Law of Negligence: Liability of Companies and Directors

Running head: LAW OF NEGLIGENCE
Law of Negligence
Name of the Student
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Author Note

1LAW OF NEGLIGENCE
Issue:
The issue in this case is concerned with various factors which are-
 Whether Yellowscope is liable for the injury caused to Fan Bingbing.
 Whether Blackspot is partially liable for the injury of Fan Bingbing.
 Whether Blackspot can avoid liability on the ground that Fan Bingbing is the sole
shareholder and director of the company.
 Whether Blackspot can be held totally liable for the injury.
Law:
Under common law, there exist two kinds of person- natural person and artificial person
or corporate bodies. A body corporate may be a group of individuals who according to the law
are recognized as a separate legal entity. The body corporate is distinct from the shareholders and
the directors and has an independent personality. In this regard, it is noteworthy to mention here
that companies being legal persons with an independent personality are not held liable for the
negligent acts in the same manner as in case of natural persons. The law of torts is concerned
with the duty of care which is an essential element to prove that the defendant was negligent in
his actions and breached the duty of care owed to him by the plaintiff. In order to claim damages
for breach caused as a result of negligent actions, it is important to establish that there was a duty
of care and it is the responsibility of the defendant to save the duty of care owed to him from
damage. However, the nature of the damage must be such as it could be foreseeable by a
reasonable man of prudent nature. In Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964]
AC 465, it was held that the directors of the company were held liable for the negligent
misstatement as they owed a duty of care on their part to the company.

2LAW OF NEGLIGENCE
In Welton v Saffery [1897] AC 29, it was held that a company being an artificial person
must be dealt differently. Therefore, in this case it was held that decisions on behalf of the
company may be taken by the board of directors and the shareholders however; in case of
negligent actions on their part the company shall be held liable. Traditionally, it has been
difficult for the Courts to apply solution if an artificial person has owed a duty of care to its
shareholders. The law has been treating companies as independent legal persons and therefore,
their actions are carried out by natural persons that involve the shareholders and the directors. A
company makes its decisions and carries out its business with the help of natural persons. In this
regard, it is worth noting that these natural persons not always act as an agent and employees to
the companies. Therefore, it has been difficulty for the Courts to identify the liability in case
where a director or a shareholder of a company has caused injury to a third person. in such cases
there is a dilemma regarding the fact that whether the company is liable or the individual causing
the damage to the injured party.
Rules of attribution has been developed by law for the purpose of determining the fact
that whether the act of an agent or employee shall be treated as an act of the company. Therefore,
in such the Courts are at the authority to impose vicarious liability. When it comes to the
knowledge of the Court that there is a close connection between the negligent actions of the
agents or the employees and between the persons who employed such employees or agents to
undertake the duty, then the Court shall apply vicarious liability accordingly. In Williams v
Natural Life Health Foods Ltd [1998] UKHL 17, it was observed that the plaintiffs claimed
damages for the negligent advice which was provided to them under a franchise agreement made
by them with the company. The plaintiffs stated that the managing director of the company was
personally liable for the negligent advice. In this regard, the plaintiffs contended that the