3.
Tort
ACTIONS IN TORT
Miranda''s marvellous bus company. driver alice-caused sb injury.
C can sue company as employer of alice. company pay easliy when its financially sound and has
insurance. what if company is insolvent and failed to insure itself.
>Arguements For Personal Liability For Corp Torts
why should sb behind the company be liable for actions of drivers.
>Crowe: dir will be liable where they were at fault. eg where they knew that alice cannot drive well or
that she was tired/oveworked. shareholder should be liable where 'they were or ought to have been,
aware of safety problems in company's operations and failed to prevent them.'
>Hansmann & kraakman:this will lead to good economic consequences. if company is aware that it
will be held liable for accidents, it will be incentivised to spend optimally on company safety
precautions.
reason for holding shareholder resposible:'For these authors, there is a strong case for holding
shareholders lable where the company cannot compensate those it has injured because this threat to
shareholders will encourage those running companies to operate more safely to avoid accidents in
the first place.'
Employee
>Vicarious Liability
-company can be made vicariously liable for tort commited by its member as long as tort is
committed in course of employment.
-tortfeaser can be also be held personally liable.
>personal tortious liability
working in a company will not prevent personal tortious liability from arising. if someone commits a
tort while working for company,he will still be liable for his personal conduct.
-duty owed to anyone reasonably,forseeably injured by neg. makes no diff that they were driving for
company.
Director
>personal capacity/assume resp
-'if direcotr,acting for a company, causes company to commit a tort it is company not dir who is liable.
However if a director is acting in personal capacity or assumes personal resp, he will be liable for tort.'
-Williams v natural life health foods:
difficult for dir to be sued. satisfy all requirements of neg misstatement-statement of
fact,untrue,made carelessly,reliance of v,reasonable to rely and suffered loss.
along with it, victim must show that dir assumed 'personal responsibility'.
normal presumption is that dir is not accepting personal responsibility. he is making statement on
behalf of company. court will look for express indication from dir that he unusually accepted personal
resp.
-depends on facts of each case:Fairline shipping v adamson
-Williams v natural health: Lord Steyn: for liability under Hedly, there must be special relationship where there is
assumption of resp undertaken by dir himself.
-'it may be possible to show that dir is personally liable for tort involving fraud or dishonesty':Standard chartered
bank v pakistan national shipping.
>outside role of dir
Dir will be liable in tort for things he did outside his role as dir just as anybody else would be liable.
Alice-bus driver-also happens to be director of the company. but when she was driving,she was acting
outside her capacity as dir. thus she will be liable. the fact that she happens to be dir will not prevent
liability.
however, generally courts are reluctant to hold dir liable for damage their actions cause
>actions as Dir and other actions; authorised:MCA Records v Charly Records:
Dir had authorised action that were infringing Copyright Desings and Patent Act 1988.court found dir
liable.
However court distinguished b/w 'actions undertaken by dir as dir and other acts of dir.'
court explained:'there is no reason why a person who happens to be a dir/controlling shareholder
should not be liable with company as joint tortfeaser if he is not exercising control and the
circumstances are such that he would be so liable if he were not a dir/controlling shareholder.'
thus, 'dir should not be held liable for doing things that only dir can do,namely when they are
exercising control over company through board meetings.'
>assumption of resp:Williams v natural life health foods:
Dir prepared financial projections that was sent to 3rd party. 3rd party in reliance on those projections, entered
into contract with company. financial projections turned out to be misleadings. court was reluctant to hold dir
personally responsible in tort of neg misstatement, for the statements made by him on behalf of the company.
this was bcz in order to hold dir personally liable, there was need for assumption of responsibility by him towards
the 3rd party. in order for dir to be liable, dir must have assumed personal responsibility for accuracy of
statement made to C.
however, it is clear that element of assumption of resp was required bcz it was an element of the tort.
if dir is alleged of tort that does not require 'assumption of resp' then he can be personally liable.
eg dir assures the creditor that company is financially good while knowing that it's not, then dir has
committed tort of deceit or fradulent misrepresentation. this tort does not require C to prove
assumption of resp. so dir can be sued and held liable for his conduct:Daido Asia Japan Co Ltd v
Rothen; Standard Chartered bank v pakistan national shipping.
Shareholders
eg alice bus driver was also shareholder of the company. this would not prevent her from being liable.
the fact that she happens to own shares in the company will not save her from liability.
however, very often shareholders are not directly involved in operations of companies so as to
commit torts. shareholders(esp controlling shareholders)'may be in position to prevent their company
operating unsafely, yet fail to do so. but can sh be liable for such an omission-for such non feasance;
or will sh only be liable where they are guilty of misfeasance-of intervening in affairs of subsidiary so
as to create danger that results in someone being injured'.
>positive or negative duty
-should shareholders be liable for misfeasance( where they acted or intervened in some way so as to
cause accident) or omission(where they could have acted so as to stop company from harming others
but failed to do so).
should sh be under 'positive duty to ensure that their company is operating safely or negative
duty:one not to interfere in their company in a way that causes it to injure someone'?
