Question Tag: Liability

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  • 8 Marks

BCL – Nov 2020 – L1 – Q4a – Tort

Explain the chances of success in a legal action under the Rule in Rylands v Fletcher.

Osrodo Leather Co. Ltd used a solvent in their tanning business. The solvent escaped from beneath the works and eventually filtered into the water supply, polluting Adade Water Co. Ltd’s dam. Adade Water Co. Ltd was forced to abandon the dam to develop new water supplies. Consequently, Adade Water Co. Ltd took legal action against Osrodo Leather Co. Ltd.

Required:
Briefly explain the chances of Adade Water Co. Ltd, in the light of the Rule in Rylands Vrs Fletcher. (8 marks)

The rule in Rylands v Fletcher (1868) was stated by the House of Lords in the following terms:
“Where a person for his own purposes brings and keeps on land in his occupation anything likely to do mischief if it escapes, he must keep it at his peril, and if he fails to do so, he is liable for all damages naturally occurring from the escape.”

  • In the instant case, there was an escape of the solvent from the container being used by Osrodo Leather Co. Ltd, and the solvent eventually percolated into the water supply run by Adade Water Co. Ltd.
  • However, the issue that would make the Rule applicable in the instant case is whether Osrodo Leather Co. Ltd could not reasonably have foreseen that the spillage or solvent over time would contaminate the water supply.
  • It is to be noted that to make the Rule fully applicable, there should be an essential requirement of foreseeability, apart from the fact that there must be an escape of a thing that inflicts injury from a place over which the alleged tortfeasor has occupation.
  • In the instant case, Osrodo Leather Co. Ltd could not have reasonably foreseen that the spillage of the solvent over time would contaminate the water supply.
  • In the circumstance of this case, the legal action taken by Adade Water Ltd to claim compensation under the Rule in Rylands v Fletcher will not succeed. It may be said that the strict liability for the escape only arises if Osrodo Leather Co. Ltd had foreseen that the escape solvent might cause damage.
  • From the facts, there is no such evidence of foreseeability on the part of Osrodo Leather Co. Ltd.

(4 points for 2 marks each = 8 marks)

  • 10 Marks

BCL – Nov 2020 – L1 – Q2a – Legal Implications Relating to Companies in Difficulty or in Crisis

Analyze the liability of officers and the company for changing the business object and the likely actions by the Registrar-General.

P&Q Company, an incorporated non-governmental organization has been formed with the object of greening the environment and sponsoring deprived children to go to school up to Junior High School level. In the course of operation, the key officers of the company took a decision that the company goes into salt mining without reference to the office of the Registrar-General.

Under this new arrangement, huge profits were made, the Board of Directors was reconstituted, and unexpected debts were incurred. In doing so, the 17-year-old daughter of the Executive Director known as the whiz-kid in financial matters became a Board member. The Registrar of Companies has been alerted on the happenings at the company.

Required:
i) Analyze the new arrangement and give reasons if any, why the officers and P&Q Company will be liable. (5 marks)
ii) What are the likely actions to be taken by the Registrar-General in the circumstance of this case? (5 marks)

i) Reasons the officers and P&Q Company should be punished.

Sections 10 and 182 of the Companies Act, 1963 ACT 179 provide the sources for answering the question.

  • The first part of the case is applicable to an incorporated company limited by guarantee.              (1 mark)
  • Section 10 of ACT 179 provides that a company limited by guarantee shall not be incorporated with the object of carrying on business for the purpose of making profits. (1 mark)
  • Where a company limited by guarantee carries on business of making profit, the officers and members of the company who are cognizant of the fact that it is so carrying on business are jointly and severally liable for the payment and discharge of the debts and liabilities of the company incurred in carrying on that business and the company and those officers are each liable to a fine. Thus, the company and their key officers will be subject to a fine with the key officers additionally bearing the debts incurred. (3 marks)

ii) Likely actions to be taken by the Registrar-General.

  • Section 182 of ACT 179 provides for certain categories of persons who are incompetent to serve on Board of incorporated. One of such persons is a minor. Any of such persons caught in violation of the section is liable on conviction to a fine or imprisonment. (2 marks)
  • The 17 years old daughter is a minor under the laws of Ghana. She is therefore, caught under section 182 and is incompetent to serve on the Board. The Registrar of Companies will proceed on criminal matter against the 17 year old. The company and every director will be also subject to be fined.            (3 marks)
  • 10 Marks

BMIS – Jul 2023 – L1 – Q1b – The business organisation and its stakeholders

Explains five reasons why a partnership may not be a suitable form of business organization.

Your childhood friend who knows nothing about business operations has decided to establish a form of business organization with funds bequeathed to him by his late uncle. While you believe a limited liability company is most suitable, he prefers either a sole proprietorship or partnership.

Required:
Explain to your friend FIVE (5) reasons a Partnership form of business would not be a good idea.

Disadvantages of Partnership:

  1. Unlimited Liability:
    Unlike a limited liability company, members of a partnership have unlimited liability, meaning their personal assets may be attached to defray the debts of the business.
    (2 marks)
  2. Death of a Partner:
    The death of a partner can result in the dissolution of the partnership, potentially disrupting the business operations.
    (2 marks)
  3. Partner’s Actions:
    The inappropriate actions of one partner can bind the entire partnership, exposing all partners to potential risks and liabilities.
    (2 marks)
  4. Liability for Partner’s Debts:
    All partners are liable for the business debts incurred by any one partner, which can lead to unpleasant consequences for the firm if one partner makes poor financial decisions.
    (2 marks)
  5. Decision Making:
    Decision-making in a partnership can be slow and cumbersome, as all partners must be consulted before a decision is made, which may not be as efficient as in other business structures.
    (2 marks)

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