Caparo Industries plc v Dickman [1990] 2 AC 605

Court: House of Lords

Basic Facts:

• C, a company, relied on an audit report from D that was inaccurate, leading to financial loss. C sued D for negligence.

Issue for the Court:

• On what grounds can Hedley Byrne liability be imposed?

Held: The House of Lords held in favour of defendants. The defendants did not owe Caparo, as future investors or existing shareholders of Fidelity, a duty of care

• Lord Bridge: There must be a relationship of proximity, with D aware that their advice would be relied upon by C in a specific transaction.

• Lord Oliver: The principle does not extend to general public statements but requires a voluntary assumption of responsibility by D towards C in the context of a specific transaction.

This created the 'Caparo test’ :

For a defendant to owe another a duty of care in the tort of negligence, the following requirements must be met:

1. It must be foreseeable that the defendant might cause the claimant loss;

2. There must be a sufficient degree of proximity between the parties;

3. It must be fair, just and reasonable to impose a duty.