Summary
A novel duty of care may arise where a professional organisation subjects a worker or quasi-worker to an ethically unsafe working environment and thereby exposes the worker to foreseeable loss of future earnings. The duty is exceptional and depends on foreseeability, proximity and whether its imposition is fair, just and reasonable. It is confined to the persons and activity with which the claimant has a sufficiently close connection.
An assurance auditor must act with integrity, objectivity and professional independence. Compliance with a local regulator’s requirements and confidentiality obligations does not justify concealing serious findings or yielding to improper regulatory pressure. Where the statutory whistleblowing regime is unavailable because the claimant ordinarily works abroad, the common law may provide a narrow gap-filling remedy.
Factual background
The claimant, a partner in an international accountancy network, brought negligence and conspiracy claims against four United Kingdom entities within that network. He had led an assurance audit of a Dubai gold refiner and alleged that senior personnel directed the audit towards concealing serious findings concerning gold smuggled from Morocco and extensive cash transactions.
After refusing to endorse the proposed reporting approach, the claimant left Dubai with his family, was replaced as engagement partner, was instructed to return to Dubai, resigned and disclosed the matters publicly. He claimed loss of earnings and related losses. The central issues were whether the defendants owed duties to protect his economic interests and to conduct the audit ethically, whether those duties were breached, whether his disclosures broke causation, and whether the defendants conspired to injure him.
Held
- Safety duty. The defendants did not owe a general duty to protect the claimant against pure economic loss resulting from his refusal to work in an unsafe environment. The conventional employer’s duty concerns personal injury and consequential loss. The claimant was justified in refusing to return to Dubai, but the tort of negligence did not provide damages for the destruction of his career on that basis.
- Audit duty. The proposed duty was novel and had to be assessed incrementally by analogy with established authority, applying foreseeability, proximity and fairness, justice and reasonableness. The authorities recognised narrow exceptions protecting post-employment economic interests, including Spring v Guardian Assurance plc, [1995] 2 AC 296, and Malik v Bank of Credit and Commerce International SA; Mahmud v Same, [1998] AC 20.
- The defendants’ global and regional personnel had assumed responsibility for directing the Kaloti audit. The claimant’s loss of earnings was foreseeable. Proximity existed in relation to the Dubai gold audits for which he was responsible, but not in relation to the separate PAMP audit. It was fair, just and reasonable to impose a narrow duty because the claimant worked outside Great Britain and could not use the statutory whistleblowing regime.
- The duty required reasonable steps to prevent the claimant suffering loss of earnings through the defendants’ failure to conduct the Kaloti audit ethically and professionally. The IFAC Code supplied the appropriate objective standard. The defendants breached the duty by proposing to change the audit period, accepting mid-audit changes to the DMCC protocol, diluting or concealing the Morocco gold and cash-transaction findings, compromising independence and objectivity, exerting improper pressure on the claimant, and issuing misleading September and November reports.
- The audit should have been terminated or conducted transparently, and reporting to the LBMA was at least permitted. Formal accreditation and Kaloti’s precise membership status did not defeat that conclusion. Confidentiality was not absolute and could not operate as a trump card against professional and ethical obligations.
- The claimant’s disclosures were foreseeable, reasonable and sufficiently connected with the breaches. They did not constitute a novus actus interveniens, were not too remote, and did not amount to contributory negligence or a failure to mitigate. The claim therefore succeeded in negligence. The conspiracy claim failed because the predominant purpose was to end the claimant’s complaints and conclude the audit, not to injure him.
Judgment was entered for the claimant for $10,843,941 and £117,950, subject to adjustment for tax.
The court’s approach to earlier authorities
Available to signed-in members.
Appellate history
First instance decision. No prior decision or appeal is stated in the judgment.
Key cases cited
The 30 most senior of 32 authorities cited.
- Gilham v Ministry of Justice [2019] UKSC 44
- Vedanta Resources PLC and another v Lungowe and others [2019] UKSC 20
- James-Bowen and others v Commissioner of Police of the Metropolis [2018] UKSC 40
- Robinson v Chief Constable of West Yorkshire Police [2018] UKSC 4
- In re B (Children) (FC) [2008] UKHL 35
- Her Majesty's Commissioners of Customs and Excise (Respondents) v. Barclays Bank plc (Appellants) [2006] UKHL 28
- Johnson (AP) v. Unisys Limited [2001] UKHL 13
- Mahmud v Bank of Credit and Commerce International SA (Malik v Bank of Credit and Commerce International SA) [1998] AC 20
- White v Jones [1995] 2 AC 207
- Henderson v Merrett Syndicates Ltd (Feltrim Underwriting Agencies Ltd v Arbuthnott, Gooda Walker Ltd v Deeny, Hughes v Merrett Syndicates Ltd, Hallam-Eames v Merrett Syndicates Ltd, The Lloyd’s Litigation: the Merrett, Gooda Walker and Feltrim Cases) [1995] 2 AC 145
- Spring v Guardian Assurance Plc [1995] 2 AC 296
- Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465
- Crofter Hand Woven Harris Tweed Co Ltd v Veitch [1942] AC 435
- Wilsons & Clyde Coal Co v English [1938] AC 57
- Donoghue v Stevenson [1932] UKHL 100
- Jesudason v Alder Hey Children's NHS Foundation Trust [2020] EWCA Civ 73
- AAA & Ors v Unilever Plc & Anor [2018] EWCA Civ 1532
- Okpabi & Ors v Royal Dutch Shell Plc & Anor (Rev 1) [2018] EWCA Civ 191
- Chesterton Global Ltd & Anor v Nurmohamed & Anor (Rev 1) [2017] EWCA Civ 979
- Chandler v Cape Plc [2012] EWCA Civ 525
- Crossley v Faithful & Gould Holdings Ltd [2004] EWCA Civ 293
- Wisniewski v Central Manchester Health Authority [1998] PIQR 324
- O'Hare & Ors v Coutts & Co [2016] EWHC 2224 (QB)
- Gestmin SGPS SA v Credit Suisse (UK) Ltd & Anor [2013] EWHC 3560 (Comm)
- Borealis AB v Geogas Trading SA [2010] EWHC 2789 (Comm)
- Barings Plc & Anor v Coopers & Lybrand (a firm)& Ors [2003] EWHC 1319 (Ch)
- Heinisch v Germany [2011] IRLR 922
- N v Agrawal [1999] PNLR 939
- R v Director of Public Prosecutions ex p Camelot Group plc (1998) 10 Admin LR 93
- Scally v Southern Health and Social Services Board [1992] 1 AC 294
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Cases citing this case
2 later cases · 2 caution
Most senior citing decisions:
- Vadim Don Benyatov v Credit Suisse (Securities) Europe Ltd [2023] EWCA Civ 140 distinguished
- VADIM DON BENYATOV v CREDIT SUISSE SECURITIES (EUROPE) LIMITED [2022] EWHC 135 (QB) explained
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