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12 November 2018

Accountants and engineers: a professional opinion

Two recent decisions from Courts of Appeal provide an important reminder that it is a professional’s responsibility to do more than blindly follow the instructions of his or her clients.

With the pace of business today, and demanding regulations and competition, it can be easy to forget that professionals are asked to provide more than just a service or product, they are asked to exercise their professional opinion using skill and expertise.

While there are numerous cases involving lawyers who fail to be anything more than a mouthpiece for their clients, there are considerably less that deal with the professional responsibility of accountants and engineers.

Despite this, we should not forget that accountants and engineers are also required to do more than mindlessly follow client instructions.  The two recent decisions discussed below remind us of the significant consequences that may result from failing to exercise and act upon a professional opinion, and the court’s reluctance to accept ‘following instructions’ as an excuse.

The customer is not always right

Actron Investments (“Actron”) v DEQ Consulting (“DEQ”) involved a dispute between a warehouse purchaser and the engineer and firm that signed off on the design and construction of the warehouse.[1]

Actron purchased the warehouse from a property developer in 2007.  When the concrete slab of the warehouse subsequently sank by an amount that made it unusable for its purpose, Actron was forced to spend more than $1 million dollars in rectification works.  As such, Actron sought recourse against, among others, DEQ and its director Mr Henry, an engineer.

The case centred upon whether or not Mr Henry had discharged his professional responsibility.  Mr Henry was asked to sign a form certifying the design of the warehouse and declaring its suitability for use and adherence to regulations.

The form required that the slab not be subject to undue settlement.  Mr Henry argued that what was undue was to be determined by the intended use and expectations for the slab.  As the client had chosen the cheaper option, those standards were to be adopted and the likely settlement was not undue, it was in accordance with expectations.  The court disagreed.

The court found that as the person signing the form “potentially affects not only the interests of a client… but all persons exposed to risks of personal or financial injury as a result of approval of a non-conforming design… it is the appropriately qualified person… who is obliged to make any judgments necessary” for whether the form should be signed.  To leave that up to a client’s decision would be to ignore their professional responsibility.

It is evident from the decision that Mr Henry had formed the professional opinion that the slab would subside substantially.  However, by giving in to client expectation and signing the form in the face of a differing professional opinion, Mr Henry was found to have engaged in misleading conduct because he made a declaration different to his actual opinion.

The payroll problem

On appeal to the Federal Court of Australia, EZY Accounting (“EZY”) denied that they were liable for contraventions of the Fair Work Act which were committed by their client.[2]

EZY was initially engaged by their client to help rectify contraventions that had been identified by a Fair Work audit in 2014.  Despite EZY’s efforts, the contraventions continued.

The Fair Work Ombudsman claimed that because EZY was in charge of the payroll for their client throughout this time, by failing to stop the contraventions they were also involved in the client’s contraventions of the Fair Work Act.

EZY conceded that they provided payroll services but claimed their limited retainer removed any possible liability because it involved them simply entering data into a payroll system, not managing the rates of pay or ensuring legal compliance.  They were, simply put, only following instructions, and were not aware the contraventions continued to occur.

The court rejected this argument, finding that EZY had actual knowledge of the contraventions in 2014.  It also became apparent that EZY had formed the opinion that if data in MYOB was not changed, then contraventions were likely to continue to occur.  As such, EZY either knew of the contraventions, or was wilfully blind to them.

EZY was found liable on the basis that they knew about the contraventions and did nothing to prevent them.  EZY proposed at trial that they were never asked to adjust the payroll figures and so never did, it was not their role to question their instructions.  The court of course rejected this and asked why they never addressed the suspicious behaviour with their client.

They, similar to the engineers above, had a responsibility to the public interest, and to follow the law where they were in a position to do so.

The court considered that where they formed a professional opinion, EZY had an obligation to make enquiries about the contraventions. Indeed, the evidence suggested that stopping these contraventions was the reason they were originally engaged.

Ultimately, by failing to raise the matter with their client, EZY was fined in the region of $50,000.00 for being knowingly involved in the contraventions.  A steep price to pay for client retention.

Key takeaways

These cases are a reminder that professionals are required to use their knowledge and expertise to provide a professional opinion, not just do what the client wants.  While the subject matter of these decisions is quite different, the key takeaway is the same, in both cases, the argument of ‘just following instructions,’ or that liability was dictated by the scope of their retainer, was not accepted by the court.

While it is easy to vilify these professionals in hindsight, it is important to remember that these situations can present to anyone.  The fact is, many professionals find themselves in situations where their professional opinion conflicts with the commercial interests of a client. At times like these the support of an experienced legal team behind you is invaluable to ensure not only the best outcome for you, but also, within the confines of the law, the most favourable outcome for your client.

For more information about this article or other related legal matters, please contact partner and accredited property law specialist, Nigel Hales on 07 4036 9700.

[1] Actron Investments Queensland Pty Ltd v DEQ Consulting Pty Ltd [2018] QCA 147.

[2] EZY Accounting 123 Pty Ltd v Fair Work Ombudsman [2018] FCAFC 134.

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