Messrs Twomax Ltd v Dickson McFarlane and Robinson

CourtCourt of Session (Outer House)
Judgment Date05 March 1982
Date05 March 1982
Docket NumberNo. 18.


Lord Stewart.

No. 18.

NegligenceWhether duty owed to person injuredNegligent misrepresentationNegligence of person possessing special skillAccountants prepared company accounts relied upon by persons purchasing sharesWhether accounts inaccurateWhether duty owedWhether accountants negligentWhether accountants liable for negligent oral representations inducing contractMeasure of damagesWhether appropriate measure of damages the price paid for shares or difference between price paid and true value at date of purchase.

DamagesNegligenceMeasure of damages.

In 1973 a company and two individuals purchased shares in a knitwear company. The purpose of the purchase by the company was to acquire a majority shareholding; the two individuals became directors, and one of them became chairman, of the knitwear company. In taking the shares at the particular prices calculated by them, all three relied upon balance sheets and accounts for the financial year of the knitwear company ending in 1973 prepared and audited by a firm of chartered accountants. The company also alleged that they relied upon advice given by a partner of the firm of accountants at meetings held prior to the conclusion of the agreement to purchase the shares to the effect that the knitwear company was a viable and profitable business. In 1975 the knitwear company went into liquidation and the three new shareholders lost their entire investments.

The three shareholders sued the accountants for reparation on the ground of the accountants' negligent misrepresentations in preparing accounts which were misleading in that they showed a profit for the year 1973 instead of a substantial trading loss. In evidence it was established that there were actual errors which reduced the trading profit from some 20,000 to 16,000; but, in view of the fact that there was a trading loss in 1975 of over 87,000, it was apparent that the profits in 1973 were substantially over-stated. At the time of preparing the 1973 accounts the accountants were not aware of the existence of the three potential shareholders. But the accountants were aware that the knitwear company was suffering a shortfall of capital, that one director wished to dispose of his shareholding, that the accounts were being made available to lenders and that they were commonly relied upon by potential investors.

The measure of damages claimed by the three shareholders was the sum each had...

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6 cases
  • Caparo Industries Plc v Dickman
    • United Kingdom
    • House of Lords
    • 8 February 1990
    ...2 K.B. 164. 82The third case upon which the respondents rely is the decision of the Outer House of the Court of Session in Twomax Ltd. v. Dickson, McFarlane & Robinson 1983 S.L.T. 98, the facts in which have a broad similarity to those in the case of JEB Fasteners and in the instant ca......
  • Cramaso LLP v Ogilvie-Grant
    • United Kingdom
    • Supreme Court (Scotland)
    • 12 February 2014
    ...B, but not where it induced A to enter into a contract with B himself (see, for example, Twomax Ltd v Dickson, McFarlane & Robinson 1982 SC 113). The Scottish Law Commission responded by recommending legislative reform. Its Report on Negligent Misrepresentation (Scot Law Com No 92, 1985......
  • Stewart v Perth and Kinross Council
    • United Kingdom
    • House of Lords
    • 1 April 2004
    ...1 F 171; Eastern Marine Services (and Supplies) Ltd v Dickson Motors Ltd, 1981 SC 355; Twomax Ltd v Dickson, McFarlane & Robinson, 1983 SLT 98. In Eastern Marine Services (and Supplies) Ltd v Dickson Motors Ltd the pursuer agreed to purchase a second-hand car from a car dealer on the ba......
  • Caparo Industries Plc v Dickman
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 29 July 1988
    ...those who may act upon them and when persons are not brought into such a relationship." 2Thus the Lord Ordinary in Twomax Ltd. v. Dickson, McFarlane & Robinson (1983) S.L.T. 98 at p.103. Others have spoken to similar effect. In Hedley Byrne & Co. Ltd. v. Heller & Partners ......
  • Request a trial to view additional results
3 books & journal articles
  • The prevention and detection of corporate fraud: An assessment of the present framework
    • United Kingdom
    • Journal of Financial Regulation and Compliance Nbr. 5-4, April 1997
    • 1 April 1997
    ...Son Ltd [1968] Ch. 455, JEB Fasteners Ltd. v. Marks Bloom & Co. [1981] 3 All ER 289, Twomax Ltd & Goode v. Dickson, McFarlane & Robinson [1982] SC 113. (14) Re Thomas Gerrard and Son Ltd [1968] Ch. 455, pp. 473-475. (15) Twomax Ltd & Goode v. Dickson, McFar-lane & Robinson [1982] SC 113. (1......
  • Waiting for Enron: The Unstable Equilibrium of Auditor Independence Regulation
    • United Kingdom
    • Journal of Law and Society Nbr. 33-3, September 2006
    • 1 September 2006
    ...728.59 [1981] 3 All E.R. 289 (duty owed to takeover bidder when reasonably foreseeablethat third party financing would be required).60 [1982] S.C. 113 (duty owed to investors although auditor did not know about theirinterest in the company at the time it issued its audit report).61 [1978] 1......
    • Singapore
    • Singapore Academy of Law Journal Nbr. 1992, December 1992
    • 1 December 1992
    ...& Robinson [1978] NZLR 553, JEB Fasteners Ltd v. Marks Bloom & Co (a firm)[1981] 3 All ER 289, Twomax Ltd v. Dickson McFarlane & Robinson1982 SC 113. 4 [1977] 2 All ER 492. 5 [1990] 1 All ER 568. 6 Robert Baxt, “The Shutting of the gate on shareholders in actions for negligence — the Caparo......

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