I'm interested in…

  • Strategy & Procedure
  • Catastrophic Injury
  • Professional Indemnity
  • Motor
  • Fraud
  • Disease
  • Liability
  • Commercial Insurance
  • Costs
  • Local Authority
  • Scotland

Tough justice: court unable to undo 'errors' in accountant’s report

Beauty Star Limited v Shiraz Janmohamed [2014]

The Claimant’s appeal seeking to re-examine the approach taken by a Joint Expert Accountant was dismissed; the Expert was appointed under a Mediation Agreement and not a Court Order. The Court had no powers to re-examine the approach taken by the Joint Expert Accountant.

Facts

The Claimant was a wholesaler for beauty products.  The Defendant retail seller purchased stock from the Claimant from 2000 onwards. The Claimant alleged the Defendant had failed to pay £92,940 of invoices between 2001 and 2006 and issued court proceedings on 27 July 2006.   The Defendant disputed the allegations and counterclaimed for £146,186.

On 12 March 2008 the parties signed a Mediation Agreement listing the agreed steps to be taken to resolve the dispute.  This included the need for the Claimant to confirm that a schedule of invoices accurately included all invoices submitted between 1 January 2001 and 5 June 2006. The parties jointly appointed an accountant to produce a report.  The accountant concluded that the Defendant had overpaid by £109,860.    The Claimant challenged the decision and alleged the accountant had overlooked payments of £166,169 of additional invoices which mistakenly had not been included by the Claimant on the confirmed schedule of invoices.

The parties went back to Court to obtain a further Order and permission to instruct a new accountant.  The Court ordered the parties to appoint a second accountant pursuant to the Mediation Agreement.  The second accountant, based on the Claimant’s confirmed schedule of invoices, concluded that the Defendant had overpaid by £178,434.

The Claimant issued a second set of proceedings for rescission and/or rectification of the Mediation Agreement on the basis that it was made under mistake and the schedules mistakenly did not refer to all relevant invoices.  The Claimant also alleged that the second accountant had made many errors in its report.

A 3 day trial followed.  The Judge dismissed the claim for rectification and/or rescission.  The Mediation Agreement was binding upon the parties.  The second accountant was not appointed by Court Order but through the Mediation Agreement; the Court therefore had no powers to re-examine the second accountant’s approach.  The Claimant was granted limited leave to appeal.

Findings

The Appeal was dismissed and the previous Judgment upheld.

The Claimant had mistakenly confirmed the accuracy of the schedule of invoices.  The Judge was right to construe the Mediation Agreement as binding on the parties.

The second accountant was appointed under the Mediation Agreement and not a Court Order.  The Court therefore had no powers to re-examine the second accountant’s method used to calculate losses. Even if the second accountant’s report contained mistakes it was binding because that was what the parties had agreed. The Claimant could, if so advised, bring a claim against the second accountant.

Comment

When accountants are acting as experts it is important to seek clarification of the nature of their instruction and specifically list all documents they have been asked to consider and rely on in order to try and avoid a professional indemnity claim from a disgruntled party.

Contact

For further details please contact Lucy Evans, Senior Solicitor on +44 (0)117 301 7864. 

By Lucy Evans

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

Top