The Charitable Corporation v Sutton (1742) 26 ER 642 is an important old English law case which holds in substance that a director of a company owes duties to the company in the same measure and quality as does a trustee to a trust. It makes the point that judges should not be quick to judge decisions of directors with hindsight.
The Charitable Corporation was a company set up by royal charter, to give loans of money to poor people, to prevent them falling into the hands of pawnbrokers. The directors (or committee-men as they were called at the time) were accused of failing to properly monitor the procedures for loans by the corporation. It had suffered a loss of around £350,000. A warehouse keeper was responsible for giving unsecured loans to fellow directors. Only five directors were actively involved in the corporation's affairs. It was alleged that the failure of the remaining forty-five directors to maintain oversight made them guilty of gross negligence.
Judgment
Lord Hardwicke held that because the directors are agents of the people who grant them power to manage the corporation's affairs they are liable for any negligent acts or omissions. He held that the five who were engaged in taking money were liable to make good all losses, and that the remaining forty-five were liable to make up any shortfall. His judgment read as follows.
I take the employment of a director to be of a mixed nature. It partakes of the nature of a public office, as it arises from the charter of the crown.
But it cannot be said to be an employment affecting the public government; and for this reason none of the directors of the great companies, the Bank, South-sea &c., are required to qualify themselves by taking the sacrament.
Therefore committee-men are most properly agents to those who employ them in this trust, and who empower them to direct and superintend the affairs of the corporation.
In this respect, they may be guilty of acts of commission or omission, of mal-feasance or non-feasance. Vide Domat's Civil Law upon this head, 2 B Tit. 3, Sec. 1 & 2.
Now where acts are executed within their authority, as repealing bye-laws and making orders, in such cases though attended with bad consequences, it will be very difficult to determine that these are breaches of trust.
For it is by no means just in a judge, after bad consequences have arisen from such executions of their power, to say that they foresaw at the time what must necessarily happen; and therefore were guilty of a breach of trust.
Next as to mal-feasance and non-feasance.
To instance, in non-attendance; if some persons are guilty of gross non-attendance and leave the management intirely to others, they may be guilty by this means of the breaches of trust that are committed by others.
By accepting a trust of this sort, a person is obliged to execute it with fidelity and reasonable diligence, and it is no excuse to say that they had no benefit from it, but that it was merely honorary (ante 60); and therefore they are within the case of common trustees. Vide Coggs v Bernard, 1 Salk. 26.
Another objection has been made that the court can make no decree upon these persons which will be just, for it is said every man's non-attendance or omission of his duty is his own default, and that each particular person must bear just such a proportion as is suitable to the loss arising from his particular neglect, which makes it a case out of the power of the court.
Now if this doctrine should prevail, it is indeed laying the axe to the root of the tree.
But if, upon inquiry before the master, there should appear to be a supine negligence in all of them by which a gross complicated loss happens, I will never determine they are not all guilty. (So 3 P. W. 215)
Nor will I ever determine that a court of equity cannot lay hold of every breach of trust, let the person be guilty of it either in a private or public capacity.
The tribunals of this kingdom are wisely formed both of courts of law and equity, and so are the tribunals of most other nations; and for this reason there can be no injury, but there must be a remedy in all or some of them; and therefore I will never determine that frauds of this kind are out of the reach of courts of law or equity, for an intolerable grievance would follow from such a determination.
In the present case one thing is clear, that Sir Arichibad Grand, Robinson, Thompson, Burrows and Squire, who were the five that were engaged in that confederacy, are certainly liable to make good the losses which the corporation have sustained in the first place and the committee-men who were not partners in this affair are liable in the second place only.
Negligence is a failure to exercise appropriate care expected to be exercised in similar circumstances.
A tort is a civil wrong that causes a claimant to suffer loss or harm, resulting in legal liability for the person who commits the tortious act. Tort law can be contrasted with criminal law, which deals with criminal wrongs that are punishable by the state. While criminal law aims to punish individuals who commit crimes, tort law aims to compensate individuals who suffer harm as a result of the actions of others. Some wrongful acts, such as assault and battery, can result in both a civil lawsuit and a criminal prosecution in countries where the civil and criminal legal systems are separate. Tort law may also be contrasted with contract law, which provides civil remedies after breach of a duty that arises from a contract. Obligations in both tort and criminal law are more fundamental and are imposed regardless of whether the parties have a contract.
