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.

Author: Akinot Arashir
Country: Serbia
Language: English (Spanish)
Genre: Education
Published (Last): 2 January 2018
Pages: 293
PDF File Size: 17.24 Mb
ePub File Size: 1.9 Mb
ISBN: 887-3-59213-511-7
Downloads: 22868
Price: Free* [*Free Regsitration Required]
Uploader: Zulucage

Caparo Industries Plc v Dickman [1990]

If the statement was made negligently, then he will be liable for any loss which results. Had Caparo been a simple outside investor, with no stake in the company, it would have had no claim. It is usually described as proximity, which means not simple physical proximity but extends to “such close and direct relations that the act ibdustries of directly affects a person whom induustries person alleged to be bound to take care dickmman know would be directly affected by his careless act: I believe this argument to be fallacious.

From Wikipedia, the free encyclopedia. The decision arose in the context of a negligent preparation of accounts for a company. 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.

Sometimes, as in the Hedley Byrne caseattention is concentrated on the existence of a special relationship. But for outside investors, a relationship of proximity would be “tenuous” at best, and that it would certainly not be “fair, just and reasonable”. In it he extrapolated from previously dickmqn cases what he thought were three main principles to industriies applied across the law of negligence for the duty of care. Cxparo was the difference in value between the company as it had and what it would have had if the accounts had been accurate.

But on this part of 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 dickmn his shares at an undervalue. The many decided cases on this indusries, if providing no simple ready-made solution to the question whether or not a duty of care exists, do indicate the requirements to be satisfied before a duty is found.


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 care, I do not understand how the scope of that duty can possibly extend beyond the protection of any individual shareholder from losses in the value of the shares which he holds.

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

industres Lord Bridge of Harwich who delivered the leading judgment restated the so-called “Caparo test” which Bingham LJ had formulated below. On a preliminary issue as to whether a duty of care existed in the circumstances as alleged by the plaintiff, the plaintiff was unsuccessful at first instance but was successful in the Court of Appeal in establishing a duty of care might exist in the circumstances. At this point Caparo had begun buying up shares in large numbers.

This was overturned by the House of Lords, which unanimously held there was no duty of care.

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

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

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 lndustries powers in general meeting to call the directors to book and to caprao that errors in management are corrected, the shareholders ought to be entitled to a remedy.

The argument then runs thus.


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. It sued Dickman for negligence in preparing the accounts and sought to recover its losses.

Retrieved from ” http: In March Fidelity had issued a profit warning, which had halved its share price. In May Fidelity’s directors made a preliminary announcement in its annual profits for the year up to March confirming the negative outlook. Leave was given to appeal. 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.

It is undustries necessary to determine indutries scope of the duty by reference to the inrustries of damage from which A must take care to save B harmless.

It follows, therefore, that the scope of the duty of care owed to him by the auditor extends to cover any loss sustained consequent on the purchase of additional shares in reliance on the auditor’s negligent 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: In some cases, and increasingly, reference is made to the voluntary assumption of responsibility: Retrieved from ” https: 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.

This confirmed the position was bad. 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.