This is now either an express or implicit aspect of advice provided by most legal firms. The fact that we are following the American example, with society becoming extremely litigious, has led to individuals actively seeking advice to minimise their personal liability.
As mentioned elsewhere on this website, key common sense steps for the limitation of a business person’s liability to customers and others are:
- The establishment of prudent processes and systems to ensure that care is taken by all personnel to perform their functions without causing loss or damage to others;
- Ensuring that all relevant documentation clearly establishes the parameters of the role of the business person or adviser. For example a solicitor handling a business transaction might make it absolutely clear that, unless the client specifically requests, all taxation advice is being provided by the client’s accountant not the solicitor;
- Displaying appropriate warnings in signs and other material. For example car parks will often display signs stating that vehicles are parked at the owner’s own risk. Such signs will only be effective if they are worded correctly and clearly visible and at an early enough time in the transaction to constitute part of the contract. The car park sign only coming to the notice of the customer after she has driven in will be of no effect;
- Including indemnities in the contractual documentation. These need to be drafted very, very carefully as the courts have an inherent bias against indemnities and will construe any ambiguity against the person trying to rely on them.
Deprivation of assets
Another common method of a business person to limit their liability is to ensure that they have no assets in their own name which would be available if they were sued. That might include transferring assets to a discretionary trust or a spouse – after being careful about capital gains tax and stamp duty implications. Clawback periods apply.
It is because of such practices that it is often prudent for a person entering into a business relationship with another – for example as a landlord and tenant – to ask for evidence as to the assets in that person’s name. Also assets in a superannuation fund are in general not available to creditors of the member.