Caparo Industries V Dickman FULL NOTES ON ALL ELEMENTS PDF

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This is a complete and detailed case analysis on the facts, judgement, test and significance of the case of CAPARO v DICKMAN, with full references and principles of other cases that have affected the application or added to the debate. ...

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CAPARO INDUSTRIES V DICKMAN (1990). Caparo Industries purchased shares in Fidelity Plc in reliance of the accounts that stated that the company had made a pre-tax profit of £1.3M. They bought the company on the strength of some reports that the company’s auditor had done on the financial strength of the company. In fact Fidelity, had made a loss of over £400,000. Once it had been sold, the buyer realised the financial state of company was a lot worse than had been suggested in the report. Caparo brought an action against the auditors claiming they were negligent in certifying the accounts and pure economic loss. The issue was that the Auditors had prepared the report for the company, not for it to be relied on by outsiders or future investors. They defended the claim that they didn’t owe a duty of care to the buyer in contract, contractual obligations were to the company. They said they shouldn’t owe a duty in tort because they couldn’t foresee that they would rely on the reports. The case went to the HOL. The buyer argued that there should be a duty of care under HANS V MERTON and they were neighbours for the neighbour principle. First opportunity for HOL to do something about the test in HANS V MERTON. HELD – no duty of care was owed. There was not sufficient proximity between CAPARO and the auditors since the auditors were not aware of the existence of CAPARO nor the purpose for which the accounts were being used by them. LORD BRIDGE – THE CAPARO TEST - “What emerges is that, in addition to the foreseeability of damage, necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the duty and the party to whom it is owed a relationship characterised by the law as one of "proximity" or "neighbourhood" and that the situation should be one in which the court considers it fair, just and reasonable that the law should impose a duty of a given scope upon the one party for the benefit of the other.”  THE THREE STAGE TEST – there has to be foreseeability of damage (DONOGHUE tells us that), needs to be proximity between party owing the duty and the party to whom it is owed (relationship needs to be close enough), had to be fair, just and reasonable. In relation to economic loss: “One of the most important distinctions always to be observed lies in the law's essentially different approach to the different kinds of damage which one party may have suffered in consequence of the acts or omissions of another. It is one thing to owe a duty of care to avoid causing injury to the person or property of others. It is quite another to avoid causing others to suffer purely economic loss… To hold the maker

of the statement to be under a duty of care in respect of the accuracy of the statement to all and sundry for any purpose for which they may choose to rely on it is not only to subject him, in the classic words of Cardozo C.J. to "liability in an indeterminate amount for an indeterminate time to an indeterminate class" (Ultramares Corporation v. Touche (1931). CAPARO v DICKMAN – LORD BRIDGE’S NEW TEST: ‘… The concepts of proximity and fairness … are not susceptible of any such precise definition as would be necessary to give them utility as practical tests, but amount in effect to little more than convenient labels to attach to the features of different specific situations…’ ‘I think the law has now moved in the direction of attaching greater significance to the more traditional categorisation of distinct and recognisable situations as guides to the existence, the scope and the limits of the varied duties of care which the law imposes.’

You can’t clearly define proximity and fairness. Lord bridge said that we should pay more attention to precedent. To what the law has previously categorised as recognised situations where there has been a duty of care. Looking at the closeness of the relationship between D and C. 

LORD OLIVER - “It is not a duty to take care in the abstract but a duty to avoid causing to the particular claimant damage of the particular kind which he has, in fact, sustained.”  Shouldn’t really justsay is there a duty of care, should say there is one for the particular claimant for the particular damage etc. LORD BRIDGE – “It is never sufficient to ask simply whether A. owes B. a duty of care. It is always necessary to determine the scope of the duty by reference to the kind of damage from which A. must take care to save B. harmless.” DUTY AND DAMAGE: Examples – Physical damage – MURPHY v BRENTWOOD DC (1990) – Murphy had to sell his house at a significant loss, as Brentwood District Council had failed to inspect the house’s foundations. Murphy sough to recover the cost from the council. ISSUES: Could murphy recover from his economic loss? NO recovery, pure economic loss – BECAUSE no liability in the absence of PHYSICAL INJURY. This was the final nail in the coffin for Anns, it overruled Anns (1978). Psychiatric injury – ALCOCK v CHIEF CONSTABLE OF SOUTH YORKSHIRE POLICE (1992) – In the Hillsborough football disaster, 95 people were killed and over 400 injured. The police authority admitted

