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Accountant negligence case overturned by Court of Appeal

Posted by , Associate

Generalist accountants are found not to be negligent for failing to give advice to the claimant about his domiciliary status or refer him to a specialist advisor.

In February we reported on the case of Mehjoo v Harben Barker in which it was found that accountants, Harben Barker, had failed to give their client, Mr Mehjoo, specialist advice on tax savings and were negligent in failing to refer him to a specialist tax planner. Earlier this week, the Court of Appeal overturned that decision in favour of the accountants finding that there was no inferred duty to give such advice in the circumstances.

The original decision from the High Court found that the accountants were negligent for failing to flag the issue with their client and refer him to a specialist advisor. The accountants appealed the decision.

The Court of Appeal looked closely at the terms of the retainer that existed between the accountants and their client and found those terms to be clear. Harben Barker were not specialist tax planning advisors and were engaged by Mr Mehjoo to give routine tax advice. The retainer letter provided a list of entirely conventional types of tax advice and explained clearly that more sophisticated advice was available on request but did not form part of their arrangement. Mr Mehjoo never requested any specific or specialist advice.

The decision in the original case was wrong and it was held to be unreasonable to imply a duty on the accountants to give advice or even a recommendation to seek advice on a subject that it was not reasonably required to know about. In summary, the accountant was not negligent in failing to specify what type of advice Mr Mehjoo should seek when it had no reason to suppose that that type of tax planning scheme existed.

The lesson for consumers here is that if you are seeking advice on unusual or very specific issues that a generalist accountant or professional advisor is unlikely to know about then it is important that you take additional advice on those issues from a specialist.

The decision does not however mean that advisors will be “off the hook” in all cases and it is clear from this case that the terms of the retainer that is agreed between the advisor and its client are critical.

If you would like any more information about professional negligence claims please contact a member of our team today on 0800 051 8057.

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