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Caparo Industries PLC v Dickman
Court
House of Lords
Decided
8 February 1990
Citation(s)
[1990] ALL ER 568, [1990] 2 AC 605
Court membership
Judges sitting
Lord Bridge of Harwich
Lord Roskill
Lord Ackner
Lord Oliver of Aylmerton
Lord Jauncey of Tullichettle
Case opinions
Decision by
Lord Bridge
Concurrence
Lord Roskill, Lord Ackner, Lord Oliver and Lord Jauncey
Keywords
negligence
three-fold test
negligent misstatement
Caparo Industries PLC v Dickman [1990] UKHL 2 is a leading English tort law case on the test for a duty of care. The House of Lords, following the Court of Appeal, set out a "three-fold test". In order for a duty of care to arise in negligence:
harm must be reasonably foreseeable as a potential result of the defendant's conduct (as established in Donoghue v Stevenson),
the parties must be in a relationship of proximity, and
it must be fair, just and reasonable to impose liability.
The final conclusion arose in the context of a negligent preparation of accounts for a company. Previous cases on negligent misstatements had fallen under the principle of Hedley Byrne v Heller.[1] This stated that when a person makes a statement, he voluntarily assumes responsibility to the person he makes it to (or those who were in his contemplation). If the statement was made negligently, then he will be liable for any loss which results. The question in Caparo was the scope of the assumption of responsibility, and what the limits of liability ought to be.
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. Lord Justice Bingham held that as a small shareholder, Caparo was entitled to rely on the accounts. Had Caparo been a simple outside investor, with no stake in the company, it would have had no claim. 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. This was overturned by the House of Lords, which unanimously held there was no duty of care.
^Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] UKHL 4, [1964] AC 465 (28 May 1963)
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Council CaparoIndustriesplcvDickman Murphy v Brentwood District Council Hedley Byrne & Co Ltd v Heller & Partners Ltd Smith v Eric S Bush White v Jones...
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