. Courts do not ordinarily award substantial financial damages merely on speculation.
9. EVIDENCE IS CRITICAL
Anyone contemplating a claim arising from negligent professional advice should preserve relevant evidence immediately.
Important documents may include:
Engagement letters
Contracts
Emails and WhatsApp conversations
Written professional opinions
Reports and valuations
Invoices and receipts
Bank statements
Transaction documents
Meeting notes
Evidence showing what decision was made because of the advice
Documents establishing the amount of the resulting financial loss.
Where the alleged negligence concerns a specialised profession, expert evidence may sometimes be necessary to establish the standard reasonably expected of a competent practitioner in that field.
10. WHAT IF THE CLAIMANT ALSO CONTRIBUTED TO THE LOSS?
A claimant's own conduct may also become relevant.
For example, a person who receives professional advice warning against a transaction but ignores the warning may face considerable difficulty blaming the adviser for the eventual loss.
Similarly, where the claimant failed to disclose material facts to the adviser, ignored obvious risks or independently contributed to the loss, questions of causation and contributory negligence may arise.
11. ACT QUICKLY WHEN SIGNIFICANT LOSS OCCURS
Potential claims should not be left indefinitely.
Limitation laws impose periods within which different categories of actions must be commenced. The applicable period may depend on:
The nature of the claim
The jurisdiction
Whether the action is framed in contract, tort or another cause of action
When the cause of action accrued
Other statutory considerations.
A claimant who delays excessively may therefore discover that an otherwise legitimate claim has become statute-barred.
CONCLUSION
Yes, a person can potentially sue for negligent advice that causes financial loss.
However, financial loss by itself is not enough. A successful claimant will ordinarily need to establish that the adviser owed a duty of care, breached the applicable standard of care, that the claimant reasonably relied upon the advice, and that the negligence actually caused legally recoverable financial loss.
For professionals, the lesson is equally important: giving advice carries responsibility. Proper investigations, accurate records, clearly defined scopes of engagement, appropriate qualifications and carefully drafted limitations are essential safeguards.
For clients and businesses, substantial financial decisions should similarly be based on properly documented professional advice rather than informal assumptions.
Where significant money has been lost after reliance on professional advice, the circumstances should be examined carefully before concluding either that there is a viable claim or that the loss is simply an unfortunate commercial outcome.
DISCLAIMER
This article is provided for general information and public legal education only. It does not constitute legal advice and should not be relied upon as a substitute for advice relating to the particular facts of any individual or business matter. The existence of liability for negligent advice depends on the circumstances of each case, the relationship between the parties, the evidence available and the applicable law. Persons who have suffered financial loss following professional or commercial advice should obtain independent legal advice before taking or refraining from any action.
ABOUT SUN NATHA-ALADE & PARTNERS
Sun Natha-Alade & Partners (SNATHAP) is a Nigerian law firm providing legal representation, advisory and dispute-resolution services to individuals, businesses, institutions and investors.
At Sun Natha-Alade & Partners (SNATHAP), we are committed to providing practical, responsive and professionally grounded legal solutions designed to protect our clients' rights, transactions and commercial interests.
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