Expertise is valuable because other people rely on it. A client asks an engineer whether a floor can take a new machine, a business owner asks an accountant whether a purchase makes sense, a project sponsor asks a consultant how much a change will save. The person asking usually cannot check the answer for themselves. That is precisely why they asked.
The same reliance that makes advice valuable can make careless advice expensive. If someone relies on a professional opinion that was given without reasonable care, and suffers a loss as a result, the adviser may be responsible for that loss, sometimes even where there is no contract between them. Just as often, the problem is not that the original advice was careless, but that it travelled: a rough estimate prepared for one purpose was reused, months later, for a much bigger decision it was never meant to support.
This article explains, in general terms, why advice can create liability, why the real risk often lies in how advice is used rather than how it was written, and a simple set of controls that protect both the people giving advice and the people relying on it. It is general information only. The law in this area is complex and fact-specific, so obtain legal advice for your own situation.
Why advice can create responsibility
In general terms, the law recognises that a person who gives advice or information in a professional or specialist capacity, knowing that another person is likely to rely on it, may owe that person a duty to take reasonable care. If the advice falls below the standard expected and the person who relied on it suffers a loss, the adviser may be liable. Lawyers often call this negligent misstatement.
The principle is often traced to a well-known English case from the 1960s, Hedley Byrne & Co Ltd v Heller & Partners Ltd, which involved a bank’s reference about a customer’s creditworthiness. Australian courts have developed the principle in their own cases, including L Shaddock & Associates Pty Ltd v Parramatta City Council, which concerned information a council provided about a property. The exact tests applied in Australia, including how disclaimers, the adviser’s assumption of responsibility and the reasonableness of reliance are treated, are matters for legal advice.
Other rules can apply as well. Statements made in trade or commerce can fall under the Australian Consumer Law’s prohibition on misleading or deceptive conduct. Contracts may contain express promises about the quality of advice. Professional bodies impose codes of conduct. And in some professions, approved professional standards schemes can limit members’ liability in certain circumstances. Which rules apply depends on the facts.
Three practical points follow for anyone giving or relying on expert advice:
- Responsibility does not depend only on a contract. Reliance in the right circumstances can be enough.
- “It was only an opinion” is a weak defence where someone holds themselves out as having expertise and knows the opinion will be relied on.
- A disclaimer is not a substitute for careful work. Disclaimers can matter, but whether and how far they protect an adviser depends on the circumstances, and some obligations cannot be excluded at all.
The real risk: advice that travels
Many disputes over advice do not begin with a careless calculation. They begin when advice moves from the decision it was prepared for into a different decision, without anyone checking whether it still holds.
Consider how often this happens:
- A preliminary structural opinion, given to help decide whether a project is worth investigating, is later treated as final design advice.
- A consultant’s savings estimate, based on assumptions provided by management, keeps appearing in business cases long after the assumptions changed.
- A supplier’s indicative capacity figure becomes a delivery commitment in a customer contract.
- A quick verbal answer in a site meeting is written into minutes and later quoted as a recommendation.
In each case, the original advice may have been perfectly reasonable for its purpose. The failure is that the organisation did not control how the advice was used. So the most useful question is not simply “was the advice correct?” but who is expected to rely on this advice, for what decision, and with what consequences?
Six things every material piece of advice should state
Treat any advice that will influence a significant decision as having a use case. Before giving it, or before relying on it, make sure it states six things.
1. Purpose
What decision is the advice intended to support? A feasibility screen, a budget estimate, a design decision, a safety assessment or a purchase approval each needs a different level of rigour.
2. Scope
What was examined, and what was not? “Based on the drawings provided, without site inspection” is a crucial qualification.
3. Evidence
What supports the opinion? Calculations, measurements, inspections, test results, documents reviewed or comparable cases.
4. Assumptions
What must be true for the advice to remain valid? Loads, volumes, prices, timeframes, material properties, regulatory settings.
5. Reliance
Who is expected to rely on it? The client, a named third party, the client’s lender? Advice prepared for one party and passed to others creates uncertainty about responsibility.
6. Review or expiry
When should the advice be reconsidered? Advice based on market prices, regulations or site conditions can go out of date quickly.
The more consequential the decision, the more explicitly these should be recorded.
Know what kind of statement you are making
Different kinds of professional statement carry different levels of confidence, but people outside the profession often treat them as interchangeable. Being precise about the type of statement reduces misunderstanding.
| Statement | What it usually means | Typical level of confidence |
|---|---|---|
| Indicative estimate | A rough figure to support early decisions | Low; may change significantly |
| Opinion | A professional judgement based on stated information | Depends on scope and evidence |
| Assessment | A structured evaluation against criteria | Moderate to high within scope |
| Verification | A check that something meets a stated requirement | High for what was checked |
| Certification | A formal statement of compliance, often under a scheme or regulation | High, with formal accountability |
| Guarantee | A promise that an outcome will occur | Highest, and rarely appropriate for advisers |
When an indicative estimate is quoted as if it were a verification, risk has been created, regardless of how careful the original estimate was.
Disclaimers and their limits
Disclaimers and limitation statements have a role. A clear statement of scope, assumptions and intended reliance helps everyone understand what the advice is for, and contract terms can allocate risk between the parties. But disclaimers have limits:
- They may not protect against careless work in all circumstances.
- Some obligations, such as those under consumer protection law, generally cannot be excluded by contract.
- A disclaimer buried in small print does little to prevent the advice being misused.
The best protection is good practice: careful work, clearly stated limitations, written records and controls on reuse. Have contract terms and limitation wording reviewed by a lawyer.
