Clare Dixon and Hannah Daly successfully defend firm of accountants in a multi-million pound claim for breach of fiduciary duty and negligence following 4-week trial in the High Court

News & Judgments
6 May 2020

Clare Dixon and Hannah Daly, instructed by Kennedys, successfully defend a firm of accountants in a multi-million pound claim for breach of fiduciary duty and negligence following 4-week trial in the High Court. The judgment in De Sena v Notaro [2020] EWHC 1031 (Ch) issues an incisive reminder about when fiduciary obligations will be said to arise in a professional liability context.

The decision and its implications are considered by Amanda Savage QC.

The claim arose out of the demerger of a family-run property development business. The demerger involved the carve-out of the interests of a major shareholder, Mrs De Sena, from the interests of her siblings. A number of properties were transferred to her under the demerger, which left her in control of a company formed for the purpose of holding her assets.

Mrs De Sena claimed that her brother had unduly influenced her to enter the demerger, that the values assigned to the properties transferred to her had been artificially inflated for the purposes of the demerger, and that the result was that she had sold her shares at an undervalue. She brought claims, inter alia, against the accountants who structured the demerger. She alleged that they owed a fiduciary duty to her, which had grown out of the long-standing relationship between the business and the accountants, and out of advice which she alleged they had given  to her personally as to the apportionment of assets under the demerger. The duty alleged required the accountants to act in good faith in advising both Mrs De Sena and the business, to advise her of a conflict of interest and to take independent legal, accounting and valuation advice. A claim was also advanced in negligence.

The arguments advanced on behalf of Mrs De Sena (if accepted) potentially widened the variety of circumstances in which fiduciary obligations would be found to exist . In particular, that such obligations would or might be owed to individual shareholders in respect of a transaction to split their interests from a company, where the professional advisers were involved in designing and implementing the transaction, and where the risk of a potential conflict of interest would be almost inevitable.

In determining whether the accountants owed a fiduciary duty to Mrs De Sena, the Judge first  considered the well-known passage of Bristol & West Building Society v Mothew [1998] Ch 1 (CA) in which Millet LJ explained the facets of a fiduciary’s obligation of single-minded loyalty. The Judge distinguished between the content of fiduciary obligations (with which Millet LJ was dealing) and their genesis.

The Judge rejected any suggestion that whenever there is a relationship of trust and confidence, there must be a fiduciary obligation (or worse, that all the obligations owed by a fiduciary are fiduciary obligations). The genesis of a fiduciary obligation required more than one party’s reposing of trust and confidence in another. But what more was needed?

The Judge considered the question was best answered by example. A fiduciary obligation would arise when a person accepted trusteeship of property, or directorship of a company. In those cases, the person voluntarily assumed an obligation to act in the best interests of the beneficiary or company and to subordinate their own interests. It was not simply a matter of a weaker party relying on a stronger one. The Judge also considered the imposition of constructive trusts, when fiduciary obligations would be imposed as a matter of law. A critical feature in each case was that one person had the special opportunity to exercise a power or discretion to the detriment of another, who is accordingly vulnerable to the abuse by that person of his position (citing the comments of Mason J in the Australian case, Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, with approval).

Turning to the facts, the Judge found that the accountants had only ever been acting for the company, and not for Mrs De Sena personally – and more, that Mrs De Sena had known this was so. She was advised to obtain independent advice and chose not to. The accountants reasonably believed that she was agreeing to the demerger and was not at a disadvantage or otherwise vulnerable. Accordingly, there were no circumstances capable of giving rise to a fiduciary duty of care.

The Judge went on to find that even if a fiduciary obligation had arisen, the only relevant question was whether the accountants had deliberately furthered the interests of the business to her prejudice. On the facts, they had not done so.

The Judge also found that the accountants had not assumed a responsibility to Mrs De Sena, such as to give rise to a tortious duty of care, but that in any event there would have been no breach.

The judgment is an incisive and welcome reminder that, in claims against professionals, both the genesis and content of alleged fiduciary duties must be carefully pleaded and considered. It will not be enough that the professional was retained to perform a service. Nor will it be enough that a relationship of trust and confidence has grown with the professional over time. In each case, the particular obligation which the professional assumes, and the power or discretion it allows them to exercise for a purpose, will be critical to fixing them with fiduciary obligations.

Click here to read the judgment in full.

Related areas

Related People

Clare Dixon KC

Call: 2002 Silk: 2021

Hannah Daly

Call: 2017



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