Question 2 (8%) Legal Liability Issue Shareholders in GGL are disappointed about

Question

Question 2 (8%)

Legal Liability Issue

Shareholders in GGL are disappointed about its falling share price. A number of issues may have affected the price, including a fall in the price of gold and a damages claim against GGL. The claim began three years ago as a result of GGL undertaking mining operations without a mining lease on land that they did not own. As a result of this action GGL has had to cease mining on this section of their mine in the current financial year. Although the claim was made some time ago, a large contingent liability for the amount was only included in the previous year’s accounts. Considerable concern about the significant damages claim was raised by shareholders at the last annual general meeting. Many voiced the opinion that this contingent liability should have been included in previous annual accounts, claiming negligence by the auditors.

Required:

With reference to relevant case law, prepare a report for the managing partner of MYH on the strength of any negligence case that GGL might bring against MYH.

Explanation / Answer

Answer:

Report on GGL case

MYH managing partner of GGL

MYH is the managing partner for the GGL organization. GGL had faced a recent contingent liability issues. For this contingent liability issue the GGL may bring liability case against MYH, MYH was the managing partner for the GGL business. The case of negligence for MYH can be brought by GGL.

Background on the subject :

Shareholders in GGL are disappointed about its falling share price due to various issues may have affected the price, including a fall in the price of gold and a damages claim against GGL.

The claim began three years ago as a result of GGL undertaking mining operations without a mining lease on land that they did not own. As a result of this action GGL has had to cease mining on this section of their mine in the current financial year. Although the claim was made some time ago, a large contingent liability for the amount was only included in the previous year’s accounts. Considerable concern about the significant damages claim was raised by shareholders at the last annual general meeting. Many voiced the opinion that this contingent liability should have been included in previous annual accounts, claiming negligence by the auditors.

The contingent liability case due to issue in lease of land of the mining project for the GGL. The MYH who was the managing partner for the GGL has not considered the lease on land, for the mine project for GGL. The lease of land was the critical factor for successful run of mining project for the GGL. But due to lack on negligence of MYH on lease of land subject, the mining project was required to be close and the GGL had incurred a major loss and which resulted into reduction of share prices of GGL in the market. Thus this act of negligence resulted into higher loss for the GGL due to MYH‘s negligence.

So based on this scenario, the GGL may bring the case of negligence liability for the MYH due to its heavy losses and reduction of share market prices.

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