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

Key points

  • The distinction between ‘advice’ and ‘information’ under the SAAMCO principle is overly rigid and the scope of duty of advisers should instead be determined by looking at the purpose of the duty
  • The counterfactual test in SAAMCO (see commentary) should only be regarded as a tool to cross-check the result on of an objective analysis of the purpose of the duty assumed


  • Grant Thornton incorrectly and negligently advised that MBS’s accounts could be prepared by “hedge accounting”, which could reflect a fair view on MBS’s financial position
  • MBS relied on the advice, and entered into long-term interest swap contracts
  • When Grant Thornton realised their error, MBS’s accounts were required to be restated, and they were found insufficient regulatory capital
  • MBS closed out the swaps, which incurred the cost of over £32m and sought to recover the cost (including other associated costs) as damages from Grant Thornton
  • The lower courts held that the the loss sustained by the society as a result of entering into long-term interest rate swaps in reliance on Grant Thornton’s negligent advice was not within the scope of Grant Thornton’s duty

Held (The Supreme Court)

  • Appeal allowed; the close-out costs were within the scope of duty of care assumed by Grant Thornton
  • The overall net loss is recoverable, subject to 50% reduction for contributory negligence by MBS
  • Lords Leggatt and Burrows agreed on the outcome with the majority but arrived at it by separate approaches

Lord Hodge and Lord Sales (with whom Lord Reed, Lord Kitchin and Lady Black agreed)

Purpose test for scope of duty

  • “In summary, our view is that
    • (i) the scope of duty question should be located within a general conceptual framework in the law of the tort of negligence;
    • (ii) 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 purpose for which the advice is being given (in the context of this judgment, we use the expression “purpose of the duty” in this sense);
    • (iii) in line with the judgment of Lord Sumption JSC in Hughes-Holland at paras 39–44, the distinction between “advice” cases and “information” cases drawn by Lord Hoffmann in his speech in SAAMCO should not be treated as a rigid straitjacket; and, following on from this,
    • (iv) counterfactual analysis of the kind proposed by Lord Hoffmann in SAAMCO should be regarded only as a tool to cross-check the result given pursuant to analysis of the purpose of the duty at (ii), but one which is subordinate to that analysis and which should not supplant or subsume it.”: [4]

Justifications for the purpose approach

  • The distinction in SAAMCO “is too rigid and, as such, it is liable to mislead” as between the extreme cases where the “adviser has assumed responsibility for every aspect of a transaction” and where the “professional adviser contributes only a small part of the material on which the client relies in deciding how to act”, there is a “spectrum of cases”: [18]
  • “examination of the purpose of the duty provides an appropriate and refined basis for identifying, out of what may be a wide range of factors which contribute to the claimant’s loss, the factors for which defendant is responsible”: [25]
  • The counterfactual analysis creates the “danger of manipulation, in argument, of the parameters of the counterfactual world…the more one moves from the comparatively straightforward type of situation in the valuer cases, as illustrated by SAAMCO , the greater scope there may be for abstruse and highly debatable arguments to be deployed about how the counterfactual world should be conceived”

On Lord Leggatt’s approach

  • “In our view the scope of duty principle can more readily be understood without placing the emphasis which Lord Leggatt JSC does on causation and the counterfactual test; the focus on causation, … distracts attention from the primary task of identifying the scope of the defendant’s duty.”: [5]

On Lord Burrows’ approach

  • “However, we differ from Lord Burrows JSC in our understanding of the location of the scope of duty issue in the scheme of the law of tort and in thinking that the focus for the analysis of that issue should be on the purpose of the duty without involving reference back to policy. The policy decision has already been made that the proper approach to the scope of duty issue is to derive it from the purpose of the duty. In our opinion it is unnecessary to reintroduce a policy-based analysis and to do so would create the risk of uncertainty … A focus on the purpose of the duty is, in our view, both more principled and more in line with authority”: [5]

Current case

  • The purpose of the advice was “to deal with the issue of hedge accounting in the context of its implications for the society’s regulatory capital”: [38]
  • “Having regard to that purpose, we consider that Grant Thornton in 2006 in effect informed the society that hedge accounting could enable it to have sufficient capital resources to carry on the business of matching swaps and mortgages, when in reality it did not.”: [38]

Lord Leggatt (Concurring)

On the SAAMCO principle

  • “It would be desirable to dispense with the description ‘information’ and ‘advice’ as terms of art and to focus instead on the need to identify with precision in any given case the matters on which the professional person has undertaken responsibility to advise”: [92]


  • Lord Leggatt proposed a test of legal causation (not factual causation) as follows: “The relevant causal relationship for this purpose is not between the provision of information or advice and the claimant’s loss but between what made the information or advice wrong and the loss. What makes information or advice wrong is the existence of facts or matters which the adviser has misrepresented or failed to report. It is the foreseeable consequences of those matters to which the adviser’s responsibility is limited.”: [96]
  • On the counterfactual test: he thought that while it should not be definitive or exhaustive, it can be useful in two situations: “One is where, as in the valuers’ negligence cases, it is necessary to divide into separate elements what on its face is a single loss…The other situation in which a counterfactual analysis is conspicuously useful is to help explain why—where this is the case—the subject matter of the defendant’s negligent advice (or other wrongdoing) was causally irrelevant to the injury which occurred”: [106]

Current case

  • Applying the counterfactual analysis, he found that “if Grant Thornton’s advice had been correct and there had been an effective hedging relationship between the swaps and the mortgages, as Grant Thornton advised that there was, the loss would not have occurred”: [175]

Lord Burrows (Concurring)

On the SAAMCO principle

  • “the decision as to whether loss falls within the scope of the professional’s duty of care is a question of law, with a particular emphasis on the purpose of the advice or information, that is underpinned by the policy of achieving a fair and reasonable allocation of the risk of the loss that has occurred as between the parties. Applying a counterfactual test can assist, whether one regards the case as one of advice or information, but such a test merely operates as a cross-check on one’s decision as to that allocation of risk.”: [203]
  • “I do not consider it necessary or helpful … to depart from a more conventional approach to the tort of negligence which begins with the duty of care, treats the SAAMCO principle as being concerned with whether factually caused loss is within the scope of the duty of care” : [212]

Current case

  • He applied the counterfactual test and asked “would the same loss have been suffered had it been true that there was an effective hedging relationship between the swaps and the mortgages?”. He found the answer was yes as the break cost would not have been suffered if that had been true: [209]
  • On these facts, an examination of the purpose of the auditor’s advice and the specific misrepresentation that there was an effective hedging relationship between the swaps and the mortgages make clear that, subject to any contributory negligence by the society, it is fair and reasonable for the risk of the break cost to be allocated to Grant Thornton not the society.


  • The judgment should be read with Khan v Meadows, which provides further guidance on the principles to ascertain the scope of the duty of care by answering six questions in sequence
  • The counterfactual test in SAAMCO applies only to ‘information’ cases (and not ‘advice’ cases). The test determines the scope of duty by asking whether the claimant’s actions would have resulted in the same loss if the advice given by the defendant had been correct. In ‘advice’ cases, the test is what position the claimant would be in had he not entered into the transaction at all. In both cases the losses must be foreseeable.