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Caparo Industries v Dickman

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FactsEdit

A company called Fidelity plc, manufacturers of electrical equipments, was the target of a takeover by Caparo Industries plc. Fidelity was not doing well. In March 1984 Fidelity had issued a profit warning, which had halved its share price. In May 1984 Fidelity's directors made a preliminary announcement in its annual profits for the year up to March confirming the negative outlook. The share price fell again. At this point Caparo had begun buying up shares in large numbers. In June 1984 the annual accounts, which were done with the help of the accountant Dickman, were issued to the shareholders, which now included Caparo. Caparo reached a shareholding of 29.9% of the company, at which point it made a general offer for the remaining shares, as the City Code's rules on takeovers required. Once it had control, Caparo found that Fidelity's accounts were in an even worse state than had been revealed by the directors or the auditors. It sued Dickman for negligence in preparing the accounts and sought to recover its losses.

IssueEdit

  1. What test should be employed in determining negligence?

DecisionEdit

Appeal allowed.

ReasonsEdit

Bridge of Harwich, writing for a unanimous court, states that the two part test employed in Dobson should not be used, and subsequently it has been abandoned in England. He reasons that when deeming if negligence has occurred one should compare cases to precedent cases with similar facts, rather than simply having an overarching test.

RatioEdit

England abandons the Anns test for negligence.

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