Bob and Jayne were invited to their friends' New Year's Eve cocktail party. When they arrived,...

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Bob and Jayne were invited to their friends' New Year's Eve cocktail party. When they arrived, a lot of the quests were strangers to Bob and Jayne. The question most people asked on an introduction was, 'and what do you do for a living? Jayne was a preschool teacher, and Bob was an auditor. Bob met Jarrod, who said he was a funds manager. Bob asked him about his firm, but Jarrod was a little reluctant to discuss his work. Bob talked about the audit he was conducting on a funds management business without naming the business. He said that he had picked up a few errors in their financial statements, which showed the business was undervalued. He did say it was early days yet, but if he had some spare cash, he would buy some shares in this business. Jarrod asked the host the name of the auditors for whom Rob worked. It happened to be the firm that was currently completing an audit on the business for which od worked. The next business day, Tuesday, Jarrod bought $20,000 worth of shares in his employer company on the securities market. Jarrod had heard rumours the internal accountants had made some errors in the financial records, and this was being picked up by the auditors. Two weeks later, the audit report on Jarrod's employer was released. It showed errors by the internal accountants showing the company was overvalued, and its share price plummeted. Jarrod lost all of his investment except for $500. Bob was not working on this company's audit but on a completely different company. i. Did Bob owe Jarrod a duty to exercise care when he was talking to him? (6 marks) ii. Regardless of your answer to (i), would Bob's employer be held vicariously liable should Bob be shown to have been negligent? (3 marks). iii. Regardless of your answer to (i), how would a court determine the relevant standard of care on these facts? (5 marks) iv. What are the legal tests used to determine the element of causation? (2 marks) v. What defences, if the claim was successful to this point, could be raised by Bob and used against Jarrod? (4 marks) Bob and Jayne were invited to their friends' New Year's Eve cocktail party. When they arrived, a lot of the quests were strangers to Bob and Jayne. The question most people asked on an introduction was, 'and what do you do for a living? Jayne was a preschool teacher, and Bob was an auditor. Bob met Jarrod, who said he was a funds manager. Bob asked him about his firm, but Jarrod was a little reluctant to discuss his work. Bob talked about the audit he was conducting on a funds management business without naming the business. He said that he had picked up a few errors in their financial statements, which showed the business was undervalued. He did say it was early days yet, but if he had some spare cash, he would buy some shares in this business. Jarrod asked the host the name of the auditors for whom Rob worked. It happened to be the firm that was currently completing an audit on the business for which od worked. The next business day, Tuesday, Jarrod bought $20,000 worth of shares in his employer company on the securities market. Jarrod had heard rumours the internal accountants had made some errors in the financial records, and this was being picked up by the auditors. Two weeks later, the audit report on Jarrod's employer was released. It showed errors by the internal accountants showing the company was overvalued, and its share price plummeted. Jarrod lost all of his investment except for $500. Bob was not working on this company's audit but on a completely different company. i. Did Bob owe Jarrod a duty to exercise care when he was talking to him? (6 marks) ii. Regardless of your answer to (i), would Bob's employer be held vicariously liable should Bob be shown to have been negligent? (3 marks). iii. Regardless of your answer to (i), how would a court determine the relevant standard of care on these facts? (5 marks) iv. What are the legal tests used to determine the element of causation? (2 marks) v. What defences, if the claim was successful to this point, could be raised by Bob and used against Jarrod? (4 marks)

Answer rating: 100% (QA)

i Yes Bob owed Jarrod a duty to exercise care when discussing the audit he was conducting on a funds management business As an auditor Bob should have ... View the full answer