Yue Xiu Finance Co Ltd and Another v. Dermot Agnew and Others

IN THE COURT OF APPEAL

-Headnote-

Claim against auditors for negligent mis-statement - Whether the plaintiff had pleaded sufficient facts to bring the case within the broad principles stated in Caparo Industries v. Dickman [1990]2 AC 605.

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Coram: Hon Litton, V-P, Mayo, JA and P. Chan J.

Date of hearing: 27 February 1996

Date of judgment: 28 February 1996

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JUDGMENT

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Litton, V-P:

Introduction

1. This appeal raises a pure pleading point: namely, whether the plaintiff Simister Investments Ltd. has, in its statement of claim, pleaded facts sufficient to establish, arguably, that the first defendants (Deloitte Haskins and Sells) and the second defendants (Messrs Ho and Ho) have incurred liability to pay damages to the plaintiff for negligence in making their report as auditors.

2. The defendants were joint auditors of two companies Texxon Industries Ltd. and Chino Industries Ltd. for the financial year ending 31 March 1988. It is common ground that, as auditors, the defendants' responsibility is, in the first place, to the members of Texxon and Chino: see Section 141(1) of the Companies Ordinance. Normally, auditors in making their report on the financial statements of companies under audit owe no duty of care to strangers to the company: however careless they may have been. As Lord Reid said in Hedley Byrne v. Heller [1964] AC 465 at 483, negligent misrepresentation gives no cause of action in common law: mere mis-statement is not enough, there must be something more.

3. The question boils down to this: Has Simister pleaded enough facts to establish, arguably, that it was in sufficient proximity to the defendants, short of contract, to land the defendants with legal liability for mis-statement?

4. The judge Cheung J in a 35-page judgment given on 26 July 1995 held against the plaintiff. He ordered that the pleadings be struck out and the action dismissed with costs. Hence this appeal.

The Background facts

5. The reports were made by the defendants on 28 April 1989. They were unqualified: that is to say, that the financial statements of Texxan and Chino, showing profits before tax of respectively HK$3.797m and HK$8.088m for the year ending 31/3/1988, gave a true and fair view of the companies' affairs and of their profits as at that date; in other words that the combined profits of the two companies amounted to $11.885m.

6. It is this, as the plaintiff avers, which is misleading: If proper provisions had been made for bad debts the companies would have shown substantial losses; and if the defendants had exercised proper care, they would have known this and should not have made the unqualified report which they did.

7. To understand how the plaintiff, not itself a member of Texxan and Chino - but, through a holding company, controlling a majority of its shares comes to have suffered the loss and damage as pleaded, it is necessary to go into the background facts. They may be summarised as follows:

The plaintiff's case

8. Given the background facts as summarised earlier, the plaintiff's case for damages against the defendants is put thus:

The application to strike out

9. It must be emphasized that the judge was concerned in the court below only with an application to strike out the plaintiff's claim under Order 18 rule 19(1)(a) of the Rules of the Supreme Court. The precise nature of the relationship between the parties has not been ascertained by evidence. What the defendants were seeking to do, by their summons, was in effect to drive the plaintiff from the judgment seat. This is a drastic remedy and it follows that no court should give effect to it unless it is satisfied that the legal basis of the claim is unarguable or almost incontestably bad: and, as Sir Thomas Bingham M.R. remarked in E (A minor) v. Dorset County Council [1994] 3 WLR 853 at 865, where the legal viability of the cause of action is sensitive to the facts, an order to strike out should not be made.

The legal basis of the claim

10. The foundation of the claim - a claim for purely economic loss - goes back to the decision of the House of Lords in Hedley Byrne v. Heller [1964] AC 465. The principle has since been refined in many intervening cases. There is in my judgment considerable danger in over-refinement, in an area of the law where the duty-situation is identified by such broad concepts as foreseeability, proximity and fairness: see Neill LJ in James McNaughton v. Hicks Anderson [1991] 2 QB 113 at 123H. Attempt at refinement is particularly inappropriate in an application to strike out the claim before the true facts have been ascertained. It would appear in reading the lengthy judgment of Cheung J that he had, in the course of the hearing, entertained elaborate submissions from counsel on the case law. Many of the reported cases since Hedley Byrne v. Heller were apparently subjected to the closest scrutiny. The so-called six propositions set out in Neill LJ's judgment in James McNaughton v. Hicks Anderson at 125-6 were examined as if they were words in a statute: when Neill LJ himself meant them as no more than a series of "overlapping headings" under which the basis for the claim in that case might conveniently be examined.

