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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Fidelity was not doing well. Lord Bridge concluded by answering the specific question of whether auditors should be liable to individual shareholders in tort, beyond a claim brought by a company. 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. In order for a duty of care to arise in negligence:.

Retrieved from ” https: It is also common ground that reasonable foreseeability, although a necessary, is not industrids sufficient condition of the existence of a duty.

The argument then runs thus. So it would not be sensible or fair to say that the shareholder did either. In determining this, foreseeability must, I think, play an important part: Sign Industgies Don’t have an account? It is not, and could not 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: He thought that if both went and invested, the friend who had no previous shareholding would certainly not have a sufficiently proximate relationship to the negligent auditor.

There can be no distinction in law between the shareholder’s investment decision to sell the shares he has or to buy additional shares.

It sued Dickman for negligence in preparing the accounts and sought to recover its losses. Had Caparo been a simple outside industriies, with no stake in the company, it would have had no claim.


In June the annual accounts, which were done with the help of the accountant Dickman, were issued to the shareholders, which now included Caparo. His decision was, following O’Connor LJ’s dissent in the Court of Appeal, that no duty was owed at all, either to existing shareholders or to future investors by a negligent auditor.

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

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 for outside investors, a relationship of proximity would be “tenuous” at best, and that it would certainly not be “fair, just and reasonable”.

The approach will vary according to the particular facts of the case, as is reflected in the varied language used. He referred to the Companies Act sections on auditors, ca;aro continued. 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.

The question in Caparo was the scope of the assumption of responsibility, and what the limits of liability ought to be. The content of industriees requirement of proximity, whatever language is used, is not, I think, capable of precise definition.

The share price fell again.

Caparo Industries Plc v Dickman [1990]

Contents [ show ]. It is never sufficient to ask simply whether A owes B a duty of care. 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 dickmzn 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 decision arose in the context of a negligent preparation of accounts for a company. A company called Fidelity plc, manufacturers of electrical equipments, was the target of a takeover by Caparo Industries plc.

Caparo Industries v Dickman | Case Brief Wiki | FANDOM powered by Wikia

Sometimes, as in the Hedley Byrne caseattention is concentrated on the existence of a special relationship. This page was last caprao on 26 Novemberat It may very well be that in tortious claims based on negligent misstatement these notions are particularly apposite.

The majority of the Court of Appeal Bingham Capafo and Taylor LJ, O’Connor LJ dissenting held that a duty ihdustries 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 not be owed to an outside investor who had no shareholding.

I believe this argument to be fallacious. Their Lordships consider that question to be of an intensely pragmatic character, well suited for gradual development but requiring most careful analysis.

Leave was given to appeal. In May Fidelity’s directors made a preliminary announcement in its annual profits for the year up to March confirming the negative outlook.

Caparo Industries v Dickman

If he sells at an undervalue he is entitled to recover the loss from the auditor. It sued Dickman for negligence in preparing the accounts and sought to recover its losses. It is one upon which all common law jurisdictions can learn much from each other; because, apart from exceptional cases, no sensible distinction can be drawn in fickman respect between the various countries and the social conditions existing in them.

The inquiry involves a weighing of the relationship of the parties, the nature of the risk, and the public interest in the proposed solution.