The special relationship between an auditor and a bank, meant that a duty of care could extend even to a second bank with its own auditors. In determining whether there had been an assumption of responsibility, the the relevant factors would include (according to the authorities): ‘(a) the precise relationship between (to use convenient terms) the adviser and the advisee. This may be a general relationship or a special relationship which has come into existence for the purpose of a particular transaction. But in my opinion counsel for Overseas was correct when he submitted that there may be an important difference between the cases where the adviser and the advisee are dealing at arm’s length and cases where they are acting ‘on the same side of the fence.
(b) the precise circumstances in which the advice or information or other material came into existence. Any contract or other relationship with a third party will be relevant.
(c) the precise circumstances in which the advice or information or other material was communicated to the advisee, and for what purpose or purposes, and whether the communication was made by the adviser or by a third party. It will be necessary to consider the purpose or purposes of the communication both as seen by the adviser and as seen by the advisee, and the degree of reliance which the adviser intended or should reasonably have anticipated would be placed on its accuracy by the advisee, and the reliance in fact placed on it.
(d) the presence or absence of other advisers on whom the advisee would or could rely. This factor is analogous to the likelihood of intermediate examination in product liability cases.
(e) the opportunity, if any, given to the adviser to issue a disclaimer.’
Judges:
Neill LJ
Citations:
Times 04-Mar-1998, [1998] EWCA Civ 236, (1998) PNLR 564, [1998] Lloyd’s Rep Bank 85
Jurisdiction:
England and Wales
Citing:
Appeal from – Bank of Credit and Commerce International (Overseas) Ltd v Price Waterhouse ChD 7-Feb-1997
No duty of care was owed by accountants who were not auditors to lenders to the company audited. The claim was struck out. . .
Cited – Morgan Crucible Company Plc v Hill Samuel and Co Ltd ChD 24-Jul-1990
The court laid down the procedure on a strike out application: ‘On an application to strike out a pleading under RSC Ord.18, r.19(1)(a) no evidence is admissible and since it is only the pleading itself which is being examined, the court is required . .
Cited – Caparo Industries Plc v Dickman and others HL 8-Feb-1990
Limitation of Loss from Negligent Mis-statement
The plaintiffs sought damages from accountants for negligence. They had acquired shares in a target company and, relying upon the published and audited accounts which overstated the company’s earnings, they purchased further shares.
Held: The . .
Cited – Candler v Crane Christmas and Co CA 15-Dec-1950
Though the accounts of the company in which the plaintiff had invested had been carelessly prepared and gave a wholly misleading picture of the state of the company, the plaintiff could not recover damages. A false statement, carelessly, as . .
Cited – Hedley Byrne and Co Ltd v Heller and Partners Ltd HL 28-May-1963
Banker’s Liability for Negligent Reference
The appellants were advertising agents. They were liable themselves for advertising space taken for a client, and had sought a financial reference from the defendant bankers to the client. The reference was negligent, but the bankers denied any . .
Cited by:
Cited – The Estate of Mohammed Sabir Raja (Deceased) v Austin Gray (A Firm) QBD 31-Jul-2002
The claimant sought damages for negligent valuation of properties belonging to the deceased, but taken into receivership under charges taken by a company who in turn charged its assets to a bank. When the debenture was enforced, the charges were . .
Appealed to – Bank of Credit and Commerce International (Overseas) Ltd v Price Waterhouse ChD 7-Feb-1997
No duty of care was owed by accountants who were not auditors to lenders to the company audited. The claim was struck out. . .
Cited – Niru Battery Manufacturing Company, Bank Sepah Iran v Milestone Trading Limited CA 23-Oct-2003
The claimant had contracted to purchase lead from some of the defendants. There were delays in payment but when funds were made available they should have been repaid. An incorrect bill of lading was presented. The bill certified that the goods had . .
Cited – Commissioner of Police of the Metropolis v Lennon CA 20-Feb-2004
The claimant police officer considered being transferred to Northern Ireland. He asked and was incorrectly told that his housing allowance would not be affected by taking time off work.
Held: The break between employments had affected his . .
Cited – Precis (521) Plc v William M Mercer Ltd CA 15-Feb-2005
Purchasers of a company sought to claim in negligence against the respondent actuaries in respect of a valuation of the company’s pension funds.
Held: There was a paucity of authority as to when a duty of care was assumed. The words used and . .
Lists of cited by and citing cases may be incomplete.
Professional Negligence, Banking
Updated: 14 November 2022; Ref: scu.143714