Banks Attack Accountants Liability Limit

Under the contracts, clients would have to agree a cap on how much they could sue their advisers in the event of a deal failing due to negligent advice or work on the part of the accountants.

Anthony Beevor, of Hambros Bank, said the ''fixed ceilings'' and ''non-negotiable nature'' of the contracts ''ought to attract the critical attention of the competition authorities''.

Beevor, who is chairman of the corporate finance committee of the London Investment Bankers Association, said: ''The principle is acceptable but it should be left to negotiation."

The new contracts will be seen as an attempt by the firms to try to stem rising legal costs by contract - while they are still pressing for reform of the law in those areas where their liability is unlimited.

 

The Big Six, on legal advice, have submitted the accord to the Office of Fair Trading which will undertake a review. It is believed to be the first such accord of its kind among the six firms.

Alan Comber of KPMG, a spokesman for the six, said: ''The Big Six has acted on the matter of liability in due diligence work to venture capitalists as a response to pressure from the DTI to limit our liability within the existing law.''

It is understood the contract cap will mainly affect management buy-outs.

It would have caught about 500 deals last year -- 12 of which were worth above 100m.

Under the cap the liability of the accountants is limited to the lowest of three criteria -- the so-called transaction size,