Charity pursues Maclntyre Hudson in the High Court

Charity pursues Maclntyre Hudson in the High Court

St Christopher's Fellowship pursues firm over due diligence

Children’s charity St Christopher’s Fellowship is headed for a High Court
showdown with chartered accountants MacIntyre Hudson.

In a claim form lodged at the High Court, the charity accuses the firm of
leaving it open to a possible £1.3m claim as a result of bad advice and is
seeking damages.

The charity, which provides housing for children, young people, and
vulnerable adults, is also seeking an indemnity against any funding clawbacks it
might face.

The dispute centres on the firm’s advice about a proposed merger with Young
Builders Trust (YBT), which obtained most of its funding from the European
Social Fund.

Months after the merger, YBT collapsed into administration. St Christopher’s
Fellowship now fears it may be sued for £1.3m YBT owed to government offices.

According to the claim, MacIntyre Hudson carried out due diligence checks on
YBT in 2006, and reported that it had a well defined future income stream of
£1.5m a year. The firm found YBT had been very successful in running contracts
properly, and had good relationships with government offices.

Soon after the merger took place, audited accounts showed YBT’s position had
deteriorated, with an increased loss, negative reserves, and weaker than
expected results.

St Christopher’s provided YBT with cash injections of £361,811, but decided
that to provide more money was not in the best interests of its service users,
and stopped paying out, according to the writ.

YBT went into administration in March 2007, and all 31 staff were made
redundant. Nineteen staffers took legal action claiming the charity was liable
to pay them more than statutory hearing, but lost after a five day preliminary
hearing.

The Government Office for the South West also sought substantial sums from
YBT and the Welsh Assembly for breach of contracts, and indicated it might
persue St Christopher’s Fellowship, according to the writ.

St Christopher’s Fellowship said MacIntyre Hudson failed to act on evidence
it had which suggested projects bids were over-optimistic, and included highly
speculative figures.

The Fellowship argues if it had known of YBT’s issues, via MacIntyre Hudson’s
due diligence work, it would not have gone ahead with the merger, according to
the writ.

St Christopher’s Fellowship said its losses include £15,336.10 for the cost
of the reports, the cash injection of £361,811, management time of £108,597,
legal fees in defending the legal action by staff, £89,549, administration costs
of £23,500, accountants’ fees of £12,431, professional fees of £10,046, other
costs of £6,238, and a possible repayment of £1.3m. It is also seeking damages,
and an order for an indemnity for any YBT funding it has to repay.

The writ was issued by James Bailey of Herbert Smith.

Mike Brown, chairman of Macintyre Hudson, said: “This matter is subject to
court proceedings and we have no further comment to make.”

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