Ready and Co, a firm of accountants and auditors, were engaged to prepare the ac
ID: 349166 • Letter: R
Question
Ready and Co, a firm of accountants and auditors, were engaged to prepare the accounts and balance sheet for Products for People plc, knowing the accounts were to be sent to Hind, a private investor, who was thinking of buying shares in Products for People plc The accounts were negligenty prepared and showed the company as financially stabe, even though the opposite was true and the company had large unpaid debts Hind showed the accounts her friend Imran. Hind bought AED1 million worth of shares and Imran bought AED 500,000 worth of shares. Within 6 mornths, Products for People plc wentinto liquidaton and both Hind and Imran losttheirinvestments. Advise () Hind and 2) Iman whether they are kely to be successful in ther daims in Whatare the 3 points to be proved in any claim based on negligence? . Whatdoes What mustbe proved in a claim for'negligent misstatement? Would Hind be successful in a claim for 'negigernt misstatement against Ready and Co? Would Imran be successful in a claim for negligent miss tatement against Ready and Co? es pure economicloss meen and when can a caim be made forit? Would Ready and Co haveany defences?Explanation / Answer
1) The three points which needs to be proved in any claim based on negligence are:
2) Pure Economic Loss means the financial damage caused to plaintiff due to negligent actions of defendant. These damages exclude physical damage to person or property, only limited to economic loss. Pure Economic loss can be categorised further into expenditure, profitability, loss of profit or some other form of financial gain.
A claim can be made for it under the law of contract but it is important to establish agreement or contractual terms were breached by the defendant, if a contract was not in place, it is difficult to claim for loss.
3) Negligent Misstatement: In order to claim for negligent misstatement, it is important that the plaintiff is able to show it to the court that on balance of probabilities the defendant owes the plaintiff duty of care. This duty of care is not to cause harm which was caused due to negligent misstatement by defendant. It is also important to establish that the defendant had breached the duty of care and the plaintiff has suffered loss because of it.
4) As per the information provided in the brief, it appears that there was no contract in place between Ready and co. and Hind. Hence, it may be difficult for Hind to be successful in his claim. However, Hind can resort to one of the aspects of negligible misstatement - Special relationship. Under this if Hind can establish that Ready and co. was aware that their action would determine Hind's actions and that Hind may suffer losses if she invests in people and co., hind would have a fair chance to succeed.
5) Since Imran invested in the company on the account of information shared by friend Hind, it would not be possible for him to be successful in his claim as there is no formal contract or special relationship between Ready and co. and Imran.
6) The only defence ready and co. have is absence of any contract or agreement between them and Hind. Ready and co. did not owe any duty of care to Hind and that it can not be held liable for negligence due to absence of contract or agreement.
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