Case: Esanda Finance Corporation Ltd v Peat Marwick Hungerfords [1997] HCA 8 ; (1997) 188 CLR 241
Outcome: cited
In Esanda Finance Corporation Ltd v Peat Marwick Hungerfords [1997] HCA 8 ; (1997) 188 CLR 241, a claim brought by a financier against the auditors of a borrower corporation, the High Court held that the statement of claim did not disclose a cause of action in negligence against the auditors. Brennan CJ said at 252 ...that mere foreseeability of the possibility that a statement made or advice given by A to B might be communicated to a class of which C is a member and that C might enter into some transaction as the result thereof and suffer financial loss in that transaction is not sufficient to impose on A a duty of care owed to C in the making of the statement or the giving of the advice. However his Honour went on to say: But, in every case, it is necessary for the plaintiff to allege and prove that the defendant knew or ought reasonably to have known that the information or advice would be communicated to the plaintiff, either individually or as a member of an identified class, that the information or advice would be so communicated for a purpose that would be very likely to lead the plaintiff to enter into a transaction of the kind that the plaintiff does enter into and that it would be very likely that the plaintiff would enter into such a transaction in reliance on the information or advice and thereby risk the incurring of economic loss if the statement should be untrue or the advice should be unsound. If any of these elements be wanting, the plaintiff fails to establish that the defendant owed the plaintiff a duty to use reasonable care in making this statement or giving advice. The statement of claim does not plead these elements. 338 The significance of the pleading in that case was pointed out by Gaudron J in Perre v Apand Pty Ltd [1999] HCA 36 ; (1999) 198 CLR 180 where her Honour said at [30] that in Esanda : ...it was not pleaded that the auditors in question knew or ought to have known that a finance provider would rely on their audited statement of accounts and thus, it was held, on the pleadings, that no duty of care was owed by the auditors to the finance provider. In the present case that matter has been pleaded in par 39A of the statement of claim. 339 An identified class in the sense used by Brennan CJ would include the class of persons who were clients of Boyds and who had requested Boyds to seek the advice of valuers in relation to these particular properties, where Boyds themselves were providing other financial advice. The circumstance that a Melbourne firm of accountants was seeking valuations of farming properties in Tasmania itself tends to show that the valuations were not being sought by the accountants themselves acting as principals. 340 In Ta Ho Ma Pty Ltd v Allen [1999] NSWCA 202 ; (1999) 47 NSWLR 1 Giles JA said at [17]: So a valuer who puts out a negligent valuation does not incur an open ended liability to any and every financier who relies on it, even if it was reasonably foreseeable that the financier would rely on it. The particular financier may be outside the class of person to whom the valuer owes a duty to take care in making the statement in the valuation, in the same manner as Esanda was outside the class of persons to whom the auditors owed a duty of care on the case as pleaded in Esanda Finance Corporation Ltd v Peat Marwick Hungerfords [1997] HCA 8 ; (1997) 188 CLR 241; the auditors owed a duty of care to the members of Excel, but not to Esanda.