BARCLAYS has lost its High Court spat with Grant Thornton over non-statutory audits for Von Essen Hotels Group (VEH).
The legal wrangle began after the Top Ten accountancy firm had signed off the hotel group’s accounts from 2006 to 2009, claiming it was in sound financial health. Within months the group had collapsed.
Barclays branded GT as negligent as it partly based its decision on the audits to continue with its £250m loan facility to VEH. The bank claimed GT was negligent as it had failed to discover fraudulent overstatements of the hotel’s true financial position. When it collapsed, Barclays was left with a debt it had little chance of recovering.
But in the reports, Grant Thornton had included a clear disclaimer that they were solely for VEH and its director and that GT held no responsibility to anyone else for its audit work. Barclays challenged its stance, arguing that such a disclaimer was unreasonable.
Justice Cooke stated that 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’, LegalBusiness, reports.
‘Grant Thornton made it clear that it was not prepared to assume responsibility to Barclays in respect of these reports. There was nothing unreasonable in that stance, as between two sophisticated commercial parties, where the approach of auditors limiting their responsibilities is well known… Barclays should have anticipated the existence of such a clause and, in my view, must have expected some such clause to be present.’
The judge said Grant Thornton was 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.
A Barclays spokesperson said it was ‘disappointed’ by the court’s decision.
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