The UK Supreme Court has today given a landmark judgment in favour of longstanding Squire Patton Boggs client Manchester Building Society in a negligence claim against its former auditor, Grant Thornton.
The case, which dates back to 2013, arose from negligent advice given by Grant Thornton concerning the use of “hedge accounting” to reduce the volatility of the mark-to-market value of swaps in its accounts. The error forced the Society to close out its long-term swaps, which caused a multimillion-pound loss and meant that it had to source emergency funding.
The case was heard in October 2020 by a seven-judge panel of the Supreme Court, who unanimously determined that the losses suffered by the Society were within the scope of Grant Thornton’s duty. The judgment has significantly reformulated the legal test for the scope of duty of care owed by professional advisers to their clients.
David Harding, Chairman of Manchester Building Society, commented, “It was always clear to the Society that our claim had merit and that it was in the interests of our members to pursue the claim up to the highest Court to recover compensation from Grant Thornton. The Society wishes to thank the solicitors and bar team who worked alongside us from beginning to end and who were absolutely committed to the case.”
The Squire Patton Boggs team representing Manchester Building Society was led by Litigation partner Anthony Taylor and included director Peter Lees and associate Alex Villers.
“The legal test for scope of duty in professional negligence had become narrow and difficult to navigate,” said Mr. Taylor. “The over emphasis on the counterfactual test had introduced both uncertainty and undue barriers to recovery in cases involving complex facts. We, therefore, welcome the simplification of the test provided by the court in this judgment. We are very grateful to our client, Manchester Building Society, for entrusting this important case to us and allowing us to navigate the Society through the lower courts and to a successful resolution of the claim before the UK Supreme Court.”