London City Equities Ltd v Ernst and Young [2019] NSWSC 963

London City Equities Ltd v Ernst and Young [2019] NSWSC 963

The broad duty of care pleaded against EY for the 2007 to 2012 audit reports was not tenable under Esanda, because the pleadings did not adequately allege material facts showing that EY knew the reports would be communicated and relied on by the plaintiffs for the pleaded share transactions. However, the correspondence pleaded at pars 27AE-27AU was sufficient, despite ambiguity, to support at least an arguable narrower case of a special relationship between EY and the plaintiff shareholders in relation to reliance on audited reports and the treatment of overburden when deciding whether to retain their shareholdings. Leave was therefore granted to amend the Statement of Claim to reflect...

Jurisdiction
Australia
Judgment Date
01 August 2019
Procedural Posture
Negligence Claim by Shareholders Against Auditors; Motion to Amend Pleadings / Notice of Motion for Leave to File an Amended Statement of Claim
Outcome
Leave granted to amend the Statement of Claim of 4 December 2018 to reflect the reasons for judgment on the plaintiffs' Notice of Motion of 9 May 2018.
Legal Topics
['duty of Care Owed by Auditors' 'negligent Misstatement' 'pure Economic Loss' 'leave to Amend Pleadings' 'strike Out Principles' 'misleading or Deceptive Conduct' 'limitation Periods']
['negligence' 'civil Procedure' 'trade Practices'] ['duty of Care Owed by Auditors' 'negligent Misstatement' 'pure Economic Loss' 'leave to Amend Pleadings' 'strike Out Principles' 'misleading or Deceptive Conduct' 'limitation Periods']

Case Brief

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Procedural Posture

Negligence Claim by Shareholders Against Auditors; Motion to Amend Pleadings / Notice of Motion for Leave to File an Amended Statement of Claim

Legal Issues

  1. 1 ['Whether the plaintiffs should be granted leave to amend the Statement of Claim dated 4 December 2018.' "Whether the plaintiffs' pleaded negligence and negligent misstatement case disclosed a tenable duty of care owed by EY as auditor of PSH to the plaintiff shareholders." 'Whether the pleaded facts established an arguable special relationship sufficient to take the case outside mere foreseeability of reliance on audited reports.']

Ratio Decidendi

The broad duty of care pleaded against EY for the 2007 to 2012 audit reports was not tenable under Esanda, because the pleadings did not adequately allege material facts showing that EY knew the reports would be communicated and relied on by the plaintiffs for the pleaded share transactions. However, the correspondence pleaded at pars 27AE-27AU was sufficient, despite ambiguity, to support at least an arguable narrower case of a special relationship between EY and the plaintiff shareholders in relation to reliance on audited reports and the treatment of overburden when deciding whether to retain their shareholdings. Leave was therefore granted to amend the Statement of Claim to reflect...

Court Disposition

Leave granted to amend the Statement of Claim of 4 December 2018 to reflect the reasons for judgment on the plaintiffs' Notice of Motion of 9 May 2018.

Orders

  • ["Leave is granted to amend the Statement of Claim of 4 December 2018 to reflect the reasons for judgment on the plaintiffs' Notice of Motion of 9 May 2018."]