Negligent misstatement–a healthier decision for company directors

Abstract

THE decision of the House of Lords in Williams v. Natural Life Health Foods Ltd. [1998] 1 W.L.R. 830, reversing the Court of Appeal's decision ([1997] 1 B.C.L.C. 131), examines the issue of an agent's liability for negligent misstatement. Of course, agents will be personally responsible for their own negligence, even if that tort is committed while on the principal's business, but what is their responsibility for the negligence of their principal? Logically the answer is “none”, and certainly in a company context statements made by directors on behalf of their companies have traditionally led to liability for the principal alone: “a company director is only to be held personally liable for the company's negligent misstatements if the plaintiffs can establish some special circumstances setting the case apart from the ordinary . . .” ([1997] 1 B.C.L.C. 131, 152 per Hirst L.J.). The Court of Appeal's decision in Williams, however, threatened to expand this category of “special circumstances” to such an extent as to make personal liability the norm for directors, at least in the context of small companies.