Legal Business

Sponsored briefing: The value of forensic accountants in investigations

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Forensic accounting Grant Thornton

Kevin Shergold draws inspiration from the art world to explain the role of forensic accountants

In the art world, spotting the difference between an authentic masterpiece and an impeccably forged fake can often hinge on the minutest of details

Renowned forensic art analyst, John Martin, has saved (and ruined) many art owners dreams by confirming or denying the authenticity of highly valued artworks. A 1965 Rothko he examined was deemed a fake due to a layer of white paint between the canvas and the oils. During the period in question, Rothko had used a transparent layer.

Legal Business

Sponsored briefing: From Barings to Bitcoin, the forensic accounting market – past, present and future

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Dispute resolution Grant Thornton

Grant Thornton UK’s Michael Barber considers the progression of the forensic accounting profession and looks ahead to what may be in store in the coming months and years

The past

Origins: Maxwell, Barings and beyond

Forensic accountancy. The term strictly refers to accountants whose work supports legal proceedings of various kinds. This is not dissimilar to the way that a forensic pathologist might provide expert evidence to the court. Only forensic accountants substitute corpses for cashbooks and scalpels for sale-and-purchase agreements (SPAs).

Legal Business

Olswang and Grant Thornton charged £8.4m for BHS sale, Sir Philip Green claims

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CMS UKGrant ThorntonLinklaters
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Months after the collapse of BHS, Sir Philip Green has revealed that Olswang and Grant Thornton charged purchaser Retail Acquisitions Limited a collective £8.4m for the transaction.

During an investigation into the demise of BHS, MPs led by Labour MP Frank Field called on the law firms involved to disclose further details of their dealings. Linklaters and Nabarro released what they billed at £1.2m and £217,000 respectively to their clients, Green’s Arcadia Group and Taveta Group.

Olswang had refused to provide details of its fees and cited client privilege.

Speaking in his first major interview since the event to ITV News yesterday (18 October), Green (pictured), who has faced criticism for his role in BHS’s demise, said both Olswang and Grant Thornton were ‘well regarded professional firms, that weren’t afraid to charge…they charged £8.4m for their services.’

Green further stated that ‘these two companies never got interviewed by the Select Committee, or the correct people didn’t get interviewed by the Select Committee, in spite of Mr Field stating, when he was told I don’t want reserves from the bench, he never called for the two principle people from the two companies to ask they what work they had done/ hadn’t done.’

Stressing that while he wasn’t ‘making an excuse’ he felt that ‘with two prominent advisers, there were two or three other lawyers in the team…we felt they had relevant people around them, there were different letters that came, different views, letters came on finance being offered, so we thought there was a good opportunity for someone to take the business forward, with money, that was provided and give it a fresh start. Unfortunately that didn’t work out.’

Green, who chairs the Arcadia Group which includes Topshop and Burton, bought British Home Stores in 2000 for £200 million, rebranding it BHS. Having faced intense market competition in 2006, the business was eventually sold to Retail Acquisitions, led by Dominic Chappell, for £1 in 2015. Chappell told the inquiry in June he was considering legal action against Green.

A plan to turn BHS around failed and it collapsed into administration in April 2016, with many blaming Green for taking big dividends and leaving the company with a huge pension deficit.

Green has since commissioned the legal opinion of Lord David Pannick QC of Blackstone Chambers who dismissed the conclusions of the inquiry criticising Green over the fall of BHS, describing it as ‘bizarre,’ ‘unstoppable,’ and ‘beset by serious factual errors.’

It comes ahead of a House of Commons vote on Green’s conduct, which will determine whether he can keep his knighthood.

sarah.downey@legalease.co.uk

Legal Business

Tchenguiz brothers’ legal bill hits £5.1m in court battle against Grant Thornton

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Litigation Grant Thornton
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The drawn-out legal battle between property billionaires, Vincent and Robert Tchenguiz, and those they hold responsible for the Serious Fraud Office (SFO)’s botched investigation into their business dealings has proved a costly affair. It has emerged they have already paid out a collective £5.1m legal bill to date in their £3bn litigation against Grant Thornton and others, surpassing the SFO’s £4.5m settlement to the pair two years ago.