11. The broad principle to be applied in a case such as the present one is clear enough. It was formulated in Lord Bridge's judgment in Caparo Industries v. Dickman [1990] 2 AC 605 at 620 H to 621 B as follows:

" The salient feature of all these cases is that the defendant giving advice or information was fully aware of the nature of the transaction which the plaintiff had in contemplation, knew that the advice or information would be communicated to him directly or indirectly and knew that it was very likely that the plaintiff would rely on that advice or information in deciding whether or not to engage in the transaction in contemplation. In these circumstances the defendant could clearly be expected, subject always to the effect of any disclaimer of responsibility, specifically to anticipate that the plaintiff would rely on the advice or information given by the defendant for the very purpose for which he did in the event rely on it. So also the plaintiff, subject again to the effect of any disclaimer, would in that situation reasonably suppose that he was entitled to rely on the advice or information communicated to him for the very purpose for which he required it."

Applying law to the facts as pleaded

12. Here, the "transaction" which the plaintiff clearly had in contemplation was the exercise of its contractual rights against Koon under Schedule 2 and Clause 11.1 of the agreement: the right to demand an adjustment of the price and a right to "put" the shares back to Koon for $24.6m. This put option had to be exercised by the plaintiff within 30 days of the publication of the audited accounts. On the pleadings the defendants were aware of the nature of the transaction. They knew that the audited accounts (and the report) would be communicated to the plaintiff. They had knowledge of the price adjustment mechanism and the put option in the shareholders' agreement and therefore knew that it was very likely that the plaintiff would rely on the audited accounts (and the report) in deciding whether the price adjustment mechanism or the put option might be triggered.

13. It seems to me that, on the facts as pleaded, this case lies at the opposite end of the spectrum from those cases where the imposition of liability would be grossly unfair to professional people, exposing them to "liability in an indeterminate amount for an indeterminate time to an indeterminate class" (in the words of Cardozo CJ quoted by Lord Bridge in Caparo v. Dickman at 621 D). It is difficult to imagine a stronger case of a special relationship short of contract. The defendants had been appointed, before the acquisition of Koon's shares, to conduct a special audit of the companies for the eight months ending 30/11/87 and the combined profits figure thus ascertained - amounting to $8.761m became the bench-mark for the exercise of the put/call options in the agreement. For the purposes of Clause 11.1 the combined profits were to be computed by reference to the audited accounts made up to 31/3/88 and to be conclusively certified by the defendants acting as experts and not arbitrators. The occasion for the exercise of the option under clause 11.1 in fact never arose because the combined profits as shown in the audited accounts exceeded the bench-mark, so there was no question of the defendants being called upon to "certify" as experts: But if, for some reason, they had been called upon to do so, nothing suggests that the figure in the certificate would have been any different from that in the audited accounts. (The only possible variation would have been inter-company transaction profits Which were to be expressly excluded from the profits figure as certified: But, as pleaded in the statement of claim, the audited accounts showed no inter-company transaction profits.) With that as background, the defendants then went on to conduct the full year's audit, knowing that the figures thus revealed would be relied upon in the exercise of contractual rights under the agreement by the parties.

14. The defendants' exposure to liability is limited to two persons: Koon and the plaintiff; the amount is limited to the loss the plaintiff (or Koon) might have suffered arising from their inability to exercise their contractual rights under the agreement as a result of the defendants' negligent mis-statement. It is difficult to think of a situation further away from Cardozo CJ's classic dictum.

15. Mr Ribeiro QC counsel for the defendants argues that to bring the defendants within the special relationship giving rise to legal liability for mis-statement the plaintiffs had to require the defendants to "certify" the combined profits under Clause 11.1: or, perhaps stronger still, if the defendants had actually done so. I fail to see why. It was because the plaintiffs relied on the defendants' report - verifying the companies' combined profits well in excess of the bench mark figure - that they did not call for the certificate. There was no occasion to do so. If the profit figures in the audited accounts were correct as the plaintiff thought they were there was no question of the put option being exercised. This, according to the plaintiff, was the precise reason why they look now to the defendants for damages.

