Court Of Appeal Considers When Director Liable As Accessory To A Tort Committed By A Company

• Published date: 01 September 2022
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Trials & Appeals & Compensation
• Law Firm: Herbert Smith Freehills
• Author: Ms Anna Pertoldi and Maura McIntosh

The Court of Appeal has held that a director was not personally liable as an accessory to a tort committed by a company and has given guidance on the applicable principles: Barclay-Watt v Alpha Panareti Public Ltd [2022] EWCA Civ 1169.

For a director or senior manager to be held personally liable as an accessory to a tort committed by a company requires that person to have assisted the company in the commission of a tortious act pursuant to a common design. Whether the test is satisfied can be a difficult, or elusive, question, requiring the balancing of competing principles, and statements of legal principle must be understood in the context in which they are made.

The competing principles are that individuals are entitled to limit their liability by incorporating a company while, on the other hand, a person should be liable for their tortious acts and should not escape liability merely because they are a director of a company.

So far as the context is concerned, consideration needs to be given to the nature of the tort in any particular case. Statements of principle which have been made in the context of strict liability torts (such as certain intellectual property torts, trespass and conversion) and deceit are not necessarily directly applicable to other torts - such as in this case, where the company's liability was dependent on its assumption of a duty to the claimants in circumstances where the director had no direct dealings with those claimants and had not assumed any duty to them.

The decision suggests that, while every case will be fact dependent, it may be difficult to establish accessory tort liability against a director or senior manager outside of the circumstances where such liability has traditionally been found to exist. Something more will be needed than the director controlling or being closely involved in the actions of the company. This will be particularly so where the tort consists of a negligent failure to take a step (in this case to warn about currency risks) as opposed to a deliberate act or omission, as in those circumstances it will be difficult to demonstrate a common design to do what makes the conduct tortious.

Background

The case concerned the marketing of luxury properties in Cyprus to the claimants, who were individuals resident in the UK. Alpha Panareti Public Ltd (APP) was the developer of the properties, which were marketed through a network of salespeople employed by APP's agent companies. A key part of the marketing...