BRYAN EDWARD EVANS v GEOFFREY WILLIAM MUXWORTHY

An accountant does not owe a client a professional duty to advise on a proposed legal challenge unless there is a retainer or an assumption of responsibility for that advice. Identifying a possible statutory route and advising the person to obtain legal advice does not amount to advice that the challenge has merit.

A director’s duty in arranging company finance is owed to the company, not ordinarily to an individual shareholder. An alleged agreement to procure funding, particularly a guarantee of success, requires clear proof. Share entitlement in a joint acquisition depends on the agreement actually made and on satisfaction of its conditions, including agreed financial contribution or security.

The claimant alleged that two accountants negligently failed to advise him to challenge the appointment of administrators over companies which owned two development properties. He also alleged that they breached agreements and fiduciary duties by securing for themselves the principal benefit of the subsequent acquisition of those properties through BGM Leisure Ltd.

The claimant contended that he was entitled to half, or alternatively one third, of BGM’s shares. The defendants maintained that he had agreed to a 10% holding, with a conditional right to a larger interest if he provided agreed security. The court determined the claims following a trial of the factual issues.

1. The claims were dismissed. Neither defendant had been retained by the claimant to give professional advice about challenging the administrations, nor had either assumed responsibility to do so. The first defendant gave no such advice. The second defendant merely identified Insolvency Act 1986, Schedule B1, paragraph 81 as a possible route to challenge an administration on grounds of improper purpose, and advised the claimant to obtain legal advice.
2. There was no evidential basis for alleging an improper purpose by the bank or for saying that a challenge had a realistic prospect of success. In any event, the claimant’s focus immediately became acquiring the properties rather than challenging the administrations. Any alleged failure to advise could not therefore have caused loss.
3. Any duty to exercise reasonable care and skill in arranging finance for BGM was owed by the directors to BGM, not to the claimant personally. In any event, the defendants engaged a suitable finance professional, pursued funding, and completed the purchase. There was no evidence that better funding was available without a financial contribution from the claimant. Nor had the defendants assumed an absolute or best-endeavours obligation to procure finance.
4. The alleged joint-venture agreement giving the claimant 50% of BGM did not exist. The agreed arrangement was that the claimant would receive 10%, with a potential beneficial interest of 50% conditional on providing security for the non-refundable deposit. He never provided that security. The alleged later agreement giving him one third was not binding and, in any event, rested on the non-existent earlier agreement.
5. The claimant was accordingly entitled only to his 10% shareholding. The counterclaim for rescission did not arise and was also dismissed.

not stated in the judgment.