The Liability of Accountants and Auditors - Essay Example

? The Liability of Accountants and Auditors – Just How Vulnerable are these Professionals to any negligent action Under the Australian Consumer Law or at the Common Law? Name University Course Tutor Date What is Professional Negligence? And The History of Negligence Law in Relation to Professional Advisors One of the most important advancements in the laws governing professional negligence was the establishment of duty of care in negligence laws under the land mark case of Donoghue v. Stephenson that saw the decomposing remains of a snail found in a ginger beer bottle mark the beginnings of modern laws on negligence. In making the ruling, Lord Atkin Directed that producers were responsible for the products they sold to all their customers.1 After a duty of care has been established, it is important to settle the matter as to whether the defendant or professional adviser actually happened to breach the duty of care that was owed. If a professional adviser is found to knowingly having provided or failed to provide information that exposes the advisee to incur any losses or damages on their part, this considered to be a breach of duty. All professionals are generally held to an established and reasonable standard of basic care and professionalism. Professionals are generally required to have the necessary learning and skill that is seen to be commonly processed by members who happen to be held in good standing within their basic profession.2 However, any lack of the proper degree of training, failure by the professional to attempt to follow up on a client’s progress, failure to remain appropriately conversant with any new emerging discoveries in the field, or failure to refer to a specialist in the event that it proves to be necessary can all be seen to constitute of negligence.3 As exemplified in the line of reasoning followed in the Hedley Byrne ruling, when an adviser communicates information to an advisee in order that the information might be used for a generally described or particularly specified purpose, and the advisee acts on this advice to his detriment, the adviser is found to fundamentally be guilty of negligence.4 Effects of Donoghue V Stevenson (1932) A decision by the British house of commons in 1932 concerning the alleged presence of a snail inside a ginger beer bottle is commonly perceived to be the best known judgment in the entire common law world. It is widely regarded as the primary foundation law of negligence throughout the entire British Commonwealth.5 Although the ruling of Donoghue V Stevenson (1932), was initially mostly applied to judgments pertaining to manufacturers and the duty of care that they happened to owe the various consumers of their products it was eventually seen to have wider relevance beyond manufacturer liability. In the ruling, Atkins was seen to assert that a duty to exercise case was actually owed to all persons who might be directly affected by one’s actions or omissions that happen to be called in question.6 This is seen to critically affect the liability of all professional advisers as in their event that they provide questionable information that eventually proves to be detrimental to the advisee, they are then effectively held viable for court action. The Effects of Hedley Byrne v. Heller (1963) The Hedley Byrne v. Heller (1963) greatly impacted the overall liability of professional advisers as it was the first decision to recognize the possibility of there being a liability for want can be perceived to be purely economic loss that is not dependent on there being a contractual relationship, for negligent statements. This was seen to affect advisers as any information that they may happen to give while not bound to any contractual agreement can also be seen to create duty of care as it might be relied upon by the advisee in determining whether to enter into a contract.7 Recent Developments in Australian High Court There have been a number of recent developments in Australia pertaining to the case of professional negligence, in Astley v Austrust Ltd, the trial judge held that the solicitors who had been contracted by the plaintiff had acted negligently in failing to advice their client when they assumed the position of trustee that the client would be personally liable for dealing with third parties. The high court ruled that although the client was guilty of contributory negligence, he was however entitled to recover for the damage suffered.8 This ruling in effect serves to indicate that advisers could potentially be deemed as having portrayed professional negligence in the event that they fail to inform the advisee on the limits of a contract as pertains to third parties. In a recent professional negligence case of pantelli Associates Ltd – v-Corporate City Developments Number Two Ltd [2010] EWHC 3189 (TCC), Justice Coulson ruled that allegations of professional negligence are by their very nature a very serious matter and as such have to be pleaded in a proper manner. Not only should be pleaded in a manner that causes them to be readily capable of a response, but they should also be based on appropriate expert evidence.9 The Effect of the Australian Consumer Law on the General Liability of Professional Advisers The Australian consumer law is seen to set a minimum set of standards to be observed as market place behavior in commerce and trade. As a result of the act defining both commerce and trade to also be including any professional or business activity, the act is seen to also apply to the provision of legal services in the same manner that it makes provisions of other businesses, commerce, professional services and trade. The consumer law has several implication on the overall liability of professional advisers. One of these is seen in Seven Network Ltd v news Ltd (No 12) [2006] FCA 348. Professional advisers who happen to receive any form of legal advice need to ensure that they are cautious when they make statements referring to the advice or else they risk losing the protection offered to them as a result of legal professional privilege. In the Seven Network Ltd v news Ltd (No 12) [2006] FCA 348 the federal court of Australia was seen to rule that Optus had voluntarily disclosed the conclusion of the legal advice that had been referred to in the document, this was judged to be inconsistent with Optus maintaining its legal professional privilege. Does Consumer Law have any Advantage over Common Law In the mass consumption society of the 19th century industrial society, the concept of caveat emptor (let the buyer beware) as well as the concept of laissez faire (the philosophy requiring governments not to interfere in dealings between people) were widely practiced and observed.10 However it slowly became evident that the two concepts did not effectively serve to provide sufficient protection to consumers in the marketplace.11 Consumer protection law was developed having a definite advantage over common law as it served to help to provide more protection to consumers. Bibliography Ashworth, A., et al. practice and procedure for the quantity surveyor. Chichester, West Sussex, UK : John Wiley & Sons Inc., 2013 Aviva, F., Contributory Negligence and Breach of Contract: The Implications of Astley v. Austrust Ltd; 29 U.W. Austl. L. Rev. 18 (2000) Banakas, K. E. and United Kingdom National Committee of Comparative Law. Civil liability for pure economic loss. Boston : Kluwer Law International, 1997. 40 Bar, C., et al. The interaction of contract law and tort and property law in Europe : a comparative study. Mu?nchen : Sellier, 2004, 277 Brassil, B. and Dimity, B. Excel HSC legal studies. Glebe, N.S.W. : Pascal Press, 2007 CCH Australia, Limited. Introducing the Law. CCH Australia Limited, 2011 Edwards, L. L., Stanley E. and Patricia K. W. Tort law. Clifton Park, NY : Delmar Cengage Learning, 2012 Fisher, J. Law of investor protection. London : Sweet & Maxwell, 2003 Shapo, S. M. Shapo on the law of products liability. New York : Wolters Kluwer Law & Business, 2013 Read More