Caparo Industries pIc v Dickman  2 AC 605 House of LordsCaparo Industries purchased shares in Fidelity Plc in reliance of the accounts which stated that the company had made a pre-tax profit of £1.3M. Caparo v Dickman  1 All ER 568 has effectively redefined the ‘neighbourhood principle’ as enunciated by Lord Atkin in the case of Donoghue v Stevenson  AC 562.. The Caparo v Dickman three-stage test can be used to establish duty of care : 1) Could the defendant has reasonably foreseen that his or her negligence would harm the claimant?
2) Is there a sufficiently proximate relationship between the claimant and the defendant? In fact Fidelity had made a loss of over £400,000. Despite the efforts to allay fears of the floodgates, the Anns test was still considered too wide. 3) Is it fair, just and reasonable to impose a duty? The Significance of Caparo v Dickman. In Caparo, the House of Lords overruled Anns and went back to the incremental approach whereby the claimant may only bring their action where they can establish an existing duty situation. Caparo brought an action against the auditors claiming they were negligent In the Caparo Industries v Dickman (1990)case, the D- an accountancy firm which had audited the C’s annual accounts made a negligent error and the claimant, who was both a shareholder and an investor, bought more shares on the strength of the accounts and consequently suffered a loss. The reason given which the court arrived at this conclusion was that Caparo did not fall within the reason for making the report.
In Caparo Industries v Dickman, the court arrived at the conclusion that the proximity between Caparo and auditors was not sufficient.