Breach of duty is not enough to bring a claim for negligence in England

The English High Court has dismissed a claim for professional negligence brought against an auditor, despite finding that the auditor's work had been "seriously deficient".

This case is a helpful reminder that demonstrating failings in a professional's work is not enough to win a claim. A claimant must also prove that those failings actually caused the loss suffered.

Background facts

In Ickenham Travel Group Ltd v Tiffin Green Ltd (2024), the claimant, ITG, alleged that its former auditor, Tiffin Green, had breached both its tortious and contractual duties by failing to identify “serious irregularities in its accounting systems and records” which resulted in the trade creditors of its consumer travel business being understated by £4.5 million. The irregularities were found to have been present for at least the duration of the defendant's retainer (2014-2017) but were not discovered by the claimant until 2019.

ITG claimed that Tiffin Green should have identified these irregularities in each of its audits and, had it done so, ITG would not have been forced to sell the business for £6 million at an undervalue. As evidence of the true value of the business, ITG pointed to sale negotiations with a private equity fund shortly before discovery of the irregularities where a purchase price of £11 million had initially been proposed. ITG was seeking to recover its losses of £5 million, representing the undervalue in sale price plus the professional fees incurred in dealing with the irregularities.

Tiffin Green accepted that it may have done a "bad job" in failing to identify the irregularities but strongly disputed that ITG had suffered the losses complained of, or that any alleged losses had been caused by its actions.

The court's decision

While it was accepted by the judge that Tiffin Green had failed to act as a reasonably competent auditor, the judge did not find that ITG had suffered the loss alleged.

ITG's evidence did not support the argument that the business had in fact been sold at an undervalue, or that, had the irregularities being identified earlier and during Tiffin Green's retainer, there would have been a different outcome. There was no evidence that ITG would have been able to sell the business at a higher price.

The judge therefore rejected the claim and found in favour of the defendant.

Osborne Clarke comment

This decision serves as a useful reminder that poor service alone by a professional service provider – here the auditor – is not enough to bring a successful professional negligence claim. A claimant must have evidence not only of the loss suffered but also that the poor service caused that loss. In this claim, the claimant fell down on both these points and crucially failed to present a convincing case supported by evidence on causation or loss suffered, namely that the business had been sold at an undervalue.

Whether building a prospective claim or defending one, evidence of loss and causation should not be overlooked; a claimant must be able to demonstrate all the constituent elements of its claim in order to succeed.