How Effective Are Bannerman Disclaimers?

Published on:
May 28, 2024

Recently, the English High Court, by departing from its previous decision in 2015, refused a Defendant’s strike out application in tort.

The Background - Amathus Drinks Plc & Others v EAGK LLP [2023] EWHC 2312 (CH)

The case involved the purchase of a Company (‘the Company’) by the Claimants (‘the Buyers’) under the terms of a Share Purchase Agreement (‘SPA’), which provided for the purchase price to be adjusted after completion based upon the Company’s completion accounts.

The Claimants had instructed the Defendant accountancy firm (‘EAGK’) to conduct financial due diligence. The same accountant company, EAGK, was also engaged to prepare the completion accounts to be used in adjusting the final purchase price pursuant to the SPA.

Following completion, the Buyers discovered that several frauds had been committed on the Company. Specifically, assets were double-counted, cash receipts were overinflated, and false invoices were lodged. Consequently, the buyers alleged that they had to overpay, around £400,000, for the acquisition.  Therefore, the Buyers claimed both in breach of contract and in negligence against EAGK.

In relation to the claim in negligence, the accountants denied liability by saying that they had been engaged by the Company and not the Buyers, and therefore, they did not owe any duty of care to the Buyers. Furthermore, they referred to the express liability disclaimers, known as Bannerman disclaimers, mentioned in a schedule of engagement attached to EAGK’s engagement letter.

Consequently, EAGK  applied to strike out the Buyers’ claim on the basis that the Buyers failed to identify the engagement schedule and the Bannerman disclaimers, which prevented the Buyers from pursuing a negligence claim.  

Exclusion of Liability under the Contract

The engagement schedule addressed to the Company included a Bannerman disclaimer. This type of disclaimer is commonly used by auditors to regulate their liability. Straightforwardly, such clauses are  an attempt for professionals who generally owe duty of care as a result of their special relationship with the other party, to deny the existence of such duty of care and therefore, avoid liability in negligence.

In the Schedule, the disclaimer stated that the report was to the Company’s shareholders and EAGK ‘to the fullest extent permitted by law… do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for the audit report or for the opinions we form’.

Additionally, as part of the instructions to EAGK, the completion accounts together with the audit report were prepared and were addressed to the Company together with the Bannerman disclaimer. Specifically, in relation to the completion accounts, the liability clause stated that the audit report was prepared only for the Company’s use and that EAGK assumed no responsibility to any other person.

The Decision

The Court, by refusing EAGK’s strike out application because of a realistic prospect of the buyer’s negligence claim succeeding, departed from a 2015 High Court decision (Barclays Bank Plc v Grant Thornton UK LLP) which EAGK sought to rely on.

In Grant Thornton , a similarly worded Bannerman disclaimer let an auditor escape liability towards one of the company’s lenders in relation to an audit.

However, the High Court distinguished the facts and matters of Amathus from Grant Thornton,  on the basis of is finding ‘continuing and direct commercial relationship’ between the parties.

Specifically, in Grant Thornton , the Court stated the parties that had a special relationship were in communication during the early stages of the transaction, but when the auditor was appointed, the communication stopped. Hence, there was no continuing relationship between the parties.

In Amathus, however, the Court found that there were ongoing communications between parties while EAGK’s audit was underway, to which the buyers’ solicitors were involved. This even led the accountants to see themselves ‘as part of the Buyers’ team’. Moreover, EAGK knew and even intended that the Buyers would rely on the correct figures identified in the completion accounts prepared by them. Therefore, the Court refused EAGK’s strike out application.


Although this matter deals with a strike out application, (and strictly speaking does not amend the law) it suggests that, in certain circumstances, an assumed duty of care may override an express disclaimer of liability.

In other words, there could be potential limitations to Bannerman disclaimers especially where an adviser, after disclaiming any liability, acts to the contrary. In such cases, the court may find a duty of care notwithstanding the disclaimer.


Heading 1

Heading 2

Heading 3

Heading 4

Heading 5
Heading 6

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur.

Block quote

Ordered list

  1. Item 1
  2. Item 2
  3. Item 3

Unordered list

Text link

Bold text