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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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.

Caparo Industries Plc v Dickman [1990]

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.

By using this site, you agree to the Terms of Use and Privacy Policy. At this point Caparo had begun buying up shares in large numbers. Views Read Edit View history. The House of Lords, following the Court of Appeal, set out a “three-fold test”.

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 ca;aro them. Caparo reached a shareholding of Retrieved from ” https: If he sells at an undervalue he is entitled to recover the loss from the auditor.

Caparo Industries v Dickman

But because the auditors’ work is primarily intended to be for the benefit of the shareholders, and Caparo did in fact have a small stake when it saw the company accounts, its claim was good.


The argument then runs thus. I find it difficult to visualise a situation arising in the real world in which the individual shareholder could claim to have sustained dixkman loss in respect of his existing shareholding referable to the negligence of the auditor which could not be recouped by the company.

I believe this argument to be fallacious. Heyman60 A.

Caparo Industries plc v Dickman – Wikipedia

He used the example of a shareholder and his friend both looking at an account capato. 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.

In March Fidelity had issued a profit warning, which had halved its share price. 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: 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 first is foreseeability. Previous cases on negligent misstatements had fallen under the principle of Hedley Byrne v Heller.

In it he extrapolated from previously confusing cases what he thought were three main principles to be applied across the law of negligence for the duty of care. In some cases, and increasingly, reference is made to the voluntary assumption of responsibility: 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.

Caparo Industries v Dickman

Assuming without deciding that a claim by a shareholder to recover a loss suffered by selling his shares at an undervalue attributable to an undervaluation of the company’s assets in the auditor’s report could be sustained at all, it would not be by reason of any reliance by the shareholder on the auditor’s report in deciding to sell; the loss would be referable to the depreciatory effect of the report on the market value of the shares before ever the decision of the shareholder to sell was taken.


If the statement was made negligently, then he will be liable for any loss which results.

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.

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. Sometimes the alternative expression “neighbourhood” is used, as by Lord Reid in the Hedley Byrne case [] A. 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.

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

It may very well be that in tortious claims based on negligent misstatement these notions are particularly apposite. O’Connor LJ, in dissent, would have held that no duty was owed at all to either group. Retrieved from ” http: Leave was given to appeal. Applying those dikcman, the defendants owed no duty of care to potential investors in the company who might acquire shares in the company on the basis of indusyries audited accounts.