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The Full Federal Court has dismissed the appeal by Pitcher Partners against a $5.6 million bill for deceitfully hiding an accounting error from a client.
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Pitcher Partners loses Full Federal Court appeal
26 July 2019
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Pitcher Partners had sought to appeal a Federal Court decision to pay its former client, Neville’s Bus Service (NBS), which trades as Busabout, just under $5.5 million as “damages for deceit”, submitting that the approach was legally flawed and there was insufficient evidence to prove any loss to NBS.
In its dismissal, the court said that the “dishonest conduct in 2014 was plainly serious misleading or deceptive conduct” and that there was a “clear and principled basis” for Pitcher Partners to pay for the loss and damage suffered by its former client.
“Here the dishonest advisers, by their misleading or deceptive conduct, led the client into a contract and then dishonestly induced it to commit to a financial liability larger than the dishonest conduct led it to believe,” the court said.
“In this way, here, the liar is held, by the relief, to restore the innocent party to the position consistent with the lie being true, that is non-operative.”
In a previous hearing on the matter of costs, dated 21 February 2019, the Federal Court awarded NBS a further lump sum of $3,366,388, contributing towards a total loss facing the company, including interest, of $5,632,844.
Amortisation error
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Pitcher Partners had provided financial and accounting services to NBS since 2003, and in 2013, had asked the firm to prepare the content of a tender for the right to operate buses in a defined area of Sydney to be awarded by a state government instrumentality Transport for New South Wales.
However, a simple amortisation error was found in one of its costing models, resulting in a shortfall of $660,000 per annum for the life of the contract.
A former partner of the firm, Ian Stewart, was found to have concealed the error, lied about it and sought to blame others for it.
“The contract price formed by the acceptance of the tender was constituted, in part, by an element for the payment of transfer-in buses that was $660,000 per annum lower than it would have been, had it not been for the amortisation error,” the Full Court said.
“At this point in time, the amortisation error was no longer ‘innocent’. It had been fraudulently concealed by Mr Stewart, and so, by Pitchers.
“It is clear from both the evidence and the findings that had NBS… known of the error, it would have increased its bid by $660,000 per annum, or sought to ask for a varied contract by that amount.
“This body of findings and evidence is important to each way the loss of NBS may be conceptualised. First, it may be seen to assist in the conclusion that the liability of NBS for the shortfall was directly related to the misrepresentation, that was later, in 2014, made deceitfully. Secondly, it may be seen to provide the foundation for the conclusion that NBS proved on the balance of probabilities that it lost a (valuable) opportunity to tender differently or to renegotiate the contract.”
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