liability for all of the claims resulting from the estates of the dead and the injured. This case was a test case for all the claims from people who saw but were not involved directly in the disaster, i.e the non-injured. It involved people who were both in the stadium or informed of the event by other or by the media. ISSUE: Under what circumstances could spectators of multiple descriptions recover. HELD: No recovery for any of the claimants, the classifications of primary and secondary victims were set out. REASONING: a primary victim is one who is a mediate or immediate participant in the incident, a secondary victim was one who is a passive bystander to the incident, all of the claimants in this case were classed as secondary victims, TO SUCCEED IN A CLAIM AS A SECONDARY VICTIM THEY MUST PROVE: 1) a close relationship of love and affection with the injured, 2) proximity to the incident in both time and space, 3) a means and suddenness of shock. MITCHELL V GLASGOW CITY COUNCIL (2009) – LORD ROGER - ‘If I negligently collide with a cyclist who is knocked unconscious, I must surely take reasonable care to move her from the path of oncoming vehicles. Whether I must also take reasonable care to prevent her belongings from being stolen may be more debatable.’ USE OF THE CAPARO TEST - Used for situation were it is an entirely different area of law or there is no precedent, or the new case cannot stretch the previous precedent to cover it to its needs. e.g. hoverboard users etc Alongside these 3 is the incremental approach – recognises that where a court is faced with a new situation it should look first to see if there is any binding precedent, alternatively if there are cases which aren’t binding because of different facts, then can the decisions on similar cases be extended to the new case. If there can be that stretching then there is no need to go straight to the CAPARO test. REASONALBE FORESEEABILITY OF HARM - ‘A duty of care is only imposed where it is reasonably foreseeable that the defendant’s actions may injure a class of persons which includes the claimant.’  Asks whether a D has actually or reasonably to have foreseen there would be consequences from their actions. Must be a class of persons that are reasonably foreseen to be affected.  Just have to prove they are included in the class of people that could be harmed.

C has to establish – that the duty was owed to them: PALSGRAF v LONG ISLAND RAILWORD CO. (1928), BOURHILL V YOUNG (1943), HALEY v LONDON ELECTRICITY BOARD (1965), HAYNES V HARWOOD (1935).  ‘Negligence in the air will not do; negligence, in order to give a cause of action, must be the neglect of some duty owed to the person who makes the claim.’ THE CASES: HALEY v LONDON ELECTRICITY BOARD (1965) - Workers employed by the defendant had excavated a trench in the footpath. They erected signs on the roadway to keep cars away from the kerb so as to allow pedestrians to pass by walking on the road. The workers surrounded the trench with implements to guard it and show pedestrians that it was there. The plaintiff, a blind man, was walking along the footpath with his white stick in front of him. The plaintiff could not see the trench in front of him and ended up tripping over the implements. He struck his head on the ground and became deaf as a consequence. He sought to sue the defendant in negligence.

Issue: was the injury sustained by C reasonably foreseeable, making the defendant liable? HOL said (bearing in mind the population of London and disabled population) that it was reasonably foreseeable. So they did owe him a duty of care. (Lord Reid): There is evidence in this case about the number of blind people in London, the number of which appears to be 1 in 500. By no means are all sufficiently skilled or confident to venture out alone, but the number who do so must be quite large. On the whole, blind people do safely avoid all ordinary obstacles on pavements. However, a low obstacle in an unusual place – such as here - always poses a grave danger, even to the most skilled blind person. In the circumstances, a light fence 60cm high would have been an adequate warning. No doubt there are many places open to the public where for one reason or another, people would be surprised to see a blind person walking alone. However, a city pavement, let alone a residential street, is not one of them. It is quite impossible to say that it is not reasonably foreseeable that a blind person may pass along a particular pavement during any given day. The ordinary principles of common law, fundamentally dependent on what a reasonable man, careful of his neighbour’s safety, would do in the position of the defendant, must apply. “A measure of care appropriate to the inability or disability of those who are immature or feeble in mind or body is due from others

