South Australia Asset Management Corporation v York Montague Ltd and Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1996] UKHL 10 is a joined English contract law case (often referred to as "SAAMCO") on causation and remoteness of damage.
It arose out of the property crash in the early 1990s, whereby banks were suing valuers for overpricing houses in order to recover the lost market value.
Owners themselves often had little or no money, since they had fallen victim to negative equity, so mortgage lenders would pursue a valuer instead to recover some losses.
[1] In the South Australia case, a valuer had (in breach of an implied term to exercise reasonable care and skill) negligently advised his client bank that property which it proposed to take as security for a loan was worth much more than its actual market value.
The House of Lords held that the valuer was not liable for the losses resulting from market fluctuations.
(1985), p. 120, say that it would, for example, be perfectly intelligible to have a rule by which an unlicensed driver was responsible for all the consequences of his having driven, even if they were unconnected with his not having a licence.
One may compare, for example, The Empire Jamaica [1955] P. 259, in which a collision was caused by a "blunder in seamanship of ... a somewhat serious and startling character" (Sir Raymond Evershed M.R., at p. 264) by an uncertificated second mate.
Although the owners knew that the mate was not certificated and it was certainly the case that the collision would not have happened if he had not been employed, it was held in limitation proceedings that the damage took place without the employers" "actual fault or privity" (section 503 of the Merchant Shipping Act 1894) because the mate was in fact experienced and (subject to this one aberration) competent.
Rules which make the wrongdoer liable for all the consequences of his wrongful conduct are exceptional and need to be justified by some special policy.
Normally the law limits liability to those consequences which are attributable to that which made the act wrongful.
On the Court of Appeal"s principle, the doctor is responsible for the injury suffered by the mountaineer because it is damage which would not have occurred if he had been given correct information about his knee.
There are of course differences between the measure of damages for breach of warranty and for injury caused by negligence, to which I shall return.
I think that the Court of Appeal"s principle offends common sense because it makes the doctor responsible for consequences which, though in general terms foreseeable, do not appear to have a sufficient causal connection with the subject matter of the duty.
It is therefore inappropriate either as an implied term of a contract or as a tortious duty arising from the relationship between them.
If his duty is only to supply information, he must take reasonable care to ensure that the information is correct and, if he is negligent, will be responsible for all the foreseeable consequences of the information being wrong.The effect of the SAAMCO case was to exclude from liability the damages attributable to a fall in the property market notwithstanding that those losses were foreseeable in the sense of being “not unlikely” (property values go down as well as up) and had been caused by the negligent valuation in the sense that, but for the valuation, the bank would not have lent at all and there was no evidence to show that it would have lost its money in some other way.
It was excluded on the ground that it was outside the scope of the liability which the parties would reasonably have considered that the valuer was undertaking.