Stefan Lo, ‘Dis-Attribution Fallacy and Directors’ Tort Liabilities’

There has developed a divergence between Australian and UK courts on the question of directors’ liabilities in respect of their commission or involvement in torts when acting for or on behalf of companies. While the UK courts generally apply the ordinary principles of joint tortfeasance, Australian courts have explicitly rejected that approach and, instead, apply special tests on directors’ liabilities. The Australian approach is based on the premise that where a director’s conduct is attributed to the company, then there is also a necessary dis-attribution of that conduct from the director such that prima facie the director is not personally liable in tort for that conduct. Liability only arises in special circumstances. It is widely thought that the above is required by the separate entity principle in company law. However, it is argued in this article that it is fallacious to assume that dis-attribution must follow from the separate entity principle. Application of the special tests for liability ― which effectively mean that directors can often escape liability despite their commission of, or participation in, a tort ― gives rise to serious problems of accountability for wrongdoing. From the perspective of both principle and policy, it is submitted that directors’ liabilities should simply be determined on the basis of the general principles of joint tortfeasance.

Lo, Stefan HC, Dis-Attribution Fallacy and Directors’ Tort Liabilities (March 16, 2016). (2016) 30 Australian Journal of Corporate Law 215.

First posted 2016-06-03 12:30:36

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