## Facts

- Manchester Building Society (MBS) retained Grant Thornton LLP to provide accounting advice regarding the use of interest rate swaps to hedge against interest rate fluctuations.
- Grant Thornton advised that "fair value hedge accounting" could be used to mitigate the impact of interest rate changes on MBS’s financial statements.
- Relying on this advice, MBS entered into long-term interest rate swaps.
- The advice was incorrect: fair value hedge accounting was not permissible under applicable accounting standards.
- As a result, MBS suffered significant financial losses when interest rates fell.
- MBS alleged negligence by Grant Thornton in providing incorrect accounting advice and sought damages for the resulting losses.

## Issues

1. Whether Grant Thornton’s liability for MBS’s losses was limited by the SAAMCO principle.
2. How the distinction between "advice" and "information" cases under the SAAMCO principle determined the scope of the defendant’s liability.
3. To what extent losses claimed by MBS fell within the purpose and scope of Grant Thornton’s professional duty.

## Decision

- The Supreme Court held that Grant Thornton’s liability was governed by the SAAMCO principle.
- The case was deemed an "information" case, not an "advice" case, meaning liability was limited to consequences flowing from the incorrect information, not all foreseeable losses.
- The Court emphasized that the purpose of the professional’s duty and the risks they were retained to address are determinative of the scope of liability.
- Grant Thornton was found liable only for losses within the scope of its duty to provide correct accounting advice, not for all consequential financial losses suffered by MBS.

## Legal Principles

- The SAAMCO principle distinguishes between "advice" cases (where professionals are responsible for a client’s course of action, entailing broader liability) and "information" cases (where liability is limited to the consequences of incorrect information).
- The scope of a professional’s liability is defined by the purpose of their duty and the risks they undertake to address.
- Clear definition of the professional's duty at the outset of an engagement determines the extent of potential liability.
- The SAAMCO principle applies equally to complex financial advice, provided the duty and assumed risks are clearly identified.

## Conclusion

The Supreme Court clarified that professionals’ liability in negligence is limited to losses arising from the specific risks they were retained to address, reaffirming and refining the SAAMCO principle and distinguishing between "advice" and "information" cases; this provides important guidance for defining the scope of liability in professional engagements, particularly for accountants and financial advisors.


Manchester Building Society v Grant Thornton LLP [2021] UKSC 20