Auditors not liable in the MemoryCard case

The Danish Supreme Court recently found that the former auditors to MemoryCard Technology A/S were not liable in a lengthy case where the MemoryCard Technology A/S estate in bankruptcy had sued the auditors, claiming DKK 100 million in damages.

In spite of the Supreme Court finding that the auditors' conduct had been actionable in connection with the presentation of the financial statements as they should have given a qualified opinion in respect of the valuation of the stocks and the valuation of a receivable, the Supreme Court found no causal connection between the error giving rise to liability and the loss. It means that it has not been proved that a qualified opinion in respect of the valuations would have resulted in the company's board of directors having discontinued or adapted the company's operations or that the banks would have refused to continue their lending. The Supreme Court consequently reversed the judgment passed by the Western High Court, which had ordered the auditors to pay damages in the amount of 100 million plus interest.

The judgment is in line with the Supreme Court's judgment from 2014 where the Supreme Court found that the auditors to the former eHuset A/S in a similar case were not liable by stating the same reasons.

It is also worth noting that in the MemoryCard case as in the eHuset case the Supreme Court established that the fact that a creditor has suffered a loss in connection with a company going bankrupt does not prevent such creditor from raising a claim for damages directly against the company's former management or auditors regardless of whether the estate in bankruptcy might do the same and vice versa, as the claim for damages raised by the estate in bankruptcy is based on a completely different basis than the individual creditor's claim regardless of the errors giving rise to liability being the same. 

The judgment by the Supreme Court can be read on its website

If you want to know more, please contact Attorney-at-Law Peter Bang who has conducted many cases involving auditor liability before both the High Courts and the Supreme Court.

Latest news on Dispute Resolution

Dispute Resolution