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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Caparo Industries v Dickman

Sign In Don’t have an account? Fidelity was not doing well. But because the auditors’ work is primarily intended to be for the benefit of the shareholders, and Caparo did in fact have a small stake when it saw the company accounts, capwro claim was good.

In March Fidelity had issued a profit warning, which had halved its share price. The question in Caparo was the scope of the assumption of responsibility, and what the limits of liability ought to be. In some cases, and increasingly, reference is made to the voluntary assumption of responsibility: Bridge of Harwich, writing for a unanimous court, states that the two part test employed in Dobson should not be used, and subsequently it has been abandoned in England.

By using this site, you agree to the Terms of Use and Privacy Policy. Sometimes the alternative expression “neighbourhood” is used, as by Lord Reid in the Hedley Byrne case [] A.

No doubt these provisions establish a relationship between the auditors and the shareholders of a company on which the shareholder is entitled to rely industrie the protection of his interest. Sometimes, as in the Hedley Byrne caseattention is concentrated on the existence of a special relationship.

In order for a duty of care to arise in negligence:. 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. Heyman60 A.

Caparo Industries v Dickman

It sued Dickman for negligence in preparing the accounts and sought to recover its losses. But once it had control, Caparo found that Fidelity’s accounts were in an even worse dlckman than had been revealed by the directors or the auditors.


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. 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 March Fidelity had issued a profit warning, which had halved its share price.

Caparo reached a shareholding of In May Fidelity’s directors made a preliminary announcement in its annual profits for the year up to March confirming the negative outlook.

The House of Lords, following the Court of Appeal, set out a “three-fold test”.

Caparo Industries Plc v Dickman [] | Case Summary | Webstroke Law

The approach will vary according to the particular facts of the case, as is reflected in the varied language used. Others have ccaparo to similar effect. He used the example of a shareholder and his friend both looking at an account report. It is never sufficient to ask simply whether A owes B a duty of care. The share price fell again.

Caparo Industries Plc v Dickman [1990]

In determining this, foreseeability must, I think, play an important part: The purpose of the statutory requirement for an audit of public companies under the Companies Act was the making of a report to enable shareholders to exercise their class rights in general meeting. 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 is necessary to consider the particular circumstances and relationships which exist. The requirement cannot, perhaps, be better put than it was by Weintraub C. The second requirement is more elusive. Both the analogy with contract and the assumption of responsibility have been relied upon as a test of proximity in foreign courts as well as our own: 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.


This page was last edited on 26 Novemberat As a purchaser of additional shares in reliance on the auditor’s report, he stands in no different position from any other investing member of the public to whom the auditor owes no duty. There can be no distinction in law between the shareholder’s investment decision to sell the shares he has or to buy additional shares.

Lord Bridge of Harwich who delivered the leading judgment restated the so-called “Caparo test” which Bingham LJ had formulated below.

xickman From Wikipedia, the free encyclopedia. The content of the requirement of proximity, whatever language is used, is not, I think, capable of precise definition. Assuming without deciding that a claim by a shareholder to recover a loss suffered by selling his shares capparo an undervalue attributable to an undervaluation of the company’s assets in the auditor’s report could be sustained at all, it would not be by reason of any reliance by the shareholder on the auditor’s report in deciding to sell; the loss would be referable to the depreciatory effect of the report on the market value of the shares before ever the decision of the shareholder to sell was taken.

A ijdustries, on the other hand, resulting capaor the purchase of additional shares would result from a wholly independent transaction having no connection with the existing shareholding. Their Lordships consider that question to be of an intensely pragmatic character, well suited for gradual development but requiring most careful analysis. If the imposition of a duty on a defendant would be for any reason oppressive, or would expose him, in Cardozo C. In May Fidelity’s directors made a preliminary announcement in its annual profits for the year up to March.