The New Zealand Institute of Chartered Accountants (NZICA) Disciplinary Tribunal has issued its decision in relation to the complaint against chartered accountant, Nicola Adam, for her actions following the collapse of the Du Val Group. The Disciplinary Tribunal has censured Ms Adam and ordered her to pay a $25,000 fine (representing half of the maximum $50,000 fine available) together with costs, following a guilty plea.

Ms Adam acted for various entities in the Du Val Group undertaking compliance and tax work. In August 2024, receivers (and subsequently statutory managers) were appointed at the instigation of the FMA to 64 Du Val Group entities including the Du Val Property Group Limited (DVPGL), the Group’s director, Kenyon Clarke, and his wife, Charlotte Clarke. The Receivers wrote to Ms Adam informing her of their appointment, requesting information, and reminding her that she must not continue to act for the Du Val Group.

Ms Adam subsequently accepted instructions from minority shareholders of DVPGL to contest the receivership / statutory management of DVPGL. As part of this instruction, Ms Adam wrote to the Minister of Commerce and Consumer Affairs attesting to DVPGL’s solvency and its ability to meet and continue to meet the liquidity limb of the statutory solvency test. In doing so, Ms Adam relied on information accessed from Xero and a draft Statement of Financial position she prepared, which contained commercial sensitive information which had deliberately not been disclosed by statutory managers in their public reporting for asset protection and realisation reasons. The Receivers / Statutory Manager’s investigations showed that DVPGL was not in a position to meet its obligations as they fell due and that no reasonable Chartered Accountant could conclude that it met the statutory solvency test.

The Receivers subsequently made a complaint to NZICA. The Tribunal found that:

The accountant should not have accepted an instruction to act for the Minority Shareholders as their interests conflicted with the Receivers and Statutory Managers of the accountant’s client, the Du Val Group.
The accountant failed to comply with the direction of the Receivers to not involve herself in the Du Val Group’s affairs.
In preparing the solvency letter and the Statement of Financial Position, the accountant had accessed client records for which she had no entitlement to access.
The statements in the solvency letter were unsustainable and should never have been made, as there was no sufficient or proper basis to conclude that DVPGL was and continued to be a solvent enterprise.

The Tribunal went on to observe that “The very public context of the Du Val Group’s receivership and statutory management meant that her actions on behalf of the Minority Shareholders would be likely to attract significant public attention. Her Solvency Letter identified her as a Chartered Accountant and emphasised her role as DVPGL’s external accountant, implying independence and objectivity to support her strongly expressed opinion as to its solvency. The evidence is that Minority Shareholders and others did rely on her status in questioning the actions of the receivers and statutory managers (and the Minister). There was considerable media attention referring to the Member’s role as DuVal’s accountant, her Solvency Letter and the reliance placed on it by Minority Shareholders questioning the statutory management.”

Comment: The Tribunal’s decision is a reminder of the importance of identifying conflicts of interests and maintaining professional independence, objectivity and integrity. While the circumstances of the receivership and statutory management are unusual and the public interest in the collapse of the Du Val Group was undoubtedly an aggravating factor, adherence to these principles remains paramount.

The penalty imposed by the Tribunal is intended to reflect the seriousness of the charges and the need to maintain professional standards and protect the public, but also the accountant’s guilty plea and acceptance of charges.

Resources

Du Val Accountant censured and fined for conduct breaches

Fee Langstone