Basil Cunningham v Public Accountancy Board
| Jurisdiction | Jamaica |
| Judge | SMITH JA , HARRIS JA , DUKHARAN JA |
| Judgment Date | 17 June 2011 |
| Neutral Citation | JM 2011 CA 58 |
| Docket Number | SUPREME COURT CIVIL APPEAL NO. 102/2007 |
| Court | Court of Appeal (Jamaica) |
| Date | 17 June 2011 |
[2011] JMCA Civ 18
JAMAICA
IN THE COURT OF APPEAL
THE HON. MR JUSTICE SMITH JA
THE HON. MRS JUSTICE HARRIS JA
THE HON. MR JUSTICE DUKHARAN JA
SUPREME COURT CIVIL APPEAL NO. 102/2007
Garth McBean instructed by Garth McBean & Company for the appellant
Miss Stephany Orr instructed by Director of State Proceedings for the respondent
Michael Hylton QC and Miss Kalaicia Clarke instructed by Rattray Patterson Rattray for the interested parties
NEGLIGENCE - Professional negligence - Whether appellant was grossly negligent in the performance of his duties - Public Accountancy Act
I have read the reasons for judgment of my sister Harris JA and I am in agreement with her. There is nothing further I wish to add.
The appellant is a registered public accountant who was brought before the Public Accountancy Board (PAB), as a result of the complaint of the interested parties, Dwight and Lynne Clacken, who were minority shareholders in the EML group of companies. This group comprised three companies, Equipment Maintenance Limited, Windshield Centre Limited and Rodeo Holdings Limited. At the time the complaint was brought, Mr Clacken was the managing director and chairman of the group. After a hearing, the appellant was found guilty of gross negligence in respect of the execution of his duties as an auditor. The penalty imposed was suspension from practice for six months and payment of the sum of $1,000,000.00 towards the costs of the enquiry.
The appellant appealed the decision. At the hearing of the appeal the Clackens were granted permission to participate as interested parties. On 29 April 2009, the appeal was dismissed with costs to the respondent and the interested parties for one day. The following are the reasons for our decision.
On 2 May 2002 a consent order was made between the Clackens, Michael and Richard Causwell, the majority shareholders in the EML group pursuant to a winding up petition of the EML group brought by the Clackens. The terms of the order essentially related to the valuation and the purchase by the Causwells of 6,666 ordinary shares in the EML, registered in the names of the Clackens. The purchase of the shares should be at a price to be fixed by Peat Marwick and Partners, accountants, who were enjoined to value the shares within 90 days of the date of the order or within such other time as approved by the court. As will be observed later, the failure of the appellant to supply the requisite financial statements had far-reaching consequences in relation to this order.
On 12 April 2005 the Clackens wrote to the PAB seeking its assistance in obtaining certain information from the appellant in respect of financial statements for the years 2000-2001 for the EML group, which had been audited by him. Financial statements were supplied. However, the Clackens, being dissatisfied with them, were impelled to transmit to the PAB, two other letters later that year, complaining of many discrepancies appearing in the statements.
By a letter dated 5 January 2006, which I have set out below in part, the Clackens again wrote to the PAB outlining their diffculties with the appellant's audit:
‘Dear Sir,
In April last year we wrote to you twice.
[April 12 th and 22 nd ].
We requested help in getting accounting explanations from J.B. Causewell & Co after our efforts failed for several years.
Among other irregularities - current liabilities are overstated in excess of sixty milliion dollars and inventory figures understated by over twenty million dollars.
While our efforts failed to get the required schedules there are signs that assets of the EML Group of Companies are still being dissipated.
Lynne Clacken and I are minority shareholders suffering heavy financial losses resulting from these irregularities. That's why we sought your help.
Our concern now is that time is passing; the Company's assets and our share value are being abused…
We need clarification of the huge discrepancies in the books of the Group.
We have attached a copy from my files - of an Affidavit from Paul Cole of KPMG which shows that not even a court order has had any impact on Mr Basil Cunningham of JB Causewell & Company. It shows that KPMG exhausted every possible avenue before declining to go any further…
Mr. Cole's affidavit confirms and supports our claim that Mr Basil Cunningham and others have withheld documents and information creating delays to the financial benefit of the majority shareholders and tremendous financial loss and emotional stress to us…’
The appellant was the sole practitioner in the firm of J.B. Causewell & Co. On 11 October 2006 the PAB wrote to the appellant advising him that at its meeting of 28 September 2006 it considered the complaints of the Clackens against him and notified him of its decision to hold the enquiry. That letter was followed by a further letter dated 8 November 2006, under the hand of the Registrar, in which the PAB outlined particulars of alleged acts of gross negligence against him as follows:
‘Further to my undertaking at the start of the Board's enquiry into the allegations when your Attorney, Mr. Garth McBean, had complained that the particulars of the charges had not been communicated, I now outline the particulars of the alleged acts of gross negligence related to the complaint, which will be examined at the enquiry:
(a) The amounts stated in the Fnancial Statements in respect of Net Current Liabilities (see below)are deemed to be incorrect and in addition you have not provided information to indicate otherwise:
2001
2000
Equipment Maintenance Ltd.
55,080,441
56,666,933
Rodeo Holdings Ltd.,
6,110,055
6,101,480
Windshield Centre Ltd.,
(14,132,522)
(5,205,524)
Net Current Liabilities
47,057,974
57,562,889
(b) The amounts stated in the Financial Statement for Inventories (see below) are deemed to be incorrect and you have not provided evidence to prove otherwise
2001
2000
Equipment Maintenance Ltd.,
566,551
909,995
Windshield Centre Ltd.,
6,003,826
3,231,018
These figures differ from Inventory Summaries provided by Mr. Dwight and Mrs. Lynne Clacken which show the following:-
Equipment Maintenance Ltd.,
272,095
274,312
Windshield Centre Ltd.,
27,462,105
22,592,493
It is noted that in respect of the Valuation of Shares done by you on October 31, 2001, the following inventory figures were shown: -
Equipment Maintenance Ltd.,
2,624,000
Windshield Centre Ltd.,
18,211,000
(c) You have incorrectly allowed certain transactions involving other companies in which Mr. Michael Causwell is a major shareholder to be expensed in the books of Equipment Maintenance Ltd.
(d) You have not provided particulars of Director's loans reflected in the following Companies' Books Equipment Maintenance Ltd., 83,360 84,409 Windshield Centre Ltd., 1,700,000 600,000
(e) You have not provided information/supporting documentation requested by KPMG to facilitate their repayment of a Valuation as ordered by the Supreme Court of Judicature of Jamaica (see letter dated June 11, 2004 addressed by KPMG to the Hon. Mr. Justice Anderson).
(f) You did not provide KPMG with the Audited Statements for 2001 (which were completed in 2002). Please see the PAB letter dated January 23, 2006 addressed to you and your reply dated February 10, 2006. The Statements were provided following the PAB letter to you dated June 27, 2006. It is observed that the Financial Statements for 2002 prepared by the Accounting Firm Lee Clarke Chang on April 11, 2003, reflected amounts which indicated that the latter Firm had the 2001 Financial Statement. It is noted that on January 19, 2005 Dunn Cox (Attorneys for Richard and Michael Causwell) advised Chancellor & Co, (Attorneys for Mr. Dwight and Mrs. Lynne Clacken), that ‘there are no audited accounts for 2001. The only audited accounts are for 2002.’ However, it is noted that there are accounts for 2001 which are dated October 2002 and November 2002.
(g) According to the Consultant engaged by Dr. Dwight and Mrs. Lynne Clacken that the Financials for 2001 reflect high shifts of figures for Accounts Payable and Accruals, Affiliated companies and Inventories for WCL, Accounts Payable and Accruals and Accounts Receivables for EML and Affilliated Companies for EML group. Please see Opinion dated 29 August 2006. He indicated that ‘given the magnitute of the changes, he would have expected to see explanations for them.’
(h) You advised the Board that certain documents werenot available as they were teken by the RPD and you were unable to have access to them. This conflicts with information provided by Mr. Dwight Clacken which suggests that you have from time to time been provided by the RPD with documentation requested by you. The Court Order was dated May 2, 2002. The RPD visited your office on July 23, 2003. The RPD have advised the (sic) Mr. Clacken that all documents were returned to Equipment Maintenance Ltd., and J.B. Causwell & Co., by way of copies or originals on Febryary 2, 2005.
(i) The preparation of incorrect financials by you is likely to impact the tax liability of the (sic) Mr. and Mrs. Clacken negatively.
(j) You did not provide the Board with the Work in Progress (Building in Progress) working papers re the building in progress on Montrose Road. See letter dated June 27, 2006.
(k) In response to the PAB request of June 27, 2006, you did not provide the listing of current liabilities of Windshield Centre Ltd. You only provided the information for the other two...
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