Delict is a term in civil and mixed law jurisdictions whose exact meaning varies from jurisdiction to jurisdiction but is always centered on the notion of wrongful conduct.
In criminal law, criminal negligence is an offence that involves a breach of an objective standard of behaviour expected of a defendant. It may be contrasted with strictly liable offences, which do not consider states of mind in determining criminal liability, or offenses that requires mens rea, a mental state of guilt.
A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties. Typically, a fiduciary prudently takes care of money or other assets for another person. One party, for example, a corporate trust company or the trust department of a bank, acts in a fiduciary capacity to another party, who, for example, has entrusted funds to the fiduciary for safekeeping or investment. Likewise, financial advisers, financial planners, and asset managers, including managers of pension plans, endowments, and other tax-exempt assets, are considered fiduciaries under applicable statutes and laws. In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance, and trust in another whose aid, advice, or protection is sought in some matter. In such a relation, good conscience requires the fiduciary to act at all times for the sole benefit and interest of the one who trusts.
A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.
The business judgment rule is a case-law-derived doctrine in corporations law that courts defer to the business judgment of corporate executives. It is rooted in the principle that the "directors of a corporation ... are clothed with [the] presumption, which the law accords to them, of being [motivated] in their conduct by a bona fides regard for the interests of the corporation whose affairs the stockholders have committed to their charge." The rule exists in some form in most common law countries, including the United States, Canada, England and Wales, and Australia.
In law, liable means "responsible or answerable in law; legally obligated". Legal liability concerns both civil law and criminal law and can arise from various areas of law, such as contracts, torts, taxes, or fines given by government agencies. The claimant is the one who seeks to establish, or prove, liability.
Vicarious liability is a form of a strict, secondary liability that arises under the common law doctrine of agency, respondeat superior, the responsibility of the superior for the acts of their subordinate or, in a broader sense, the responsibility of any third party that had the "right, ability or duty to control" the activities of a violator. It can be distinguished from contributory liability, another form of secondary liability, which is rooted in the tort theory of enterprise liability because, unlike contributory infringement, knowledge is not an element of vicarious liability. The law has developed the view that some relationships by their nature require the person who engages others to accept responsibility for the wrongdoing of those others. The most important such relationship for practical purposes is that of employer and employee.
Corporate liability, also referred to as liability of legal persons, determines the extent to which a company as a legal person can be held liable for the acts and omissions of the natural persons it employs and, in some legal systems, for those of other associates and business partners.
Smith v. Van Gorkom 488 A.2d 858 is a United States corporate law case of the Delaware Supreme Court, discussing a director's duty of care. It is often called the "Trans Union case". Van Gorkom is sometimes referred to as the most important case regarding business organizations because it shows a unique scenario when the board is found liable even after applying the business judgment rule. The decision "stripped corporate directors and officers of the protective cloak formerly provided by the business judgment rule, rendering them liable for the tort of gross negligence for the violation of their duties under the rule."
Bartlett v Barclays Bank Trust Co Ltd [1980] 1 Ch 515 in an English trusts law case. In it Brightman J gave a comprehensive discussion of the duties of trustees in connection with companies whose shares are part of the trust property. Although it is common to hear lawyers refer to "the rule in Bartlett v Barclays Bank", the case only restated law that had been accepted since Speight v Gaunt.
Regal (Hastings) Ltd v Gulliver [1942] 1 All ER 37 is a leading case in UK company law regarding the rule against directors and officers from taking personal advantage of a corporate opportunity in violation of their duty of loyalty to the company. The Court held that a director is in breach of his duties if he takes advantage of an opportunity that the corporation would otherwise be interested in but was unable to take advantage. However the breach could have been resolved by ratification by the shareholders, which those involved neglected to do.
