Big Five - French client hits E&Y with #100,000

Ernst & Young was served a writ for damages of at least #100,000 last week by a French company claiming the firm had provided ‘negligent’ tax advice.

Gallay Conteneurs et Systemes SA agreed to sell its Birmingham-based subsidiary – Gallay Containers and Systems – to GEI International in 1996. GEI agreed to pay #1m for Gallay’s shares and a further dividend of #500,000.

According to the writ, E&Y partner Mark Hodgkins advised the parent company to reduce GEI’s dividend payment by #100,000, as the money was recoverable as an advance corporation tax refund in France.

But the company was unable to recover the money and the writ demands it from E&Y. ‘They ought to have known that the ACT paid by the company in respect of the interim dividend would not be recoverable by the plaintiff in France,’ the writ says.

E&Y, which also faces a writ for #500,000 from the Royal College of Obstetricians and Gynaecologists over alleged breach of contract, said it would fight Gallay’s writ.