Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830 remains the leading House of Lords authority on when a director, employee or other officer of a company can be held personally liable in negligence for a negligent misstatement made in the course of the company's business. It sits alongside Hedley Byrne v Heller and Henderson v Merrett as one of the cases every professional should understand before signing a report in their own name.
Mr and Mrs Williams took a franchise from Natural Life Health Foods Ltd. The projections in the franchisor's brochure were prepared largely by Mr Mistlin, the company's founder and sole director, who had significant personal expertise in the sector. The franchise failed. The Williamses sued both the company and Mr Mistlin personally for negligent misstatement. The company had by then become insolvent, so the practical question was whether Mr Mistlin owed a personal duty of care.
Lord Steyn, giving the leading speech, restated the principle that liability for a negligent statement in this context depends on an objective assumption of personal responsibility by the individual, and reasonable reliance by the claimant on that assumption. Close involvement in the company's work, or even being the driving force behind it, is not enough on its own. There must be conduct which, viewed objectively, crossed the line between representing the company and assuming a personal duty. On the facts, Mr Mistlin had not dealt with the Williamses directly and had not held himself out as personally responsible. He was not personally liable.
Williams restricts personal liability but does not remove it. The test can still be satisfied in a number of recognisable scenarios:
Where any of those features are present, the fact that the work was invoiced through a limited company will not, on its own, defeat a personal claim.
Most professional indemnity wordings used in the UK cover the practice entity and its principals, partners, directors, employees and consultants for civil liability arising from the professional business. The definition of Insured therefore usually catches the individual director alongside the company. That matters, because a claimant who names both is presenting a single claim against the practice and the policy is generally intended to respond as one.
Points worth checking in any specific wording include the exact scope of the definition of Insured, whether former principals and consultants are picked up, whether the policy responds to claims brought against an individual in a personal capacity for work done for the practice, and the position on run-off if the company is dissolved.
Illustrative scenario — hypothetical only. Sarah is the sole director of a one-partner limited-company accountancy practice. She prepares an M&A due-diligence report for the buyer of a trading company. She signs the report "Sarah Jones FCA" above her personal qualification, not simply as "For and on behalf of Jones & Co Ltd". A material contingent liability is later discovered which the report did not identify. The buyer sues both the company and Sarah personally.
Under Williams, Sarah's personal liability turns on whether she objectively assumed personal responsibility. Signing the report in her personal name, as a named professional with a personal qualification designation, is a strong indicator that she did. A PI policy that defines the Insured to include the individual director in respect of the practice's work should respond, but the point to check at inception and each renewal is whether the wording treats the sole director's personal liability as covered practice liability.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.