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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Moreover, the loss in 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, it might sensibly lie within the scope of the auditor’s duty to protect. The many decided cases on this subject, 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. The second requirement is more elusive.
It is always necessary to determine the scope of the duty by reference to the kind of damage from which A must take care to save B harmless.
House of Lords cases English tort case law in case law in British law. If the imposition of a duty on a defendant would be for any reason oppressive, or would expose him, in Cardozo C.
It sued Dickman for negligence in preparing the accounts and sought to recover its losses. A company called Fidelity plc, manufacturers of electrical equipment, was the target of a takeover by Caparo Industries plc. The shareholders of a company have a collective interest in the company’s proper management and in so far as xickman 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.
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.
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 ijdustries, is a careful analysis and weighing of the relevant competing considerations.
It is never sufficient to ask simply whether A owes B a duty of care. The requirement cannot, perhaps, be better put than it was by Weintraub C. 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.
At this point Caparo had begun buying up shares in large numbers. Previous cases on insustries misstatements had fallen under the principle of Hedley Byrne v Heller. The share price fell again. 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.
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. 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.
But the focus of the inquiry is on the closeness and directness of the relationship between the parties. There can be no distinction in law between the shareholder’s investment decision to sell the shares he has or to buy additional shares.
This page was last edited on 26 Novemberat If the statement was made negligently, then he will be liable for any loss which results. In some cases, and increasingly, reference is made to the voluntary assumption of responsibility: It is necessary to consider the particular circumstances and relationships which exist. There could not be a duty owed in respect of “liability in an indeterminate amount for an indeterminate time to an indeterminate class” Ultramares Corp v Touche per Cardozo C.
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: Leave was given to appeal.
This was the difference in value between the company as it had and what it would have had if the accounts had been accurate. The first is foreseeability.
Caparo Industries Plc v Dickman 
The inquiry involves a weighing of the relationship of the parties, the nature of the risk, and the public interest in the proposed solution. Heyman60 A. He used the example of a shareholder and his friend both looking at an account report. In March Fidelity had issued a profit warning, which had halved its share price. 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.
In March Fidelity had issued a profit warning, which had halved its share price. In May Fidelity’s industties made a preliminary announcement in its annual profits for the year up to March confirming the negative outlook.
So it would not be sensible or fair to say that the shareholder did either. 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.
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It sued Dickman for negligence in preparing the accounts and sought to recover its losses. The approach will vary according to the particular facts of the case, as is reflected in the varied language used. 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. Caparo reached a shareholding of This was overturned by the House of Lords, which unanimously held there was no duty of care.
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 dockman company itself and any loss suffered by the shareholders, e. The question in Caparo was the scope of the assumption of responsibility, c what the limits of liability ought to be.
From Wikipedia, the free encyclopedia. O’Connor LJ, in dissent, would have held that no duty was owed at all to either group.