The Limits of Separate Legal Personality: When Those Running a Company Can Be Held Personally Liable for Losses Caused to Third Parties Outside of the Company

Practitioners are commonly faced with clients who are the victims of some wrongdoing committed by persons running a company. Often in such cases, compared with those controlling the company who may have done well out of it, the company itself has no or very little assets to go after. The question arises whether those running the company can be sued personally for their role in that wrongdoing instead or as well as the company. Many are deterred from contemplating such personal claims, believing that the company’s separate legal personality alleviates its directors of personal liability. It may be surprising to learn that there is no such immunity from personal liability provided by separate legal personality. A director of a company may be liable to a third party wherever an agent might be liable to a third party under the ordinary law of agency. That will mean that an agent will not be liable on his principal’s contract, and he cannot be sued for procuring a breach of contract unless he acts in bad faith to his principal. But outside of that contractual context, those controlling a company can be sued personally for their role in committing any wrongdoing harming an outsider. The question is one about the extent of their participation and whether it can be established that they committed the tort or other actionable wrong or commissioned it so as to give rise to liability as joint tortfeasor. This book considers the limits of the protection afforded by separate legal personality and explores the many different situations in which those in control of a company can be held liable to third parties. It does so in a practical and accessible way, covering the wide array of causes of action and relevant principles and considering also the relevant statute that imposes legal liability. ABOUT THE AUTHOR Dr Mike Wilkinson is a barrister practising business and property law from 18 St John Street Chambers in Manchester. Whilst Mike’s practice encompasses the traditional range of commercial chancery work, he has developed a particular interest in this field, establishing when those controlling a company will (or will not) be personally liable for harm caused to third parties for things they do (or intend to do) for the company. TESTIMONIALS “It is extremely useful to have access to a book which is dedicated to answering the singular question about when those running a company can be liable to third parties outside of the company ... I would commend this book to readers. It is replete with factual examples and clear propositions of law, logic and policy. It admirably simplifies and puts into context the competing concepts: the rules of attribution, the principle of separate legal personality and limited liability, the law of joint liability, accessory liability and vicarious liability and the identification and controlling mind theories. The result is a practical, insightful guide which will likely be useful for practitioners and courts alike for years to come.” – His Honour Judge Richard Pearce CONTENTS Chapter One – Defining the Limits of a Company’s Separate Legal Personality Chapter Two – Piercing and Lifting the Veil: Interposing a Company to Evade Existing Restrictions or to Conceal Involvement Chapter Three – Contractual Liability: The Proper Party Principle Chapter Four – Extra-Contractual Liability: The Relevant Principles, Rules and Doctrines for Upholding Personal Liability Chapter Five – Types of Torts and Causes of Action Giving Rise to Personal Liability Chapter Six – Asset-Stripping Situations Chapter Seven – Personal Liability in Proceedings Chapter Eight – Personal Liability Under Statute Chapter Nine – Conclusions: The Implications for Practitioners