Categories of Negligence and Duties of Care: Caparo in the House of Lords
| Published date | 01 November 1990 |
| DOI | http://doi.org/10.1111/j.1468-2230.1990.tb01846.x |
| Date | 01 November 1990 |
The
Modern
Law
Review [Vol.
53
as a more realistic and egalitarian understanding of the extent to which the Crown, in
common with all other legal persons, is to be bound by statute. After all, if it is to be
the intention of the legislature that contrary to the notion of equality before the law, the
Crown alone is to be
granted
special privileges and immunities, then, as has been argued
in
another Australian case,46 it is surely not overly burdensome to insist that the
legislature clearly indicate that intention. In default of which, in any event, it ought not
to be for the judiciary to presume strictly, without any consideration of the context in
which an enactment was made, that the Crown has been furnished with immunity.
Categories
of
Negligence and Duties
of
Care: Caparo in
the House
of
Lords
Robyn
Martin*
It was pointed out in the Likierman Report’ that as the law stands on joint and several
liability, auditors might well bear the brunt of liability for the fraudulent activities
of
company
directors. Such might well have been the fate of the defendants in
Caparo
v
Dickman.’
It was claimed by the plaintiffs that the defendant auditors were negligent in basing their
audit on what was allegedly fraudulent misrepresentation on the part of the directors of
a company. The plaintiffs, who were already shareholders of the company and therefore
entitled to a copy of the auditors’ rep~rt,~ relied on the audited accounts in purchasing
further shares. Profits were not as high as projected, the company’s share price fell
significantly, and the plaintiffs suffered economic loss.
The plaintiffs’ claim as investors received no support at any level of the proceedings,
but the Court of Appeal accepted that there was sufficient proximity between auditors
and shareholders to warrant a duty of care with respect to the decision by a shareholder
to further in~est.~ The House of Lords on appeal rejected such a duty. In the course
of
the judgment the House looked, once again, at the requirements for duty of care in cases
of negligent statements.
Two
Approaches to Duty: Specific Situation
or
Single Principle
In cases preceding
Donoghue
v
Stevenson5
there was found to be no general duty not to
cause damage by negligence, but rather the existence of a duty was recognised only in
specific situations. However by
1932
in
Donoghue
v
Stevenson,
the House of Lords was
prepared to recognise a general duty of care to one’s neighbour. The principle was refined
and reformulated into a two-stage test in
Anns
v
Merron
LBC,6
where the neighbour
principle made up the first stage of the test, and a qualification that the duty might be
negatived where questions of policy dictated provided the second. The test was originally
46
*Lecturer in
Law,
University of Bristol.
Townsville Hospitals
Board
v
Townsville
City
Council
[I9821 42
ALR
319, 325-6
(per Gibbs CJ).
Likierman Report
on
Professional Liability
(HMSO,
1989).
Companies Act
1985,
s
240.
1
2
[1990]
2
WLR
358.
3
4 [1988] 2
WLR
316.
5
[1932]
AC
562.
6 [1978]
AC
728.
824
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