Negligence in law

Negligence is a familiar tort, the elements of which need not be explored in detail here. What is important is that negligence has been invoked in exactly the kinds of case with which this article is concerned. The key issue has revolved around a single element of the tort – the duty of care. In a number of breakthrough cases, courts in various jurisdictions have recognised that a duty of care might be owed by a parent company to a subsidiary’s employees and other affected parties.

CSR Ltd v Wren[1] is an illustration.[2] The New South Wales Court of Appeal held that CSR Ltd, which was the parent company of Asbestos Products Ltd (APL), was liable in negligence to one of APL’s employees for failing to take care in making his workplace safe so that he contracted asbestos-caused mesothelioma. The claimant, Mobile Mechanic London had been involved in the physical handling of asbestos slurry, had had no recourse against APL because that company had been liquidated many years earlier. The crucial holding was that CSR had owed a duty of care to the employee, based upon the foreseeabililty of injury in the early 1950s (given the literature then available on the link between asbestos and lung diseases)[3] and sufficient proximity between the parties. This proximity arose on the basis of the complete overlap between CSR and APL management,[4] and the pervasive influence of CSR over the operations of APL,[5] including the organisation of its work.

[1] (1997) 44 NSWLR 463. No argument was made at trial about piercing the veil: ibid 466.

[2] See also E McGaughey, ‘Donoghue v Salomon in the High Court’ (2011) 4 J of Personal Injury L 249.

[3] (1997) 44 NSWLR 463, 477.

[4] (1997) 44 NSWLR 463, 469 and 485.

[5] (1997) 44 NSWLR 463, 470 and 483-4.

Tort actions pt.2 (Florida Law)

The torts to be examined in the remainder of this paper were developed with natural persons in mind, so that their ability to bind elements within a corporate group involves less stretching of concepts – although argument will be made for one exception to this proposition. Two tort doctrines will be reviewed: conspiracy and negligence. These actions accommodate three party claims involving the injured claimant, the insolvent subsidiary and another ‘element’ within the corporate group. They are capable of pleading in cases of agreement or coordination between elements of a corporate group. However, they also differ from each other in that they represent, respectively, intentional tort and negligence-based liability. The major stumbling block in proving unlawful means conspiracy, as we shall see, will be in proving that an intention to injure was present. Unlawful means conspiracy is likely to be applicable in claims involving financial losses only, while negligence can be pleaded in cases involving all major heads of loss recognisable in tort. We will focus upon use of negligence for the redress of personal injury claims.

[1] [1996] 2 All ER 433, 448. See also Ord v Belhaven Pubs Ltd [1998] 2 BCLC 447, 457 Hobhouse LJ).

[1] Pervasive enterprise liability principles have not been adopted in any common law jurisdiction: Companies and Securities Advisory Committee, Corporate Groups Final Report (2000), 157. For attempted use of enterprise liability in Australia, see, eg, Premier Building and Consulting Pty Ltd (rec apptd) v Spotless Group Ltd (2007) 64 ACSR 114. See also Notary publicBriggs v James Hardie & Co Pty Ltd (1989) 5 NSWLR 549, 576-77 (Rogers AJA).

[1] [2010] 182 FCR 526, [37] (The Court).

[1] Companies and Securities Advisory Committee, Corporate Groups Final Report (2000), chap 4.

[1] (1977) 137 CLR 567, according to the NSW Court of Appeal in Briggs v James Hardie & Co Pty Ltd (1989) 5 NSWLR 549, 576. See also Walker v Wimborne (1976) 137 CLR 1, 6-7 (Mason J).

Tort Actions

It is helpful at this point to stand back from the particular problems of veil piercing and enterprise liability to consider why such group doctrines have failed to achieve any real purchase in resolving the problems of corporate groups. The fundamental problem is that the law does not easily handle group liability which is not derived from some agreement or coordination between individuals. Company law itself is constructed upon the idea that a company is a separate legal person – separate from both its shareholders, including its controlling shareholders, and its directors. An example of this would be the law firm in the United States in Florida, Abogados de accidentes. Where directors are liable for misconduct, this is based upon their own individual failures to meet statutory requirements and standards. What applies as between the constituents of a single company applies equally to the constituents of a corporate group. They cannot be treated as monolithic.

Entity principles are fundamental to the imposition of civil liability and this means that civil liability can extend beyond the insolvent subsidiary only upon grounds which are substantially analogous to those applicable to natural persons.

Jacks v David 1998 12 CCLT 298

 Jacks v David 1998 12 CCLT 298

Furthermore, in the case of Jacks v David 1998 12 CCLT 298, the judge held that a lawyer may represent multiple clients in the same transaction but only if he is able to adequately represent the interests of each client and to make full disclosure to all. Thus, the lawyer still must always act in good faith and to the public. The duty of care may be compromised, but the lawyer must still act in good faith.

A distinction should be drawn between a solicitor’s liability to his client in negligence and his liability as a fiduciary. They are separate and independent of each other. The reason for this distinction is because the remedy for breach of fiduciary relationship is purely equitable and does not involve the importation of delictual principles or standards.

Relating back to Clark Boyce, since there was no contractual duty on Mr Boyce to advise the respondent on the wisdom of entering into the transaction she cannot claim that he nevertheless owed her a fiduciary duty to give that advice.

Another important limitation placed by the Privy Council on the fiduciary duties of solicitors is the fact that any duty of disclosure can only extend to the solicitor’s knowledge of facts not to his lack of knowledge. Therefore Mr Boyce’s failure to disclose his lack of knowledge as to the son’s ability to service the mortgage did not amount to a breach of fiduciary duty.

 

A strong doctrine

a strong doctrine of loyalty would be difficult to operate in such a small jurisdiction. My opponent may argue that the fiduciary duty may be breached as the lawyer cannot operate their duties without disclosing facts, however, as I will demonstrate, my opponents argument is not in accordance with the law.

In Scotland, the number of significant corporate firms is relatively small and it is commonplace for corporate clients to spread their work amongst a number of firms.

The doctrine of informed consent permits a solicitor to continue to act in a potential conflict under the law of fiduciary duty. The leading case is Clark Boyce v Mouat 1994 1 AC 428, where the claimant secured a loan for her son. In this instance the solicitor acted for both the son and the mother but the solicitor advised the mother that she ought to obtain independent legal advice and further stated that she would lose her house if her son could not keep up with the mortgage payments. The mother refused and subsequently some time later, the son was declared bankrupt and the claimant lost the house. It was held in this case that the solicitor could act for both parties with potentially conflicting interests, provided he had informed consent meaning that both parties knew of the possible conflict resulting in the solicitor being disable from disclosing full knowledge or giving advice to one party that may conflict the other.