The judgment

16. I turn now to look briefly at the judgment in the court below. At p29 the judge said:

17. Here the judge seems to have adopted the voluntary assumption of responsibility by the defendants as the test of liability. He spoke of the defendants' role in "computing" and "conclusively determining" the combined profits and said that the defendants had assumed no relevant relationship with the plaintiff and Koon. But, with respect, that plainly is the wrong test. The judge is equating the special relationship in this branch of the law with contract, when the whole basis for the imposition of liability is that there is no contract. As Lord Griffiths said in Smith v. Eric S. Bush [1990] 1 AC 831 at 862:

" ... I do not think that voluntary assumption of responsibility is a helpful or realistic test for liability. It is true that reference is made in a number of the speeches in Hedley Byrne to the assumption of responsibility as a test of liability but it must be remembered that those speeches were made in the contest of a case in which the central issue was whether a duty of care could arise when there had been an express disclaimer of responsibility for the accuracy of the advice. Obviously, if an adviser expressly assumes responsibility for his advice, a duty of care will arise, but such is extremely unlikely in the ordinary course of events. The House of Lords approved a duty of care being imposed on the facts in Cann v. Willson (1888) 39 Ch.D. 39 and in Candler v. Crane, Christmas & Co. [1951]2 K.B. 164. But if the surveyor in Cann v. Willson or the accountant in Candler v. Crane, Christmas & Co. had actually been asked if he was voluntarily assuming responsibility for his advice to the mortgagee or the purchaser of the shares, I have little doubt he would have replied, 'Certainly not. My responsibility is limited to the person who employs me.' The phrase 'assumption of responsibility' can only have any real meaning if it is understood as referring to the circumstances in which the law will deem the maker of the statement to have assumed responsibility to the person who acts upon the advice."

18. Taking the view, as the judge apparently did, that to establish liability on the defendants' part, there must in effect be a voluntary assumption of responsibility by them, it is not surprising that he then went on to conclude that the plaintiff's pleading was defective. As he puts it at p30H of his judgment:

"there is no allegation that the Defendants intended that Simister should place reliance on the statutory audit for the purpose of Simister's own evaluation ... as to its position under the Shareholders Agreement."

19. Obviously if the defendants had actually intended - and can be shown to have intended - that the plaintiff should place reliance on their statement, this would be almost conclusive in establishing proximity. But there is no such requirement in law, and the judge was wrong to have so concluded.

20. What is pleaded in this case is that the defendants knew or should have known that the plaintiff would rely on their statements: para 16 of the statement of claim. That, plainly, is enough. It was not necessary to go on to aver that the defendants so intended: subjective intention of this nature would be impossible to prove and can form no part of the legal requirement. It does not appear in Lord Bridge's formulation of the principle in Caparo Industries v. Dickman as I have quoted earlier, nor does it feature in Lord Oliver's speech at 638-9. If there is any valid distinction between knowledge on the part of the defendants and intention, then it is clear on a proper reading of the judgments in Caparo Industries v. Dickman that where the House of Lords referred to intention, their Lordships meant intention actual or inferred. Plainly, from the facts as pleaded in the statement of claim, intention can be inferred in this case.

21. In short, the judge formulated for himself the wrong test. He failed to look at the facts as pleaded in the round, to see if, arguably, it established sufficient proximity to found the special relationship. He erred, for example, when he said (p19 M of his judgment) that the financial statements for the 8 months' period up to 30th November 1987 were "of no relevance". He failed to appreciate that, by accepting appointment as auditors for the special audit, prior to the execution of the agreement, the defendants were immediately brought into close touch with the plaintiff. The profits shown in the accounts ending 30/11/87 formed, as I have mentioned earlier, the bench-mark for triggering the put/call options: the transaction giving rise to the plaintiff's loss.

Conclusion

22. In my judgment, the statement of claim shows a viable cause of action against the defendants and the judge erred in ordering it to be struck out.

23. There is before us a motion for leave to amend the statement of claim. I see nothing objectionable in the amendments as such, though perhaps not all of them are strictly necessary. The pleading before the judge was in my view perfectly adequate to raise a case against the defendant.

24. I would accordingly allow the plaintiff's appeal, discharge the judge's order of 26 July 1995 and allow the plaintiff's motion to amend the statement of claim. I would add this. The matter goes back to April 1989, when the auditors' report was signed, and in my judgment, this case should be brought to trial as soon as possible.

25. We should now hear counsel concerning the appropriate order for costs, both here and below, and whether there are any appropriate orders we can make to ensure a speedy trial.

