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 requirement cannot, perhaps, be better put than it was by Weintraub C. 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. 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.

In June the annual accounts, which were done with the help of the accountant Dickman, were issued to the shareholders, which now included Caparo.

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: The second requirement is more elusive. From Wikipedia, the free encyclopedia. It is never sufficient to ask simply whether A owes B a duty dickmman care.

On the other hand, a duty will be the more readily found if the defendant is dicmkan 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. The argument then runs thus. 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 vv, 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.

It is necessary to consider the particular circumstances and relationships which exist. The approach will vary according to the particular facts of the case, as is reflected in the varied language used. Lord Bridge then proceeded to analyse the particular facts of the case based upon principles of proximity and relationship.

It follows, therefore, that the scope of the duty of care owed to him by the auditor extends to cover any didkman sustained consequent on the purchase of additional shares in reliance on the auditor’s negligent report.


Caparo Industries Plc v Dickman [1990]

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 industdies was to inform investors so that they could make choices within a company about how to use their shares.

It sued Dickman for negligence in preparing the accounts and sought to recover its losses. Sometimes, as in the Hedley Byrne caseattention is concentrated on the existence of a special relationship. If the imposition capqro a duty on a defendant would be for any reason oppressive, or would expose him, in Cardozo C. J New York Court of Appeals.

He referred to the Companies Act sections inustries auditors, and continued. It is always necessary to determine the scope of capago duty by reference to the kind of damage from which A must take care to save B harmless. 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: So it would not be sensible or fair to say that the shareholder did either.

Sometimes it is regarded as induustries that the parties’ relationship is “equivalent to contract” see the Hedley Byrne caseat p. Fidelity was not doing well. But the crucial question concerns the extent of the shareholder’s interest which the auditor has a duty to protect.

The question in Caparo was the scope of the assumption eickman responsibility, and what the limits of liability ought to be. This page was last edited on 26 Novemberat In June the annual accounts, which were done with the help of the accountant Dickman, were issued to the shareholders, which now included Caparo.

Caparo Industries plc v Dickman – Wikipedia

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

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 this respect between the various countries and the social conditions existing in them.


industgies Previous cases on negligent misstatements had fallen under the principle of Hedley Byrne v Heller. It is usually described as proximity, which means not simple physical proximity but extends to.

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 did not extend induwtries the provision of information to assist shareholders in the making of decisions as to industrise investment in the company. A company called Fidelity plc, manufacturers of electrical equipments, was the target of a takeover by Caparo Industries plc.

The decision arose in the context of a negligent preparation of accounts for a company. In March Fidelity had issued a profit warning, which had halved its share price. It is also common ground that reasonable foreseeability, although a necessary, is not a sufficient condition of the existence of a duty. Their Lordships consider that question to be of an intensely pragmatic character, well suited for gradual development but requiring most careful analysis.

If he sells at an undervalue he is entitled to recover the loss from the auditor. This was the difference in value between the company as it had and what it would have had if the accounts had been accurate.

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. 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 not be owed to an outside investor who had no shareholding.

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.

He used the example of a shareholder and his friend both looking at an account report. At this point Caparo had begun buying up shares in large numbers.

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.

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