English trust law concerns the protection of assets, usually when they are held by one party for another's benefit. Trusts were a creation of the English law of property and obligations, and share a subsequent history with countries across the Commonwealth and the United States. Trusts developed when claimants in property disputes were dissatisfied with the common law courts and petitioned the King for a just and equitable result. On the King's behalf, the Lord Chancellor developed a parallel justice system in the Court of Chancery, commonly referred as equity. Historically, trusts have mostly been used where people have left money in a will, or created family settlements, charities, or some types of business venture. After the Judicature Act 1873, England's courts of equity and common law were merged, and equitable principles took precedence. Today, trusts play an important role in financial investment, especially in unit trusts and in pension trusts. Although people are generally free to set the terms of trusts in any way they like, there is a growing body of legislation to protect beneficiaries or regulate the trust relationship, including the Trustee Act 1925, Trustee Investments Act 1961, Recognition of Trusts Act 1987, Financial Services and Markets Act 2000, Trustee Act 2000, Pensions Act 1995, Pensions Act 2004 and Charities Act 2011.
Re D’Jan of London Ltd [1994] 1 BCLC 561 is a leading English company law case concerning a director's duty of care and skill, whose main precedent is now codified under Section 174 of the Companies Act 2006. The case was decided under the older Companies Act 1985.
Bristol and West Building Society v Mothew [1996] EWCA Civ 533 is a leading English fiduciary law and professional negligence case, concerning a solicitor's duty of care and skill, and the nature of fiduciary duties. The case is globally cited for its definition of a fiduciary and the circumstances in which a fiduciary relationship arises.
Re Cardiff Savings Bank [1892] 2 Ch 100, often called the Marquess of Bute's case is a UK company law case concerning the duty of care owed by members of the board. It is old law but is still often mentioned as an extreme example of to what extent a "subjective" duty of care allowed directors to escape consequences of their negligence.
Attorney General v Blake[2000] UKHL 45, [2001] 1 AC 268 is a leading English contract law case on damages for breach of contract. It established that in some circumstances, where ordinary remedies are inadequate, restitutionary damages may be awarded.
Dishonest assistance, or knowing assistance, is a type of third party liability under English trust law. It is usually seen as one of two liabilities established in Barnes v Addy, the other one being knowing receipt. To be liable for dishonest assistance, there must be a breach of trust or fiduciary duty by someone other than the defendant, the defendant must have helped that person in the breach, and the defendant must have a dishonest state of mind. The liability itself is well established, but the mental element of dishonesty is subject to considerable controversy which sprang from the House of Lords case Twinsectra Ltd v Yardley.
Re City Equitable Fire Insurance Co [1925] Ch 407 is a UK company law case concerning directors' duties, and in particular the duty of care. It is no longer good law, as it stipulated that a "subjective" standard of competence applied. Now under Companies Act 2006 section 174, and given the development of the common law in Re D'Jan of London Ltd, directors owe an objective standard of care based on what should reasonably be expected from someone in their position.
English law contains homicide offences – those acts involving the death of another person. For a crime to be considered homicide, it must take place after the victim's legally recognised birth, and before their legal death. There is also the usually uncontroversial requirement that the victim be under the "King's peace". The death must be causally linked to the actions of the defendant. Since the abolition of the year and a day rule, there is no maximum time period between any act being committed and the victim's death, so long as the former caused the latter.
References
MJ Trebilcock, 'The Liability of Company Directors for Negligence' (1969) 32 Modern Law Review 499 saying the case 'has been regarded as something of a high point in the duty of care the law has demanded of directors'.
Other articles
B Fischhoff, 'Debiasing' in D Kahneman, P Slovic and A Tversky (eds) Judgment Under Uncertainty: Heuristics and Biases (Cambridge University Press 1982)
WT Allen, JE Jacobs and LB Strine Jr, 'Realigning The Standard Of Review Of Director Due Care With Delaware Public Policy: A Critique of Van Gorkom And Its Progeny As A Standard Of Review Problem' (2002) 96 North Western University Law Review 449
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