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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Caparo Industries plc v Dickman – Wikipedia
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. Lord Bridge then proceeded to analyse the particular facts of the case based upon principles of proximity and relationship.
If the statement was made negligently, then he will be liable for any loss which results. 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.
It may very well be that in tortious claims based on negligent misstatement these notions are particularly apposite. 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 shareholder, qua shareholder, is entitled to rely on the auditor’s report as the basis of his investment decision to sell his existing shareholding.
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. In order for a duty of care to arise in negligence:. The share price fell again. Retrieved from ” https: This was overturned by the House of Lords, which unanimously held there was no duty of care.
The decision arose in the context of a negligent preparation of accounts for a company. 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.
Had Caparo been a simple outside investor, with no stake in the company, it would have had no claim. From Wikipedia, the free encyclopedia. Sometimes it is regarded as significant that the parties’ relationship is “equivalent to contract” see the Hedley Byrne caseat p.
The requirement cannot, perhaps, be better put than it was by Weintraub C. 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 
The inquiry involves a caparro of the relationship of the parties, the nature of the risk, and the public interest in the proposed solution. But once it had industdies, Caparo found that Fidelity’s accounts were in an even worse state than had been revealed by the directors or the auditors.
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. He thought that if both went and invested, the insustries who had no previous shareholding would certainly not have a sufficiently proximate relationship to the negligent auditor.
Caparo reached a shareholding of His decision was, following O’Connor LJ’s dissent in the Court of Appeal, that no duty was owed at all, either to existing shareholders or to future investors by a negligent auditor.
Caparo Industries v Dickman
The approach will vary according to the particular facts of the case, as is reflected in the varied language used. In June the annual accounts, which were done with the help of the accountant Dickman, were issued to the shareholders, which now included Caparo. A company called Fidelity plc, manufacturers of electrical equipment, was the target of a takeover by Caparo Industries plc.
Retrieved from ” http: 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: Assuming without deciding that a indusyries by a shareholder to recover a loss suffered by selling his shares at an undervalue attributable to an undervaluation capado the company’s assets in the auditor’s report could capaor 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 caparoo the report on the market value of the shares before ever the decision of the shareholder to sell was taken.
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. The first is foreseeability.
Sign In Don’t have an account? In determining this, foreseeability must, I think, play an important part: 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 vickman Court of Appeal in establishing a duty of indutries might exist in the circumstances.
So it would not be sensible or fair to say that the shareholder did either. Caparo reached a shareholding of 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.
But for outside investors, a relationship of proximity would be “tenuous” at best, and that it would certainly not be dkckman, just and reasonable”.
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 indystries existing shareholding referable to the negligence of the auditor which could not be recouped by the company. It is one upon which all common law jurisdictions can learn much from each other; because, apart from exceptional cases, f sensible distinction can be drawn in this respect between the various countries and the social conditions existing in them.
He used the example of a shareholder and his friend both looking at an account report. This confirmed the position was bad. But because the auditors’ work is primarily intended to be for the benefit industriies the shareholders, and Caparo did in fact have a small stake when it saw the company accounts, its claim was good. Contents [ show ]. Others have spoken to similar effect.
Fidelity was not doing well. It is usually described as proximity, which means not simple physical proximity but extends to “such close and direct relations that the act complained of directly affects a person whom industriws person alleged to be bound to take care would know would be directly affected by his careless act: House of Lords cases English tort case law in case law in British law.
Previous cases on cpaaro misstatements had fallen under the principle of Hedley Byrne v Heller.
Lord Bridge concluded by answering the specific xaparo of whether auditors should be liable to individual shareholders in tort, beyond a claim brought by a company.