Barclays Bank Plc v Grant Thornton UK LLp

An auditor’s disclaimer may prevent a duty of care arising to a third party where it objectively makes clear that responsibility is not being assumed. The disclaimer is relevant to assumption of responsibility rather than being treated simply as a contractual exclusion clause. Where the Unfair Contract Terms Act 1977 applies, the notice must satisfy the requirement of reasonableness as a whole. In a commercial setting, a clear disclaimer addressed to sophisticated parties, who could have sought a direct engagement and negotiated terms, may be reasonable. Expected reliance on the report does not overcome an effective disclaimer.

Barclays claimed damages from Grant Thornton for allegedly negligent non-statutory audit reports concerning the Von Essen Hotels Group. Barclays alleged that it relied on the reports when continuing lending under a facility agreement and that Grant Thornton should have detected fraud affecting the group’s financial position.

Grant Thornton applied for summary judgment under CPR 24.2 and/or strike-out under CPR 3.4(2)(a). The central issues were whether the disclaimer excluded any duty of care, whether the Unfair Contract Terms Act 1977 applied and, if so, whether the disclaimer was reasonable, and whether there was any compelling reason for a trial.

1. Summary judgment. Grant Thornton was entitled to summary judgment. Barclays had no realistic prospect of success and there was no other compelling reason for the claim to proceed to trial.
2. Assumption of responsibility. The existence of a disclaimer is a fact relevant to whether responsibility was assumed, applying the approach in McCullagh v Lane Fox & Partners Ltd and Hedley Byrne v Heller. The question is objective. A person cannot ordinarily be taken to assume responsibility in circumstances where responsibility is expressly negatived.
3. The expectation that Barclays would rely on the reports, and the fact that the reports were produced for the purposes of the lending facility, did not itself create a duty. The clear disclaimer stated that Grant Thornton did not accept responsibility to anyone other than the company and its director. It should have been read and understood by a sophisticated commercial bank.
4. Reasonableness. Assuming that the Unfair Contract Terms Act 1977 applied, the disclaimer had to be assessed as a whole under sections 2 and 11. The burden lay on Grant Thornton to show reasonableness. Relevant matters included the parties’ bargaining positions, alternatives, knowledge of the term, the commercial setting, the absence of a fee or direct engagement, the clarity and legitimate purpose of the disclaimer, and Barclays’ ability to obtain a direct engagement with agreed limits.
5. Those factors established that the disclaimer was reasonable. Barclays was a sophisticated party familiar with professional disclaimers and had previously entered direct engagements with Grant Thornton containing limitations of liability. The court rejected the submission that the wording was ineffective because it retained the words “as a body”; its meaning was sufficiently clear.
6. The court declined to decide whether a contractual limitation agreed with the client could be relied upon against a third party to whom a duty of care was otherwise owed. That uncertainty reinforced the legitimate purpose of using a disclaimer to avoid such disputes.
7. Because the parties identified no further material facts likely to emerge at trial, and the issue could properly be resolved on the evidence available, there was no compelling reason for a trial. Costs followed the event.

First-instance decision. No prior appellate decision is stated in the judgment.