What Is The Separate Entity Architecture Modern Corporation?
The issue in this case is that whether Yellowscope is liable for Fan’s injury. The issue is also associated with the fact that whether Blackspot is held partially liable for Fan’s injury and can he avoid liability based on which grounds.
A company is a separate legal entity which is separate from its shareholders. According to the provisions of Section 119 of the Corporation Act 2001 (Cth) a company attains the title of a separate corporate after its registration. Therefore, it is noteworthy to mention here that only the company has the right to sue and to be sued in its own name (Lozano, Carpenter and Huisingh 2015). According to the provisions of Section 124(1) every company has the same capacity and powers which are similar to the general powers of an individual. Therefore, in this regard, it is worth mentioning that, only the company shall be held liable for the debts incurred during the process of business transactions (Veldman 2018). According to Section 180(1) of the Corporation Act 2001 (Cth) directors are required to act in due diligence and care.
Under the law of torts, a person may be held liable for the acts or omission on the part of another person. In such cases, the persons are not personally held liable for their own conduct. Therefore, it is worth noting that an employer may be vicariously liable for the acts of their employees which were held in Hollis v Vabu Pty Ltd (2001) 207 CLR 21. It is noteworthy to mention here that, the employer shall not be held vicariously liable for the acts done by independent contractor.
It is worthwhile to mention here that the company does not act as an agent to its shareholders; however the shareholders act as an agent to the company. In this regard, the case of Salomon v Salomon & Co Ltd  AC 22 can be emphasized. In this case, it was held by the Court that Salomon being the sole shareholder was not personally liable to the creditors. The company was held liable as it was a separate legal entity. The case Salomon v Salomon & Co Ltd  AC 22 was a landmark case in which it was established that how a company functions. The case was concerned with the claims demanded by unsecured creditors during the process of liquidation. However, as Salomon was the majority shareholder of the company, he was held personally liable for the debts incurred by the company. in this regard, the Court in its decision held that Salomon being a shareholder is not personally liable for the loss of the company and therefore cannot be personally sued. However, in the ruling, the Court was of the opinion that the company was incorporated by Salomon but the creditors in this case conducted the business as an agent of Salomon who should according to the application of law be held liable for the debts incurred by them during the course of agency. It is worth stating that the shareholders of a company cannot be held liable for any negligence in regard to the company. In case of negligence occurred as a result of their personal conduct, the shareholders shall be held liable.
In the given scenario, it can be observed that Fan Bingbing is the plaintiff who is an employee, sole shareholder and director of the company Blackspot Pty Ltd. However, the plaintiff used to work for Yellowscope Pty Ltd as well (defendant no). It can be argued that the plaintiff was working on a project given by defendant when she received injuries. In this case, it is worthwhile to refer here that the Court was of the opinion that as the plaintiff was carrying out the work for the purpose of the defendant no.1 and not for her personal conduct, then in such case Yellowscope Pty Ltd (defendant) shall be held liable. Blackspot Pty Ltd cannot be held liable to the injuries caused to the plaintiff because she was using the techniques assigned to her by the defendant. However, in the opinion of the Court there was a duty of care on the part of the defendant to check into matters whether it was operating correctly. It is evident that the plaintiff is the shareholder and director of the company. In this regard, the case of Salomon v Salomon & Co Ltd  AC 22 can be referred. According to the provisions of Section 119, a company is a separate legal person. Therefore, the shareholders and directors of the company cannot be held liable for any loss or negligence on the part of the company. However, in the present case the plaintiff was carrying on the operations according to her personal conduct and regarding which her company Blackspot Pty Ltd was not aware. Therefore, the Court opined that there is a ground to avoid liability on the part of Blackspot regarding the fact that the plaintiff being a shareholder of the company has performed the techniques on her own personal conduct. However, in this case, the Court held that the techniques which were implemented by the plaintiff was for her own personal benefit and was doing it for the defendant. Therefore, the company Blackspot Pty Ltd shall not be held liable for the activities done by the shareholders outside their authority. In the present case study, it may be possible on the part of Blackspot Pty Ltd to be liable for the injury caused to Fan Bingbing. In this regard, the case of Hollis v Vabu Pty Ltd (2001) 207 CLR 21 can be applied where the employers can be held vicariously liable for the acts of their employees. Similarly Blackspot can be held 100% liable for the acts of Fan Bingbing.
In the conclusion, it can be stated that-
- Yellowscope Pty Ltd is liable for the injury caused to Fan Bingbing.
- Blackspot Pty Ltd can be held to be partially liable for the injury.
- There is a possibility on the part of Blackspot Pty Ltd to avoid liability on the ground that Fan is sole shareholder and director of the company.
- In this case, Blackspot can be held fully liable for the injury caused to Fan Bingbing.
It can be finally concluded that in the present case study, Fan Bingning won the case on the ground of being the sole shareholder and director of the company which was held in Salomon v Salomon & Co Ltd  AC 22. Fan Bingbing also won the case on the ground of vicarious liability as Blackspot being her employer is liable for her acts according to the case of Hollis v Vabu Pty Ltd (2001) 207 CLR 21.
Dodd, E.M., 2017. For whom are corporate managers trustees?. In Corporate Governance (pp. 29-47). Gower.
Joy, J., 2018. Legal Entity Operating Structure. In Divestitures and Spin-Offs (pp. 157-168). Springer, Boston, MA.
Lozano, R., Carpenter, A. and Huisingh, D., 2015. A review of ‘theories of the firm’and their contributions to Corporate Sustainability. Journal of Cleaner Production, 106, pp.430-442.
Salomon v Salomon & Co Ltd  AC 22.
Veldman, J., 2018. The Separate Legal Entity and the Architecture of the Modern Corporat