EXECUTOR TRUSTEE AUST LTD and OTHERS v PEAT MARWICK HUNGERFORDS No. SCGRG 92/1218 Judgment No. 4918 Number of Pages - 9 Audit, Auditors and Accountants (1995) 13 ACLC 201 (1995) Aust Torts Reports 81-318 (1995) 63 SASR 393

The case before the Supreme Court of South Australia involved an application by the defendant, Peat Marwick Hungerfords, to strike out certain allegations of negligence and breach of statutory duty from the plaintiffs' Statement of Claim. The plaintiffs, including banks and debenture holders, sought damages and declarations against the defendant, who had acted as auditors for Excel Ltd, a company that had provided the plaintiffs with reports and statements that the plaintiffs alleged were negligently misstated. The plaintiffs claimed they had relied on these reports and statements to their detriment. The court was required to decide whether the plaintiffs had pleaded sufficient grounds to establish a duty of care on the part of the defendant towards them, given that the reports and statements were not directly made to the plaintiffs but were instead made to the company, which then shared them with the plaintiffs.

The court's reasoning centred on the principles established in previous cases regarding the imposition of a duty of care for negligent misstatements. The court found that the plaintiffs had sufficiently alleged an assumption of responsibility by the defendant towards them. This was evidenced by the detailed pleadings that demonstrated the defendant's knowledge of the intended use of the reports, the reliance by the plaintiffs on those reports, and the defendant's failure to advise against such reliance. The court also noted that while the intention to induce reliance was an important factor, it was not the sole determinant of the duty of care. The court found that the plaintiffs' Statement of Claim adequately raised the issue of the defendant's assumption of responsibility, along with other necessary elements of negligence.

In light of these findings, the court exercised its discretion to refuse the application to strike out the allegations. The court held that the matter was not suitable for summary disposal and that the complex questions of law involved warranted a full trial. The court emphasised that the Statement of Claim, despite its length, sufficiently outlined the plaintiffs' complaints, the reasons for those complaints, and the legal basis for the claims. The court concluded that the whole issue as pleaded should proceed to trial.

The court's final orders were to refuse the application to strike out the allegations of negligence and breach of statutory duty.