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A SIGNIFICANT FEATURE OF THE NSW Court of Appeal's judgement earlier this year in the AWA case is that auditors may be able to rely on contributory negligence to diminish, or perhaps even extinguish, their liability when sued for negligence.
Until this decision confirmed the decision of the trial judge, it was thought that a finding of contributory negligence could not be made in a professional negligence action against an auditor.
The Court of Appeal recognised that the cornerstone of arguments against allowing auditors to rely on their client's contributory negligence to reduce any award for damages is the auditor's function of safeguarding the interests of shareholders and, for that purpose, checking on directors and, through them, on...