Messrs Twomax Ltd v Dickson McFarlane and Robinson
| Jurisdiction | Scotland |
| Judgment Date | 05 March 1982 |
| Docket Number | No. 18. |
| Date | 05 March 1982 |
| Court | Court of Session (Outer House) |
OUTER HOUSE.
Lord Stewart.
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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Caparo Industries Plc v Dickman
...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 case. ......
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