People entrust the management of their money to others in many forms: an agent managing property and collecting rent, a partner running a company while the others remain at a distance, a guardian dealing with a minor's assets, a judicial custodian holding disputed property. In every such case a fundamental obligation arises that is frequently overlooked: the duty of a person managing another's money to render an account supported by documents. Where they refuse or render an incomplete account, the remedy is an accounting action, a claim of a particular character differing from an ordinary claim for a fixed sum. This article explains its rules in practical terms.
Who Owes a Duty to Account
The duty rests on everyone who has managed money for another or performed work requiring the receipt or disbursement of funds:
- Agent: must keep the principal informed of the progress of the mandate, render an account of it, and hand over what was received on the principal's behalf even where not owed to them.
- Managing partner: must account to the other partners for their management, and the partners' right to inspect the books and records is a substantive right rather than a concession.
- Guardian and conservator: must render periodic accounts of their management of a minor's or incapable person's assets as the supervising authority requires.
- Judicial custodian: must account for management of the disputed property at the end of the appointment or periodically according to the appointment order.
- Liquidator: must account for the liquidation to partners and creditors.
- Bailee and depositary: as to what was received and what was spent.
- Co-owner in possession: a co-owner who alone manages and exploits common property must account to the others for the income.
- Heirs: the duty passes to the heirs of a person bound to account, within the limits of what devolved to them.
What the Account Must Contain
A summary statement does not suffice. The account must be complete:
- Detail: receipts and payments set out individually with their dates and reasons rather than aggregated into a single line.
- Supporting documents: invoices, receipts, and bank statements attached. An account unsupported by documents carries no weight.
- Full period: covering the entire period of management without gaps.
- Statement of balance: extracting the final balance in favour of one party or the other.
- Integrity: not mixing the manager's own funds with those of the person for whom they act. Mixing is itself an indication of breach and weighs against the person bound to account.
- Retention: a manager must retain documents for a reasonable period, and their loss does not excuse them and may be construed against them.
Conditions and Procedure
This action has a dual character, beginning with an order to perform and ending with an order to pay:
- The claimant's standing: a legal interest in the accounting as principal, partner, heir, or holder of a right in the property managed.
- Establishing the management relationship: the most important element, proved by the mandate, partnership agreement, appointment order, or correspondence and transfers evidencing actual management.
- Prior demand: serving formal notice requesting the account before filing is advisable, as it establishes refusal and strengthens the position.
- The relief sought: the claim seeks an order requiring the defendant to render a documented account for a defined period, and then payment of the resulting balance.
- Two stages: the action proceeds in two stages: a judgment ordering the account, then examination of the account rendered, its settlement, and judgment for the balance.
- Alternative relief: including an alternative application for appointment of an expert to settle the account if the defendant refuses avoids a fresh round of litigation.
Expert Appointment and Challenging the Report
Accounting expertise is the backbone of these claims:
- The expert's mandate: defined precisely in the operative part: examining books and documents, tabulating receipts and payments, and stating the balance.
- Enabling the expert: both parties must give the expert access, and one party's refusal to produce documents is construed against them, allowing the expert to rely on what the other produced.
- Attending expert meetings: parties must attend and produce their documents there, since what is not put to the expert is difficult to remedy later.
- Challenging the report: parties may object by identifying specific defects rather than by general objection, and may seek a remission or a new expert where the report is materially deficient.
- The court's power: the report is one element of proof, and the court may adopt it in whole or in part or reject it with adequate reasons.
Consequences of Refusing to Account
A person who refuses does not escape accountability and may worsen their position:
- Presumption against the refuser: refusal to render an account or produce documents is taken as an indication supporting the other party's contentions within the bounds of reason.
- Astreinte: the court may attach a daily penalty to the order to render an account, to induce compliance.
- Inferential assessment: where documents cannot be obtained, the expert and the court may resort to an inferential assessment based on available data, usually to the refuser's disadvantage.
- Liability for loss: the refuser answers for loss caused by their delay in addition to the balance due.
- Criminal dimension: where refusal is accompanied by misappropriation of the funds entrusted, the matter moves from civil accounting to breach of trust offences, a separate question requiring careful examination.
Limitation and Defences
The claim does not remain available indefinitely, and certain defences should be anticipated:
- Commencement of limitation: ordinarily runs from the end of the management relationship or the last transaction rather than from its commencement, which widens the scope of claim in long relationships.
- Prior accounting: where an account was previously rendered and expressly discharged, it cannot be reopened save by establishing mistake, fraud, or omission.
- Effect of a discharge: signing a discharge without reservation binds the signatory, so it should not be signed before detailed review.
- Denying the management relationship: by disputing that the relationship existed at all, in which case the burden of proving it falls on the claimant.
- Set-off: the manager may rely on set-off for expenditure from their own funds or fees due to them.
Practical Guidance
- Those entrusting the management of their money should specify in the contract the frequency and form of accounts and the supporting documents required.
- Request accounts periodically rather than waiting years. Assembling documents after time has passed is far harder.
- Do not sign a final discharge before a documented detailed review.
- Those managing others' money should keep bank accounts entirely separate from the first day. Mixing is the most damaging point a manager can face.
- Retain every receipt and document throughout the management and for a reasonable period afterwards.
- Render periodic accounts voluntarily even if not requested, which forecloses any later claim.
An accounting action is among the most complex claims to prove and the most dependent on documentation, and success begins on the first day of the relationship rather than the day of the dispute. Yamnak Law Firm drafts management and agency agreements ensuring transparency and conducts accounting and settlement claims and expert report challenges before the courts.
