The UK High Court has ruled that Barclays cannot claim a financial loss of £250m from Grant Thornton based on the alleged fraudulent overstatements of a client’s financial position.
In the dispute, dating back to 2006 and 2007, the court found that the audit reports submitted by Grant Thornton to Von Essen Hotels Group (VEH) included a disclaimer which stated that the reports were made solely to VEH’s directors and that the accounting giant did not accept responsibility to anyone other than VEH and its directors for its audit work.
Barclays relied on the two non-statutory audits carried out by Grant Thornton for VEH and continued its funding of VEH under £250m loan facility. Barclays claimed the financial loss from Grant Thornton when VEH became insolvent and couldn’t repay the loan.
The bank alleged Grant Thornton had been negligent in producing the reports because it failed to uncover fraudulent overstatements of VEH’s financial position and argued that the disclaimer was ‘unreasonable’ and therefore inapplicable – for which Grant Thornton sought summary judgment on that point and won.
The High Court ruled that the disclaimer was ‘clear on its face’, ‘could not have been misunderstood’ and ‘would have been read and understood by anyone at Barclays who had read the two page reports’.
The judge concluded that Grant Thornton is 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.