The plaintiffs had purchased shares in a company, relying upon accounts prepared by the second defendant auditors. They appealed against a decision that the auditors did not owe them a duty in negligence, not being shareholders.
Held: The appeal succeeded (O’Connor LJ dissenting). Whilst there was no relationship between an auditor and a potential investor sufficiently proximate to give rise to a duty of care at common law, there was such a relationship with individual shareholders, so that an individual shareholder who suffered loss by acting in reliance on negligently prepared accounts, whether by selling or retaining his shares or by purchasing additional shares, was entitled to recover in tort.
Bingham LJ said that in considering whether or not a duty of care of particular scope was incumbent upon a defendant it was material to take into consideration whether it was just and reasonable that it should be so.
Bingham LJ, O’Connor LJ
[1989] QB 653
England and Wales
Citing:
Appeal from – Caparo Industries plc v Dickman QBD 5-Aug-1988
The plaintiff complained that they had suffered losses after purchasing shares in a company, relying upon statements made in the accounts by the auditors (third defendants).
Held: The claim failed. Whilst auditors might owe statutory duties to . .
Adopted – Peabody Donation Fund v Sir Lindsay Parkinson and Co Ltd HL 18-Oct-1983
Architects proposed a system of flexible drains for a site, but the contractors persuaded them to accept rigid drains which once laid proved inadequate at considerable cost. The local authority had permitted the departure from the plans.
Held: . .
Cited by:
At CA – 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 . .
Lists of cited by and citing cases may be incomplete.
Professional Negligence, Company
Updated: 17 November 2021; Ref: scu.552890