E.3. Responsibility of CPA Milner
E.1.3. The parties' arguments
- The plaintiffs' appeal is also directed to the ruling of the trial court that the claim against CPA Milner should be dismissed.
As may be recalled, the trial court ruled that it is possible to learn about the shareholders' consent to the submission of the company's and the subsidiary's financial statements separately by CPA Milner, by virtue of the fact that he had acted in this way since the establishment of the subsidiary until the 1999 report. Therefore, the trial court ruled, the shareholders are prohibited from suing CPA Milner for failing to consolidate the reports. In this aspect as well, the plaintiffs argued, the court canceled the separation between the company and its shareholders. The plaintiffs also argued that there was no dispute between the various experts that Statement 57 required the consolidation of the company's reports with the subsidiary's reports, and that in view of the significant increase in investment in the subsidiary in 1999 compared to previous years, as well as the subsidiary's situation, the decision not to consolidate the reports in that year was a negligent decision. According to the plaintiffs, if the reports had been consolidated, and the data had been presented in a prominent and clear manner, even a "negligent" director could have learned that the company is in financial difficulties due to the investment in the subsidiary.
According to the plaintiffs, CPA Milner's negligence was one of the reasons for the company's damages, even if there were other reasons for these damages. It was argued that in our case there were several negligent wrongdoers (the directors and the accountants) who even if it was possible that each of them separately would have caused the damage, each of them could have prevented it. It was argued that the damage caused by CPA Milner should also include the damages caused in the period following the date of the reports, since during this period he was still performing work for the company, and he should have known about the financial conduct and the massive flow of funds from the company to the subsidiary, at least until the day he signed the reports for 1999 (April 25, 2001).