Northamber v Genee offers a sharp reminder of how messy the numbers can get when unreliable records, deleted invoices and credibility issues collide. This case note highlights how the court weighed conflicting expert evidence, assessed “unique” accounting practices and ultimately distilled a £1.6m claim down to a £24k loss, an instructive study in forensic valuation under hostile conditions.
Introduction
Northamber PLC ("Northamber") is a distributor of information technology equipment in the UK. It distributes many different brands of IT equipment to IT resellers. Genee World Limited, founded by Mr R Singh and his wife, created its own brand of IT equipment, which was manufactured in China. Genee granted Northamber an exclusivity agreement to distribute Genee products in the UK.
Venomous litigation
Following the breach of this exclusivity agreement, Northamber issued an injunction on 10 September 2018. This prohibited any further breach of the exclusivity agreement.
The litigation quickly became even more poisoned than usual, with Mr Singh being filed £25,000 for contempt of court due to his failure to provide information to Northamber.
Northamber raised a claim against Genee for £1.635 million in respect of the breach of the agreement.
The forensic accounting experts step in
Two forensic accounting experts were required to calculate the losses to Northamber in the period from 1 July 2017 to 31 December 2018.
The forensic accountants were faced with a fundamental uncertainty regarding the accounting records and deleted sales invoices: were firm orders entered by Mr Singh as sales on the Sage accounting system in advance of fulfilment, as he claimed? Did this then explain the subsequent deletion of some sales invoices? Or were some more nefarious forces at work?
This was relevant as it provided evidence as to whether or not Genee continued to breach the exclusivity agreement, even after the issue of the injunction.
A clue to the answer to this enigma is given by a comment of the judge: “I am sorry to say however that, for the reasons that follow, I have come to the firm conclusion that Mr Singh was not an honest witness doing his best to assist the court with his honest recollection of events.”
The forensic accounting expert appointed by Genee had seen thousands of Sage records over the years but had never previously encountered the accounting practice as alleged by Mr Singh. He had therefore described this as “unusual.” On being pressed by the judge, he agreed that a more fitting description was a “unique practice.”
Further differences between the two experts centred on the percentage loss on sales values: one expert used a figure of 25%, the other 10.4%.
The damage
Mr Singh did not help himself, or the court, when he gave two alternative explanations as to the deletions of sales invoices, one to the forensic accounting expert and one to the court.
The judge found that the sales in breach of the exclusivity agreement amounted to £491,355 plus VAT. Northamber’s recoverable loss was 5% of this amount, which was £24,568.
*the views expressed are the author’s and not ICAEW’s