Caparo three-stage test: when does a professional owe a duty of care?

Reviewed by Matthew Bartlett, Director · Last reviewed 2026-06-30

What the Caparo test is and why it matters in PI

The Caparo three-stage test comes from the House of Lords decision in Caparo Industries plc v Dickman [1990] 2 AC 605. It is the framework English courts have used for the better part of three decades to decide whether one party owes another a duty of care in the tort of negligence. For professionals carrying indemnity insurance — solicitors, accountants, surveyors, architects, financial advisers — the test sits at the entrance to almost every third-party claim. Before damages, before quantum, before causation, a claimant has to establish that the professional owed them a duty in the first place. Caparo is the gate.

The facts of Caparo

Caparo Industries acquired shares in Fidelity plc in reliance on Fidelity's audited statutory accounts, then launched a takeover bid. After completing the acquisition Caparo alleged the accounts had been negligently prepared by the auditors, Touche Ross (Mr Dickman was the engagement partner). Caparo sued the auditors directly. The Lords held that the auditors owed no duty of care to Caparo. The statutory audit was prepared for the shareholders as a body so that they could exercise governance rights — not for individual investors making investment decisions, and not for takeover bidders. The class of potential claimants was too wide and the purpose of the report was different from the use Caparo put it to.

The three limbs

Lord Bridge distilled the duty inquiry into three elements:

• Foreseeability of damage — was it reasonably foreseeable that careless work would cause loss to the claimant?
• Proximity — is there a sufficiently close and direct relationship between the parties? Proximity is not physical closeness; it is legal nearness, often grounded in an assumption of responsibility for known purposes.
• Fair, just and reasonable — would imposing a duty in this situation be a sensible extension of the law, taking account of policy, the indeterminacy of the class of potential claimants and the wider consequences?

The modern position after Robinson v West Yorkshire

The Supreme Court revisited the duty question in Robinson v Chief Constable of West Yorkshire Police [2018] UKSC 4. Lord Reed clarified that Caparo was never meant to be a universal test applied from scratch to every claim. Where the situation falls within an established category of duty — a surveyor reporting to a known client, a solicitor advising an identified beneficiary, a doctor treating a patient — the duty is settled and the court does not start with the three-stage test. Caparo applies to novel situations, where no analogous category exists. Even then, the court proceeds incrementally, by analogy with established categories rather than as a free-standing policy exercise.

What this means for PI claims

The practical effect for professionals is that most claims by a direct client will not turn on Caparo at all — duty is taken as read. The disputes tend to be at the edges: third-party lenders relying on a valuation, sub-purchasers, beneficiaries of a will, regulators, claimants further down a chain. There Caparo, refracted through Robinson, still does the work.

Worked example — a homebuyer survey

A surveyor produces a homebuyer report for Buyer A on a property in Bristol.

• Buyer A — the report was commissioned by Buyer A for the purpose of informing a purchase decision. This sits squarely within an established category (analogous to Smith v Eric S Bush [1990] 1 AC 831). Duty is established without needing Caparo.
• Buyer A's lender — if the surveyor knew the report would be passed to a named lender to support the mortgage advance, proximity is likely to be made out and a duty is generally owed. If the surveyor had no knowledge of the lender, the position is more difficult and turns on what the surveyor was told about the report's purpose.
• Sub-purchaser B — Buyer A sells the property to B six months later, and B obtains a copy of the original report. Foreseeability that someone might rely on an old report is arguable but proximity is weak — the surveyor never assumed responsibility to B, did not know B existed, and the report was for a different transaction. Imposing a duty would also expose the surveyor to an indeterminate class of future purchasers. A court is unlikely to find a duty on Caparo principles, and there is no established category by analogy.

For more on the source authority see Caparo v Dickman, and for the related principle on negligent misstatement see Hedley Byrne v Heller. Sector-specific application is covered in the Apex pillar guides for surveyors, solicitors and accountants.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952.