Reference no: EM133799255

Question

Caparoindustires plc v dickman case

This is a well known british case decided by the house of lords, their high courts, capraro industries v dickman. Caprao was a shareholder in a company called fidelity. Dickman was the auditor for the fidelity. Dickman prepared audited financial statement that was supposed to be true and accurate. On the basis that the accounts capraro , caparo invested more money in fidelity. Essentially bought out the rest of the shares in fidelity. Once they have the ownership they can look into the book properly and found out that the audited accounts were wrong. Again they looked around and blamed the auditors. They sued the auditor on ground of negligent misstatement. Three question that we have in tort for negligence misstatement was harm foreseeable in term of duty of care, was the relationship close enough and is it just and equitable to impose liability on public policy. Court decided on this on public policy. Said the duty owed to the company not individual shareholder. If were to owed to shareholders it would be current shareholders. The relationship is not close enough and therefore isnt fair to impose a liability. We can see that court on public policy grounds saying let keep this narrow, keep it to the company and should be to the bottom of shareholders as well. The point of audit is to enable the current shareholder to understand what is happening in the company.