Corporate Law: Liability of Squelch Ltd for Leonard's Injuries

This article discusses the liability of Squelch Ltd for Leonard's injuries under the Australian Corporations Act 2001 (Cth) and relevant case laws. It analyzes the duty of care of a director, the liability of a company for the actions of its directors, and the statutory remedies available to ASIC. The article concludes that Squelch Ltd is liable for Leonard's injuries and ASIC may impose civil penalty upon the director or the court may make pecuniary penalty orders against her.

Running head: CORPORATE LAW
Corporate Law
Name of the Student
Name of the University
Author Note

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Issue
Whether Squelch Ltd be liable for Leonard’s injuries
Rule
In White Horse Distillers Ltd v Gregson Associates Ltd [1984], the court laid down the
test of an assumption of a duty of care. The court explained the duty of a director to act as an
agent of the company.
In Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705, the court
explained that it is not possible for a company to think, act or resolve but a company does so
though the directors of the company. This makes the directors agents of the company and the
company liable for the actions of the directors. However, directors being agents of the company
cannot be held personally liable for their acts unless they commit a breach of any legal
provisions of the Corporations Act 2001 (Cth) as mentioned in it in particular (Harris, Hargovan
and Adams 2015).
According to section [769B (a)] of the Corporations Act 2001 (Cth) any conduct
engaged on behalf of the corporation by the director, agent or employee within the scope of the
apparent or actual authority of such persons, shall be considered as a conduct engaged by the
corporate itself. Further, under the Common law as per section 181 of the Act, a director is liable
to act in good faith for the best interests of the company.
As per the statutory remedies, the Australian Securities and Investment Commission
[ASIC] is responsible for initiating legal action against a director under the Corporations Act
2001 (Cth) as the ASIC is regulates and enforces compliance with the Act. The court may make

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pecuniary penalty orders against the director for which maximum penalty is 200,000 or may
disqualify the director.
Application
On the facts here, Jennifer being the director of Squelch Ltd was responsible for the
production of the company and related operations. Now, Here, Jennifer being the director of
Squelch Ltd acts as agents of the company. She was aware that the Lennard was inside the
machine and started the machine even after the machine operator refused to start the machine
until Lennard came out.
Here, Lennard sustained injuries due to the act of Jennifer for which the company shall be
held liable. This is because as per the White Horse’s and Lennard’s case, a director acts as the
agent of a company and is not liable for his or her own acts unless it breaches the legal
provisions. The company becomes liable for the acts of the directors. Further, any act done by
the directors or employees or agents within their actual or apparent authority shall be deemed the
act of employees, agents or directors. Furthermore, Jennifer’s conduct was not in the best interest
of the company as it would not have affected the production if she waited for Leonard to come
out of the machine.
Conclusion
Squelch Ltd is liable for the injuries sustained by Leonard and ASIC may impose civil
penalty upon the Jennifer or the court may make pecuniary penalty orders against Jenifer
200,000 or may disqualify her as a director.

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References
Corporation Act 2001 (Cth)
Harris, J., Hargovan, A. and Adams, M. (2015). Australian Corporate Law. 5th ed. Australia:
Lexis Nexis.
Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705
White Horse Distillers Ltd v Gregson Associates Ltd [1984] RPC 61