Page 95 - Microsoft Word - 00 Prelims.docx

The law of torts

Where there is a special relationship

 If advice is given or financial statements prepared for a specific purpose, then a
duty of care is owed to those who are relying on them for that specific purpose.

Illustration 8 – Professional advice

and negligent misstatement

MORGAN CRUCIBLE v HILL SAMUEL BANK LTD 1991

Facts:

MC made a bid for X Ltd. X Ltd issued circulars containing profit records and
forecasts recommending that its shareholders reject the bid. MC increased its
bid and on the board of X Ltd’s recommendation the bid succeeded.

MC discovered the issued circulars grossly overstated the profits and X Ltd was
in fact worthless. MC sued X Ltd, their bank, directors and accountants for
negligence in respect of the circulars.

Held:

The claim succeeded:

 The bidder had been identified to the defendant

 It was intended the bidder should rely on the accounts

 Express representations had been made to the bidder by the defendant

 Where a statement is made confirming the veracity of audited results or
auditors give specific assurances to a third party they are liable to that
third party if the assurance is given negligently.

91