In the Caribbean Steel Company Limited v Price Waterhouse decision, the Privy Council has reiterated the principle that expert evidence is required to establish the relevant standard of care in a profession.
In what may seem a declaration of common sense, it was held that for a court to find that a professional had breached his duty of skill and care, expert evidence ought to be adduced from persons in the same profession as the defendant as to the standard of care required in the particular case and the defendant’s failure to reach that standard.
Background
In the early 1990’s, the claimant (Caribbean Steel Company Limited) purchased 50.1% of the shares in Caribbean Cable Company Limited (a company that produced materials for construction in Jamaica).
Price Waterhouse acted as their accountants and prepared a valuation ahead of the purchase. Their valuation provided that a J$13,849,000 surplus in the pension fund for Caribbean Cable was an asset. They did not mention that Caribbean Cable had already borrowed J$1,400,000 from that fund.
The claimant argued that the accountants were negligent for not bringing the borrowing to their attention, asserting that the issue would have materially affected their decision to purchase.
They were successful at first instance but Price Waterhouse appealed successfully to the Jamaica Court of Appeal. In response, The claimant further appealed to the Privy Council.
Decision
The Privy Council dismissed the Claimant’s appeal (thereby agreeing with the Jamaica Court of Appeal’s) and held that the first instance judge had not given due regard to Price Waterhouse’ expert evidence.
In the first hearing, Price Waterhouse provided an expert witness who argued that the J$1,400,000 loan from the pension fund was not relevant to the valaution of the company.
Both the Court of Appeal and the Privy Council found that in response to this expert evidence, the Claimant’s own expert had not given a valid rebuttal.
Crucially, the court found that it was essential that reasons given by experts for reaching their opinion were carefully scrutinised. If a valid and sound reason for rejecting that evidence could not be found, then the judge could not properly find that professional negligence had been established.
Conclusion
This decision re-affirms the principle that compelling and coherent expert evidence must be carefully assessed when making a decision regarding professional negligence.
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