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    [Unfair Contract Terms Act 1977.]

    The executors of H’s estate, K sought summary judgment in an action against a firm of accountants, PWC, for professional negligence. H had owned a substantial shareholding in a company, BGG, and following his death BGG, in accordance with a “buy back” provision in its Articles of Association, requested that PWC prepare a valuation of H’s shareholding. PWC duly produced a valuation of £2.1 per share. The bulk of the shareholding was subsequently sold at that price pursuant to a deemed notice given by K. Following the sale, a report was prepared by a second firm of accountants at K’s request which valued the shares at £4 each. Proceedings were therefore issued against PWC in negligence seeking damages in excess of £30 million. Two issues arose, namely (1) whether an accountant assigned by the director of a company to carry out a valuation of that company’s shares and in so doing establishing the price at which shares in the ownership of specific shareholders would be compulsory acquired in accordance with the company’s Articles of Association, owed the specific shareholders a duty of care when carrying out the valuation, and (2) whether such liability, if established, could be subject to a clause in the contract between the company and accountant limiting liability and, if so, whether such a clause fulfilled the requirements of reasonableness within the Unfair Contract Terms Act 1977.

    Held, granting the application in part, that (1) a duty of care was owed by PWC to K despite the absence of any contractual relationship between the parties. Such a conclusion was justified in the light of the fact that (a) PWC was appointed for a particular purpose of which it was well aware, namely the sale of the shares by K; (b) K could have no means of protecting themselves as against a negligent valuation whilst PWC always had the option of obtaining additional indemnity insurance, a larger fee or simply refusing to act; (c) the imposition of a duty would not result in an “indeterminate risk to an indeterminate number of people”; (d) K had not participated in agreeing the terms and conditions on the basis of which PWC were retained and which furthermore did not exclude the possibility of liability for negligence to third parties, and (e) K was the only party with any claim if the valuation proved to be negligent and therefore if no duty of care existed PWC could rely on the limitation clause or whether such clause was unfair under the 1977 Act prior to the full trial. A decision on such issues would not result in the action being concluded and, furthermore, might produce further delays given the likelihood of an appeal.

    KILLICK v. PRICEWATERHOUSECOOPERS (NO.1) [2001] 1 B.C.L.C. 65, Neuberger, J, Ch,d

    “Current Law” March 2001