Caparo Industries Plc v Dickman

JurisdictionEngland & Wales
Judgment Date29 July 1988
Judgment citation (vLex)[1988] EWCA Civ J0729-7
Docket Number88/0692
CourtCourt of Appeal (Civil Division)
Date29 July 1988
Caparo Industries Plc
Appellants (Plaintiffs)
Dickman & Ors.
Respondents (Defendants)

[1988] EWCA Civ J0729-7


Lord Justice O'Connor

Lord Justice Bingham


Lord Justice Taylor







(Sitting as a deputy High Court Judge)

Royal Courts of Justice

MR. C. BATHURST Q.C and MR. M. BRINDLE (instructed by Messrs Berwin Leighton) appeared on behalf of the Appellants (Plaintiffs).

MR. A.B. GOLDSMITH Q.C. and MR. S. MORIARTY (instructed by Messrs Freshfields) appeared on behalf of the Respondents (Defendants).


"It is not easy, or perhaps possible, to find a single proposition encapsulating a comprehensive rule to determine when persons are brought into a relationship which creates a duty of care upon those who make statements towards those who may act upon them and when persons are not brought into such a relationship."


Thus the Lord Ordinary in Twomax Ltd. v. Dickson, McFarlane & Robinson (1983) S.L.T. 98 at p.103. Others have spoken to similar effect. In Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465 Lord Hodson said (at p.514):

"I do not think it is possible to catalogue the special features which must be found to exist before the duty of care will arise in a given case",


and Lord Devlin (at p.529) said:

"I do not think it possible to formulate with exactitude all the conditions under which the law will in a specific case imply a voluntary undertaking any more than it is possible to formulate those in which the law will imply a contract."


In Mutual Life and Citizens' Assurance Co. Ltd. v. Evatt [1971] A.C. 793 at p.810 Lord Reid and Lord Morris of Borthy-y-Gest said:

"In our judgment it is not possible to lay down hard-and-fast rules as to when a duty of care arises in this or in any other class of case where negligence is alleged."


In Rowling v. Takaro Properties Ltd. [1988] 2 W.L.R.418 at p.429H Lord Keith of Kinkel emphasised the need for careful analysis case by case:

"It is at this stage that it is necessary, before concluding that a duty of care should be imposed, to consider all the relevant circumstances. One of the considerations underlying certain recent decisions of the House of Lords ( Governors of the Peabody Donation Fund v. Sir Lindsay Parkinson & Co. Ltd. [1985] A.C.210) and of the Privy Council ( Yuen Kun Yeu v. Attorney-General of Hong Kong [1987] 3 W.L.R.776) is the fear that a too literal application of the well-known observation of Lord Wilberforce in Anns v. Merton London Borough Council [1978] A.C.728, 751–752, may be productive of a failure to have regard to, and to analyse and weigh, all the relevant considerations in considering whether it is appropriate that a duty of care should be imposed. Their Lordships consider that question to be of an intensely pragmatic character, well suited for gradual development but requring most careful analysis. It is one upon which all common law jurisdictions can learn much from each other; because, apart from exceptional cases, no sensible distinction can be drawn in this respect between the various countries and the social conditions existing in them. It is incumbent upon the courts in different jurisdictions to be sensitive to each other's reactions; but what they are all searching for in others, and each of them striving to achieve, is a careful analysis and weighing of the relevant competing considerations."


The many decided cases on this subject, if providing no simple ready-made solution to the question whether or not a duty of care exists, do indicate the requirements to be satisfied before a duty is found.


The first is foreseability. It is not, and could not be, in issue between these parties that reasonable foreseability of harm is a necessary ingredient of a relationship in which a duty of care will arise: Yuen Kun Yeu v. Attorney-General of Hong Kong [1988] A.C. 175 at 192A. It is also common ground that reasonable foreseability, although a necessary, is not a sufficient condition of the existence of a duty. This, as Lord Keith of Kinkel observed in Hill v. Chief Constable of West Yorkshire [1988] 2 W.L.R. 1049 at 1052H, has been said almost too frequently to require repetition.


