Thorley Ltd owns five large poultry farms in Parramatta. The City of Parramatta Council has taken legal action against the pollution in the Parramatta River, especially the pollution from chicken farms. The local council has sued Thorley Ltd for water pollution and is claiming that Thorley will have to pay fines.

Thorleys lawyers have advised them they will defend Thorleys actions and claim that they expect to win the case.

Required:

Should Thorley Ltd recognize a liability for this event? Justify your answer by reference to the definition and recognition criteria as per the Conceptual Framework.