## Facts

- Caparo Industries plc brought a negligence claim against Dickman regarding the accuracy of audited accounts used during the purchase of shares.
- The Caparo case led to the formulation of a structured test for determining the existence of a duty of care in tort law.
- The test was developed amidst evolving case law, responding to the need for a clear standard in establishing negligence liability.
- The context includes factual review of the parties’ relationship, nature of harm, and circumstances of interaction.

## Issues

1. Whether the defendant owed a duty of care to the claimant given the circumstances of the case.
2. What criteria should guide the court in establishing the existence of such a duty of care in negligence.
3. Whether policy considerations, in conjunction with foreseeability and proximity, limit the imposition of liability in negligence cases.

## Decision

- The House of Lords articulated a three-stage test requiring foreseeability of damage, a relationship of proximity between claimant and defendant, and the imposition of a duty being fair, just, and reasonable.
- The Court emphasized the test is not a rigid rule, but a framework to guide analysis in varied factual contexts.
- It was held that the duty of care should not be automatically imposed merely because harm was foreseeable; proximity and policy considerations must also be satisfied.
- The outcome established that the auditors did not owe a duty of care to Caparo in these particular circumstances, due to the absence of sufficient proximity and the role of policy concerns.

## Legal Principles

- The Caparo test for duty of care in negligence comprises three elements: (1) the harm must be reasonably foreseeable; (2) the relationship between claimant and defendant must be sufficiently proximate; (3) it must be fair, just, and reasonable to impose a duty.
- Foreseeability alone is insufficient; proximity and fairness are separate and necessary inquiries.
- Policy considerations, such as floodgates arguments and impacts on public functions, play a role in determining the imposition of liability.
- The test is a flexible analytical framework rather than a strict checklist and requires contextual application.
- Alternatives, such as the assumption of responsibility approach and incremental development, may also guide the court where relevant.

## Conclusion

The Caparo test remains central to establishing duty of care in negligence, ensuring liability is grounded in foreseeability, proximity, and fairness, while allowing courts the flexibility to consider policy and contextual factors in each case.


Caparo Industries plc v Dickman [1990] 2 AC 605 (HL)