Mayo JA:

26. This is an appeal against an order made by Cheung J pursuant to Order 18 rule 19 of the Rules of the Supreme Court striking out the appellant's claim against the defendants for professional negligence in relation to an audit which they jointly undertook. Cheung J also declined to grant leave for amendments to be effected to the appellant's statement of claim which they submitted would overcome the deficiencies alleged in the statement of claim.

27. The 1st plaintiff in the proceedings has not lodged an appeal against Cheung J's order and so we are only concerned with the claims being made by the 2nd plaintiff.

28. Before us the appellant has taken the position that they maintain that they had an arguable right of action against the respondents but as a precaution they have outlined further amendments they would be prepared to seek leave to introduce on the assumption that their analysis of the situation was wrong and that they had not on their pleaded case which was considered by Cheung J made out a valid claim. The respondents' position is that they contend that even if the latest amendments proposed by the appellants were incorporated into the pleading it would still not comply with the requirements for making out a claim for professional negligence against the respondents and accordingly they opposed the proposed amendments.

29. The main complaint which is made by the respondents is that while it is accepted that both firms of accountants had knowledge of the Subscription and Shareholders Agreement (SSA) dated 24 June 1988 between the appellant Mr Koon and Goldstar Enterprise Inc. the appellants have not pleaded that it was the intention of the defendant that they should owe a duty of care to the appellant.

30. Mr Ribeiro QC for the 1st Respondent submitted that it was manifest from the statement of claim that the respondents did not owe any duty of care to the appellant.

31. Paragraph 14 of the statement of claim which referred to the relevant provisions of the SSA provides:

CHEDULE 2 Clause 2 (b) - Payments by KOON or SIMISTER

SCHEDULE 2

Clause 2(b) - Payments by KOON or SIMISTER

The following provisions shall apply in relation to Clause 2.2:-

32. Mr Ribeiro contended that it was common ground between the parties that neither Mr Koon nor the appellant had procured the certification referred to in Clause 2(2). He did not accept the submission made by Mr Robert Tang QC that the computation of profits was a simple mechanical exercise and this being the case the failure of the parties to procure the certification absolved the respondents from owing the necessary duty of care to the appellant. Mr Stone QC for the 2nd respondent adopted this submission.

33. The consequence of this according to Mr Ribeiro and Mr Stone was that the joint audit which had been undertaken by the respondents should be treated in the same way as any normal statutory audit and that the appellant should be regarded as a stranger.

34. This was notwithstanding the fact that it was clear from the appellant's pleaded case that the respondents knew that the appellant and Mr Koon would be placing reliance upon the audited accounts when they made their decision on whether or not the price adjustment mechanism referred to in Clause 2(2) would be actuated and whether the options either way would be triggered.

35. The law on when a negligent mis-statement may be actionable has been conveniently stated in the speech of Lord Bridge at 620 H of Caparo Plc. v. Dickman [1990] 2 AC 605:

"          The salient feature of all these cases is that the defendant giving advice or information was fully aware of the nature of the transaction which the plaintiff had in contemplation, knew that the advice or information would be communicated to him directly or indirectly and knew that it was very likely that the plaintiff would rely on that advice or information in deciding whether or not to engage in the transaction in contemplation. In these circumstances the defendant could clearly be expected, subject always to the effect of any disclaimer of responsibility, specifically to anticipate that the plaintiff would rely on the advice or information given by the defendant for the very purpose for which he did in the event rely on it. So also the plaintiff, subject again to the effect of any disclaimer, would in that situation reasonably suppose that he was entitled to rely on the advice or information communicated to him for the very purpose for which he required it. The situation is entirely different where a statement is put into more or less general circulation and may foreseeably be relied on by strangers to the maker of statement for any one of a variety of different purposes which the maker of the statement to be under a duty of care in respect of the accuracy of the statement to all and sundry for any purpose for which they may choose to rely on it is not only to subject him, in the classic words of Cardozo C.J. to 'liability in an indeterminate amount for an indeterminate time to an indeterminate class:' see Ultramares Corporation v. Touch (1931) 174 N.E. 441, 444; It is also to confer on the world at large a quite unwarranted entitlement to appropriate for their own purposes the benefit of the expert knowledge or professional expertise attributed to the maker of the statement. Hence, looking only at the circumstances of these decided cases where a duty of care in respect of negligent statements has been held to exist, I should expect to find that the 'limit or control mechanism ... imposed upon the liability of a wrongdoer towards those who have suffered economic damage in consequence of his negligence' rested in the necessity to prove, in this category of the tort of the negligence, as an essential ingredient of the 'proximity' between the plaintiff and the defendant, that the defendant knew that his statement would be communicated to the plaintiff, either as an individual or as a member of an identifiable class, specifically in connection with a particular transaction or transactions of a particular kind (e.g. in a prospectus inviting investment) and that the plaintiff would be very likely to rely on it for the purpose of deciding whether or not to enter upon that transaction or upon a transaction of that kind."

