In August 2015, the First and Second Claimant’s (the Buyers) entered into an SPA to purchase the shares in the Third Claimant (the Company) from various parties (the Sellers). Subsequent to that purchase, the Buyers discovered serious alleged fraud which had been perpetrated on the Company by the Sellers. That fraud had the effect of devaluing the Company and meant that, under the SPA, the Buyers had paid the Sellers far in excess of the value of the shares.

As part of the purchase, the Buyers retained the services of EAGK (the Auditors) to undertake financial due diligence on the transaction. Further, after the purchase, the Auditors became the auditors of the Company – in the course of which they produced statutory accounts – and the Auditors produced a Completion Certificate pursuant to which the final price to be paid under the SPA was calculated. During the course of these engagements, the Auditors failed to detect the alleged fraud.

In 2021, the Buyers brought professional negligence proceedings against the Auditors, alleging that they failed to detect the alleged fraud, in breach of contract and a common law duty of care. The Auditors sought to strike out the claim on four main grounds—

  1. There was no contract between the Buyers and the Auditors;
  2. The statutory accounts produced by the Auditors (and documentation which preceded them) contained a so-called ‘Bannerman’ disclaimer. This disclaimer made clear that the Auditors did not assume liability for their statements to any person other than the Company and its ‘members as a whole’. The Auditors accepted that, were it not for this disclaimer, it would be reasonably arguable that they had assumed responsibility to the Buyers for the accuracy of the accounts and the Completion Certificate. However, the Auditors contended that the presence of the Bannerman disclaimer presented an insuperable barrier to the claim;
  3. That, contrary to comments of Coulson J in Pantelli Associates v Corporate City Developments (No.2) [2011] PNLR 12, the Buyers had not obtained expert evidence before pleading breach of duty. Further, their pleadings of breach were deficient and;
  4. That the Buyers pleading on causation was ‘incoherent’ and included ‘contradictory factual arguments’.

The application came before Master Brightwell. In his decision ([2023] EWHC 2312 (Ch)), the Master concluded:


There was insufficient evidence to show that there was a contract between the Buyers and the Auditors. Part of the retainer had been lost and there was no real prospect of that part being found during the course of the litigation. On the part of the retainer which was still available, the interpretation favoured the Auditors.

Bannerman Disclaimer

The Master noted the test for an assumption of responsibility set out by the Supreme Court in NRAM Ltd v Steel [2018] 1 WLR 1190. He then went on to consider the judgment of Cooke J in Barclays Bank plc v Grant Thornton UK LLP [2015] 1 CLC 180. Crucially, in that case, Cooke J stated—

“It is to my mind self-evident that, if the “assumption of responsibility” test for determining the existence of a duty of care is applied, no one can be taken as assuming responsibility in circumstances where it is specifically negatived by him”

Cooke J’s decision has been taken as giving strong judicial support to Bannerman disclaimers. However, in this case, the Master was able to distinguish the decision. In particular, the Master considered it ‘entirely arguable’ that the Auditors had ‘crossed the line’, not only knowing, but intending that the Buyers would rely upon the statutory accounts and the Completion Certificate. This was arguably demonstrated, for instance, by continued direct communications between the Auditors and the Buyers even after the audit had been complete, and by the eventual provision of the Completion Certificate to the Buyers. Nor were the Buyers as a sophisticated party as Barclays had been when relying on Grant Thornton’s audit.

Breach of Duty

In line with ACD (Landscape Architects) Limited v Overall [2012] EWHC 100 and Crest Nicholson (South West) Limited v Grafik Architects Limited [2021] EWHC 2948, the Master concluded that the decision in Pantelli Associates does not require strike out where a claimant brings a professional negligence claim without having first obtained expert evidence – what is required is that the claimant intends to obtain expert evidence at an appropriate time. That was particularly so in this case, where the Auditors had failed to give the Buyers disclosure of documents which would enable them to obtain expert evidence. The Master therefore made an order for disclosure, pursuant to PD 57AD, Para 5.11 or, in the alternative, CPR3.1(2)(m).


The Master accepted that a claimant can properly plead alternate sets of facts, supported by a statement of truth, provided that neither alternative is unsupported by any evidence and thus pure speculation or invention (relying on Clarke v Marlborough Fine Art (London) Ltd [2002] 1 WLR 1731 at [30] (Patten J)). The Master considered that it was open to the Buyers at this stage (prior to the obtaining of expert evidence) to reserve their factual position on what exactly they would have done had the alleged fraud been revealed by the Auditors.

Samir Amin, instructed by Ian Meadows of Else Solicitors LLP, acted for the successful Claimants