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Caparo industries

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Caparo Industries Plc. v Dickman

[1990] 2 AC 605

This House of Lords decision established the 'tri-partite' test to be employed when considering an action for Delict (Scotland) where the situation is deemed to be a novel one (i.e. there are no factually similar cases which have previously been founded upon).

The 'Tri-Partite' Test

A delictual action, when employing the 'tri-partite' test, must satisfy three requirements:

  • the loss suffered must be of a resonably forseeable consequence of the defender's conduct
  • there must be a sufficient degree of proximity of relationship between the defender and the pursuer
  • public policy reasons must be satisfied i.e. is it "fair, just and reasonable" to impose liability

Facts

The existence of a duty of care, owed to Caparo Industries Plc by the company auditor Dickman, was unsuccessfully established by Caparo Industries Plc during the course of a negligence action. Caparo sought remedy from the courts for the negligence of the company auditor (Dickman) in the preparation of the accounts of Fidelity plc, which was identified by Caparo as a takeover candidate. It was discovered, upon completion of the takeover, that the accounts of Fidelity plc were in a worse state than Dickman had divulged and Caparo sought damages in relation to having purchased the shares of Fidelity plc at an inflated value.


Caparo were unsuccesful in establishing a claim in negligence as, ultimately, the House of Lords held that the issuing of company accounts (by Dickman) was intended to be for the use of company shareholders for the purpose of exercising their class rights in general meetings etc. The accounts were not, it was held, published for the intention of illustrating the potential of future investment by shareholders or other interested parties.


The main turning point of the decision was that Dickman had no knowledge as to the use that the published accounts would be put to, and thus there could be no proximity of relationship as the accounts were published and issued to shareholders as a whole.

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