Comlaw203 Aropa

Tutorial 4 AROPA

The issue of this case is whether R&L is able to personally bring action against Cleopatra. A sub issue deals with whether R&L could bring liability against Cleopatra Limited, as a company.

Firstly, under the Williams v Natural Life Health Foods case, the director of a company can be brought to court for negligent misstatement. However, the case used a proximity test, which shows that Cleopatra had no ‘personal’ dealings with R&L. C’s employees delivered the financial information, as a result C (director) would not be liable directly for the false statements.

R&L may potentially be able to bring action against the firm due to the fact that the records were faulty which, as a result, was a large persuading factor of acquisition of C Limited. This is illustrated in the Re Bennet Keane and White case, where it was decided that all financial information must be assembled to determine the financial position of the firm at ‘any given time’. The case is relevant because the financial situation of C Limited incorrect at the time R&L decided to purchase the company. It is evidently shown when the company begins to make losses.

Lastly, R&L may be able to bring action against the auditor of C Limited for falsifying/exaggerating the accounts. The responsibility of the auditor is to identify whether the proper accounting standards have been kept and whether they comply with FRA. The detriment of faulty records affects any company in contract and shareholders. However, this is dependant on how the courts interpret a ‘true and fair’ approach, whether it is through the ‘overview’ or ‘technical’ approach. The auditor may owe certain fiduciary duties, which can be seen in Mangos Furnishers Ltd v Bateman.

In conclusion, R&L may well have potential cause to bring action against C Limited. However, it is they will not be able to bring action against Cleopatra personally.