FOREWORD
How far a person can avoid taking responsibility for the harm caused by the actions they commit whilst acting for another has always given rise to legal and conceptual difficulties, especially when the person they are acting for is a company (which after all is a pure legal fiction). Whilst at law a company’s separate legal personality is to be treated as utterly complete, as a matter of logic it is not always easy to reconcile that singular fictional identity with the community of different stakeholders that make up a company’s being. The entire purpose of incorporation is to create a separate legal entity which becomes liable in its own right on its own dealings and in a way which precludes, or at least limits, the personal liability of its incorporators, shareholders, or agents. It is important for those running companies therefore that liability can be attributed to a company’s personality.
That works perfectly well of course in most cases that involve contractual dealings. But it runs into difficulties when one is dealing with other extra-contractual wrongs, such as one of the economic torts. In that context, legal policy does not casually allow a person to escape personal responsibility for the harm they cause others by merely blaming another party, whether or not it is a company. A person cannot avoid responsibility for harming their victim simply by saying that they are committing their tort on behalf of another, let alone a fictional, person.
Where and how to draw the line between imposing personal responsibility on those running a company and allowing a company’s separate legal personality to shield its controllers from any responsibility will never be easy. There are positive economic benefits from limiting the liability of those involved in the running of a company and upholding a company’s separate legal personality. But there is also a need to ensure that the victims of wrongdoing are effectively compensated in a system that does not lend itself to the furtherance of fraud, especially when such wrongdoing can be so difficult to prove.
These are not merely conceptual problems of pure policy or academic interest, but they are real issues which regularly rear their heads in cases before the courts. Victims of frauds or other wrongdoing often try to sue those running a company for the frauds perpetrated on them, not least because the company may prove to be a hollowed-out shell.
For lawyers and courts alike dealing with such cases, 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 cannot think of any other book which deals with that sole issue, at least not to do the subject matter justice in the way this text does. For plugging that gap, and for treating the subject in a well-structured, well-reasoned, user-friendly way, 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 principle of personal responsibility, the law of joint tortfeasorship 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
Judge in charge of the Manchester Circuit Commercial Court
14 June 2022