SCENARIO 4

Ready and Co, a firm of accountants and auditors, were engaged to prepare the accounts and balance sheet for Products for People plc, knowing the accounts were to be sent to Hind, a private investor, who was thinking of buying shares in Products for People plc. The accounts were negligently prepared and showed the company as financially stable, even though the opposite was true and the company had large unpaid debts. Hind showed the accounts to her friend Imran. Hind bought AED1 million worth of shares and Imran bought AED 500,000 worth of shares. Within 6 months, Products for People plc went into liquidation and both Hind and Imran lost their investments.

Advise (1) Hind, and (2) Imran whether they are likely to be successful in their claims in negligence against Ready and Co and what defences the company may have.

1. What are the 3 points to be proved in any claim based on negligence?

2. What must be proved in a claim for negligent misstatement?

3. Would Imran be successful in a claim for negligent misstatement against Ready and Co?

4. Would Ready and Co have any defences?