R falsely misrepresented the value of a company in audit on the basis of this unrealistically good report, P, already a shareholder, bought the rest of the company’s shares and claimed that R had been negligent in making the report, upon discovering the true value of he company. HL held that R had a duty of care to people to whom the report was directed for its specific purpose (i.e. shareholders) so that it had been negligent towards P as a shareholder but NOT as a potential investor. NEW TEST for duty of care: EITHER a duty of care has been established in these circumstances previously OR (1) there is reasonable foreseeability of harm, (2) there is proximity, and (3) it would be fair, just and reasonable to impose a duty of care.
Lord Bridge: He criticises the broad approach to finding a duty of care by saying: Firstly that attempts at universal or general approaches are necessarily vague, especially step 2 - bad for legal certainty. Secondly, the broad approach would lead to a flood of claims, spreading liability too wide. He says there should be a broad categorisation of circumstances where duties of care may be found, e.g. the Anns v Merton LBC case “is failure to perform properly a statutory duty claimed to have been imposed for the protection of the plaintiff either as a member of a class or as a member of the public”, while this case is “advice which has been communicated, directly or indirectly, to the plaintiff and upon which he has relied”. He says that to establish a duty of care there should be (1) reasonably foreseeable harm, (2) proximity, and (3) fair, just and reasonable that an extension of the duty of care occur OR an established category where duty of care has been held to exist