Barclays Bank PLC v Grant Thornton UK LLP

The court granted summary judgment for the defendant, holding that the disclaimer in Grant Thornton's two non-statutory auditor's reports negatived any assumption of responsibility to Barclays and was, in the circumstances, a reasonable restriction on liability under the Unfair Contract Terms Act 1977. The judge applied the assumption of responsibility framework derived from Hedley Byrne and related authorities and treated the disclaimer as a material fact relevant to whether a duty of care arose.

The key legal points were: (i) a clear and prominent disclaimer in an auditor's report may prevent the auditor from assuming responsibility to a third party; (ii) where the Unfair Contract Terms Act 1977 applies the notice must satisfy the reasonableness test in s.11 (and relevant factors in Schedule 2), and the party seeking to rely on the notice must show it is reasonable; and (iii) on the facts assumed true for the summary judgment application Barclays, a sophisticated commercial lender, had no real prospect of overcoming the Disclaimer because it did not contract with or pay Grant Thornton, the Disclaimer was obvious on the face of a two‑page report, and Barclays could and should have protected its position by seeking a direct engagement.

This was a first‑instance application for summary judgment by the auditor (Grant Thornton) against a claim by Barclays arising from two non‑statutory audit reports for the Von Essen Hotels Group for the years ending 2006 and 2007. Barclays alleged that Grant Thornton negligently failed to detect fraud by two employees which had caused Barclays to continue and advance lending under a 2006 facility, and sought to recover approximately £45 million.

• Nature of the claim: A negligence claim in tort alleging negligent misstatement in auditor's reports supplied (via the company) to Barclays and relied on by Barclays in relation to the banking facility.
• Procedural posture: Summary judgment/strike‑out application under CPR 24.2 and CPR 3.4 on the basis there was no real prospect of success and no other compelling reason to trial.
• Issues framed: (i) whether the auditors' disclaimer prevented a duty of care arising at common law; (ii) whether the Unfair Contract Terms Act 1977 applied to the disclaimer; (iii) if it applied, whether the disclaimer satisfied the statutory reasonableness test; and (iv) if Barclays had no real prospect of success, whether there was any other compelling reason for trial.

The judge accepted for present purposes the facts pleaded by Barclays (including foreseeability, proximity and actual reliance) and proceeded to test whether, on those facts, the Disclaimer would be effective. The court examined authority including Hedley Byrne, Caparo, Man v Freightliner, Omega Trust and McCullagh, and analysed the reasonableness test under the 1977 Act, with reference to Schedule 2 factors such as bargaining strength, availability of alternatives and whether the customer knew of the term. The judge emphasised that Barclays was a sophisticated commercial party, had entered into other bespoke engagements with Grant Thornton in the past, had not engaged or paid Grant Thornton for these particular reports, and that the Disclaimer was clear and prominent on the two‑page reports addressed to the company’s director. The judge also noted the uncertainty and potential unfairness of imposing an open‑ended common‑law liability on an auditor where contractual limits had been used when an engagement had been agreed.

On balance the court found the Disclaimer would have the effect of negating any assumption of responsibility to Barclays and that it was reasonable in the circumstances. No other compelling reason existed for trial, and summary judgment for the defendant was entered. The judge commented on the commercial context and the familiarity of professional disclaimers in that context when assessing reasonableness.

Summary judgment for the defendant. The court held that the auditors' disclaimer in the two non‑statutory reports negated any assumption of responsibility to Barclays and, applying the Unfair Contract Terms Act 1977, the notice was reasonable in the circumstances. Accordingly Barclays had no real prospect of success and there was no other compelling reason for a trial.