Williams v Natural Life Health Foods Ltd

The House of Lords held that a company director is not personally liable for negligent advice given by his company unless the director himself assumed personal responsibility to the claimant.

Assumption of responsibility is an objective question. The inquiry focuses on communications or conduct which crossed the line between the director (or someone on his behalf) and the claimant.

General references to a director's experience or prominent role in the company do not establish personal liability.

The claim arose from negligent financial projections and advice supplied to prospective franchisees by a franchisor company. The franchisees sued the company and, after its dissolution, sued the company’s managing director personally. The trial judge and a majority of the Court of Appeal held the director personally liable.

The central question before the House of Lords was whether a director can be held personally liable in tort for negligent statements or advice given by his company without direct dealings showing an assumption of personal responsibility.

Lower courts: [1996] B.C.L.C. 288 (first instance); [1997] 1 B.C.L.C. 131 (Court of Appeal).

1. The appeal is allowed. The director was not personally liable to the franchisees.
2. The extended Hedley Byrne principle applies to negligent performance of services and rests on assumption of responsibility. The House followed [1995] 2 AC 145 and [1964] AC 465 as governing authority.
3. The test for assumption of personal responsibility is objective. The court must look to words or conduct by the director, or by someone acting on his behalf, that conveyed to the claimant that the director accepted personal responsibility.
4. General publicity about the director’s expertise, or the fact that the director supplied material through the company, does not by itself show an assumption of personal responsibility.
5. The Court rejected the submission that the director was a joint tortfeasor with the company because he had been involved in preparing the projections. A special relationship between the claimant and the director himself was required and was absent.
6. Practical consequence: where there are no personal dealings and nothing crossing the line to show personal assumption of responsibility, the protection of limited liability is not displaced.
7. Costs: the House ordered costs to be paid out of the Legal Aid Fund under Legal Aid Act 1988, s.18, suspended for four weeks to permit objection.

• House of Lords: Appeal allowed. [1998] UKHL 17.
• Court of Appeal: Appeal dismissed (majority). [1997] 1 B.C.L.C. 131.
• High Court (Chancery/Commercial list): Claimant succeeded at first instance. [1996] B.C.L.C. 288.