Auditors and third party liability – judicial reassurance

By Richard Curd and Elizabeth O'Connell

Man Nuzfahrzeuge AG and Others v Freightliner Ltd and Others [2005] EWHC 2347

The issue of auditors’ liability to third parties has been brought sharply into focus recently with The Company Law Reform Bill which embodies some significant changes in relation to auditors’ liability, namely the ability to negotiate "Liability Limitation Agreements" (For more on this,Click Here). However, with regard to third party claims, the Government has decided not to codify any statement of auditors’ duty of care, as expressed by the House of Lords in Caparo Industries v Dickman [1990] 2 AC 605, [1990] 1 All ER 568, HL. Auditors therefore remain reliant on the judiciary to determine the circumstances in which damages for economic loss can be recovered by third parties who allege they have relied on the audited accounts to their detriment.