36. The speech of Lord Oliver at p638 is also of relevance to the present case and is in conformity with the views expressed by Lord Bridge:

"What can be deduced from the Hedley Byrne case, therefore, is that the necessary relationship between the maker of a statement or giver of advice ('the adviser') and the recipient who acts in reliance upon it ('the advisee') may typically be held to exist where (1) the advice is required for a purpose, whether particularly specified or generally described, which is made known, either actually or inferentially, to the adviser at the time when the advice is given; (2) the adviser knows, either actually or inferentially, that his advice will be communicated to the advisee, either specifically or as a member of an ascertainable class, in order that it should be used by the advisee for that purpose; (3) it is known either actually or inferentially, that the advice so communicated is likely to be acted upon by the advisee for that purpose without independent inquiry, and (4) it is so acted upon by the advisee to his detriment. That is not, of course, to suggest that these conditions are either conclusive or exclusive, but merely that the actual decision in the case does not warrant any broader propositions."

37. Mr Ribeiro submitted that mere knowledge was not sufficient to establish the necessary proximity referred to by Lord Bridge. What was necessary was to prove the intention that the appellant would rely on the statement for the required purpose. The appellant had not pleaded any such intention and this was a fatal defect.

38. I do not think that this is correct. The Court of Appeal considered this question in Galoo Ltd. v. Bright Grahame Murray [1994] 1 WLR 1360. At 1388 Evans LJ states:

"If it is right to confine the duty of care, meaning, to restrict the class of persons who can recover damages if the adviser/representor is negligent, to cases where the defendant is shown not merely to have known that the individual plaintiff would or might rely upon the representation but to have intended that it should be relied upon, by him and for the particular purpose and without intermediate examination, then the resulting analysis comes close to the 'voluntary assumption of responsibility' which has been referred to in many of the authorities but which was discounted as a test of liability in Smith v. Eric S. Bush [1990] 1 A.C. 831, 862, per Lord Griffiths:

'... I do not think that voluntary assumption of responsibility is a helpful or realistic test for liability. It is true that reference is made in a number of the speeches in Hedley Byrne [1964] A.C. 465 to the assumption of responsibility as a test of liability but it must be remembered that those speeches were made in the context of a case in which the central issue was whether a duty of care could arise when there had been an express disclaimer of responsibility for the accuracy of the advice.... The phrase 'assumption of responsibility' can only have real meaning if it is understood as referring to the circumstances in which the law will deem the maker of the statement to have assumed responsibility to the person who acts upon the advice.'

Lord Devlin referred in Hedley Byrne & Co. Ltd v. Heller & Partners Ltd. [1964] A.C. 465,530 to 'a relationship equivalent to contract' and it is clear from Lord Griffiths's speech in Smith's case [1990] 1 A.C. 831,862 that the contractual analogy cannot serve as a definition of the cases where the duty of care may arise. But if the statement is made to an identifiable person and the maker not only knows that it will or is likely to be acted upon but also intended that it should be acted upon for a particular purpose, then these may well exemplify 'circumstances in which the law will deem the maker of the statement to have assumed responsibility' to the person who acts upon it: per Lord Griffiths, at p.862E. The 'indeterminate class' of persons referred to by Cardozo C.J. in Ultramares Corporation v. Touche (1931) 174 N.E. 441, 444 is thus reduced to an inter-personal relationship where liability may be imposed, and it would seem unreasonable and even unjust to do so, in my view, if the defendant could not be said to have assumed responsibility towards the plaintiff, not necessarily as an individual, in the circumstances of the case. It is sufficient for present purposes to note that the relationship by definition must be 'voluntary' in the sense that no consideration proceeds from the plaintiff for the defendant's advice."

39. I have no doubt that this is right. What is necessary is to consider all of the surrounding facts and circumstances and then determine whether sufficient proximity has been established. A specific pleading of intention is not necessary.

