Tort Law

The Three-Stage Test for Duty of Care Explained

Caparo's three-stage test is the gateway to every negligence claim. Here's exactly how it works and where students go wrong.

The three-stage test for duty of care comes from Caparo Industries plc v Dickman [1990] 2 AC 605. If you're studying tort law at any level, you will meet this case. You need to understand not just what the three stages are, but why the courts use them the way they do, and what happens when a scenario doesn't fit neatly.

What the Test Actually Says

The House of Lords in Caparo identified three requirements that must all be satisfied before a duty of care will be imposed:

1. Foreseeability of damage to the claimant
2. Proximity between claimant and defendant
3. It must be fair, just and reasonable to impose a duty

All three must be met. A defendant who satisfies two out of three owes no duty. Courts don't average it out.

The backdrop matters here. Caparo arose from a takeover bid. Caparo bought shares in Fidelity plc relying on audited accounts prepared by Dickman's firm. The accounts were wrong, the company was in a far worse state than shown, and Caparo suffered loss. The House of Lords held the auditors owed no duty to Caparo as potential investors, even though the accounts were public documents. The auditors' duty ran to the company's existing shareholders as a body, not to the world at large.

That outcome tells you something important about how the test operates in practice: foreseeability alone is never enough. Of course an auditor can foresee that someone might rely on published accounts to buy shares. That gets you nowhere without proximity and fairness.

Stage One: Foreseeability

Foreseeability asks whether a reasonable person in the defendant's position would have foreseen the risk of damage to someone in the claimant's position. This is an objective test. You're not asking what this particular defendant actually foresaw.

The foundational authority here predates Caparo by decades. In *Donoghue v Stevenson* [1932] AC 562, Lord Atkin's famous neighbour principle asked who you must take reasonable care to avoid injuring: people so closely and directly affected by your acts that you ought reasonably to have them in contemplation. The language of foreseeability runs through that formulation, and it runs through every negligence case since.

In practice, foreseeability is rarely the stage that kills a claim. It's a threshold question, not a high bar. The harder work is done by proximity and fairness.

Stage Two: Proximity

Proximity is the tricky one. It doesn't just mean physical closeness. It means a sufficiently close relationship between the parties, which can arise from physical nearness, a pre-existing relationship, an assumption of responsibility, or reliance.

The courts have been honest that proximity is not a precise legal concept. Lord Oliver in Caparo described it as a label attached to a conclusion rather than a guide to reaching one. That's mildly unsatisfying from a student's perspective, but it's important to understand why: proximity is doing the work of distinguishing cases where it would be just to impose liability from cases where it wouldn't, before you've even got to the third stage.

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 is the leading case on proximity in the economic loss/negligent misstatement context. The House of Lords held that a duty could arise where the defendant voluntarily assumed responsibility for advice and the claimant reasonably relied on it. That assumption of responsibility and reliance formula has been hugely influential. In Caparo itself, the auditors had not assumed any responsibility to potential investors. They prepared accounts for a statutory purpose, for the existing shareholders. Proximity failed.

Think about how this plays out in a problem question. A financial adviser who gives tailored advice to a named client has proximity. The same adviser who publishes a generic newsletter to thousands of unknown subscribers almost certainly doesn't, at least not to any individual reader who loses money acting on it.

Psychiatric Injury and Proximity

Proximity takes on a specific, technical form in psychiatric injury cases. After Alcock v Chief Constable of South Yorkshire Police [1992] 1 AC 310 (the Hillsborough case), the courts draw a hard line between primary and secondary victims.

A primary victim is someone within the zone of physical danger. If you're physically imperilled by the defendant's negligence and suffer psychiatric injury, you don't need to show any special proximity beyond foreseeability of physical injury. The point is made clearly in *Page v Smith* [1995] UKHL 7: once the defendant could foresee physical injury to a primary victim, it doesn't matter that the actual harm suffered was psychiatric rather than physical.

A secondary victim (someone who suffers psychiatric injury from witnessing injury to another) faces a much stricter proximity analysis. They must show:

• Close ties of love and affection with the primary victim
• Proximity in time and space to the accident or its immediate aftermath
• Perception of the accident or aftermath through their own unaided senses

This is proximity doing real gatekeeping work. The courts are worried about indeterminate liability, too many claimants, and fraudulent or exaggerated claims. The three control mechanisms above are the doctrinal response to those policy concerns.

Stage Three: Fair, Just and Reasonable

The third stage is explicitly a policy valve. It lets the court say: even if damage was foreseeable and there was proximity, we're not going to impose a duty here.

This stage comes up most often in cases involving public authorities, the police, and emergency services. Hill v Chief Constable of West Yorkshire [1989] AC 53 held that the police owed no duty of care to the general public in the investigation of crime, even where a failure to catch a serial killer earlier led to further deaths. The House of Lords held it wouldn't be fair, just and reasonable to impose such a duty, partly because of the chilling effect on police investigation.

