Wexcombe Ltd asks its accountants, Quill LLP, to prepare management accounts. Quill knows these will be sent to Northgate Bank, which will rely on them in deciding whether to grant a specific £2m loan. The accounts are negligently prepared, and the bank lends and suffers loss. Is Quill LLP likely to owe the bank a duty of care?

Correct answer: A) Yes, because Quill knew the accounts would be given to an identified party for a specific purpose and that the party would rely on them without independent enquiry

Explanation

Under the Hedley Byrne principle, as developed in Caparo, a duty of care for negligent misstatement arises where the adviser knows the statement will be passed to an identified recipient for a specific transaction and that the recipient is likely to rely on it. Here Quill knew all of this, so there is sufficient proximity and an assumption of responsibility. No contract is needed, and pure economic loss is recoverable in negligent misstatement cases.