First filed by Vincent Tchenguiz after a settlement with the watchdog in 2014, the pair allege defendants, includingGrant Thornton, conspired to pass information, dishonestly, to the SFO in order to instigate and encourage an investigation by the watchdog into his relationship with collapsed Icelandic bankKaupthing, and that they did so for their own commercial gain.

Robert Tchenguiz followed suit and filed against the same defendants in 2015.

The brothers have lost several court hearings to date and consequently were ordered to pay out large sums to the defendants, either in adverse costs or by way of security as a condition of their cases proceeding.

A breakdown of costs so far shows Robert Tchenguiz and his associated business interests have in total paid £2.7m while Vincent Tchenguiz and associated entities have shelled out £2.4m. This includes a £230,000 payment toKaupthing, a defendant, by Vincent in respect of its costs of the proceedings, as well as a £2m payment to Icelandic lawyer Jóhannes Rúnar Jóhannsson, who helped wind up the bank. Both of those parties have had their claims dismissed, a decision the brothers are appealing.

All parties have been ordered to pay the SFO’s costs, which so far total nearly £90,000 – or around £23,000 each.

A judgment handed down by Mr Justice Flaux in November on the security for costs application in the Robert Tchenguiz case showed the defendants collectively estimate their costs through to trial to be between £12m and £16m.

Travers Smith is acting for defendantsKaupthing and Jóhannsson, while Simmons & Simmons is acting for Grant Thornton. Travers instructed 4 Stone Buildings’ Robert Miles QC and South Square’s Jeremy Goldring QC. Vincent Tchenguiz is advised by McGuireWoods, which instructed Selborne Chambers’ Romie Tager QC and One Essex Court’s David Cavender QC. Robert Tchenguiz is advised by Stephenson Harwood, which instructed One Essex Court’s Alain Choo Choy QC.

The spiralling costs have now surpassed the SFO’s £4.5m payout to both brothers two years ago in civil damages prior to the beginning of trial – a stark reduction from the lawsuit against the SFO – claiming around £300m in damages. The £5.1m sum does not include their own legal fees, which are understood to run into the millions.

Other high-profile cases proving expensive at London’s High Court include the £4bn shareholder group action againstThe Royal Bank of Scotland, with the bank’s adviser firm Herbert Smith Freehills exceeding its cost estimate of £92m earlier this year.

sarah.downey@legalease.co.uk

Legal Business

Tchenguiz brothers’ legal bill hits £5.1m in court battle against Grant Thornton

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Litigation Grant Thornton
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The drawn-out legal battle between property billionaires, Vincent and Robert Tchenguiz, and those they hold responsible for the Serious Fraud Office (SFO)’s botched investigation into their business dealings has proved a costly affair. It has emerged they have already paid out a collective £5.1m legal bill to date in their £3bn litigation against Grant Thornton and others, surpassing the SFO’s £4.5m settlement to the pair two years ago.

First filed by Vincent Tchenguiz after a settlement with the watchdog in 2014, the pair allege defendants, includingGrant Thornton, conspired to pass information, dishonestly, to the SFO in order to instigate and encourage an investigation by the watchdog into his relationship with collapsed Icelandic bankKaupthing, and that they did so for their own commercial gain.

Legal Business

‘Brought to an end’: Addleshaw Goddard and Grant Thornton settle Berezovsky fee dispute

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Litigation Addleshaw GoddardGrant Thornton
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Following an original High Court costs ruling in April, Addleshaw Goddard has reached a settlement with the administrators of former client Boris Berezovsky’s estate, ending a dispute over £12.6m in fees.

The administrators, Grant Thornton partners Nicholas Wood and Kevin Hellard, had refused to pay the legal fees relating to litigation undertaken by Berezovsky against the estate of Arkadi Patarkatsishvili, metals magnate Vasily Anisimov and other parties, as they believed the estate to be insolvent. These disputes were run concurrent to the more well-known court action Berezovsky had against Roman Abramovich, which Addleshaws also acted on.

The administrators argued against Addleshaws, claiming the firm’s contract with Berezovsky had been a conditional fee arrangement rather than a contentious business agreement and that even if owed, that the firm would rank alongside unsecured creditors.

