This analysis will examine whether an accountant owed a duty of care to Anna for advice that led to her financial loss. The central legal issue is the tort of negligence, specifically concerning liability for pure economic loss that arises from a negligent misstatement. Generally, the law is reluctant to impose liability for pure economic loss. However, an exception was established in the case of *Hedley Byrne & Co Ltd v Heller & Partners Ltd* [1964] AC 465, which allows for a claim where a ‘special relationship’ exists between the person giving advice and the person receiving it. This response will analyse the facts of Anna’s situation against the legal principles derived from *Hedley Byrne* to determine if such a duty of care was owed and if the accountant may consequently be liable.
The ‘Special Relationship’ and Duty of Care
For a duty of care to arise in cases of negligent misstatement, the courts look for evidence of a special relationship between the parties. This test, originating from *Hedley Byrne*, avoids the broader three-stage test for duty of care established in *Caparo Industries plc v Dickman* [1990] 2 AC 605, which is more suited to cases involving physical harm. The *Caparo* case itself, which involved auditors’ reports, helped to clarify the criteria for establishing a special relationship in the context of professional advice.
For a special relationship to exist, several conditions must generally be met. First, the advisor must possess a special skill or expertise in the area upon which they are advising. Second, the advisor must know, or ought reasonably to know, the purpose for which the advice is required and that the advisee is likely to rely on it for that purpose without independent inquiry. Third, the advisee must actually rely on that advice, and finally, it must have been reasonable in the circumstances for the advisee to do so. If these elements are present, the law will recognise a voluntary assumption of responsibility by the advisor, creating a duty of care towards the advisee.
Application to Anna and the Accountant
Applying this framework to the scenario, it is necessary to assess each element in turn. First, the individual giving the advice is an accountant, a professional who by definition possesses a special skill and competence in financial matters. This condition is clearly satisfied.
Second, the facts explicitly state that “the accountant knows that Anna will rely on his advice when deciding whether to invest.” This direct knowledge of reliance for a specific purpose is a key factor. It distinguishes Anna’s situation from that of the general public in *Caparo*, where the auditors’ report was prepared for the company’s shareholders as a whole, not for potential individual investors. Here, the advice was given directly to Anna for a known transaction.
Third, Anna did in fact rely on the accountant’s advice. She was told the company was “financially strong” and subsequently “invests the money”. This demonstrates a clear causal link between the advice given and the action she took, satisfying the requirement of actual reliance.
Finally, it was reasonable for Anna to rely on the advice. She approached a professional for specialist guidance on a significant investment of £30,000. It is common business practice to seek and depend upon such expert counsel. The case of *Smith v Eric S Bush* [1990] 1 AC 831, where it was held reasonable for a homebuyer to rely on a surveyor’s report paid for by the mortgage lender, supports the view that reliance on a professional retained for a specific purpose is reasonable. There is no indication that the advice was given in a social or informal context, which might have made reliance unreasonable.
Potential Liability for Financial Loss
Given that all the requirements for a special relationship appear to be met, it is highly likely that a court would find the accountant owed Anna a duty of care. To establish liability, Anna would also need to prove that this duty was breached and that the breach caused her loss. The facts state the accountant advised Anna “without properly checking the company’s financial information”. This conduct would almost certainly fall below the standard expected of a reasonably competent accountant, thus constituting a breach of duty. As Anna’s investment was lost after the company collapsed, the negligent advice is the direct cause of her financial loss. Therefore, the accountant may well be found liable for Anna’s loss.
Conclusion
In conclusion, the accountant did owe Anna a duty of care. The relationship between them met the criteria for a ‘special relationship’ as established in *Hedley Byrne* and developed in subsequent case law. The accountant possessed a special skill, knew Anna would rely on his advice for her investment, and she reasonably did so. By failing to properly check the company’s finances, he likely breached this duty, causing her to suffer a foreseeable financial loss. Consequently, it is probable that the accountant would be held liable in negligence for the £30,000 that Anna lost.
References
- Caparo Industries plc v Dickman [1990] 2 AC 605
- Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465
- Smith v Eric S Bush [1990] 1 AC 831
