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Charles wrote to Oliver’s accountant requesting turnover about the annual turnover of the inn
The accountant wrote to Charles informing him that the annual sales were ‘ in the region of £200,000’ adding that the information was given without any responsibility on his part.
Charles purchased the inn and later found that although several years previously turnover had once approached £200,000, generally it was about £150,000 a year.
Task 3: which of the following is correct
– accountant owes a duty of care to Charles
– accountant does not owe a duty of care to Charles
– accountant will be liable for losses which Charles has suffered
– accountant will not be liable for losses which Charles has suffered.Q> as far as I’m aware, if they specified they were not taking responsibility for their advice, it is what happened in Hedley where they assumed no risk so their was no negligent misstatement case. My question is why is it that despite this, the accountant is liable for losses Charles suffered and owes a duty of care?
Thank you sir.
Where an accountant is asked specifically a question such as the above by someone like Charles, knowing that that information is likely to be relied upon, there is a duty of care from the accountant to the other party
This was tested in the case Royal Bank of Scotland v Bannerman
I admit that this is a tricky area but, as a direct consequence of the Bannerman case, it is now commonly the case that auditors specifically restrict the extent of their liability by the inclusion of a very strong limitation of liability paragraph within the audit report
OK?
So for an accountant, including a limiting liability or assume no risk paragraph IN the written RESPONSE to the specific request for information, cannot be sufficient to restrict or avoid liability?
As in, it is only valid for limiting liability, and it is only possible to do so by the paragraph usually at the beginning of the auditor’s report?
Thank you sir
Not quite – it’s rather more subtle than that
An accountant always has a duty to take care and avoid any statement that could later be construed as negligent
Where an accountant receives a request from a third party, this creates a separate contract with that third party (to whom no prior duty was apparently owed)
Guidance tells us that where an accountant puts their name to information knowing (or reasonably believing) that that information is to be relied upon, there is a duty to take care
That paragraph within the audit report merely restricts the extent of the auditors’ liability – restricted to the members of the company. And, even then, the liability is to the members of the company as an aggregate group (referred to as ‘the company’ and not as individuals
It would be too easy for accountants to be totally care-less (in responding to requests) to put down any old ‘facts’ and then include a limitation of liability paragraph within this care-less response in the belief that they were protected
OK?
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