Directors' liability in negligence to third parties: challenging the assumption of responsibility approach. (2nd January 2016)

• Record Type: Journal Article
• Authors: Stace, Victoria
• Is Part Of: Oxford University commonwealth law journal. Volume 16:Number 1(2016)
• Page Start: 183
• Page End: 194
• Publication Date: 2016-01-02
• Subjects: Directors' liability -- negligence -- assumption of responsibility; Law -- Commonwealth countries -- Periodicals; Law -- Periodicals; 349.11241
• DOI: 10.1080/14729342.2016.1244454
• Languages: English
• ISSNs: 1757-8469

Abstract

ABSTRACT: What is the role of 'assumption of responsibility' when determining directors' liability in negligence to third parties? A recent decision of the English High Court of Justice confirms that, so far as the English courts are concerned, 'assumption of responsibility' is a threshold test for establishing liability. This test requires conduct that would lead a third party to conclude that the director intended to assume personal responsibility. However recent academic writing argues that assumption of responsibility is not a threshold test, but rather a subset of proximity. This note suggests that a preferable approach, which is the approach taken by New Zealand courts, is to apply a two-stage proximity plus policy inquiry, which enables the court to address policy considerations relevant to imposing liability on directors.