Williams v Natural Life Health Foods Ltd
Encyclopedia
Williams v Natural Life Health Foods Ltd [1998] UKHL 17 is an important English tort law
, company law
and contract law
case. It held that for there to be an effective assumption of responsibility, there must be some direct or indirect conveyance that a director had done so, and that a claimant had relied on the information. Otherwise only a company itself, as a separate legal person, would be liable for negligent information.
for a health food shop in Rugby
(ie, they wanted to use the Natural Life brand to run a new store and pay Natural Life Ltd a fixed fee). Mr Williams was given a brochure with financial projections. They entered the scheme. They failed, and lost money. So Mr Williams sued the company, alleging that the advice they got was negligent. However, before the suit could be completed, Natural Life Health Foods Ltd went into liquidation
. So Mr Williams sought to hold the company's managing director and main shareholder personally liable. This was Mr Mistlin, who in the brochure had been held out as having a lot of expertise. Mr Mistlin had made the brochure projections, but had not been in any of the negotiations with Mr Williams.
The High Court allowed Mr Williams claim, and so did the Court of Appeal by a majority. The company and Mr Mistlin appealed to the House of Lords.
English tort law
English tort law concerns civil wrongs, as distinguished from criminal wrongs, in the law of England and Wales. Some wrongs are the concern of the state, and so the police can enforce the law on the wrongdoers in court – in a criminal case...
, company law
United Kingdom company law
United Kingdom company law is the body of rules that concern corporations formed under the Companies Act 2006. Also regulated by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary legal vehicle to organise and run business...
and contract law
English contract law
English contract law is a body of law regulating contracts in England and Wales. With its roots in the lex mercatoria and the activism of the judiciary during the industrial revolution, it shares a heritage with countries across the Commonwealth , and the United States...
case. It held that for there to be an effective assumption of responsibility, there must be some direct or indirect conveyance that a director had done so, and that a claimant had relied on the information. Otherwise only a company itself, as a separate legal person, would be liable for negligent information.
Facts
Mr Williams and his partner approached Natural Life Health Foods Ltd with a proposal. They wanted to get a franchiseFranchising
Franchising is the practice of using another firm's successful business model. The word 'franchise' is of anglo-French derivation - from franc- meaning free, and is used both as a noun and as a verb....
for a health food shop in Rugby
Rugby, Warwickshire
Rugby is a market town in Warwickshire, England, located on the River Avon. The town has a population of 61,988 making it the second largest town in the county...
(ie, they wanted to use the Natural Life brand to run a new store and pay Natural Life Ltd a fixed fee). Mr Williams was given a brochure with financial projections. They entered the scheme. They failed, and lost money. So Mr Williams sued the company, alleging that the advice they got was negligent. However, before the suit could be completed, Natural Life Health Foods Ltd went into liquidation
Liquidation
In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...
. So Mr Williams sought to hold the company's managing director and main shareholder personally liable. This was Mr Mistlin, who in the brochure had been held out as having a lot of expertise. Mr Mistlin had made the brochure projections, but had not been in any of the negotiations with Mr Williams.
The High Court allowed Mr Williams claim, and so did the Court of Appeal by a majority. The company and Mr Mistlin appealed to the House of Lords.
Judgment
The House of Lords held unanimously that Mr Williams claim would fail. They emphasised that there had been no separated assumption of responsibility directly to Mr Williams, and no requisite reliance. Lord Steyn's judgment was as follows.See also
- Lister v Romford Ice & Cold Storage Co Ltd [1957] AC 555
- Professional negligenceProfessional negligenceIn the English law of tort, professional negligence is a subset of the general rules on negligence to cover the situation in which the defendant has represented him or herself as having more than average skills and abilities. The usual rules rely on establishing that a duty of care is owed by the...