The FRC Appeal Tribunal has handed down its long awaited judgment in the proceedings brought against Deloitte following the collapse of MG Rover, overturning eight of the thirteen rulings made by the Disciplinary Tribunal and substantially reducing the fines imposed on Deloitte (from £14m to £3m) and one of its corporate finance partners (from £250,000 to £150,000) in respect of the remaining findings.

The Background

In September 2013, the Tribunal made 13 findings of misconduct against Deloitte and one of its partners, Mr Maghsoud Einollahi, in connection with its work for MG Rover.

The proceedings concerned to two transactions in relation to which Deloitte had provided advice to the company; the purchase of a loan book from BMW (Project Platinum) and the surrender of substantial MG Rover tax losses to a company indirectly controlled by the ‘Phoenix Four’ who had acquired the business from BWW in 2000 (Project Aircraft).

The Tribunal found that Deloitte had not adequately considered the public interest in respect of these engagements, had not properly addressed conflict of interest issues and had failed to safeguard against the self-interest threat by the use of contingency fees. Deloitte was fined £14m and Mr Einollah fined £250,000 and excluded from practice for three years.

The Appeal Tribunal Decision

Deloitte sought leave to appeal all of the adverse findings and against the sanctions imposed by the Tribunal. Initially, Deloitte was only granted leave in respect of the findings in relation to Project Aircraft, however, the Appeal Tribunal subsequently – although only after Deloitte had commenced a judicial review process – directed that the scope of the appeal should be extended to cover all matters.

The Appeal Tribunal handed down its judgment on 29 January 2015, allowing Deloitte its appeal concerning the public interest in respect of Project Platinum and its appeal in respect of all of the findings relating to Project Aircraft. The remaining findings which were upheld related to conflicts of interest and a contingency fee (in the form of a proposed equity stake in the joint venture) in respect of Project Platinum.

As a result of the successful appeal, the Appeal Tribunal reduced the fines imposed on Deloitte (from £14m to £3m) and Mr Einollah (from £250,000 to £150,000) and overturned the decision to exclude Mr Einollah from practice. Both Deloitte and Mr Einollah were given severe reprimands.


The requirement for accountants to take the public interest into account in performing their work was the subject of great debate after the first judgment.

In overturning the Tribunal’s decision on that front, the Appeal Tribunal emphasised that it was in the public interest but that there was little guidance as to how any decision of an accountant was to be affected beyond those requirements of integrity, honesty and, objectivity and competence . The Appeal Tribunal considered that the only guidance which was available, in the form of the ICAEW’s Guide to Professional Ethics, could not alone form the basis of any charge that an accountant has been guilty of misconduct for failure to consider the public interest.

It is understood that the FRC and the ICAEW are considering the lack of clarity identified by the Appeal Tribunal as to how an accountant should discharge his responsibilities in this regard but, for now, the prospect of not acting in the public interest amounting to a charge of misconduct in future cases appears to have fallen away.

Insofar as the use of contingency fees and conflict of interest (issues in relation to which the Tribunal’s findings were upheld) are concerned, it is likely that these will prove to be a continuing subject of debate. The key finding in that respect was that insufficient regard had been had to the conflict of interest which had developed on the engagement, an issue exacerbated by the contingency fee arrangements. The take away from this would appear to be the need to ensure that conflict issues are kept constantly under review, not just considered at the outset of an engagement.