Manchester Building Society loses appeal against Grant Thornton

Manchester Building Society has warned over its long-term future after the lender lost a legal challenge against its former auditor Grant Thornton.

The group, which has around 17,000 customers, said on Wednesday the Court of Appeal has upheld an earlier legal ruling relating to the way its mortgage lending was reported in its accounts.

It had sought £49 million from Grant Thornton, accusing it of breach of contract and negligence over its audits between 2006 and 2013.

However, last year the High Court awarded damages of just £335,727 to the Society, while it was forced to stump up £1.9 million to Grant Thornton in costs.

It warned on Wednesday: “The Court of Appeal has today dismissed the Society’s appeal and upheld the first instance judgment. The Society is disappointed with this decision.

“The Society expects that it will have some further liability to pay costs to Grant Thornton following a detailed cost appraisal, the timing of which is not yet known.

“There continues to be material uncertainty regarding the long-term future of the Society. The Society will continue to discuss and consult with its regulators on the next steps and on the capital position of the Society.”

It no longer has capital to engage in new lending and the group is in talks with the Prudential Regulation Authority over its next steps.

During the period in which Grant Thornton acted as auditor, Manchester Building Society had to raise millions to plug a capital shortfall and restate its accounts.