A firm of accountants which failed to advise its client about a change in tax law has successfully defended a negligence claim as its client did not suffer any loss as a result.
This is a further example of a ‘causation’ defence previously reported in Brunel News in October and December 2014.
The accountants, Baker Tilley, advised Altus, a Canadian real estate consultancy, on Corporation Tax from 2007 to 2010. In 2009 a change in the Corporation Tax Act meant that Altus could no longer carry forward losses from prior years against its tax bill. Baker Tilley failed to tell Altus about the change. Altus subsequently discovered from another adviser that it could have restructured its business, which may have enabled it to avoid some of the tax.
Altus claimed that Baker Tilley had been negligent by failing to tell it about the change in Corporation Tax rules and as a result it had lost the chance to restructure its business. Baker Tilley accepted that it should have advised its client about the changes, but argued that Altus would not have gone ahead with a restructure and as a result had suffered no loss. Baker Tilley also argued that a restructure would not have worked as it could have been successfully challenged by HMRC.
Judge Keyser QC decided that Baker Tilley were in breach of their duty of care. However it ruled that Altus had not proved that it would have completed the restructure and as a result its claim failed.
“This was a highly complex case, with the judge having to decide whether Altus would have acted differently had it received the correct advice,” said James Burgoyne, Director – Claims & Technical, Brunel Professional Risks. “At its heart however was the simple question whether they had suffered any loss at all. As no loss was proved there was no ground for damages to be paid.”
In a further twist the court highlighted that a professional firm that holds itself to be a “a top-end and very large firm of specialist advisers”, will be judged by higher standards than an “ordinary” firm. “This means specialist firms could more easily be found liable for negligence than generalists and highlights the very high professional standards that the courts will expect recognised experts to reach,” said James Burgoyne.