When you engage a lawyer or accountant, you expect professional competence and care. But what happens when their negligence causes you financial loss? In Malaysia, professionals who fail to meet the required standard of care can be held liable for professional negligence. This comprehensive guide explains everything you need to know about pursuing such claims.
What is Professional Negligence?
Professional negligence occurs when a professional fails to perform their duties to the standard expected of a reasonably competent practitioner in their field, resulting in loss or damage to their client. Unlike ordinary negligence, professional negligence claims involve specialised knowledge and higher standards of care.
For lawyers and accountants in Malaysia, professional negligence can manifest in various ways:
Common examples of lawyer negligence:
- Missing limitation periods for filing claims
- Failing to advise on important legal matters
- Drafting defective contracts or documents
- Mishandling client funds
- Failing to conduct proper due diligence
- Providing incorrect legal advice
Common examples of accountant negligence:
- Errors in financial statements or audits
- Incorrect tax advice leading to penalties
- Failure to detect fraud during audits
- Negligent preparation of financial projections
- Breach of confidentiality
The Three Essential Elements of Professional Negligence
To succeed in a professional negligence claim in Malaysia, you must establish three key elements:
1. Duty of Care
The first element requires proving that the professional owed you a duty of care. For lawyers and accountants, this duty typically arises from the contractual relationship when you engage their services. However, duty of care can also extend to third parties in certain circumstances, particularly where the professional knows their work will be relied upon by others.
Malaysian courts apply the established common law principles to determine whether a duty of care exists, considering factors such as proximity, foreseeability, and whether it is fair, just, and reasonable to impose such a duty.
2. Breach of Duty
Once duty is established, you must prove that the professional breached that duty by falling below the standard of care expected of a reasonably competent practitioner. This is often the most contested element in professional negligence cases.
The standard is not one of perfection. Professionals are entitled to make errors of judgment provided they act reasonably. The test is whether the professional exercised the degree of skill and care that would be expected from a reasonably competent member of their profession.
Expert evidence is typically required to establish the appropriate standard of care and whether it was breached. Courts will consider professional guidelines, industry standards, and the practices of other competent practitioners.
3. Causation and Loss
Finally, you must prove that the breach of duty caused your loss. This involves two components:
Factual causation: Would the loss have occurred "but for" the professional's negligence?
Legal causation: Was the loss a reasonably foreseeable consequence of the negligence?
You must also prove that you suffered actual, quantifiable loss. In professional negligence cases, this is typically financial loss, which must be calculated with reasonable certainty.
Limitation Periods: Time Limits for Filing Claims
Understanding limitation periods is critical, as failing to file within the prescribed time will bar your claim entirely.
The General Rule: Six Years
Under Section 6 of the Limitation Act 1953, actions founded on contract or tort must be brought within six years from the date the cause of action accrued. For contractual claims, time runs from the date of breach. For tort claims, time runs from when damage occurs.
The Discoverability Rule: Section 6A
The Limitation (Amendment) Act 2018 introduced Section 6A, which provides important relief for claimants in negligence cases not involving personal injuries. This is particularly relevant to professional negligence claims against lawyers and accountants.
Under Section 6A, where the claimant did not know about the damage at the time it occurred, the limitation period is three years from the "starting date" — the date when the claimant first had both the knowledge required to bring the action and the right to do so.
The "knowledge required" includes:
- Material facts about the damage
- That the damage was attributable to the professional's act or omission
- The identity of the defendant
This knowledge includes facts the claimant could reasonably have been expected to discover, including through expert advice.
The 15-Year Longstop Period
Importantly, Section 6A(3) imposes an absolute longstop period of fifteen years from the date the cause of action accrued. No action can be brought after this period, regardless of when the damage was discovered. This provides certainty for professionals while still protecting claimants who could not reasonably have known about their loss.
Concurrent Claims in Contract and Tort
Professional negligence claims can often be framed in both contract and tort. The retainer agreement creates contractual obligations, while the general law imposes a duty of care in tort. This can be strategically important:
- Contract: Time runs from the date of breach
- Tort: Time runs from when damage occurs (which may be later)
Claimants should consider both causes of action to maximise their chances of being within time.
Contributory Negligence
Under Section 12 of the Civil Law Act 1956, if you contributed to your own loss through your own negligence, damages may be reduced according to your share of responsibility. For example, if you failed to provide complete information to your accountant or ignored your lawyer's advice, this could reduce your recovery.
Practical Steps Before Filing a Claim
1. Gather Documentation
Collect all relevant documents including the retainer agreement, correspondence, invoices, and any documents produced by the professional. These will be essential evidence.
2. Seek Independent Expert Opinion
Obtain an independent assessment from another qualified professional about whether the standard of care was breached. This expert may later provide evidence at trial.
3. Calculate Your Loss
Work with appropriate experts to quantify your financial loss with reasonable precision. Courts require evidence of actual loss, not speculation.
4. Check Limitation Periods
Carefully assess when your cause of action accrued and ensure you file within time. If in doubt, seek legal advice immediately.
5. Consider Professional Indemnity Insurance
Both lawyers and accountants in Malaysia are typically required to maintain professional indemnity insurance. Verify that the professional has adequate coverage, as this affects the practicality of recovery.
6. Attempt Resolution
Consider writing a letter of demand setting out your claim. Many professional negligence disputes are settled without litigation, saving time and costs.
The Litigation Process
If settlement is not possible, you will need to file a civil claim in the appropriate court. The court's jurisdiction depends on the quantum of your claim. Professional negligence cases typically involve complex evidence and expert testimony, making experienced legal representation essential.
Regulatory Complaints
In addition to civil claims, you may also lodge complaints with the relevant professional bodies — the Malaysian Bar for lawyers or the Malaysian Institute of Accountants for accountants. While regulatory proceedings do not provide compensation, they can result in disciplinary action and may support settlement negotiations.
Conclusion
Professional negligence claims against lawyers and accountants require careful preparation and a thorough understanding of the legal requirements. The key is to act promptly, gather evidence diligently, and seek expert advice early. With proper preparation, legitimate claims can be successfully pursued to recover losses caused by professional failures.
Disclaimer: This article provides general information about the law in Malaysia and does not constitute legal advice. The application of law depends on the specific facts of each case. For advice on your particular situation, please consult a qualified legal professional. Limitation periods and other legal requirements may vary depending on circumstances, and this article should not be relied upon as a substitute for professional legal advice.