Summary of Caparo Industries plc v Dickman [1990] 2 AC 605 (HL)

Caparo Industries plc v Dickman

Facts of the case
C, a company, owned shares in F plc. F’s accounts were audited by D and published. C then purchased further shares in F, ultimately taking over F. They suffered a substantial financial loss. C sued D in negligence, claiming that the shares in F had been purchased in reliance on D’s audit and that the financial position of F had been misstated (and was
thus misleading): in particular that an apparent pre-tax profit of £1.3m should have beenshown as a loss of over £400,000 and that had these accounts been correct, C would not have bought further shares in F.

The judge at first instance held that D did not owe C a duty of care either as ashareholder of F or as an investor holding no shares. On appeal by C, the Court of Appeal, by a majority, held that a duty of care was owed to C as shareholders but not as investors. D appealed to the House of Lords.

Legal principle
The House of Lords allowed the appeal, holding that D had not owed a duty of care to C in respect of its purchase of F’s shares (even though the affairs of the company were known to be such as to render it susceptible to an attempted takeover). To establish a claim in negligent misstatement, particularly with regard to the ‘special relationship’, the claimant must prove that the defendant must have known that:

■ the statement would be communicated to the claimant;
■ the statement would be made specifically in connection with a particular transaction;
■ the claimant would be very likely to rely upon it in deciding whether or not to proceed with the transaction.

Hey there, you’re welcome once again to Ansmyques.com (short for Answer my Questions) blog, you can type the name of any case you’re looking for in the search box below or above as we’ve made summary of many cases available. have a nice time.