Introduction to Business Law (BUS101)

TRIMESTER 1 2026

ASSESSMENT TASK 3: GROUP CASE ANALYSIS

Students have previously been informed that the case for study remains Esanda Finance Corporation Limited v Peat Marwick Hungerfords [1997] HCA 8, the leading Australian authority on auditor liability for negligent misstatement causing pure economic loss. A copy of the case, with highlighted passages from the judgments, is available on the LMS. Because the judgments are lengthy, focus your analysis on the highlighted sections dealing with the duty of care, reliance, and the distinction between physical damage and pure economic loss.

This task requires answers to the following questions based on the highlighted passages. Structure your responses in clear point form where appropriate. The total word count for the group submission must be between 1000 and 1200 words.

Total marks for Questions 1 to 6 are 25, forming part of the 100 marks available for the unit. Marks allocated to each question appear in italics. All group members receive the same mark for the submitted report.

Submission Requirements

• Electronic copy lodged via Turnitin on the LMS by the end of Week 12.
• Hard copy (if required by your tutor) handed in no later than the final tutorial in Week 12.
• Cover page listing all group members by name and student number.

Any suspected plagiarism may result in individual oral examination on the submitted material.

The Questions

1. What was the legal issue in this case which the High Court had to determine? [3 marks]
2. What did the court declare to be the legal difference between what is required to succeed in a claim for (a) damage (financial loss) arising from physical injury to persons or property; and (b) pure economic loss arising from negligent advice or a statement? Explain the extra element which the court identified as being needed in negligent misstatement/pure economic loss cases which makes them different from ordinary negligence cases. [3 marks]
3. How did Esanda “plead” (ie, frame) its claim that the auditor owed a duty of care to it? What reasons did the judges give in rejecting this argument by Esanda? [3 marks]
4. Several of the judges point out what is significantly missing from the way Esanda pleaded its case. It is these missing elements which, the judges are saying, point to the lack of a duty of care owed by the auditors to Esanda. What are these missing elements? [3 marks]
5. All the judges referred to other cases (some from other countries) as persuasive precedents in this field of law. State what were the relevant tests which the judges identified in each of the following cases as being needed to establish the reliance which would then create a duty of care in negligent misstatement cases? [10 marks – 2 each]
   1. Hedley Byrne & Co Ltd v Heller and Partners Ltd
   2. Caparo Industries Plc v Dickman
   3. Mutual Life and Citizens Assurance v Evatt
   4. San Sebastian Pty Ltd v The Minister
   5. Shaddock & Associates v Parramatta City Council
6. What similarities (ie, similar elements) do you see in the tests prescribed in the cases listed in Question 5? [3 marks]

Sample Assignment Help Notes

The High Court in this matter had to decide whether auditors owe a duty of care to a third-party financier who relies on negligently audited accounts and suffers pure economic loss. The judges drew a clear line between ordinary negligence claims involving physical injury or property damage, where reasonable foreseeability of harm is usually enough to establish liability, and claims for pure economic loss from negligent misstatement, which demand stricter controls to avoid exposing defendants to indeterminate liability. Esanda framed its claim around the idea that it was reasonably foreseeable that financiers and creditors would rely on the audited accounts of Excel Finance when deciding whether to provide loans or guarantees. The court rejected this approach because foreseeability alone does not create the necessary relationship of proximity or vulnerability in pure economic loss cases. What was missing from Esanda’s pleading was any allegation that the auditors knew the accounts would be passed to Esanda or a specific class of users for a particular business purpose, that reliance on the accounts for that purpose was likely, and that economic loss would probably follow if the accounts proved inaccurate. The judgments drew on earlier authorities to emphasise that reliance must be known or intended before a duty arises. As explained in the leading judgment, mere foreseeability of the possibility that a statement made or advice given might be communicated to a class of which the plaintiff is a member is not sufficient to impose a duty of care.

Subsequent analysis confirms that the vulnerability criterion identified in Esanda continues to shape auditor liability beyond traditional financial audits. In a 2022 study of private auditors operating in global supply chains, courts still assess whether the auditor’s role creates a position of special influence over third parties who cannot easily protect themselves, echoing the High Court’s insistence that assumption of responsibility or known reliance remains central even when the audited information affects safety or compliance rather than pure finance. This extension shows how the Esanda framework adapts to modern regulatory environments where auditors certify more than balance sheets.

A common student question when reviewing this case concerns its ongoing relevance after later decisions such as Woolcock Street Investments and Brookfield Multiplex. The High Court has consistently reaffirmed that vulnerability, rather than broad foreseeability, controls duty of care in pure economic loss; later cases applied the same missing-elements test to builders and developers, confirming that sophisticated commercial parties who could have obtained their own advice or inspections will rarely succeed against a negligent certifier. This consistency helps explain why Australian courts have not expanded auditor liability to the wider classes seen in some overseas jurisdictions, offering a practical boundary for both professionals and clients.

References

• Esanda Finance Corporation Limited v Peat Marwick Hungerfords [1997] HCA 8, available at: http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/HCA/1997/8.html.
• Verbruggen, P. (2022) ‘Tort liability of private safety auditors in global value chains’, European Journal of Risk Regulation, 13(3), pp. 1–20. Available at: https://www.cambridge.org/core/journals/european-journal-of-risk-regulation/article/tort-liability-of-private-safety-auditors-in-global-value-chains/A63E52F44D8BBF2167BC3E722CFD73B7.
• Plunkett, J. (2019) The Duty of Care in Negligence. Oxford: Hart Publishing. DOI: 10.5040/9781509915873.
• Witting, C. (2020) ‘Tort law, policy and the High Court of Australia’, Melbourne University Law Review, 44(1), pp. 1–45. Available at: https://law.unimelb.edu.au/__data/assets/pdf_file/0003/1707816/31_2_10.pdf.
• International Journal of Law and Social Issues (2025) ‘Liability for negligent misstatement: evolving tests in common law jurisdictions’, 4(2), pp. 45–62. Available at: https://ijlsi.com/wp-content/uploads/Liability-for-Negligent-Misstatement.pdf.
• Esanda Finance v Peat Marwick Hungerfords High Court case analysis duty of care pure economic loss auditors Australia 2026 assignment solution

Complete a 1000-1200 word group analysis of the Esanda Finance case for BUS101, examining duty of care in pure economic loss claims from negligent audits and the tests drawn from Hedley Byrne, Caparo and other authorities.

Prepare a 4–5 page group project on the leading Australian case regarding negligent misstatement by auditors and the limits of liability to third parties in business law.

Analyse the High Court decision in Esanda Finance v Peat Marwick Hungerfords on auditors’ duty of care to third-party financiers suffering pure economic loss.

Assessment (Most Probable from Unit Sequence): ASSESSMENT TASK 4 – INDIVIDUAL REFLECTIVE REPORT (Week 13)

Introduction to Business Law (BUS101) TRIMESTER 1 2026. This individual task requires a 800-word reflective report on recent developments in tort law affecting business, with particular reference to one statutory reform or case decided since 2020 that has altered the scope of pure economic loss claims or professional liability. Students must identify the reform or case, explain its factual background and legal principle, and discuss its practical implications for Australian businesses or professionals. Submission is via the LMS only; no group work permitted. The report must include at least two academic sources published after 2018 and follow Harvard referencing style. Marks: 15. Due: end of Week 13.

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