CH5 Negligence Flashcards
- Identify instances and consequences of negligence (particularly negligent misstatement) in a given scenario - Identify instances and consequences of vicarious liability in a given scenario
Is the law of tort civil or criminal? When does it apply?
Civil
When damage is incurred but there is no contract in place
What is the purpose of damages in respect to tort?
To put the person in the position they would have been in had the tort not happened
What is the limitation period for bringing action in respect to tort?
6 years from suffering the damage
3 years if personal injury
What four things need to be in place in order for negligence to exist?
Duty of care was owed
Duty of care was breached
DAMAGE resulted
Damage was not too REMOTE
Who has to prove that there has been negligence?
The claimant
What are the four tests used in deciding whether a duty of care exists?
- Reasonably foreseeable
- Proximity
- Fair, just and reasonable
- Public policy (would it offend pp?)
Does a breach of duty of care need to be caused by an act?
Act
Omission
What is the standard of care required in relation to breach of duty of care?
A reasonable person…
A reasonable person guided by considerations which ordinarily regulate the conduct of human affairs
In relation to standard of care and breach of duty of care, what are the TESTS that have been developed by case law? 7 of them SSHP AEV
- Particular skill: use it
- Lack of skill not relevant
- No hindsight
- Body of professional opinion supports approach
- Advantage and risk reasonably balanced
- Emergency (reasonable person test applied)
- Vulnerability (high standard of care owed for disability)
In terms of standard of care, who is responsible for proving a breach?
The claimant
What is the exception to the rule stating that it is the responsibility of the claimant to prove a breach of standards of care? Who has to prove that the standards of care where not breached in this case?
Res ipsa loquitor (the facts speak for themselves)
The defendant
When does the res ipsa loquitur rule apply? 3 things
Slip on yogurt
- CAUSE of damage not known
- Damage would NOT have ARISEN without defendant’s lack of care
- The thing which caused the damage was under the defendant’s CONTROL
In terms of loss caused by a breach of care, what is the ‘but for’ test? What is the example (tea/hospital)? What three points were ticked/not ticked?
Would the damage have occurred ‘but for’ the negligent act?
Man drank tea > ill > hosp > nurse > doc (call) > sent home > died
- Duty of care? Yes
- Duty of care breached? Yes
- Result? Not caused by negligent act
What are examples of losses caused by a breach in standards of care? What is NOT usually covered?
- Personal injury/damage to property
- Financial loss directly connected to injury
**Pure economic loss is NOT usually covered
Normally you CANNOT claim for pure economic loss due to negligence. What is the exception and when does it apply?
Where there is a SPECIAL RELATIONSHIP between the parties. When you have paid for advice.
In the circumstance where you can claim for pure economic loss due to negligence, what 4 points must be satisfied to do so?
- Client requests professional opinion
- Opinion given in professional capacity
- Client relies on opinion
- Client suffers loss as a result
In the case of Caparo vs Dickman, where an individual shareholder bought more shares in Fidelity due to the positive accounts (which had been prepared negligently) why was a duty of care not owed? 3 points
No special relationship.
There was a duty of care towards the shareholders as a body and not individuals.
The purpose of the accounts was not to inform potential investors.
RBS vs Bannerman: RBS lent money to a company because they relied on accounts prepared by the auditors for that company. What three conditions were met in order to prove that the auditors had a duty of care towards a third party (RBS)?
The auditors must KNOW:
1. Who (identity of third party - RBS)
2. How (what the accounts will be used for - a loan decision)
3. Reliance (the third party will rely on the accounts - to make a desicion about the loan)
In terms of take over bids, if an auditor KNOWS who the takeover bidder is and has been EXPRESSLY TOLD that the takeover will rely on the accounts, will a duty of care be owed?
Yes
In non takeover situations, when would auditors have a duty of care?
If the auditors KNOW that the client will rely on their work (this gives rise to the special relationship).
E.g. KPMG owed a duty of care to the Law Society because it was entirely foreseeable that they would rely on that report to decide whether or not to intervene.
What was the key point in the Notaro holdings case that meant that no duty of care was owed to the sister? Family business - the sister wanted to get out. She was given some buildings in return for her shares. She later claimed that the buildings were worth less than she had been advised.
The accountants worked for Notaro Holdings and not for the sister. Therefore they owed her no duty of care.
In the Jeb Fasteners case, where JF bought a company based on negligently prepared accounts (overstated profits, etc), why was a loss NOT suffered?
The ‘but for’ test was not satisfied.
They would have bought the company anyway because they wanted access to their ‘know how’.
What are the factors that the court will consider in negligent misstatement cases? 7 points PRK CRR FEP
- PURPOSE the statement is made for and communicated
- RELATIONSHIP between professional, recipient and any third party
- KNOWLEDGE of professional (who, why, how much reliance)
- Assumed RESPONSIBLITY to claimant?
- Size of CLASS to which recipient belongs
- Extent of RELIANCE and whether FORESEEABLE
- FAIR, EQUITABLE, not offence to PUBLIC POLICY to impose duty of care?
Under the Companies Act 2006, what is the criminal offence related to auditors potentially acting recklessly? What is the punishment?
Recklessly causing an auditor’s report to contain MATERIAL misleading or false matter.
Punishable by fine
