Caparo Industries plc v Dickman [] UKHL 2 is a leading English tort law case in Caparo was the scope of the assumption of responsibility, and what the. Caparo Industries Plc v Dickman []. Facts. Caparo, a small investor purchased shares in a company, relying on the accounts prepared by. A company called Fidelity plc, manufacturers of electrical equipments, was the target of a takeover by Caparo Industries plc. Fidelity was not doing well. In March.

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The question in Caparo was the scope of the assumption of responsibility, and what the limits of liability ought to be. By using this site, you agree to the Terms of Use and Privacy Policy.

The shareholder, qua shareholder, is entitled to rely on the auditor’s report as the basis of his investment decision to sell his existing shareholding. This was overturned by the House of Lords, which unanimously held there was no duty of care. Caparo reached a shareholding of The shareholders of a company have a collective interest in the company’s proper management and in so far as a negligent failure of the auditor to report accurately on the state of the company’s finances deprives the shareholders of the opportunity to exercise their powers in general meeting to call the directors to book and to ensure that errors in management are corrected, the shareholders ought to be entitled to a remedy.

It may very well be that in tortious claims based on negligent misstatement these notions are particularly apposite. In June the annual accounts, which were done with the help of the accountant Dickman, were issued to the shareholders, which now included Caparo.

He used the example of a shareholder and his friend both looking at an account report.

The third requirement to be met before a duty of care will be held to be owed by A to B is that the court should find it just and reasonable to impose such a duty: Lord Bridge then proceeded to analyse the particular facts of the case based upon principles of proximity and relationship.

I believe it is this last distinction which is of critical importance and which demonstrates the unsoundness of the conclusion reached by the majority of the Court of Appeal. The House of Lords, following the Court of Appeal, set out a “three-fold test”. This confirmed the position was bad. It is incumbent upon the courts in different jurisdictions to be sensitive to each other’s reactions; but what they are all searching for in others, and each of them striving to achieve, is a careful analysis and weighing of the relevant competing considerations.


It is necessary to consider the particular circumstances and relationships which exist. At this point Caparo had begun buying up shares in large numbers. Applying those principles, the defendants owed no duty of care to potential investors in the company who might acquire shares in the company on the basis of the audited accounts.

Caparo Industries Plc v Dickman [1990]

He reasons that when deeming if negligence has occurred one should compare cases to precedent cases with similar facts, rather than simply having an overarching test. In March Fidelity had issued a profit warning, which had halved its share price. From Wikipedia, the free encyclopedia. It was considerations of this kind which Lord Fraser of Tullybelton had in mind when he said that “some limit or control mechanism has to be imposed upon the liability of a wrongdoer towards those who have suffered economic damage in consequence of his negligence: In June the annual accounts, which were done with the help of the accountant Dickman, were issued to the shareholders, which now included Caparo.

On the other hand, a duty will be the more readily found if the defendant is voluntarily exercising a professional skill for reward, if the victim of his carelessness has in the absence of a duty no means of redress, if the duty contended for, as in McLoughlin v O’Brian [] 1 A.

Sometimes it is regarded as significant that the parties’ relationship is “equivalent to contract” see the Hedley Byrne caseat p.

But dicknan focus of the inquiry is on the closeness and directness of the relationship between the parties.

Others have spoken to similar effect. Heyman60 A. Moreover, the loss in the case of the sale would be of a loss of part of the value of the shareholder’s existing holding, which, assuming a duty of faparo owed to individual shareholders, it might sensibly lie within the scope of the auditor’s duty to protect.

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The first is foreseeability. The second requirement is more elusive.

Caparo reached a shareholding of In March Fidelity had issued a profit warning, which had halved its share price. But once it had control, Caparo found that Fidelity’s accounts were in an even worse state than had been revealed by the directors or the auditors.

This page was last edited on 26 Novemberat But in practice no problem arises in this regard since the interest of the shareholders in the proper management of the company’s affairs is indistinguishable from the interest of the company itself and capwro loss suffered by the shareholders, e.


A claim to recoup a loss alleged to flow from the purchase of overvalued shares, on the other hand, can only be sustained on the basis of the purchaser’s reliance on the report.

But on this part invustries the case your Lordships were much pressed with the argument that such a loss might occur by a negligent undervaluation of the company’s assets in the auditor’s report relied on by the individual shareholder in deciding to sell his shares at an undervalue.

It did not extend to the provision of information to assist shareholders in the making of decisions as to future investment in the company. The majority of the Court of Appeal Bingham LJ and Taylor LJ, O’Connor LJ dissenting held that a duty was owed by the auditor to shareholders individually, and although it was not necessary to decide that in this case and the judgment was obiterthat a duty would industried be owed to an outside investor who had no shareholding.

The content of the requirement of proximity, whatever language is used, is not, I think, capable of precise definition. It is never sufficient to ask simply whether A owes B a duty of care. The purpose of the statutory requirement for an audit of public companies under the Industriea Act was the making of a report to enable shareholders to exercise their class rights in general meeting.

It is not, industris could infustries be, in issue between these parties that reasonable foreseeability of harm is a necessary ingredient of a relationship in which a duty of care will arise: So it would not be sensible or fair to say that the shareholder did either.

Caparo Industries v Dickman

Views Read Edit View history. But because the auditors’ work is primarily idckman to be for the benefit of the shareholders, and Caparo did in fact have a small stake when it saw the company accounts, its claim was good. In determining this, foreseeability must, I think, play an important part: I believe this argument to be fallacious. Fidelity was not doing well. In some cases, and increasingly, reference is made to the voluntary assumption of responsibility: