Legal Updates

Absent special circumstances a company manager will not be personally liable to third parties for actions of the company

April 10, 2022

A company did not sign a lease extension in a manner that caused the lessor to lose an opportunity to enter into a lease with a third party. The company was held liable to compensate the lessor for breach of contract, but the lessor sought to also personally obligate the manager who conducted the negotiation.

The Court held that the manager should not be held personally liable to the company debt. The mere fact that a person acts as an organ, officer or employee of a company does not grant him immunity from personal liability for damages, in so far as his actions or omissions fulfill the foundations of a tort, even if he commits the tort not for himself but for company. However, to ensure that the principle of separate legal personality of the company is respected there will be no independent personal duty of care of the manager except when acting in bad faith or when there are circumstances beyond the normal and routine activities of an officer in the company such as personal expertise of the manager on the issue of the engagement on which the counterparty relied or existence of a special relationship between the manager and the counterparty, which resulted in the counterparty giving the particular manager trust and confidence that the manager, personally, takes responsibility towards the counterparty. Here, although the manager conducted the negotiations, there was no individual reliance because of the manager's personal commitment or because of his expertise or the existence of a special and particularly close relationship, so there is no room to charge the manager personally.