Ultramares in candler v cane christmas last case

Info icon This preview shows pages 12–14. Sign up to view the full content.

Ultramares . - In Candler v Cane Christmas (last case before Hedley ) Lord Denning: DOC could be owed by auditors to employers but also third parties that the auditor knows the employer will show the reports too. Caparo Industries plc v Dickman (1990 HOL UK) FACTS: Fidelity (public company listed on London stock exchange) audited by D (accountants). Caparo owned a share in the company. Directors announced a poor result so share process dropped and auditors audited. Because of the drop in share price it was possible that a predatory company would want to by the fidelity. It was foreseeable that that investors and possible buyers could read the report. There was a mistake in the report so when things went bad P sued saying they would have sod if the report was correct. HELD: No DOC. Must be a known recipient . San Sebastian Pty Ltd v The Minister Administering EPA Act 1986 HC FACTS: Sydney Council put up plans for a development. P relied on this and bought a lot of lands. Plans didn’t go ahead – P sued Council and planning agency. HELD: No DOC Not reasonable foreseeable that there would be reliance on an off-hand statement. It was just a proposal. Esanda Finance Corporation Ltd v Peat Marxick Hungerfords (1997 affirms San Sebastian ) (Only interlocutory decision) FACTS: Esanda (large Co) lent money to Excell (private company) based on auditor reports produced by the defendant. Accountants were wrong, Excell couldn’t repay. Esanda sued arguing that they belonged to a class that it was reasonably foreseeable Brennan CJ: Defendant needs to know/ought to know all of: o Info would be communicated to the P (as individual of class). o Info communicated for a purpose that would be ‘likely to lead plaintiff to enter into the transaction’. o Likely that plaintiff would enter into transaction in reliance on the statement and reliance must be reasonable . The fact that auditors knew who would see the reports insufficient. Lowe Lippman Figdor & Franck v AGC Ltd (1992) FACTS: AGC lent money to a company called Weaving Mill. Weaving Mill hired Lowe Lippman accountants to audit themselves. After the audit AGC looked at the report to decide whether to whether to make further loans to WM. The report was wrong. They loaned more, WM went bust. LL knew of AGC’s interest. HELD: No DOC. Where there are no other telling circumstances, a DOC will only arise if the defendant intended the plaintiff to act on the statements given. The auditor’s intention was only to fulfil their contractual obligation with WM.
Image of page 12

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Policy - Auditors already face possible penalties in civil and criminal jurisdictions if the audit badly. - Imposing more liability is unlikely to promote a higher standard of care as there is already pressure. - Insurance would become prohibitively huge due to indeterminate liability – auditors will go out of business/have to charge more/business less likely to get audited.
Image of page 13
Image of page 14
This is the end of the preview. Sign up to access the rest of the document.
  • Fall '09
  • reasonable foreseeability, mental harm

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern