04. STUDY MANUAL questions on Negligence.

Question 1

T/F: in tort no previous transaction or contractual relationship need exist.

Answer 1

TRUE

Question 2

The ‘neighbour’ principle was established by …

Answer 2

Donoghue v Stevenson (1932)

Question 3

“Persons so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected.”

Answer 3

Legal ‘neighbours.’

Question 4

There are (two / three / six) elements for a negligence claim to be successful.

Answer 4

three:

-duty of care existed,

-was breached,

-defendant suffered consequential loss.

Question 5

T/F: when the court applies ‘res ipsa loquitor,’ the defendant does not have to prove anything.

Answer 5

FALSE

if ‘res ipsa loquitor’ is applied the inference is that the duty of care has been breached and it is up to the defendant to prove that it has not

Question 6

The leading case on negligent misstatement, paving the way for damages in respect of financial loss.

Answer 6

Hedley Byrne v Heller (1963)

Question 7

T/F: if it could be proved that the claimant followed a course of action regardless of the acts of the defendant than a claim for negligence would fail.

Answer 7

TRUE

Question 8

T/F: the fact that a defendant might not be fully qualified would count as a mitigation in determining the breach of a duty of care in a negligence case.

Answer 8

FALSE

Question 9

T/F: if it could be proved that an intervening act broke the chain of causation then a claim for negligence would fail.

Answer 9

TRUE

see Lamb v Camden, Carslogie v Norway

Question 10

T/F: if the existence of a duty of care was restricted by public policy then a claim for negligence would fail.

Answer 10

TRUE

Question 11

T/F: a public company’s auditors owe no duty of care to the public at large.

Answer 11

TRUE

see Caparo v Dickman

Question 12

Four of the matters to be taken into account when considering cases of alleged negligent misstatement are …

Answer 12

Reliance, Responsibility, Relationship, Reason

Question 13

In order for an employer to be vicariously liable for a tort, that tort must have been comitted …

Answer 13

-by an employee (not an independent contractor)

-acting in the course of their employment (or in close connection to it)

Question 14

T/F: an injured party may only claim against a principal if they have already claimed or attempted to claim against their agent and been unsatisfied.

Answer 14

FALSE

the principal’s (vicarious) liability is in addition to the tortous malefactor’s (primary) liability.

Question 15

T/F: in order for liability to arise in negligent misstatement the the professional must have expressly or implicitly acknowledged a responsibility to the claimant who relies on their work.

Answer 15

TRUE

see De Sena v Notaro, Law Soc, Travel Agents

Question 16

T/F: an accountant or solicitor acting for a limitied company has no resulting contractual relationship with its individual members or dirctors.

Answer 16

TRUE

the company is a separate legal entity.

Question 17

T/F: Where A is in breach of a duty of care that they owe to B and B suffers loss, A will be liable in negligence to compensate B for all the loss and damage they suffer.

Answer 17

FALSE

only for that loss for which causation can be proved, i.e. that which is not too remote.

Question 18

T/F: A trainee is held to a lower standard of care than a fully qualified professional.

Answer 18

FALSE

Question 19

Pure financial loss is only usually claimable in the case of …

Answer 19

negligent misstatement.

Question 20

T/F: negligence can be claimed in respect of personal injury.

Answer 20

TRUE

Question 21

T/F: negligence can be claimed in respect of pure financial loss.

Answer 21

TRUE
in situations of negligent misstatement

see Hedley Byrne v Heller

Question 22

T/F: negligence can be claimed in respect of loss of earnings.

Answer 22

TRUE

provided that they are not deemed too remote.

Question 23

T/F: negligence can be claimed in respect of damage to property.

Answer 23

TRUE

Question 24

T/F: if a claimant would have acted in the same way despite the existence of a negligent misstatement then their claim will probably fail.

Answer 24

TRUE

see JEB Fasteners v Marks Bloom

Question 25

An auditor only owes a duty of care to a takeover bidder ...

Answer 25

if that bidder, and their reliance on the auditor's work is known to the auditor at the time of making the negligent misstatement. see Galoo v Bright

Question 26

T/F: An exclusion clause that seeks to avoid liability for negligent misstatement causing financial loss (other than in respect of audited accounts) will be void.

Answer 26

FALSE see Barclays v Grant Thornton they will however be subject to the reasonableness test under the UCTA.

Question 27

T/F: Liability for negligent misstatement is not imposed on individuals but only on companies and firms who provide advice in the course of a business.

Answer 27

FALSE personal liability may also exist

Question 28

Can a company agree to limit the auditor's liability for negligence in respect of audited accounts?

Answer 28

YES under a 'liabillity limitation agreement' under the Companies Act 2006

Question 29

Can a company agree to indemnify the auditor against costs incurred in defending any proceedings in which the auditor is successful in their defence?

Answer 29

YES such indeminty is possible under the Companies Act 2006.

Question 30

Vicarious liability only extends to an employer ...

Answer 30

if the person committing the tort is an employee and the act is done in 'close connection' with their employment.

Question 31

T/F: whether loss or damage was intentional is relevant to establishing the existence of a duty of care.

Answer 31

FALSE the relevant 'Nicholas H' criteria are: -Reasonably forseeable -Proximity -Fair, just and resonable -Public policy

Question 32

The accountant-client relationship establishes potential liability in ...

Answer 32

tort and contract.

Question 33

The accountant-client relationship establishes potential liability in ...

Answer 33

tort and contract.