When several experts contribute
Large decisions often combine advice from several specialists: engineering, cost, safety, finance and legal. Each opinion may be reasonable on its own, but the combination can still go wrong if nobody integrates them, resolves conflicting assumptions or decides what the advice means for the decision as a whole.
For important decisions, make it clear who integrates the specialist advice, who resolves conflicts between assumptions and who owns the final recommendation. Otherwise individually reasonable opinions can add up to a decision that nobody actually owns.
A worked example
This is an illustration. A small engineering consultancy is asked by a food manufacturer whether an existing mezzanine floor can support a new packaging machine weighing about 1.8 tonnes. The client wants a quick answer to decide whether to request quotes for the machine.
The engineer reviews the original drawings, which are incomplete, and does not inspect the site. Based on the drawings, the floor appears to have adequate capacity, but the engineer is uncertain about the condition of connections and whether alterations have been made since construction.
Poor practice. The engineer replies by email: “Should be fine for the new machine.” Six months later, the client’s builder quotes the email as the basis for installing the machine without further checks. The mezzanine deflects visibly under the load, and the installation is stopped while the structure is strengthened. Everyone disputes who was responsible.
Better practice. The engineer issues a short letter:
- Purpose: to help the client decide whether to seek quotes for the machine.
- Scope: desktop review of the 1998 drawings provided. No site inspection. Connections, member condition and any later alterations were not assessed.
- Evidence: member sizes and spans from the drawings, the machine supplier’s stated weight and footprint.
- Assumptions: the structure matches the drawings, is in sound condition, and the machine load is distributed as described by the supplier.
- Conclusion: on those assumptions, the mezzanine appears likely to have capacity, subject to detailed assessment.
- Reliance: for the client’s internal planning only. Not for construction or installation. A site inspection and detailed design check are required before the machine is installed.
- Review: this opinion should not be relied on after 12 months or if the machine specification changes.
When the builder later asks to proceed, the letter makes the next step obvious: commission the site inspection and detailed check. The inspection finds a modified connection that needs strengthening, which is completed before installation. The cost is modest, nobody is harmed and responsibility is clear.
Communicating uncertainty clearly
Much advice goes wrong not because the expert was careless but because uncertainty was lost in communication. Executives and clients often want a single number or a yes-or-no answer, and specialists feel pressure to give one. A few habits help:
- Give ranges, not single points, where the evidence supports a range: “between 1.5 and 2.2 tonnes, depending on connection condition”.
- Say what would change the answer: “if the connections have been altered, capacity could be significantly lower”.
- Separate the conclusion from its conditions visually, so readers cannot quote one without the other.
- State confidence plainly: “this is a preliminary view, not a design assessment”.
Organisations that reward clear statements of uncertainty, rather than false certainty, get better decisions from their experts.
How this applies to a small Australian business
If you give advice
Many small businesses give advice as part of their work, even if they do not think of themselves as advisers: engineers, designers, fabricators, IT contractors, accountants, consultants and tradespeople answering technical questions. Practical protections include:
- Write it down. Confirm important advice in writing, including scope, assumptions and intended use.
- Separate quick answers from formal advice. Make it clear when a comment is preliminary and what further work would be needed.
- Stay within your competence. If a question falls outside your expertise, say so and suggest who should answer it.
- Keep records of the information you relied on and the work you did.
- Use clear engagement terms that describe your services, limits and who may rely on your work, reviewed by a lawyer.
- Hold appropriate insurance. Professional indemnity insurance is common, and sometimes mandatory, for people giving professional advice. Discuss your needs with an insurance broker.
- Check professional obligations that apply through your professional body or licensing scheme.
If you rely on advice
Business owners rely on advice constantly. Before relying on a professional opinion for a significant decision, check:
- Was the advice prepared for this decision, or for a different one?
- What did the adviser examine, and what did they exclude?
- What assumptions does it depend on, and are they still true?
- How old is it?
- Is a more rigorous assessment needed before you commit money or accept a safety risk?
The article on testing decision systems before you trust them applies similar thinking to automated tools and models.
Common mistakes
- Giving verbal opinions on significant matters without written confirmation of scope and assumptions.
- Reusing preliminary advice for final decisions without revalidation.
- Dropping assumptions from summaries, so decision-makers see the conclusion but not its conditions.
- Pressuring specialists for certainty they cannot provide, then treating their answer as a guarantee.
- Relying on disclaimers instead of careful work and clear communication.
- Passing advice to third parties without considering who may now rely on it.
- Letting commercial teams overstate the confidence behind technical estimates in proposals.
Questions to ask
- What decision is this advice meant to support, and is that the decision we are now making?
- What was examined, and what was left out?
- What assumptions must hold, and who checks whether they still do?
- Who is entitled to rely on this advice?
- When does the advice need to be reviewed?
- Is this an estimate, an opinion, an assessment, a verification or a certification?
- Who integrates the advice from different specialists and owns the final recommendation?
- Do we have appropriate insurance and engagement terms for the advice we give?
Bringing it together
Professional advice creates value because others rely on it, and that reliance brings responsibility. In general terms, careless advice given in circumstances of reliance can lead to liability even without a contract, and disclaimers are not a substitute for careful work. The more common risk, though, is advice that travels beyond the decision it was prepared for. Every material piece of advice should state its purpose, scope, evidence, assumptions, intended reliance and review date, and the type of statement it is. Small businesses that give advice should write it down, stay within their competence and hold appropriate insurance. Businesses that rely on advice should check that it was prepared for the decision they are actually making. For your own circumstances, get legal advice.
Source: KEVOS notes. Examples in this article are illustrations. This article is general information, not legal advice.
