Hewlett Packard auditors sued over Autonomy purchase
29 Nov, 2012
Deloitte and KPMG are being sued over their alleged role in Hewlett Packard’s controversial purchase of Autonomy.
Jonathan Thornton (pictured), Partner at Russell-Cooke Solicitors commented: “‘Jurisdiction shopping’ is an increasingly common phenomena across the globe, for both large corporations and wealthy individuals. We have seen in recent months how wealthy divorcing couples and Russian Oligarchs favour London and English law. The reasons seem to be the strength and independence of the courts and, in the case of divorce, a feeling on the part of some wives that they will be treated more favourably under English divorce law.
“The Hewlett Packard / Autonomy litigation is an example of the perceived advantages in a different context of litigating in the USA, not England.
“In the USA the courts often make penal awards where they consider the defendant was at fault so commercial litigants may make considerably more money if they win. In England the courts only recompense a claimant for their actual loss, and will not usually make a penal award. Showing “loss” can often be difficult even if something was clearly done incorrectly. What’s more, in England a case called “Caparo” limits the liability of auditors to third parties. So a company’s shareholders or a buyer of the company have limited scope to sue the auditors if they invest or buy in reliance on the audit and it subsequently proves inadequate.
“It is even more difficult in England to bring an action against directors of a company personally. Generally, unless the directors have given a personal guarantee or been fraudulent, they do not have personal liability for the decisions they take on behalf of their company.
“In the USA the cases have been brought by individual shareholders, which would be difficult in England, as the shareholder would have great difficulty in showing that the auditors owed individual shareholders a duty that had been breached and the individual shareholder’s loss would be unlikely to be sufficient to make the cost of litigating worthwhile. An individual shareholder in England would also not usually be able to sue the directors personally. The prospect of a penal award against the auditors in the USA and the slightly greater willingness of US courts to hold directors personally liable changes that equation.”