Caparo v Dickman (1990) HL

Issue

Duties Owed to Others

Court:

Civil

Act, Regulation or Reference:

 

Date: 1990

Facts

Dickman (D) auditors of company accounts. Caparo (C) bought shares and then discovered that the accounts did not show the company had been making a loss. C alleged that in negligence a duty was owed to Caparo.

The Decision

Approving a dictum of the High Court of Australia (Brennan J) in Sutherland Shire Council v Heyman (1985), that the law should preferably develop novel categories of negligence incrementally and by analogy with established categories, rather than by a massive extension of a prima facie duty of care restrained only by indefinable "considerations which ought to negative or limit the scope of the duty or the class of person to whom it is owed". D wins

Notes

The common law duty of care owed by employers to their employees is founded on the contractual relationship between them.
The duty owed to others that may be affected by the employer’s activities is not defined with the same precision. It is based on the principles of negligence in that a duty of care must first be established.
This used to be decided on the basis of the neighbour principle. However, the notion of reasonable foresight is unquestionably too wide and has caused problems in civil actions in many areas of tort e.g. actions for nervous shock. It has therefore been further refined.
Steps to establish duty of care are (at the time of writing);

a) Is there an existing case, which would hold there to be a duty of care? If not then ask three questions.

1. Was loss to the claimant foreseeable?

2. Was there sufficient proximity between the parties?

3. Is it fair, just and reasonable to impose a duty of care?

The last step brings in the concept of policy in which the courts have to balance the needs of an injured claimant against that of opening the “floodgates” and creating an indeterminate liability.