CAPARO V DICKMAN

General principle:

Introduction of the Caparo-three stage test that represents the actual state of the law in identifying duty of care.

Name:

Caparo Indutries plc v Dickman [1990] UKHL 2

Facts:

Caparo Indutries plc sued the Defendant for negligent misstatement. The Claimant relied on the incorrect statutory audited accounts of the Company drawn by Dickman to purchase additional shares.

Ratio:

Three elements were needed to identify a duty of care:

1) Foreseeability – was the loss caused by the Defendant to the Claimant reasonably foreseeable?

2) Proximity – Is there legal closeness between the parties at the time the Defendant was negligent?

3) Fair, just and reasonable – Is it fair, just and reasonable to impose a duty to the Defendant? (Residual discretion left to the court in deciding the imposition of a duty).

Application:

Caparo Industries plc was entitled to rely on the accountant.

The new incremental approach

Caparo Industries plc v Dickman introduces the ‘incremental approach’ represents the main theory applied in court to identify the existence of duty of care. According to the so-called ‘incremental approach’, a duty of care exists in those situations that can be regarded as analogous to one in which a duty of care has already been recognised. In order to establish the presence of duty of care firstly, it has to be checked whether there is any existing legal authority for a duty of care in circumstances similar to the one under examination. If there is a duty recognised by earlier cases, then the court can follow them. If there is no existing legal authority, then all the three requirements set out in Caparo three-stage test should be used.

Analysis:

It was held that a duty of care was owed to third parties where there was foreseeable harm and owed a duty to take reasonable care was required to prevent the risk from occurring. It was this reasonable foreseeability which encouraged Lord Bridge in Caparo v Dickman to ‘create’ the tripartite test which asked whether duty of care should be imposed. This was recently clarified in the judgement of Robinson which stated they were purely meant to be guidelines as the “terms themselves are not helpful but constitute pragmatic labels”. It was this misunderstanding and the obscure theories of proximity that caused confusion and beleaguered the succeeding case law, clouding the “minds of the highest courts of the land”. The turbulence continued in the Hill case where the infamous term ‘blanket immunity’ was first used. In addition, Lord Keith stated the policy reasons for non-liability in negligence cases, which previously held that immunity was granted for all actions carried out during the investigation or prevention of crime. Coupled with the courts attempts to distinguish positive actions and omissions, first illustrated in Anns v Merton, these policy reasons demonstrate how Hill and case law alike are “riven with problems of interpretation”. The current position laid down by Robinson corrects and amends those principles, explaining the need for an incremental approach. First “enunciated by Lord Bridge [this notion] was called into question and ultimately disparaged”. Not only does this highlight how the courts have gone round in circles but also how the traditional route of precedent would have been best to use right from the start.