The New Zealand case of Wilson Neill v Deloitte - High court, Auckland, CP 585/97, 13 November 1998 has shown that "The major accounting firms have in place a protocol agreement promising none will give evidence criticisng the professional competence of other Chartered Accountants".
The details of the case are as follows:
REPORT FROM THE (NEW ZEALAND) CHARTERED ACCOUNTANTS JOURNAL, APRIL 1999, P. 70. - by Mike Ross
VALUATION OF SHARES
A $42.7 million negligence claim against Deloitte has been struck out.
Wilson Neill alleged Deloitte was negligent in its valuation of shares in Ripwood Pty Ltd, sold to Australian Brewing & Hospitality in 1994.
Justice Morris struck our the claim because there was insufficient evidence to support allegations of negligcnce.
The major accounting firms have in place a protocol agreement promising none will give evidence criticising the professional competence of other Chartered Accountants.
Listed company Wilson Neill went into liquidation in December 1997 with Auckland Chartered Accountant Michael Stiassny appointed liquidator.
Wilson Neill sued Deloitte, alleging it was negligent In the preparation of an appraisal report before the 1994 sale of Ripwood. Deloitre valued Ripwood within the range of nil to $4.3 million. taking into account the company’s indebtedness of $115 million.
Australian Brewing was offering $11 million for Ripwood. Deloitte recommended that the offer should be accepted. Acceptance was approved by a meeting of Wilson Neill shareholders. Wilson Neil! now claims Ripwood was worth nearly $53 million at the time of sale.
When the case was filed in December 1997, Deloitte challenged the proceed-ings on several grounds, including an argument that Deloitte Corporate Finance Pry Ltd, which prepared the report, had no legal presence in New Zealand with its registered office and principal place of’ business being in Australia.
The High Court Master hearing the initial challenge did not rule on this point, but dismissed the negligence claim on the basis chat there was no arguable case against Deloitte. This was upheld by Justice Morris on appeal.
His Honour said more is required than mere statements of belief by the liquidator that Deloitte is liable. Specific allegations of negligence are required.
The liquidator attempted to use for the 1997 claim, written evidence previously given by accountants From Australia and the US in an unsuccessful 1994 claim by US creditors against Wilson Neill. In this evidence the overseas accountants were critical of Deloitte’s Ripwood valuation.
Justice Morris ruled that the liquidator could not use evidence provided for different litigation in 1994 as evidence in support of the 1997 claim against Deloitte.
The protocol agreement between major accounting firms meant no-one would give evidence regarding die 1997 claim, but Justice Morris said the court can only act on the evidence before it, Because there was no evidence of negligence by Deloitte, the claim was struck out.
Wilson Neil Ltd v Deloitte — High
Court, Auckland, CP 585/97. 13