From: Neil Foster <Neil.Foster@newcastle.edu.au>
To: Mårten Schultz <Marten.Schultz@juridicum.su.se>
CC: obligations@uwo.ca
Date: 26/11/2008 22:48:34 UTC
Subject: Re: Auditor liability
Dear Mårten;
While there are "caps" on damages now in NSW under the Civil Liability Act 2002 (and similar legislation in other States and at the Federal level), these all as far as I am aware only apply to personal injury awards, not to "economic loss" claims as would be expected to be applicable to auditors. What we do have for such claims, however, is a regime of "proportionate liability", where the liability of anyone for economic loss where there are joint tortfeasors, is now to be limited to the specific identified portion the court regards as "just" (as opposed to the traditional common law model of "solidary liability", which as I'm sure you know meant that so long as a plaintiff could find one solvent tortfeasor they could recover all the damages from that one, leaving contribution from others to be chased by the defendant.) In a way this is similar, I guess, to the proposal you note about auditors being liable as a "last resort", though even stricter in the sense that the plaintiff will now bear the risk that other tortfeasors may not have funds or be unavailable.
The NSW version is Part 4 of the Civil Liability Act 2002 (see http://www.austlii.edu.au/au/legis/nsw/consol_act/cla2002161/ ). At the Federal level, an action against auditors might be taken on the basis of "misleading and deceptive conduct" under s 52 of the Trade Practices Act 1974, and the Commonwealth Parliament has also introduced "proportionate liability" for such actions under Part VIA of that Act (see http://www.austlii.edu.au/au/legis/cth/consol_act/tpa1974149/index.html ).
I am not aware so far of any of these provisions (introduced between 2002-2004) being raised in an action against auditors but it will no doubt come up. A case involving "financial advisers" generally which is still proceeding through the lower courts is Atkins v Interprac Financial Planning Pty Ltd & Crole (No 2) [2008] VSC 99 (8 April 2008) http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/vic/VSC/2008/99.html .
Regards
Neil F
 
Neil Foster
Senior Lecturer, LLB Program Convenor
Newcastle Law School
Faculty of Business & Law
MC158, McMullin Building
University of Newcastle
Callaghan NSW 2308
AUSTRALIA
ph 02 4921 7430
fax 02 4921 6931


>>> Mårten Schultz <Marten.Schultz@juridicum.su.se> 27/11/08 3:46 >>>
A proposal for new legislation on liability for auditor's in Sweden has recently been presented. I am supposed to, on behalf of my faculty, to comment on the proposal. The proposal notes the difficulties of the big auditor firms working in Sweden to insure themselves, especially after Andersen. It thereafter proposes some liability limitations, the most interesting being that the auditor is liable only as a last resort (if a third party has a claim she must start with the company representatives) and in addition a cap on damages is suggested. (Approx. 11 million Euro.)

I tend to dislike caps intuitively, but I guess there are some sound arguments for it. I would be very grateful for any comment on how caps in general are motivated in other countries and especially if some of you have experiences of caps on damages for auditors in particular.