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Professional Negligence

Auditors' negligence

When businesses fail or are rendered unviable as a result of fraud, financial malfeasance or other dishonest conduct, scrutiny falls on the role and conduct of those professionals who may have deliberately or inadvertently facilitated deception. Investigating action taken by accountants and auditors in discharging their duties may uncover evidence of negligence, which may offer an opportunity to recouping some of the financial losses incurred in these contexts.

We have market leading Claimant side auditors' negligence practices both in London and Hong Kong, with broad industry sector experience. We have been involved in many of the recent high profile auditor negligence actions arising from fraud, financial scandals and corporate collapses in London, Hong Kong, Singapore, Malaysia, Bermuda and the Cayman Islands, and have been brought in as co-counsel to assist with auditors' negligence actions outside of our home jurisdictions.

Our teams of lawyers in London, Hong Kong and Singapore are supported by our in-house teams of forensic accountants and analysts. We work in close collaboration with each other, such that investigations and claims can be pursued 24/7, and we can harness the experience and expertise of a truly multi – jurisdictional team in dealing with the complex issues that often arise in the auditor's negligence actions.

Our auditors' negligence teams are led by Mark Davis and Jason Karas.

Work highlights

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AssetCo PLC

Representing the successful claimants both at first instance and in the Court of Appeal in AssetCo PLC v Grant Thornton UK LLP [2019] EWHC 150 (Comm); [2020] EWCA Civ 151. This decision is one of the leading cases on the recovery of losses caused by an auditor's failure to detect fraud.

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Liquidators of Patisserie Holdings PLC

Representing the liquidators of Patisserie Holdings PLC and its subsidiaries in their claim for c £200 million against Grant Thornton UK LLP, arising out of the negligent audits of the 2014, 2015, 2016, and 2017 Financial Statements, in respect of which Grant Thornton were issued a severe reprimand and fined £4 million by the FRC.

Work highlight

UK subsidiaries of the Bonnier AB

Representing the UK subsidiaries of the Bonnier AB, a substantial privately owned Swedish media group, in its auditors' negligence action for c £80 million against Hays Macintyre LLP arising out of the audit of its UK subsidiaries.

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Watchstone PLC

Acting for Watchstone PLC in its auditors' negligence action against KPMG arising out of the negligent audit of its 2013 Financial Statements, in respect of which KPMG were fined £4.5 million and reprimanded.

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Liquidators of China Forestry Holdings Co Limited

Acting for the liquidators of China Forestry Holdings Co Limited in its auditors' negligence action against KPMG HK, which was settled confidentially on the eve of trial in June 2021 and for which KPMG was reprimanded and fined by the HKICPA.

Work highlight

Liquidators of the Kingate Funds

Acting for the liquidators of the Kingate Funds, the second largest of the Madoff feeder funds, against PwC Bermuda over their conduct of 17 audits across nine years. The action was commercially resolved for close to the limit of insurance after the defendant failed to strike out the action, which had to be pleaded to the wilful misconduct standard under Bermuda law.

Work highlight

Liquidators of 3D-Gold Jewellery Holdings Limited

Acting for the liquidators of 3D-Gold Jewellery Holdings Limited which collapsed with claims of HK$2.5bn following the death of its Chairman and discovery that over 800kg of gold bullion was missing. An audit negligence action against PwC HK was commercially resolved successfully through early mediation.

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Liquidators of Akai Holdings Limited

Acting for the liquidators of Akai Holdings Limited in their auditors' negligence claim against Ernst & Young HK which was commercially resolved on record terms during trial.

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Multiple ongoing actions before the Hong Kong courts

Retained by claimants in multiple ongoing actions before the Hong Kong courts and arbitral tribunals arising from the collapses of China Medical Technologies Inc, Sino-Forest Corporation, Platinum Partners Value Arbitrage Fund and Hua Han Health Industry Holdings Limited.