Accountancy firm Grant Thornton has succeeded in persuading a judge to throw out a claim for more than £50m from Barclays, over audit reports provided to the collapsed Von Essen Hotels group.
Cooke J today gave a summary decision striking out Barclays’ claim, in which the bank had alleged that GT owed it a duty of care in tort in relation to the contents of the audits of Von Essen’s accounts. He found that GT was entitled to rely on a disclaimer of responsibility in non-statutory audit reports it provided to the Von Essen Hotels Group (VEH).
The judge said: “Grant Thornton are entitled to summary judgment on the basis that Barclays have no realistic prospect of success in the action in the face of the disclaimer and there is no good reason why the action should go to trial.”
He refused Barclays permission to appeal, but it remains open to the bank to seek leave directly from the Court of Appeal.
The judge said that the disclaimer of responsibility was clear on its face and would have been read and understood by anyone at Barclays who had read the two-page reports for the years ending 2006 and 2007.
He continued: “In the face of an express disclaimer it is not enough to say that both Grant Thornton and Barclays expected Barclays to rely upon the terms of the report in the context of the 2006 facility. Barclays was being told expressly that it relied on the reports at its own risk.
“Grant Thornton made it clear that it was not prepared to assume responsibility to Barclays in respect of these reports. There was nothing unreasonable in that stance, as between two sophisticated commercial parties, where the approach of auditors limiting their responsibilities is well known and, in the statutory context, is the subject of a standard form ICAEW clause. Barclays should have anticipated the existence of such a clause and, in my view, must have expected some such clause to be present.”
Barclays, together with Lloyds Bank, granted VEH loan facilities totalling £250m in 2006. It sought to recover its losses, following VEH’s collapse, of £46m plus interest.
It claimed that GT owed it a duty of care in tort in relation to the contents of those reports and that it was negligent in their production because of their failure to uncover the fraud of two employees of VEH, financial controller Simon Tate and finance director Stephanie Gibbs, who it alleges had deliberately caused GT to be misled about the true sales and expenses position.
The judge said that one of the employees, Tate, has admitted that he “encouraged a culture of obfuscation and diversion amongst hotel accounts staff in their dealings with Grant Thornton” and acted in concert with the other to “provide misleading explanations to Grant Thornton”.
Separate proceedings have also been issued against Tate and Gibbs, which are unaffected by the judge’s ruling.
Barclays Bank v Grant Thornton LLP Commercial (Cooke J) 18 February 2015
Simon Salzedo QC and Oliver Jones (instructed by Taylor Wessing LLP) for the applicant
David Halpern QC and Benjamin Wood (instructed by Addleshaw Goddard LLP) for the respondent
