“Directors not personally liable unless they personally assume responsibility to claimant.”
The Williams invested in a franchise with Natural Life Health Foods based on projected figures that proved wildly inaccurate. The company went into liquidation and the Williams sued both the company and its managing director, Mistlin, personally for negligent misstatement causing economic loss.
Whether a company director can be held personally liable in tort to third parties who deal with the company, and what test should be applied to determine such personal liability.
The House of Lords held that Mistlin was not personally liable. Personal liability requires the director to have assumed personal responsibility to the claimant, which requires the claimant to have relied on the director's personal skill and judgment, not merely the company's.
This case is crucial for understanding the limits of directors' personal liability and the protection offered by corporate structure. It clarifies the Henderson v Merrett test in the corporate context and remains the leading authority on when directors face personal tort liability, making it essential for corporate law and professional negligence studies.
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OSCOLA Citation
Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830
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