The second requirement is more elusive. It is usually described as proximity, which means not simple physical proximity but extends to "such close and direct relations that the act complained of directly affects a person whom the person alleged to be bound to take care would know would be directly affected by his careless act" ( Donoghue v. Stevenson [1932] A.C. 562 at 581 per Lord Atkin). Sometimes the alternative expression "neighbourhood" is used, as by Lord Reid in Hedley Byrne at p.483 and Lord Wilberforce in Anns v. Merton London Borough Council [1978] A.C. 728 at p. 751H, with more conscious reference to Lord Atkin's speech in the earlier case. Sometimes, as in Hedley Byrne, attention is concentrated on the existence of a special relationship. Sometimes it is regarded as significant that the parties' relationship is "equivalent to contract" ( Hedley Byrne at p.529, per Lord Devlin) or falls "only just short of a direct contractual relationship" (Junior Books v. Veitchi Ltd. [1983] 1 A.C. 520 at 533B per Lord Fraser) or is "as close as it could be short of actual privity of contract" ( ibid. at 456C, per Lord Roskill). In some cases, and increasingly, reference is made to the voluntary assumption of responsibility: Muirehead v. Industrial Tank Specialies Ltd. [1986] Q.B. 507 at p. 528A, per Goff L.J.; Yuen Kun Yeu (supra) at pp.l92F, 196G; Simaan General Contracting Co. v. Pilkington Glass Ltd. [1988] 2 W.L.R. 761 at pp. 776B, 779A; Greater Nottingham Co-operative Society Ltd. v. Cementation Piling and Foundations Ltd. (unreported, 23rd March 1988, C.A. Transcript at pp. 21H, 30A, 33B). Both the analogy with contract and the assumption of responsibility have been relied upon as a test of proximity in foreign courts as well as our own: see, for example, Glanzer v. Shepard (1922) 135 N.E. 275 at p.276; Ultramares Corporation v. Touche (1931) 174 N.E. 441 at p.446; State Street Trust Co. v. Ernst (1938) 15 N.E. 2 d.416 at p.418; Scott Group Ltd. v. McFarlane [1978] 1 N.Z.L.R. 553 at p.567. It may very well be that in tortious claims based on negligent mis-statement these notions are particularly apposite. The content of the requirement of proximity, whatever language is used, is not, I think, capable of precise definition. The approach will vary according to the particular facts of the case, as is reflected in the varied language used. But the focus of the enquiry is on the closeness and directness of the relationship between the parties. In determining this, foreseeability must, I think, play an important part: the more obvious it is that A's act or omission will cause harm to B, the less likely a court will be to hold that the relationship of A and B is insufficiently proximate to give rise to a duty of care.


The third requirement to be met before a duty of care will be held to be owed by A to B is that the court should find it just and reasonable to impose such a duty: Governors of the Peabody Donation Fund v. Sir Lindsay Parkinson & Co. Ltd. [1985] A.C. 210 at p.241, per Lord Keith. This requirement, I think, covers very much the same ground as Lord Wilberforce's second stage test in Anns (at p.752A) and what in cases such as Spartan Steel & Alloys Ltd. v. Martin & Co. (Contractors) Ltd. [1973] Q.B. 27 and McLoughlin v. O'Brian [1983] 1 A.C.410 was called policy. It was considerations of this kind which Lord Fraser of Tullybelton had in mind when he said that "some limit or control mechanism has to be imposed upon the liability of a wrongdoer towards those who have suffered economic loss in consequence of his negligence": Candlewood Navigation Corporation Ltd. v. Mitsui O.S.K. Lines Ltd. [1986] A.C. 1 at p.25A.


The requirement cannot, perhaps, be better put than it was by Weintraub C.J. in Goldberg v. Housing Auth. of Newark (1962) 38 N.J. 578, 583, 186 A 2d 291:

"Whether a duty exists is ultimately a question of fairness. The inquiry involves a weighing of the relationship of the parties, the nature of the risk, and the public interest in the proposed solution."


If the imposition of a duty on a defendant would be for any reason oppressive, or would expose him (in Cardozo C.J.'s famous phrase in Ultramares at p.444) "to a liability in an indeterminate amount for an indeterminate time to an indeterminate class", that will weigh heavily, probably conclusively, against the imposition of a duty (if it has not already shown a fatal lack of proximity). On the other hand, a duty will be the more readily found if the defendant is voluntarily exercising a professional skill for reward, if the victim of his carelessness has (in the absence of a duty) no means of redress, if the duty contended for (as in McLoughlin v. O'Brian) arises naturally from a duty which already exits or if the imposition of a duty is thought to promote some socially desirable objective.


At the heart of this case lies the role of the statutory auditor. That role is, I think, without close analogy. Its peculiar characteristics derive from the nature of the public limited liability company. The members, or shareholders, of the company are its owners. But they are too numerous, and in most cases too unskilled, to undertake the day to day management of that which they own. So responsibility for day to day management of the company is delegated to directors. The shareholders, despite their overall powers of control,...

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