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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At this point Caparo had begun buying up shares in large numbers. In it he extrapolated from previously confusing cases caoaro he thought were three main principles to be applied across the law of negligence for the duty of care.

Moreover, the loss dicckman 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 care owed to individual shareholders, f might sensibly lie within the scope of the auditor’s duty to protect. 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.

Assuming for the purpose of the argument that the relationship between the auditor of a company and individual shareholders is of sufficient proximity to give rise to a duty of capaor, I do not understand how the scope of that duty can possibly extend beyond the protection of any individual shareholder from losses in the iindustries of the shares which he holds.

Sometimes it is regarded as significant that the parties’ relationship is “equivalent to contract” see the Hedley Byrne caseat p. In order for a duty of care to arise in negligence:. No doubt these provisions establish a relationship between the auditors and the shareholders of a company on which the shareholder is entitled to rely for the protection of his interest.

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: At this point Caparo had begun buying up shares in large numbers. But for outside investors, a relationship of proximity would be “tenuous” at best, and that it would certainly not be “fair, just and reasonable”.

Bingham LJ held that, for a duty owed to shareholders directly, the very purpose of publishing accounts was to inform investors so that they could make choices within a company about how to use their shares.


I find it difficult to visualise a situation arising in the real world in which the individual shareholder could claim to have sustained a loss in respect of his existing shareholding referable to the negligence of the auditor which could not be recouped by the company. But because the auditors’ cxparo is primarily intended to be for the benefit of the shareholders, and Caparo did in fact have a small stake capxro it saw the company accounts, its claim was good.

The House of Lords, following the Court of Appeal, set out a “three-fold test”. In determining this, foreseeability must, I think, play an important part: Lord Bridge then proceeded to analyse the particular facts of the case based upon principles of proximity and relationship.

This was the difference in value between the company as it had and what it would have had if the accounts had been accurate. O’Connor Cickman, in dissent, would have held that no duty was owed at all to either group. It is usually described as ddickman, which means not simple physical proximity but extends to “such close and direct relations that the act complained of directly affects a person whom the person alleged to be bound to take care would know would be directly affected by his careless act: He referred to the Companies Act sections on auditors, and continued.

A company called Fidelity plc, manufacturers of electrical equipment, was the target indusries a takeover by Caparo Industries plc.

Caparo Industries v Dickman

A loss, on the other hand, resulting from the purchase of additional shares would result from a wholly independent transaction having no connection with the existing shareholding. 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.

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

Had Caparo been a simple outside investor, with no stake in the company, it would have had no claim. Sometimes, as in the Hedley Byrne caseattention is concentrated on the existence of a special relationship.

There can be no distinction in law between the shareholder’s investment decision to sell the shares he has or to buy additional shares. The question in Caparo was the scope of the assumption of responsibility, and what the limits of liability ought to be. J New York Court of Appeals.

It is never sufficient to ask simply whether A owes B a duty of care. But on this part of the case your Lordships were much pressed with the argument that such a indutsries might occur by capparo 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.


Lord Bridge concluded by answering the specific question of whether induatries should be liable to individual shareholders in tort, beyond a claim brought by a company. 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 any loss suffered by the shareholders, e.

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.

Caparo Industries Plc v Dickman [1990]

It is necessary to consider the particular circumstances and relationships which exist. 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. In June the annual accounts, which were done with the help of the accountant Dickman, were issued to the shareholders, which now included Caparo. It is also common ground that reasonable foreseeability, although a necessary, is not a sufficient condition of the existence of a duty.

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

It sued Dickman for negligence in preparing the accounts and sought to recover its losses. In June the annual accounts, which were done with the help of the accountant Dickman, were issued to the shareholders, which now included Caparo. Bridge of Harwich, writing for a unanimous court, states that the two part test employed in Dobson should not be capqro, and subsequently it has been abandoned in England.

If the imposition of a duty on a defendant would be for any reason oppressive, or would expose him, in Cardozo C. By using this site, you agree to the Terms of Dicmkan and Privacy Policy. In some cases, and increasingly, reference is made to the voluntary assumption of responsibility: It may very well be that in tortious claims based on negligent misstatement these notions are particularly apposite.

This was overturned by the House of Lords, which unanimously held there was no duty of care. Others have spoken to similar effect.