PracticeConsultingHigh court verdict lifts liability threat

High court verdict lifts liability threat

Accountancy firms concerned about the extent of their liabilities have been offered additional security by a High Court verdict this week.

The reassurance comes after a judge ruled that a company director could not assume that his auditor bears a ‘commercial responsibility’ to the business.

Court action followed after City firm Alliotts started proceedings against Howglen, the outdoor adventure specialist, for unpaid fees amounting to #66,000. This followed the disclosure in 1995 that the business had made a #50,000 loss.

Howglen counterclaimed that Alliotts was negligent in the preparation of the accounts.

The outdoor specialist also claimed Alliotts’ partner Andre Damyon was a quasi-financial director of the company and therefore owed a duty of care to provide commercial advice.

The judge, Mr Justice Morrell, ruled that Alliotts was not negligent in preparing the accounts and that a commercial duty of care was not owed.

Pradeep Dandiker, partner at law firm Davies Arnold Cooper, which represented Alliotts, said: ‘It’s very good news for accountants. It’s good to have this clarification from the court.’

He said that it meant businesses could not assume their advisers were holding their hands through every financial decision that they took.

More on this issue at www.accountancyage.com/Practice/1124685

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