Binder judgment underlines case for reform

The accountancy profession will hardly welcome it, but yesterday's pounds 65m judgment against Binder Hamlyn is the best piece of evidence it can point to in its campaign for a change in the law relating to auditors' liability. Here is the nightmare scenario that accountants and their insurance brokers have been predicting for much of this decade. Because of a shortfall in the firm's professional indemnity insurance cover - caused by insurers' unwillingness to take on such big risks in the face of mounting litigation - more than 100 partners face having to meet pounds 34m of the claim. The judgment is being appealed, but if a year from now it stands, some prominent accountants might be made personally bankrupt.

Well, almost. This case is complicated by the fact that much of Binder Hamlyn has, since late 1994, been part of the immensely successful US- based Arthur Andersen. Having acquired it because of its UK audit business, Arthur Andersen is unlikely to want to cast the Binder people off. But nor, as rival firms were quick to point out, is it likely to dip into its pocket to bail them out. That would, in the words of one partner at another practice, be a "more than generous gesture". Ultimately, ADT would probably be better off agreeing a deal under which the money is paid off over time, rather than forcing the partners out of homes and callings.

The wider implications are somewhat easier to assess. Irrespective of the final result, the case can only accelerate the rush to incorporate begun earlier this year by KPMG, Britain's largest audit firm. Indeed, the signs are that the coming weeks, if not days, will see many other leading firms delivering their responses to KPMG's attempt to protect itself from huge negligence suits in this way.

There are still doubts over how KPMG's decision to incorporate only its audit arm will work. If Binder had been totally incorporated at the time of the deal that landed it in court, the liability would have been limited to the firm's assets, and the individual partner responsible, rather than scores of others with no connection to the transaction. Even this may be no more than a partial solution, however.

With this case fresh in its mind, the profession will be hoping that the Law Commission, which is studying options for reform of the law of joint and several liability, might provide a more elegant way out of the problem. It has long pressed changes to a principle under which its members can find themselves bearing the whole cost of a corporate disaster.

Suggested Topics
PROMOTED VIDEO
Arts and Entertainment
From Mean Girls to Mamet: Lindsay Lohan
theatre
Sport
Nathaniel Clyne (No 2) drives home his side's second goal past Arsenal’s David Ospina at the Emirates
footballArsenal 1 Southampton 2: Arsène Wenger pays the price for picking reserve side in Capital One Cup
News
Mike Tyson has led an appalling and sad life, but are we not a country that gives second chances?
peopleFormer boxer 'watched over' crash victim until ambulance arrived
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
tv
News
i100
Travel
travelGallery And yes, it is indoors
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech
Arts and Entertainment
The Tiger Who Came To Tea
booksJudith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed'
News
i100
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
News
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Syria air strikes: ‘Peace President’ Obama had to take stronger action against Isis after beheadings

Robert Fisk on Syria air strikes

‘Peace President’ Obama had to take stronger action against Isis after beheadings
Will Lindsay Lohan's West End debut be a turnaround moment for her career?

Lindsay Lohan's West End debut

Will this be a turnaround moment for her career?
'The Crocodile Under the Bed': Judith Kerr's follow-up to 'The Tiger Who Came to Tea'

The follow-up to 'The Tiger Who Came to Tea'

Judith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed' - which has taken 46 years to get into print
BBC Television Centre: A nostalgic wander through the sets, studios and ghosts of programmes past

BBC Television Centre

A nostalgic wander through the sets, studios and ghosts of programmes past
Lonesome George: Custody battle in Galapagos over tortoise remains

My George!

Custody battle in Galapagos over tortoise remains
10 best rucksacks for backpackers

Pack up your troubles: 10 best rucksacks for backpackers

Off on an intrepid trip? Experts from student trip specialists Real Gap and Quest Overseas recommend luggage for travellers on the move
Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world