Man Nutzfahrzeuge Ag & Anor v Freightliner Ltd [2007] EWCA Civ 910 (12 September 2007)

Man Nutzfahrzeuge Ag & Anor v Freightliner Ltd [2007] EWCA Civ 910 (12 September 2007)

Ernst & Young (UK) did not owe Western Star or Freightliner a duty of care to protect against losses arising from fraudulent misrepresentation by Mr Ellis during sale negotiations. The audit duty did not extend to such losses, and no special duty was established as Ernst & Young (UK) did not assume responsibility for the accuracy of accounts for the purpose of sale negotiations. Their involvement in due diligence was limited and did not create additional duties. Ernst & Young (UK) was not liable to contribute under the Civil Liability (Contribution) Act 1978, as they were not liable to MAN for the same damage.

Citation
[2005] EWHC 2347
Parties
Claimants/respondents: MAN Nutzfahrzeuge AG and another; Defendant/part 20 Claimant/appellant: Freightliner Limited; Part 20 Defendant/respondent: Ernst & Young (a firm)
Jurisdiction
England and Wales
Judgment Date
12 September 2007
Procedural Posture
Appeal / Court of Appeal (civil Division)
Outcome
Appeal dismissed
Legal Topics
Fraudulent Misrepresentation, Deceit, Duty of Care, Auditor Liability, Contribution Under Civil Liability Act, Share Purchase Agreement Warranties
Commercial Law Contract Law Tort Law Professional Negligence Fraudulent Misrepresentation Deceit Duty of Care Auditor Liability +2 more

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Parties

MAN Nutzfahrzeuge AG and another

Claimants/respondents

Freightliner Limited

Defendant/part 20 Claimant/appellant

Ernst & Young (a firm)

Part 20 Defendant/respondent

Procedural Posture

Appeal / Court of Appeal (civil Division)

Legal Issues

  1. 1 Whether auditors owed a duty of care to the seller for losses arising from fraudulent misrepresentation by an employee during sale negotiations
  2. 2 Whether auditors owed a duty of care in connection with due diligence
  3. 3 Whether auditors are liable to contribute under Civil Liability (Contribution) Act 1978 for the same damage as the seller

Ratio Decidendi

Ernst & Young (UK) did not owe Western Star or Freightliner a duty of care to protect against losses arising from fraudulent misrepresentation by Mr Ellis during sale negotiations. The audit duty did not extend to such losses, and no special duty was established as Ernst & Young (UK) did not assume responsibility for the accuracy of accounts for the purpose of sale negotiations. Their involvement in due diligence was limited and did not create additional duties. Ernst & Young (UK) was not liable to contribute under the Civil Liability (Contribution) Act 1978, as they were not liable to MAN for the same damage.

Court Disposition

Appeal dismissed

Orders

  • Ernst & Young (UK) not liable to indemnify Freightliner Limited
  • Ernst & Young (UK) not liable for contribution under Civil Liability (Contribution) Act 1978