-if duty is negative one, then shareholder is not liable even if they know that company is operating
unsafely. they can sit back and do nothing about it. they are only committing omission-no liability in
tort for omission.
>direct duty
this is direct duty of care owed by parent to subsidiary employees. not instance of veil lifting.
(1)Chandler v cape: parent liable for omission-failed to ensure S operated safely:4 conditions
-chandler: claimant is not trying to pierce veil. he accepts that subsidiary was a separate entity and
that it owed him duty of care. but he argued that cape, parent company, also a separate entity,
nevertheless also owed him duty of care-duty to ensure that subsidiary operated safely and not injure
him. it breached that duty.
court: applied 3 stage caparo test. found that parent owed duty of care to employees of its subsidiary
if 4 conditions are met.
'if 4 conditions are met then parent is under positive duty of care to ensure that its subsidiary was
operating safely and if it failed to do so, it could be liable for any accident'.
-'parent companies might indeed,in some circumstances, be liable for their omissions, where they
failed to ensure their subsidiaries operated safely.'
court later on retreated from their position, holding that sh will only be liable where there is active
misfeasance.
COA:'Duty of parent company exists if factors are present:
-parent company operated in same industry as subsidiary
-parent did know, or ought to have known, as much abt health and safety as did subsidiary
-parent knew or ought to have known that subsidiary's operations were unsafe
-subsidiary/employee were relying on parent to safeguard employee's health and safety.'
-within chandler, duty of care was imposed on parent company to make sure that its subsidiaries are
operating safely.
generally under tort law, there is no duty for omission; this case opened up new liability for omission
in tort.
After chandler, courts attitude changed. they grew more reluctant to impose liability/duty of care on
parent company.
(2)Thompson v Renwick group:holding company. No business,only shares:
in the case, court 'refused to impose duty of care on parent within a corporate group that acted only
as a pure holding company. the parent company carried on no business itself but merely owned
shares in subsidiary companies,which conducted all group's business.'
-parent company defendant, Renwick Group Plc, was a holding company, i.e. an investment company
that does not carry on business but simply holds assets
(3)AAA v unilever:active misfeasance:
-move away from chandler; parent only liable for misfeasance.
-AAA v unilever: 'sh mere failure to intervene to make company operate safely was insufficient to
make sh liable. sh would only be liable for what they did,not what they failed to do'.
>took over management/ neg advice
sh liable if:
'(i)it took over management of the relevant activity of the subsidiary in place of or jointly with the
subsidiary's own management; or
(ii)where the parent has given relevant advice to the subsidiary about how it should manage a
particular risk. '.+
Court of Appeal concluded that the evidence showed that the claimants had no chance of establishing that
Unilever had exercised the relevant degree of control of Unilever Kenya on the basis that the group-wide system
of mandatory policies imposed by Unilever did not amount to the exercise of operational control.
(3)Vendanta resources v lungowe:public representation
these were only 2 situations in which there is sufficient misfeasance.
-'if parent makes representations to public that it is ensuring that company is opearting safely, then
failure to live up to those representations could , perhaps, result in liability'-only situation in which
liability was imposed for omission.
>direct resp for devising health and safety OR control opeartion
"A duty may be owed by a parent company to the employee of a subsidiary, or a party directly
affected by the operations of that subsidiary, in certain circumstances.
Those circumstances may arise where the parent company
(a) has taken direct responsibility for devising a material health and safety policy the adequacy of
which is the subject of the claim, or
(b) controls the operations which give rise to the claim.’
parent company took direct responsibility for drafting and devising the policies the adequacy of which was the subject of the
claim; or the parent company controlled the operations which give rise to the claim.
Vedanta had: published a sustainability report which emphasised how the Board of the parent company had oversight over its
subsidiaries; entered into a management and shareholders agreement under which it was obligated to provide various services
to KCM, including employee training; provided health, safety and environmental training ; provided financial support to KCM;
released various public statements emphasising its commitment to address environmental risks and technical shortcomings in
KCM’s mining infrastructure; and exercised control over KCM.
(4)okpabi v royal dutch shell: sufficient interference-sufficient control/intervention/supervision/
advise/management of activity
-Okpabi: SC: reaffirmed vedanta. 'liability is to be based on misfeasance. what matters is whether sh
has interfered sufficiently within its company to be responsible for event which leads to injury'.
-retreat from chandler. 'parent company may well know what is going inside the subsidiary company
they control. but as long as they do not interfere within subsidiary they will not be liable.'
‘ordinary tort principles apply to claim that a parent company owes duty of care to someone injured
by its subsidiary.
Parent companies will ordinarily be liable only for their active misfeasance-only where they
sufficiently take over, intervene in, control, supervise or advise the management of those subsidiary
activities which have caused harm to others.'
