Good morning Professor, I just finished your lecture about negligence and you mentioned two cases Caparo v Dickman and JES v Marks Bloom. And you also explained that the duty of an auditor is to government or the firm. And then for JES the duty did exist but for Caparo there is no duty existing relating to the shareholders. May I ask it is because for the previous case, JES is buying the whole company thus the controller of the company and so Marks Bloom then is responsible for it but for the case of Caparo, it is only an individual shareholder and thus no responsibility exited?
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duty of the auditor
Hi Ichen,
The simple answer to your question is "no" the reason a duty of care did arise in JES v Marks Bloom is not because JES was buying the whole company.
The reason why Marks Bloom owed a duty of care to JES was because of the circumstances. Mainly that it was reasonable for Marks Bloom to forsee that JES would rely on the audited accounts for the purpose of taking over the company because of the financial position of the company which was being taken over.
In Caparo v Dickman, Dickman (Auditors) did NOT owe a duty of care because it was NOT reasonably forseeable for Dickman (Auditors) to know that Caparo would rely on the audited accounts for the purpose of taking over Fidelity.
A duty will only arise if it is reasonably forseeale that others will rely on the audited accounts for the purpose of take over as per JES v Marks Bloom and please also see ADT v BDO where a duty of care did arise in the circumstances.
I hope this clarifies?
Kind regards,
Vijay
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