Manchester Building Society v Grant Thornton UK LLP: advice or information? SAAMCO explained

19th February 2019

A Court of Appeal case in January 2019 has provided a useful analysis on using SAAMCO to distinguish between ‘advice’ and ‘information’ cases involving financial professional negligence.

SAAMCO is commonly used acronym for the case of South Australia Asset Management Corp v York Montague Ltd. In that case it was found that a professional adviser who has a duty to advise as to what action to take will be liable for the foreseeable consequences of the action if the advice is negligent. However, where a professional merely provides information to enable the recipient to make a decision on a course of action the professional will only be liable for the consequences of the information being wrong.

The Manchester Building Society Case

The Claimant, Manchester Building Society, issued fixed interest lifetime mortgages whereby the loans and interest only became repayable when the borrower entered a care home or died. The Building Society entered into long term interest rate swaps to hedge its risk of a difference between the fixed rate of interest received from borrowers and the variable rate upon which the Building Society borrowed money to make the loans to the borrowers.

In 2005, new accounting standards were introduced which meant that swaps had to be recorded on the Building Society’s balance sheet leading to high volatility of the balance sheet due to the changes in the variable rates.

In 2006, Grant Thornton (who was the Building Society’s auditor) advised that a practice known as hedge accounting could be applied to offset the fair value of the swap on the balance sheet. The Building Society relied on this advice and purchased further swaps and made more loans.

In 2008, the financial crisis caused interest rates to fall and in 2013, the Building Society found out that they could not use the hedge accounting practice. The result was that the volatility in the balance sheet returned as the full losses on the swaps had to be recorded and were no longer off-set. The revised accounts meant that the Building Society did not hold sufficient capital. The Building Society claimed that Grant Thornton was responsible for the losses caused by breaking the swaps as it flowed from the negligent advice to apply hedge accounting.

The trial judge concluded that the losses were caused by market forces and so were not recoverable. Although the negligent advice did cause the Claimant to break the swaps, the Defendant did not assume responsibility for the losses which flowed from market forces. The losses crystallised at the time the swaps were closed out but were caused by market forces and not by the act of closing out the swaps.

The Court of Appeal dismissed the Building Society’s appeal and gave some additional guidance on how to differentiate between an advice and an information case when applying SAAMCO. The Court of Appeal found the approach the judge had taken was not the correct approach in law but the correct overall decision was still reached so the appeal was dismissed.

This case was an information case and therefore Grant Thornton did not assume responsibility for the swap transactions but only for the financial consequences of its advice as to the hedge accounting process being wrong. The trial judge should therefore have looked at what the losses would have been if the advice was correct. The Building Society had not proved that the losses would not have been suffered if the advice had been correct.


The Court of Appeal provided a clear step by step process to apply the principles first set out in SAAMCO. The first step is to decide whether the case is an ‘advice’ or ‘information’ case and that distinction will determine the scope of the professional’s liability. The key to making the distinction is to decide whether the advice/information related to one aspect of a transaction or advice in relation to the entering into the transaction as a whole.

The step by step process may be summarised as follows:

1. Is the case an ‘advice’ or an ‘information’ case?

a. An ‘advice’ case is a where “it is left to the adviser to consider what matters should be taken into account in deciding whether to enter into the transaction” and the adviser is “responsible for guiding the whole decision making process”

b. An ‘information’ case is anything which is not an advice case.

2. In advice cases the adviser will have assumed responsibility for the decision to enter into the transaction. As a result, the adviser will be responsible for all foreseeable financial consequences of the transaction

3. In information cases the adviser will not have assumed responsibility for the decision to enter into the transaction and will only be responsible for the foreseeable financial consequences of the information being wrong i.e. an assessment of the position the client would have been in if the information had been correct.


Even though Grant Thornton was found to have been negligent they were not liable for the full losses suffered by the Building Society which recovered less than 10% of its overall claim. The recoverable losses were further reduced by reason of the Building Society’s contributory negligence in entering into swaps which lasted longer than the initial mortgages which gave rise to the volatility. This is likely to be a very welcome decision for professional advisors as it reduces the recoverability of a large category of losses even where the professional is negligent.

The Court reaffirmed the question as to whether a professional was acting in providing advice as to how to act or information to enabling the client to decide how to act. The Court of Appeal found that all cases which were not clearly ‘advice’ cases were ‘information’ cases. In the latter case, the key question is whether the same loss would have been suffered if the information had been correct.

Following the Court of Appeal’s checklist for applying SAAMCO it should be easier to assess how the SAAMCO case applies to the scope of a professional’s duty on a particular set of facts. The case also assists in establishing when an adviser has assumed responsibility for a particular risk and whether this responsibility includes liability for a client’s losses resulting from a particular transaction.

Whilst the Court of Appeal did not agree with the trial judge’s reasoning it did endorse the judge’s view that it would be “…a striking conclusion to reach that an accountant who advises a client as to the manner in which its business activities may be treated in its accounts has assumed responsibility for the financial consequences of those business activities…”

The full judgment can be found here: Manchester Building Society v Grant Thornton UK LLP [2019] EWCA Civ 40.

Feel free to get in touch with our Professional Negligence team if you need assistance.