However, the court disagreed and Master Campbell handed down judgment on 8 April in Addleshaws’ favour. Grant Thornton appealed the decision and the case was due to be heard in the Chancery Division of the High Court on 8 December, but has now settled.

Addleshaws said in a statement: ‘The parties are pleased to announce that the proceedings have been brought to an end. The terms of the settlement agreement are confidential and no further comment will be made.’

The firm began legal proceedings in the High Court against trustees Wood and Hellard of Grant Thornton – which were then the administrators, and later became the trustees of the estate – back in October 2014.

Addleshaws’ instructed Nicholas Bacon QC and Danial Saoul of 4 New Square on its claim alongside South Square’s John Briggs. The administrators turned to Holman Fenwick Willan partner Noel Campbell for their defence, which instructed 4 New Square’s Robert Marven and Stephen Atherton QC from 20 Essex Street.

jaishree.kalia@legalease.co.uk

For more coverage of the landmark Berezovsky litigation see: Battle Royale. 

 

Legal Business

The importance of a ‘disclaimer’: High Court finds in favour of Grant Thornton in Barclays negligence dispute

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Litigation Addleshaw GoddardGrant ThorntonTaylor Wessing
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The High Court has this morning (18 February) found in favour of Grant Thornton in relation to its high profile auditors’ negligence dispute brought against it by Barclays Bank.

Heard on the 12 February, Brick Court Chambers’ duo Simon Salzedo QC and Oliver Jones appeared for Grant Thornton, and were instructed by Taylor Wessing, while 4 New Square pair David Halpern QC and Benjamin Wood acted for Barclays and were instructed by Addleshaw Goddard.

The dispute arose after Barclays relied on two non-statutory audits carried out by Grant Thornton for the Von Essen Hotels Group (VEH) in 2006 and 2007 in continuing to fund VEH under a £250m loan facility. The bank alleged Grant Thornton had been negligent in producing the reports because it failed to uncover fraudulent overstatements of VEH’s financial position by two of its employees, and, subsequently, causing Barclays financial loss when VEH became insolvent and couldn’t repay the loan.

Constituting the first case in which the lawfulness of a Bannerman clause in an auditors’ report had been considered, each of the reports produced by Grant Thornton included a disclaimer which stated they were made solely to VEH’s director and that the accounting giant did not accept responsibility to anyone other than VEH and its director for its audit work.

Barclays argued that this disclaimer was ‘unreasonable’ and therefore inapplicable – for which Grant Thornton sought summary judgment on that point and won.

Justice Cooke held the disclaimer was ‘clear on its face’, ‘could not have been misunderstood’ and ‘would have been read and understood by anyone at Barclays who had read the two page reports’.

‘Grant Thornton made it clear that it was not prepared to assume responsibility to Barclays in respect of these reports. There was nothing unreasonable in that stance, as between two sophisticated commercial parties, where the approach of auditors limiting their responsibilities is well known… Barclays should have anticipated the existence of such a clause and, in my view, must have expected some such clause to be present.’

The judge concluded that Grant Thornton is entitled to summary judgment on the basis that Barclays ‘have no realistic prospect of success in the action in the face of the disclaimer’ and there is ‘no good reason’ why the action should go to trial.

A Barclays spokesperson said: ‘We are disappointed in the Court’s decision relating to our claim against Grant Thornton LLP, the former auditors of Von Essen Hotels Ltd. We will however continue to pursue all avenues available to the bank to recover sums lost in connection with the loan facilities granted to Von Essen.’

Addleshaw Goddard is also currently advising Barclays in a dispute to recoup money loaned to partners of collapsed US firm Dewey & LeBoeuf, an instruction the firm picked up following the hire of partner Richard Clayton from TLT.

sarah.downey@legalease.co.uk

Legal Business

UK listing for Russell Jones & Walker not immediate priority

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ABS Grant ThorntonSlater and Gordon
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Neil Kinsella, Russell Jones & Walker (RJW)’s chief executive, is non-committal on the possibility of a UK listing for his firm, should its recently announced acquisition by listed Australian firm Slater & Gordon (S&G) complete.

S&G, the world’s first listed law firm, is set to buy UK personal injury firm RJW for £53.8m later this year. The publicly listed Melbourne-based practice will become the first Australian firm to take over a UK firm.