Professional advisers can rely on clear and unambiguous disclaimers to protect themselves against claims of negligence following a High Court decision. The Court threw out a claim by Barclays Bank that accountants Grant Thornton had been negligent in failing to spot fraudulent statements exaggerating a hotel group’s financial position. Barclays lost £250m when the hotel chain went bust.

Grant Thornton audited Von Essen Hotels Group’s (VEH) accounts for 2006 to 2009 which showed the group was in good financial health. Soon after the group collapsed, leaving Barclays Bank with an outstanding loan of £250m which it had little chance of recovering.

Barclays accused Grant Thornton of negligence for failing to uncover the fraudulent statements, claiming that it had relied on the audit reports in deciding whether to continue its loan facility to VEH. In its defence Grant Thornton relied on a disclaimer which said the reports were prepared for the use of the VEH’s director only and that it did not accept liability to third parties.

The judge agreed that the disclaimer was clear and unambiguous and awarded Grant Thornton summary judgement. Justice Cooke said the disclaimer ‘could not have been misunderstood’ and ‘would have been read and understood by anyone at Barclays who had read the two page reports’, according to a report in Legal Business.

“This case shows that a carefully worded disclaimer can be very valuable for professional firms who want to protect themselves against claims from third parties,” said James Burgoyne, Director – Claims & Technical, Brunel Professional Risks. “The Court did note, however, that both parties were sophisticated, commercial entities, who would be well aware of limitations of liability. These comments were directed at the powers given to the Court under the Unfair Contract Terms Act 1977, and the Court was confirming why they had not exercised those powers. The case is a useful reminder of the necessary elements of an effective limitation clause, and underlines the Court’s willingness to enforce them where the parties clearly understand the limitation clause and its implications.”

Details of the case have been reported in Legal Business, Accountancy Age and by law firm Brodies.