Professional negligence claims often arise when individuals or businesses suffer financial loss after relying on advice from a solicitor, accountant, surveyor or another professional. While proving that a professional made a mistake is an important part of any claim, it is not the only question the courts will consider.
One of the most significant developments in professional negligence law in recent years came in the UK Supreme Court's decision in Manchester Building Society v Grant Thornton UK LLP. The judgment has reshaped the way courts assess whether a professional is legally responsible for the losses suffered by their client and continues to influence claims across a wide range of professions.
The Background
Manchester Building Society sought accounting advice from its auditors, Grant Thornton, on how to account for certain financial products used to manage interest rate risk. The advice provided was later found to be incorrect.
As a result, the building society adopted an accounting treatment that ultimately forced it to unwind its hedging arrangements when the error came to light, leading to significant financial losses.
Although the advice had been negligent, the central issue before the Supreme Court was whether Grant Thornton should be responsible for all of the losses that followed.
A New Approach to Recovering Losses
Before Manchester Building Society, courts often focused on technical legal tests to determine whether losses had been caused by professional negligence. These tests could produce inconsistent results and were sometimes criticised for being overly complex.
The Supreme Court took the opportunity to simplify the approach.
Rather than asking only whether the loss would have occurred "but for" the negligent advice, the Court emphasised a different question:
What was the purpose of the professional's advice or service?
In other words, what specific risk had the professional been engaged to protect the client against?
If the loss suffered was the very type of loss that the professional had been retained to guard against, it would generally be recoverable. If it fell outside that purpose, the professional might not be liable, even if they had acted negligently.
This principle is commonly referred to as the "scope of duty" approach.
Why Does Scope of Duty Matter?
The decision recognises that professionals are not responsible for every financial consequence that follows a mistake.
For example, a surveyor engaged to value a property is responsible for exercising reasonable care in providing an accurate valuation. They are not necessarily responsible for wider market movements that later reduce the property's value.
Similarly, an accountant who provides negligent tax advice may be liable for tax liabilities that competent advice would have avoided, but not for unrelated commercial losses arising from decisions outside the scope of that advice.
The Court's approach seeks to ensure that professionals are held accountable for the risks they have undertaken to protect against, while avoiding liability for losses that were never part of their role.
How the Decision Has Influenced Later Cases
Since Manchester Building Society, the courts have consistently applied the scope of duty principle in professional negligence claims involving solicitors, accountants, surveyors and other professional advisers.
Rather than focusing solely on whether negligence occurred, courts now closely examine:
what the professional was instructed to do;
the purpose of the advice or service provided;
the risks the professional assumed responsibility for; and
whether the losses claimed fall within those risks.
This has led to a more structured and principled approach when determining liability.
In some cases, claimants have successfully recovered substantial losses because those losses were precisely the type the professional had been engaged to prevent. In others, claims have failed because the losses arose from broader commercial risks that fell outside the professional's responsibility.
What Does This Mean for Clients?
For anyone considering a professional negligence claim, Manchester Building Society highlights the importance of looking beyond whether a mistake was made.
A successful claim will often depend on establishing:
the terms of the professional's retainer or engagement;
the advice the professional was asked to provide;
the purpose of that advice; and
whether the financial losses suffered were the type of losses the professional had undertaken to protect against.
This means that documents such as engagement letters, emails, reports and attendance notes can play a crucial role in determining the outcome of a claim.
What Does This Mean for Professionals?
The decision also serves as an important reminder for professionals to define clearly the scope of their work from the outset.
Clearly drafted engagement letters, careful record-keeping and effective communication with clients can help reduce uncertainty about what advice was requested and what responsibilities were assumed.
Where expectations are clearly documented, disputes are often easier to resolve if problems later arise.
Looking Ahead
More than five years after it was decided, Manchester Building Society v Grant Thornton remains one of the most influential authorities in professional negligence law.
Its emphasis on the scope of a professional's duty has brought greater clarity to an area that was once criticised for being overly technical. At the same time, it reminds both professionals and clients that negligence alone does not automatically give rise to compensation. The courts will always consider whether the losses claimed are the very losses the professional was engaged to prevent.
Whether bringing or defending a professional negligence claim, understanding the scope of the professional's duty is now central to assessing liability and the value of any claim.
