Contractual clauses which seek to exclude potential liability for negligence are often ineffective. However, an accountancy firm has defeated a £45 million professional negligence claim after the High Court ruled that it was entitled to rely upon a clearly stated and reasonable disclaimer of responsibility.
In an audit report, the firm had signed off a company’s accounts as representing a true and fair view of its financial health. A bank claimed that it had extended a £250 million loan facility to the company on the strength of that report. The company was alleged to have fraudulently given a misleading picture of its financial position and the bank was said to have lost heavily as a result.
The bank claimed that the firm had negligently failed to identify the fraud and sought to recover its losses. However, the firm pointed to a clause in the report which stated that it was prepared solely for the benefit of the company’s director and for no other purpose. The provision explicitly stated that the firm accepted no responsibility to anyone other than the company and its director.
In dismissing the bank’s claim, the Court noted that the disclaimer was printed in red ink, capitalised and underlined. Both the bank and the firm were sophisticated business entities and it was not a case where there was an imbalance of bargaining power between the parties. The bank could be expected to take its own measures to protect itself against the risk of fraud and there was ‘nothing unreasonable’ about the firm’s reliance on the disclaimer.