These include whether the defendant owes the plaintiff a duty of care, whether the defendant
breached the standard of care and whether the defendants breach caused the plaintiff harm. From
there, the onus shifts to the defendant to establish any possible defences.
a more secured investment or could have requested her to invest a portion of her redundancy
payment. Therefore, it is reiterated that the defendants actions breached a duty of care.
2001 (Cth) states that preparation of audits and accounts are a statutory requirement, a duty of care
is owed to the public, investors and creditors.
In Mutual Life and Citizens Assurance Company Ltd v Evatt, the plaintiff sought financial advice
similar to Gail. Based on the advice received the plaintiff invested in the company but lost money as
a result. Therefore, he sued for negligent misstatement and the High Court concluded that a duty of
care was owed to Evatt. However, this decision was reversed by the Privy Council upon appeal. This
is due to the application of the Barwick test where the knowledge of being trusted, known reliance
and reasonable reliance must be satisfied. The auditors Slack & Co, have special skills, therefore,
third parties trust that they have the expertise to prepare financial statements that are a true and
fair representation of the business. In addition, Slack & Co were aware that the financial statements
they were preparing would be used by third parties for investments and other uses. External parties
such as Gavin have solely relied on the Prospectus of ANRL to determine whether it is a good
investment, thus relying on the documentation developed by Slack & Co. In line with the Barwick
test, Slack & Co owe a duty of care to external parties since they satisfy the three requirements and
thus under tort law Gail has the capacity to sue them for a breach of duty of care.
Hence, it can be settled that Gavin owed Gail a duty of care and breached it due to his careless
actions. This caused her economical loss, however Gavin can defend himself claiming that the
negligence was contributory due to the audited accounts not being prepared accurately and Gails
acceptance to invest in an unsecured note. Therefore, the onus shifts to Slack & Co the auditors
who owe a duty of care to third parties since the prospectus is being used for a significant matter.
Since they did not act in a proper manner to that in their profession, Slack & Co can be held liable for
breaching their duty of care.