This case is easily recalled but rarely considered in any depth. It involved the takeover of a business called Fidelity plc, a manufacturer of electrical products, by Caparo Industries plc. Fidelity plc had been founded by the Dickman family, which still held almost 20% of shares in the company. The Dickman family contributed senior members to the board of directors, including the chair and managing director, Steven Dickman. Fidelity’s accounts were audited by Touche Ross accountants.
Caparo Industries plc succeeded in taking over Fidelity plc, renaming it Intersound Consumer Electronics. Caparo soon came to regret the decision, however, discovering that the business it had purchased had been overvalued and had been operating at a loss. Caparo claimed that it had only bid for Fidelity in reliance on its audited accounts in June 1984 and that these were seriously misleading (e.g. showing a profit rather than a loss). Realising that its investment would not pay off, Caparo sued members of the Dickman family for fraudulent misrepresentation and Touche Ross for negligence in auditing the 1984 accounts.
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