Case Analysis: Caparo Industries Plc v. Dickman

Abstract

The Caparo Industries Plc v. Dickman was a landmark case regarding the test for a duty of care. In this case, the question as to when duty of care arises in cases of negligence was discussed in detail. In specific, the question was whether the auditors of the Company Fidelity Plc owed a duty of care to the prospective and the current investors especially Caparo Industries (who had a majority shares of 91.8%) in case of any action taken by Caparo Industries in pursuance of the misleading accounts produced by the auditors. The auditors were thus sued for negligence. In furtherance of the same, the House of Lords laid down the three-fold test. The case has also effectively redefines the neighbourhood principle as laid down in the case of Donoghue v. Stevenson. It also briefly takes into account the other tests for establishing duty of care i.e. Anns test laid down in Anns v. Merton London Borough Council. The question in the current case was thus the scope of the assumption of responsibility, and what the limits of liability ought to be. This paper is a humble effort to throw light on the same.