Directors need to be mindful that they can’t hide behind a corporate shield if they are actively involved in the misdeeds of their company.
By Rory O’Hare, Corporate and Commercial Partner
A recent strike out action in the Hight Court has provided a timely reminder for company directors that when it comes to considering the wrongful acts of a company, the Courts will always look to hold every individual accountable for their own wrongful acts.
This includes a company’s directors where they are found to have been personally involved in the wrongful acts of a company to an extent sufficient to render them liable as a joint tortfeasor (or joint wrongdoer.)
In Tangle Inc v One for Fun Limited and Others the directors of One for Fun Limited (One for Fun) were claimed to be jointly and severally liable for the copyright infringement by One for Fun, of Tangle Inc’s (the “claimants”) toy product.
Tangle Inc set out that the directors as controlling influences of One for Fun were joint tortfeasors and therefore jointly and severally liable by authorising and/or procuring One for Fun’s infringing acts.
The defendants contended that none of the pleaded allegations were able to sustain, as a question of law, a finding of joint tortfeasance against the directors.
What is a joint tortfeasor?
The notion of a joint tortfeasor relates to an individual who has intentionally set out to commit a “tort” with another person. A tort being a breach of an obligation imposed by law that results in a civil liability.
It is important to remember that the law distinguishes between a company and its directors, viewing both as separate legal entities, but even if someone is acting in their capacity as a director, they are not protected from joint liability with their company if their conduct in a matter would make them liable as an accessory in any event.
Two of One for Fun’s directors were successful in having the claims against them struck out, as on the pleaded case, their involvement in the matter was not shown to be more than involvement over and above their roles as company directors.
There was nothing in the pleadings to suggest that they had co-operated in the alleged infringing acts and nothing to suggest that their co-operation would help bring about the alleged infringing acts. In essence, they did no more than carry out their proper functions as directors.
However, the application to strike out the claim against the third director failed, as there was just enough evidence to support the position that the director intended his co-operation in the event to bring about the alleged copyright infringement. This meant it wasn’t possible to say that the case against this director had no real prospects of success.
The case is now proceeding to establish the primary case of infringement by One for Fun of the Tangle product.
What does this mean?
Intellectual Property (IP) cases have often been at the forefront of joint tortfeasor actions. Although heavily reliant on the specific facts of each case (and therefore also dependent on having sufficient evidence at hand) the intentionality behind an IP infringement often means that a claimant can look to include within the claim a controlling hand behind a corporate infringer.
Directors need to be mindful therefore that they can’t hide behind a corporate shield if they are actively involved in the misdeeds of their company.
If you need support understanding your Intellectual Property rights, get in touch with Rory O’Hare today: firstname.lastname@example.org