Liability of Professional Services Firm for Investigative Findings Affecting Third Parties

Overview

The High Court of Singapore, in Tan Woo Thian v PriceWaterHouseCoopers Advisory Services Pte Ltd[1] has declined an invitation to hold PWC (Defendant), a professional service firm, liable in negligence for producing a report containing negative findings against a third party. According to See Kee Oon J, “putting professional firms like the Defendant which are engaged in forensic investigation and fact-finding purposes under a duty of care to any person who is named in the report might potentially encourage defensive and excessively circumspect reporting which would not be in the public interest”. In any event, the Defendant offered the Plaintiff the opportunity to be heard on the allegations contained in the report, but the Plaintiff did not cooperate.

Facts

The Plaintiff was the founder and CEO of the SBI Offshore Limited (SBI). The Plaintiff superintended over the acquisition and subsequent disposal of shares in the company. Some controversies surrounding the deal led SBI to appoint PWC to conduct a fact-finding investigation into the matter. Some negative findings were made against the Plaintiff. And the Plaintiff was given the opportunity to respond to the negative findings. The Plaintiff declined. Subsequently, the report was submitted to the investigative agencies of the Singaporean Police Service for further action. The Plaintiff, dissatisfied with the report, commenced an action against the Defendant for the negative findings made against him. The findings, the plaintiff alleged, had caused him financial and reputational losses.

The issue before the court was whether (a) the Defendant owed a duty of care to the Plaintiff; (b) the Defendant breached the said duty of care; and (c) Plaintiff has suffered any loss.

Findings

In deciding on whether or not the Defendant owed the Plaintiff a duty of care, the court focused on whether (a) there was a special relationship between the Defendant and the Plaintiff; (b) Whether the Defendant voluntarily assumed any responsibility to the Plaintiff; and (c) whether the Plaintiff could rely on the investigative report for any purpose. In all of these  questions, the court made a negative finding.

According to the court, “…the Defendant was not engaged by the Plaintiff but by SBI’s Audit Committee. It was thus difficult to see how the defendant could have voluntarily assumed responsibility to the Plaintiff, who was a third party to the contract between SBI and the Defendant.”

Further, the court seems to have been swayed by the fact that the engagement letter between the SBI and the Defendant contained a clause in which the Defendant disclaimed responsibility for its investigation and report to any persons except SBI’s audit committee. There was therefore no special relationship between the Plaintiff and the Defendant.

Also, another factor that tipped the scale in favour of a finding that the Defendant did not owe a duty of care to the Plaintiff was the “reliance” provisions in the engagement letter. As pointed out earlier, the engagement letter contained an express clause to the effect that the investigative report was for the benefit of no other person other than the Plaintiff. The court also found as a matter of fact that the Plaintiff, even though he was given the opportunity to be heard did not take that opportunity. As the court noted, “… the Plaintiff had clearly chosen to play no part in the preparation of the PWC report or the executive summary despite having been invited to give his input on the same…the Plaintiff was unable to provide a credible explanation for his professed inability to respond the Defendant’s inquiries”.

The Plaintiff was also unable to prove that the Defendant had breached its duty of care to it and that it had suffered damage as a result of the said breach.

Photo by Agence Olloweb on Unsplash


[1] [2020]SGHC 171

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