Blaw week 12:
Torts 2
When it comes to neglignat meisstatemnts, you must apply the Hadley burn case test,
Whenever there isnegligant misstatement, along with spandak test, you also have to
sigh Hadley burn
Yes there is factual foreseeability
Case reference : Smith v Eric S Bush
Delia knew that Cain would read her audit report and find it useful in helping him reach a decision
whether to act as the company’s guarantor
Auditors liability to third parties
Duty of care under the tort if negligent mis-statement
Ikumene Singapore and anvor leong chee leng case- only case in sg which discusses auditors lability
for negligant misstatements to third parties
Other cases on tort if negligent misstatement ( but not directly in respect of auditors liability to third
parties )
Spandeck test – factual foreseeability, followed by 2 stage test
A more restricted approach is preferred for cases of pure economic loss
Factual foreseeability ?
Qn of fact which precedes the legal requirements
Reasonably foreseeable that if delia did not exercise due care, cain would suffer loss
Almost always satisfied
Qn 2:
Yes there is legal proximity
Causal proximity, - is there a relation between delias negligence and cains loss ? yess, there is cus c
depended on Ds report
Circumstantial proximity- no circumstantial proximity
Reliance and vulnerability as C is reliant on D
Apart of spandac test, cus its negligent misstatement, we also apply special relationship test, as in
Hadley burn
Here we test:
-
assumption of responsibility and
is there reasonable reliance
there is reasonable reliance, as C relied on Ds report, and him being an investor, is likely to have
replied on any auditors report
since spandac test and special relationship test there is closeness of relationship, bbut look at
disclaimer threat D put,
cus of that disclaimer, there is NOOOOO closeness for relationship
Include Hadley burn case; whenever it is a negligence misstatement qn, include Hadley burn case
when you talk about legal proximity
Qn 3:
If this was open and D was said to have duty of care, then Floodgates open (floodgates argument),
in future auditors will be held accountable to third parties, and they should not
Note :
It is usually a negligent misstatement case when :
1) usually bankers or auditors would have given same advise or something that ways
negligent
2) the type of loss is usually always an economic loss