IAI Actuarial Core Principles · Business Management · Professional negligence
Vikram Shah, an appointed actuary of Himalaya Life, certifies a solvency valuation to the board. A long-standing shareholder, Mrs Iyer, buys more shares after reading the published summary, never having communicated with Vikram. The valuation was careless and she loses money. Vikram's counsel argues no duty is owed to her. Which argument is most likely to succeed?
Counsel's best argument is that Vikram neither knew nor intended Mrs Iyer to rely on the valuation when buying shares, so there is no proximity or assumed responsibility towards her. Financial loss, lack of a fee or statutory status do not by themselves defeat a duty.
- ADuty is excluded because Vikram is a statutory appointee
- BDuty is excluded because she is a shareholder
- CDuty is excluded because the loss was purely financial
- DDuty is excluded because Vikram did not charge her a fee
- Vikram did not know she would rely on the work for her share purchase, so the required proximity and assumption of responsibility to her are absentCorrect
Explanation
Where advice is given for a specific purpose to the company or board, courts are reluctant to extend a duty to investors who use it for an unrelated decision such as buying shares, as there is no assumption of responsibility towards them. Pure financial loss and absence of a fee, or statutory status, are not in themselves decisive bars.
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