Forty Squares (Pty) Ltd and Others v GL Palmer and Company (2023/110502) [2025] ZAGPJHC 37 (24 January 2025)

Forty Squares (Pty) Ltd and Others v GL Palmer and Company (2023/110502) [2025] ZAGPJHC 37 (24 January 2025)

The court held that the plaintiffs' particulars of claim, read with the relevant statutory provisions and pleaded facts, are sufficient to disclose a cause of action for delictual damages against the defendant auditor. The court found that section 46 of the Auditing Profession Act contemplates liability to third parties in circumstances where the auditor knew or ought to have known that the report would be relied upon, and where negligence is established. The allegations that the defendant knew the audit report would be used to induce the plaintiffs to purchase shares and that the plaintiffs relied on the report are matters for evidence at trial. The court concluded that it cannot be said...

Citation
[2025] ZAGPJHC 37
Parties
Respondent: Forty Squares (Pty) Ltd; Respondent: Mogamat Jassen Davids; Respondent: Mogamat Fajek Davids; Applicant: GL Palmer & Company
Court
South Gauteng High Court, Johannesburg
Jurisdiction
South Africa
Judgment Date
24 January 2025
Case Number
2023/110502
Procedural Posture
Exception Application / Exception to Particulars of Claim
Outcome
Exception dismissed with costs, including costs of senior counsel.
Judges
Malungana
Legal Topics
Professional Negligence, Auditor Liability, Pure Economic Loss, Auditing Profession Act, Wrongfulness, Negligent Misstatement
Delict Civil Procedure Commercial and Corporate Professional Negligence Auditor Liability Pure Economic Loss Auditing Profession Act Wrongfulness +1 more

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Downloadable case file Legal principles 4 Authorities cited 10 Party arguments 2 Amounts and remedies 2
Sign in to unlock

Parties

Forty Squares (Pty) Ltd

Respondent

Mogamat Jassen Davids

Respondent

Mogamat Fajek Davids

Respondent

GL Palmer & Company

Applicant

Procedural Posture

Exception Application / Exception to Particulars of Claim

Legal Issues

  1. 1 Whether the particulars of claim disclose a cause of action for delictual damages against the defendant auditor.
  2. 2 Whether the defendant owed a legal duty to the plaintiffs as third parties relying on the audit report.
  3. 3 Whether the alleged negligent misstatement by the defendant is actionable in law under the Auditing Profession Act and common law principles.

Ratio Decidendi

The court held that the plaintiffs' particulars of claim, read with the relevant statutory provisions and pleaded facts, are sufficient to disclose a cause of action for delictual damages against the defendant auditor. The court found that section 46 of the Auditing Profession Act contemplates liability to third parties in circumstances where the auditor knew or ought to have known that the report would be relied upon, and where negligence is established. The allegations that the defendant knew the audit report would be used to induce the plaintiffs to purchase shares and that the plaintiffs relied on the report are matters for evidence at trial. The court concluded that it cannot be said...

Court Disposition

Exception dismissed with costs, including costs of senior counsel.

Orders

  • The exception is dismissed with costs, such costs to include the costs of senior counsel.