Manchester Building Society v Grant Thornton UK LLP
[2021] UKSC 20
Ratio Decidendi
In professional negligence claims, the scope of the defendant's duty of care determines which losses are recoverable. The court must identify the purpose for which the advice was given and ask whether the loss that materialised is the kind of loss against which that purpose was to protect. The correct analytical tool is a counterfactual: would the claimant have suffered the same loss if the adviser's information or advice had been correct? If so, the loss falls outside the scope of duty. The Supreme Court reformulated Lord Hoffmann's SAAMCO distinction between 'advice cases' (full liability) and 'information cases' (scope limited to consequences of information being wrong), treating the distinction as a guide to the more fundamental enquiry rather than a rigid binary rule.
Fapte
Grant Thornton negligently advised Manchester Building Society that hedge accounting could be used for lifetime mortgages. When the advice proved wrong, MBS had to close out hedging positions at a loss of over £32 million.
Rezumatul hotărârii
The Supreme Court (Lord Hodge, Lord Reed, Lord Briggs, Lord Sales, and Lord Burrows) unanimously allowed the appeal in part and restated the law on scope of duty in professional negligence. The case arose from Grant Thornton's auditing negligence: they advised MBS that hedge accounting was applicable to lifetime mortgages, enabling MBS to avoid showing marked-to-market volatility in its accounts. When the advice proved wrong, MBS had to close swaps positions at a multi-million-pound loss. The Court rejected both the Court of Appeal's narrow formulation and the broader reading urged by MBS. Lord Hodge and Lord Sales delivered the leading judgment, holding that SAAMCO [1997] AC 191 remains authoritative but is best understood as an example of the scope of duty principle, not a self-contained binary rule. The correct approach asks: what was the purpose of the duty, and was the loss the kind against which that purpose was directed? The 'SAAMCO counterfactual' — subtracting the effect of the advice being wrong — is one tool but not a mechanical test. On the facts, Grant Thornton's duty was limited to the consequences of the accounting advice being incorrect; it did not extend to all losses MBS might suffer from its mortgage business decisions. Grant Thornton were not acting as MBS's business advisers. Only the 'consequences of the negligent advice' category of loss was recoverable.
Citate cheie
"The scope of the duty of care assumed by a professional adviser is governed by the purpose of the duty, judged on an objective basis by reference to the reason why the advice is being given."
— Lord Hodge and Lord Sales at [6]
"The SAAMCO principle is a principle about the scope of the duty of care, which limits the losses that are recoverable when a professional has negligently provided inaccurate information that has been relied upon by the claimant."
— Lord Hodge and Lord Sales at [17]
"The counterfactual enquiry, asking what the claimant's position would have been if the information had been correct, remains a useful cross-check but is not a substitute for the prior question: what was the purpose of the duty?"
— Lord Hodge and Lord Sales at [54]
Tratament ulterior
Now the leading authority on scope of duty in professional negligence. Applied in Khan v Meadows [2021] UKSC 21 (decided on the same day), where the Court applied the same purposive scope-of-duty analysis to a clinical negligence case.
Applied in Freehold Commercial v BNP Paribas [2023] EWHC 2300 (Comm), where the Commercial Court applied the purposive scope-of-duty test to limit a bank's liability for credit-risk advice.
Reformulated the binary 'advice vs information' distinction from SAAMCO [1997] AC 191, treating it as an illustrative example of the scope-of-duty principle rather than an autonomous rule.
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