That line of authority was developed (and partially qualified) in Robinson v Chief Constable of West Yorkshire Police [2018] UKSC 4, where the Supreme Court emphasised that the question is not simply about applying a three-stage test afresh in every case. Where an established category of duty exists, you apply that. Where it doesn't, Caparo helps structure the incremental extension. Lord Reed was essentially pulling back against the idea that Caparo requires a free-standing policy analysis in every case.

For your exams, the practical point is this: if the defendant is a public authority, ask whether there's an established duty in that context. If not, the third stage is where the claim is most likely to fail.

The Incremental Approach and Why Caparo Isn't Always Stage 1

Here's something that trips students up. Caparo is not a checklist you mechanically apply to every problem question. The courts don't want that. What they want is for novel situations to be resolved by analogy with established categories of duty.

So in an exam scenario involving a road traffic accident, you don't need to run a full three-stage Caparo analysis from scratch. Drivers owe road users a duty of care. That's settled. You move on to breach and causation.

Caparo's three stages become relevant when you're dealing with:

• Pure economic loss
• Negligent misstatement
• Psychiatric injury (especially secondary victims)
• Omissions (where the defendant failed to act)
• Third-party acts (where someone other than the defendant caused the damage)
• Public authorities

In those areas, there's either no established category, or the established rule is itself based on a proximity/fairness analysis that you need to reason through.

Established Categories: A Quick Map

Knowing the key established duties saves you time and shows the examiner you understand doctrine rather than just the Caparo framework:

| Situation | Duty? | Key Case | |---|---|---| | Manufacturer to consumer | Yes | Donoghue v Stevenson | | Driver to road users | Yes | Standard | | Employer to employee | Yes | Standard | | Solicitor to client | Yes | Standard | | Auditor to investor in takeover | No | Caparo | | Police investigating crime | Generally No | Hill, Robinson | | Voluntary assumption of responsibility re advice | Yes (if reliance) | Hedley Byrne |

How to Structure a Duty of Care Answer

In a problem question, you should:

1. Identify whether there's an established duty. If yes, state it and cite authority. Move to breach.
2. If not established, apply Caparo in order: foreseeability, proximity, fair/just/reasonable.
3. For each stage, identify the relevant facts and explain which way they point. Don't just state the test and conclude. Engage with the facts.
4. Flag policy concerns where they're live, especially for public authority defendants or economic loss.
5. Reach a provisional conclusion, acknowledge uncertainty where the law is genuinely unsettled.

One common mistake: students state the three stages correctly, then jumble them. They'll discuss proximity, drift into fairness, come back to foreseeability. Keep the analysis staged. Examiners follow the structure.

Another mistake: treating the third stage as a formality. "It would be fair, just and reasonable because the defendant caused harm." That's circular. The third stage asks whether imposing a legal duty would be fair and reasonable as a matter of policy. You need to engage with why, looking at things like defensive practices, floodgates concerns, and whether another area of law already covers the ground.

Economic Loss: Where Students Most Often Lose Marks

Pure economic loss (financial loss with no underlying physical damage or property damage) is generally not recoverable in negligence. Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1973] QB 27 is the Court of Appeal case that cements this. When the defendant negligently cut a power cable and the factory lost production it would have made during the outage, the Court held that lost profits with no underlying physical damage were pure economic loss and irrecoverable.

The exception runs through Hedley Byrne. If there's a special relationship involving an assumption of responsibility and reliance, economic loss can be recovered. This exception expanded significantly in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 and White v Jones [1995] 2 AC 207 (where a solicitor owed a duty to intended beneficiaries who would lose out from a negligently prepared will).

In the Caparo context, economic loss is almost always where the proximity analysis does the decisive work. The auditors in Caparo could easily foresee economic loss to investors. What they couldn't satisfy was the proximity requirement: no special relationship, no assumption of responsibility, no reliance of the right kind.

A Word on the SQE

If you're preparing for SQE1, be aware that the assessments test functioning legal knowledge rather than deep doctrinal analysis. You need to know what the three stages are, be able to apply them to a set of facts, and identify when an established category applies. You're unlikely to be asked to write discursively about the policy underpinnings of Caparo. But you do need to know the standard established duties and the main exceptions, because SQE1 scenarios often turn on whether a duty exists at all before you can even get to breach.

For LLB students writing essays or problem answers, the policy dimension matters more. Understand the relationship between Caparo and Robinson. Understand why Lord Bridge in Caparo said the law should develop incrementally by analogy with established categories. That incremental methodology is what stops negligence liability expanding without limit, and examiners want to see that you understand the architecture, not just the three labels.

You can test your understanding of these principles using the Caselaw quizzes, which cover negligence scenarios alongside other core tort topics.