Deloitte loses bid to file appeal over Priceclub negligence lawsuit

The accounting firm Deloitte has been refused a second chance to appeal a case that found it had acted negligently in the way it had audited the Priceclub supermarket chain, which ran aground with millions in debts.

Deloitte has been twice refused its right to file a new appeal against a decision that found it had acted negligently in its accounting duties, in a case brought against it by foodstuffs company Valle del Miele.

The firm had been used by Valle Del Miele Ltd in 2001 for work in connection with the Priceclub chain of supermarkets, which that same year went bankrupt with millions in unpaid credit from suppliers.

In 2003, the courts declared that Deloitte had been negligent in connection with the work carried out for Priceclub Operators.

Deloitte appealed, but in 2004, the Court of Appeal ruled that the appeal was inadmissable as it had not been filed within the legal time limit – 20 days from the date of the judgment and not within 20 days from the authorisation to appeal.

Deloitte then filed a constitutional case in the First Hall of the Civil Court in its constitutional jurisdiction, claiming the Appeal Courts’ decision had violated its fundamental human right to a fair hearing. In 2006, that court ruled in Deloitte’s favour.

Subsequently, the Attorney General appealed to the Constitutional Court, which in turn overturned the previous court’s ruling in 2007.

So, Deloitte partners Raphael Aloisio, Malcolm Booker, Steve Cachia, Edward Camilleri, Andrew Manduca, Paul Mercieca and Stephen Paris took the decision to Strasbourg, where in 2011 the ECHR found that their rights had been breached, ordering that compensation of €6,000 is paid to them.

The ECHR found they had suffered a breach of fair hearing.

However, Deloitte filed a new case based on the ECHR’s findings in 2013, requesting that the Maltese courts grant them the power to appeal the Valle del Miele decision. But both the First Hall of the Civil Court constitutional jurisdiction in 2017, and later the Constitutional Court, refused Deloitte’s request.

“This court considers the issue of the preliminary appeal’s refusal as having been definitely closed once the ECHR’s sentence was delivered in 2011. The execution of the sentence was carried out once the Maltese state paid the compensation,” the Constitutional Court declared in its decision earlier last week.

Originally, the courts had upheld an action by foodstuffs company Valle Del Miele Ltd (VDM) against Deloitte and its partners.

VDM was owed over €350,000 by the bankrupt Priceclub supermarket for merchandise sold to the supermarket. Deloitte had been engaged to carry out an audit for Priceclub on the basis of audited accounts from 2000, a year before the supermarket chain went belly-up.

VDM accused Deloitte of having portrayed an optimistic picture of Priceclub’s business without indicating that the supermarket had financial difficulties, and on that basis decided to continue to supply merchandise to Price Club.

Despite the published accounts, Priceclub stopped payments to its creditors in April 2001, owing millions to various suppliers.

VDM claimed Deloitte had acted in a negligent or fraudulent manner when it prepared Priceclub’s accounts, and that its partners were liable in damages, claims that Deloitte categorically denied.

But the court ruled that the accountants had a duty of care to their direct employers as well as to any third party to whom they themselves showed the accounts.

The court also said VDM itself had not taken necessary precautions before deciding to extend credit to Price Club, despite being aware that Priceclub had financial problems. So the court found that Deloitte had acted in a negligent manner but they had not caused VDM to suffer damages.