who know of, or ought to anticipate, the presence of such persons within the scope and hazard of their operations” . The defendant owed to a duty of care to the disabled who would come across their operations – Plaintiff successful. BOURHILL V YOUNG (1943) – A pregnant lady (bourhill), upon disembarking from a tram, went to collect her luggage from a luggage storage area. At the luggage storage area, she heard a motorcyclist crash (50ft away); the motorcyclist was killed in the case, and she later saw blood on the road, the preganat lady suffered nervous shock and later gave birth to a stillborn child. ISSUE: COULD THE CLAIMANT RECOVER FROM THE ESTATE OF THE MOTORCYCLIST? HELD: no recovery – BECAUSE there was no foreseeable harm or relationship between the motorcyclist and bourhill, nor was their a close relationship. ‘The four cornerstones of tort law within which we all work are the duty of care, breach of duty, causation and damage. We know them so well they are like members of our family. Yet they are sometimes unpredictable because each time the facts of a new case are put before the judges who interpret them, they may be shifted forwards or backwards a little to cope with the justice of the case. The tool which judges use to move the cornerstones of tort is the crowbar marked with the manufacturers’ label “foreseeability plc.”’ -- Ritchie, A., (2009) ‘Damages for self-harm after suffering tortious injury’ JPIL 20 For physical damage/personal injury, reasonable foreseeability is probably enough: MURPHY V BRENTWOOD DC (1990); cf. MARC RICH & CO. v BISHOP ROCK MARINE (1995) - where it was stated that proximity, and the requirements of fairness, justice and reasonableness still had to be met – C lost cargo when a ship sank, D (ship classification society) allegedly been negligent in certifying ship sea worth, C sued for damages. ISSUE: should a duty of care be imposed? HELD: D didn’t owe a duty of care, D were a non-profit making organisation carrying out classification as public good, would not be fair, just and reasonable to impose duty (it may endanger existence of such organisations). MITCHELL v GLASGOW CITY COUNCIL (2009) – LORD HOPE: ‘the concept of reasonable foreseeability embraces a wide range of degrees of possibility, from the highly probable to the possible but highly improbable. As the possible adverse consequences of carelessness increase in seriousness, so will a lesser degree of likelihood of occurrence suffice to satisfy the test of reasonable foreseeability.’ - DOESN’T MEAN MORE LIKELY THAN NOT, OR 99% OR HIGHER.

- IT IS ABOUT REASONABLY FORESEEABLE. - ALWAYS ROOM FOR ARGUMENT. ‘A relationship of characterised by the law as one of proximity or neighbourhood.’ - Might think about physical closeness. Spatial proximity is a factor but it not enough. - LEGAL PROXIMITY. - Level of closeness of relationship - Not really concerned with physical distance - Means different things in different situations:

1st factor which affects proximity is the type of harm: Psychiatric injury requires extra evidence – the law is suspicious of this injury o 2nd factor that affects proximity is: how the harm is caused. If its indirect harm then it would be harder to establish proximity. o Another way proximity can be difficult is in omissions. Harm involving a 3rd party. MITCHELL – Drummond went round with bar to kill him. His relatives sued the council - even though it was D. the council failed to warn Mitchell. Indirect. Made it difficult for his family to prove proximity. Also difficult to establish a duty of care on harm that was inflicted by a third party. o

PROXIMITY:  2 particularly difficult aspects of proximity: – where C.’s loss is caused by D.’s failure to control a third party; and – where C.’s loss is caused by an omission by D. USE OF THE CAPARO TEST: ‘FAIR, JUST AND REASONABLE’: ‘the court considers it fair, just and reasonable that the law should impose a duty of a given scope on the one party for the benefit of another.’ - Each of those terms is subject to argue their extent. - So that means lawyers do argue about what is fair just and reasonable. - There is still some degree of flexibility as to how this is applied. THIS IS FORESHADOWED IN THE CASE OF PEABODY DONATION FUND V SIR LINDSAY PARKINSON & CO. LTD (1984) – LORD KEITH: ‘in determining whether or not a duty of care of particular scope was

incumbent on a defendant it is material to take into consideration whether it is just and reasonable that it should be so.’ More recently in MITCHELL v GLASGOW CITY COUNCIL (2009) – LORD BROWN - ‘Would that be fair, just and reasonable? More colloquially – but to my mind no less accurately – would this be a good idea?’ - Need to think about common sense arguments – where does tort law draw a line? LORD HOPE LOOKED AT BOTH SIDES OF THE ARGUMENT - ‘It really is no more than an expression of the idea that lies at the heart of every judgment about legal policy. If liability is to attach, it should be in situations where this is readily understandable because, looking at both sides of the argument, it is fair and reasonable that there should be liability.’ It is about where tort draws the line – should they owe a duty of care or not in the situation. NO DUTY ON POLICY GROUNDS – CONTROL MAINTAINED: WRONGFUL BIRTH – MCFARLANE V TAYSIDE HEALTH BOARD (2000) POLICE INVESTIGATIONS – police do not owe a duty of care to potential victims of crime fro failing to apprehend offenders. o HILL V CHIEF CONSTABLE OF WEST YORKSHIRE POLICE (1988) – the final victim of the Yorkshire ripper told the police that she suspected she would be killed before it happened. ISSUE: Could her estate claim damage – HELD: NO DUTY THERE –because the police have no duty to prevent crime to this extent, police should be able to make their own decisions. o OR o MICHAEL V CHIEF CONTSTABLE OF SOUTH WALES (2015) - she was being harassed by former partner, she rang police. They passed her around and didn’t get to her in time and her ex partner killed her. Supreme court held there was no duty as it would not be fair, just and reasonable. AUDITORS LIABILITY TO PROSPECTIVE INVESTORS – CAPARO V DICKMAN (1990)

