The Gaelic Inns and JSI Shipping cases

As mentioned in a previous posting, the 2 cases of

1. PlanAssure PAC v Gaelic Inn Pte Ltd and
   
2. JSI Shipping (S) Pte Ltd v Teofoongwonglcloong
   

are Court of of Appeal cases involving the liability of auditors. In both cases, the auditors failed to spot fraud committed by the officers of the respective plaintiff companies and were therefore found liable to some extent for the losses caused by the fraud.

It is of course impossible for auditors to stop the first act of fraud and it is normally impossible to blame them except in exceptional cases. For example, if the auditors were hired to suggest improvements in a company's internal control systems but failed to point out serious weaknesses, thus allowing fraud to occur.

The normal way in which auditors are to be blamed for fraud losses is that if the fraud was discovered earlier by the auditors, then either later fraudulent acts would have been stopped or that it might have been possible to recover more of the stolen monies before the criminals had disposed of it. Notice here that the plaintiffs are using arguments as to what might have happened and not on certainties. This is well accepted by the court. Few things in life can be predicted with 100% certainty. The courts adopt a realistic approach by working with probabilities of events happening where appropriate.