40. In making such a determination it may also be helpful to consider the factors which were weighed by Slade LJ at 317 of Morgan Crucible v. Hill Samuel [1991] Ch 295:

41. I would accept the validity of the submission made by Mr Tang that the question of the requirement for certification is a separate matter and is certainly not crucial to the outcome of this application.

42. In my opinion the statement of claim which was before Cheung J disclosed a good cause of action and should not have been struck out under Order 18 rule 19. This appeal should accordingly be allowed.

P. Chan, J.:

43. I agree with the judgments and reasons given by my Lords. Since we are differing from the learned judge, I would like to add a few words.

44. Upon a close examination of the authorities, I do not think that the House of Lords in the Caparo case have laid down as a general principle that in order to impose a duty of care on an auditor, it is necessary to show that the statement or advice given by him must be intended to be relied on by the advisee. In fact, Lord Oliver, the Law Lord who, counsel for the defendants submitted, had suggested this, acknowledged in the same case that another House of Lords decision Smith v. Bush [1990] 1 A.C.831 established "beyond doubt that the law may attribute an assumption of responsibility quite regardless of the expressed intentions of the adviser" (see p.641 1F and also p.638H). Nor do I think the Court of Appeal in Galoo Ltd v. Bright Grahame Murray [1994] 1 W.L.R. 1360 which applied the Caparo case and Morgan Crucible Co. Plc v. Hill Samuel Co Co Ltd [1991] Ch. 295 did or intended to lay down such a general principle. I note from the facts of the Galoo case that for the claim which the Court did not strike out, the pleading did not expressly allege that the statements in question were intended to be relied on. I do accept, however, that if an audit was intended to be relied on. this would be a very relevant circumstance for consideration.

45. There must of course be a relationship of proximity to give rise to a duty of care. But there can be no simple test or criterion for proximity. As Lord Oliver in the Caparo case said at p. 633 D:

"Proximity is no doubt a convenient expression so long as it is realised that it is no more than a label which embraces not a definable concept but merely a description of circumstances from which pragmatically, the courts conclude that a duty of care exists."

He also sounded a note of caution on generalisation. He said at p.635H:

"One must, however, be careful about seeking to find any general principle which will serve as a touchstone for all cases, for even within the limited category of what, for the sake of convenience, I may refer to as 'the negligent statement cases,' circumstances may differ infinitely and, in a swiftly developing field of law, there can be no necessary assumption that those features which have served in one case to create the relationship between the plaintiff and the defendant on which liability depends will necessarily be determinative of liability in different circumstances of another case."

46. At the end of the day, the court has to decide whether the particular situation before it is one which it is fair and reasonable to impose a duty of care having regard to all the circumstances of the case.

47. Counsel argued that the financial statements for the year ended 31st March 1988 were audited by the defendants for the purpose of the Companies Ordinance. However, it can also be said that when they did that, they knew that these statements were also required by the plaintiff for the purpose of exercising its rights under the Subscription and Shareholders Agreement and were of vital importance not only to the parties to that Agreement but also to the defendants themselves if and when they were asked to make a certification. As counsel for the plaintiff submitted, if intention (actual or inferential) is a necessary ingredient for giving rise to a duty of care, in such circumstances, the defendants may arguably be said to be taken to have intended that those statements would be relied on by the plaintiff. It seems to me that the purpose of the certificate was to put matters beyond doubt in case the parties to the Agreement wanted to exercise their rights under that agreement and to lay at rest any possible dispute between them. It is most unlikely that the defendants who had audited the financial statements would have done anything other than adding figures based on the statements and certifying in effect the correctness of those statements. I think it is artificial to say that it must be the certificate which can only give rise to a duty of care on the part of the defendants towards the plaintiff.

48. This is not a case of foreseeability alone. My Lords have set out the facts as pleaded and I do not propose to repeat them. Assuming those facts to be correct, I take the view that they disclose sufficient circumstances which can very arguably establish a relationship of proximity. With respect to the learned judge, I do not think the plaintiff's cause of action as pleaded is obviously unsustainable. I too would allow the appeal.

Representation:

Mr Robert Tang QC leading Mr Joseph Fok inst'd by M/S Johnson, Stokes & Master for 2nd Plaintiff/Appellant

Mr Robert Ribeiro, QC, leading Mr Godfrey Lam inst'd by M/S Barlow Lyde & Gilbert for 1st Defendant/1st Respondent

Mr William Stone, QC inst'd by M/S Deacons, Graham and James for 2nd Defedant/2nd Respondent