LANDLORD’S DUTY TO PROTECT TENANTS FROM NEIGHBOURS: MITCHELL V GLASGOW CITY COUNCIL (2009).

DUTY ON POLICY GROUNDS – SOFTENING OF APPROACH? –  Referees of adult amateur rugby matches: VOWLES V EVANS – before this there was no duty of care for this. Suffered spinal injury and sued referee. Applied caparo v dickman. It is reasonable, there is proximity and it would be fair just and reaosnable to impose a duty on him to take care of players.  Fire brigade (in limited circumstance: CAPITAL & COUNTIES V HAMPSHIRE COURT COUNCIL (1997) – duty to not make the situation worse, for example turning up to a fie and turning sprinklers on, making the fire spread. 

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Negligent references: SPRING v GUARDIAN ASSURANCE PLC (1994) HL – THEIR WAS A DUTY ON SOMEONE COMPLING A REFERENCE FOR ANOTHER TO PROVIDE REASONABLE CARE WHEN WRITING A REFERENCE. solicitors and beneficiaries: WHITE V JONES (1995) HL Concurrent liability in contract and tort: HENDERSON V MERRETT SYNDICATES LIMITED (1994)

MITCHELL V GLASGOW CITY COUNCIL (2002) – LORD HOPE - ‘Defensive measures against the risk of legal proceedings would be likely to create a practice of giving warnings as a matter of routine. Many of them would be for no good purpose, while others would risk causing undue alarm or reveal the taking of steps that would be best kept confidential.’  DEFENSIVE PRACTICE – if there is duty of care is owed – might make the people who owe the duty to not to do things anymore e.g. a doctor might not want to be a doctor anymore because of risk of being sued – and it would mean everyone will start suing everyone for minor things  DON’T WANT TO SITUATION WHEN EVERY THING IS OWED A DUTY OF CARE – THEN IT WOULD NEAR IMPOSSIBLE TO KNOW WHAT YOUR LIMITS ARE. USE OF THE CAPARO TEST: WIDER IMPLICATIONS: ULTRAMARES CORPORATION V TOUCHE (1931) – CARDOZO – undesirability of exposing D to a potential liability - ‘‘in an indeterminate amount for an indeterminate time to an indeterminate class.’

“One of the most important distinctions always to be observed lies in the law's essentially different approach to the different kinds of damage which one party may have suffered in consequence of the acts or omissions of another. It is one thing to owe a duty of care to avoid causing injury to the person or property of others. It is quite another to avoid causing others to suffer purely economic loss… To hold the maker of the statement to be under a duty of care in respect of the accuracy of the statement to all and sundry for any purpose for which they may choose to rely on it is not only to subject him, in the classic words of Cardozo C.J. to "liability in an indeterminate amount for an indeterminate time to an indeterminate class" Courts are also concerned – they don’t want to make mistakes for the past. That there are duties for everything and no one knows how far those duties stretch. This would take it back to the days of HANS V MERTON. Careful not to expose the D to limit their liability - Could be unreasonably wide. MORE RECENTLY IN MITCHELL V GLASGOW CITY COUNCIL – LORD HOPE: – ‘The implications [of a duty] are complex and far-reaching.’ – Social landlords/private landlords – Tenants/others in the community IDEA OF REASONABILITY OF THIRD PARTY – takes in to account of the CAPARO test and acts against omissions and third party acts - shows that the courts will consider different factors and take these in to account MITCHELL V GLASGOW CITY COUNCIL (2009) – LORD ROGER – regarding the autonomy of C -- ‘Imposing ... a duty would tend to run counter to the thrust of the housing legislation towards recognising public sector tenants, in general, as responsible individuals with rights, rather than a class of people who could not be expected to look after their own interests.’  Assumes that adults can take care of themselves – should take their own precautions. Shouldn’t need to be warned about every potential risks. AUTONOMY OF TORTFEASORS / THIRD PARTIES - HALE - ‘Anti-social tenants are presumed to be grown-ups with minds of their own who can make their own choic...