Amathus Drinks PLC v EAGK LLP & Anor
[2023] EWHC 2312 (Ch)
Ickenham Travel Group Limited v Tiffin Green Limited
11 January 2024
[2024] EWHC 27 (Comm)
High Court
A travel agency sued its auditors for missing accounting errors that led to the sale of part of the business. The court said the agency didn't prove the auditors' mistake caused them to lose money because they probably would have had to sell that part anyway, even if the errors were found sooner. The agency also couldn't prove the auditors caused them to spend extra on fees to fix the problem.
Key Facts
- •Ickenham Travel Group Limited (Ickenham) claimed against its former auditors, Tiffin Green Limited (Tiffin Green), for negligence and breach of contract.
- •Ickenham, a travel agency with two divisions (BTD and LG2), discovered serious accounting irregularities in LG2 resulting in a £4,500,000 understatement of trade creditors.
- •The understatement was believed to have existed since at least 2014, when Tiffin Green was first appointed.
- •To raise cash, Ickenham sold BTD to Reed & Mackay in 2019, allegedly at a £6,000,000 undervalue compared to a potential offer from Endless/Amber Road.
- •Ickenham claimed losses from the undervalue sale and professional fees incurred addressing the irregularities.
- •Tiffin Green argued it had no liability due to the sale of BTD at fair value, lack of factual causation, inability to discover the irregularities, and the type of loss not being within its scope of duty.
Legal Principles
To succeed, Ickenham had to prove it suffered a loss when selling BTD; the cash received was less than BTD's value.
Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602, Mount v Barker Austin [1998] PNLR 493
If Ickenham would have taken the same steps in 2014 as in 2019 upon discovery of irregularities, Tiffin Green would not be liable.
None explicitly stated but implied in the judgment.
Auditors owe a duty of care to conduct audits with reasonable skill and competence, informed by statutory and regulatory duties.
None explicitly stated but implied in the judgment.
The scope of an auditor's duty is determined by the purpose of the advice, judged objectively by the reason for giving the advice.
Manchester Building Society v Grant Thornton UK LLP [2022] AC 788
Limitation Act 1980: Claims in tort must be brought within 6 years of the act causing damage; s14A allows claims within 3 years of acquiring knowledge and right to sue.
Limitation Act 1980, Forster v Outred [1982] WLR 4, Integral Memery plc v Haines Watts 2012 EWHC 342 (Ch), Hallam-Eames v Merrett Syndicates Ltd [2001] Lloyd’s Rep PN 178, Haward v Fawcetts [2006] 1 WLR 682
Outcomes
Judgment for the Defendant, Tiffin Green.
Ickenham failed to prove it suffered any loss on the sale of BTD or that the consequences would have been different if irregularities were discovered earlier. The claim regarding professional fees also failed.