Monday 4 November 2024
Your weekly SQE Prep Quiz has arrived
Dear Subscriber,
I hope you had a great weekend. Please see below for the question, the answer to the previous question and associated resources. This is the web version of this newsletter.
Question: Ella is a director of FreshFarm Ltd., a company specializing in organic produce. She is also a director and shareholder of another company, GreenGrocers Ltd., which operates in the same industry. FreshFarm Ltd. is in the process of negotiating a lucrative contract to supply organic vegetables to a major supermarket chain. Ella attends a FreshFarm Ltd. board meeting where the contract terms are discussed. Shortly afterward, she approaches the supermarket on behalf of GreenGrocers Ltd. and secures the contract for her own company, undercutting FreshFarm Ltd. in the process. When the other directors of FreshFarm Ltd. find out, they accuse Ella of breaching her duties as a director.
Which of the following duties under the Companies Act 2006 has Ella most likely breached, and what remedy might FreshFarm Ltd. pursue?
1. The duty to exercise reasonable care, skill, and diligence; FreshFarm Ltd. can sue Ella for negligence.
2. The duty to promote the success of the company; FreshFarm Ltd. can apply to the court for an injunction preventing Ella from acting as a director.
3. The duty to avoid conflicts of interest; FreshFarm Ltd. can seek an account of profits for any benefit Ella obtained from the contract.
4. The duty to declare an interest in a proposed transaction; FreshFarm Ltd. can rescind the contract Ella secured with the supermarket on behalf of GreenGrocers Ltd.
5. The duty to act within powers; FreshFarm Ltd. can request that Ella be removed as a director under section 168 of the Companies Act 2006.
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Answer and feedback to last week’s question: Michael owns a small coffee shop and recently decided to install a new decorative fountain in the seating area. During a busy morning, the fountain leaks water onto the floor, creating a slippery surface. A warning sign about the wet floor is placed near the fountain, but it is partially obstructed by a table and not clearly visible to customers entering the seating area. Lucy, a customer, slips on the wet floor, injuring her ankle. She decides to sue Michael for negligence, arguing that he breached his duty of care by not ensuring the floor was safe for customers.
Which of the following factors will the court most likely consider when determining whether Michael breached his duty of care to Lucy?
1. Whether Michael warned Lucy personally about the wet floor before she entered the seating area.
2. Whether Michael’s actions were reasonable in light of the risk of harm from the wet floor and the visibility of the warning sign.
3. Whether Lucy was wearing appropriate footwear, which might have prevented her fall.
4. Whether Michael had insurance coverage to pay for Lucy’s medical expenses.
5. Whether Lucy’s injury was severe enough to justify a claim for damages.
Correct Answer: 2. Whether Michael’s actions were reasonable in light of the risk of harm from the wet floor and the visibility of the warning sign. Feedback: In determining whether Michael breached his duty of care, the court will apply the “reasonable person” standard and assess whether Michael took reasonable precautions to prevent harm to customers. A key factor is whether the warning sign was sufficiently visible to alert customers to the wet floor hazard. Placing the sign where it was partially obstructed by a table may be viewed as inadequate, as it does not sufficiently mitigate the risk of customers slipping. The court will consider whether a reasonable person in Michael’s position would have ensured that the warning sign was clearly visible and took other steps to prevent accidents. Option 1 is incorrect because Michael is not required to warn each customer individually; rather, he must ensure general safety measures are adequate. Option 3 is incorrect because while Lucy’s footwear could be a factor in contributory negligence, it does not directly determine Michael’s duty of care. Option 4 is incorrect because having insurance does not affect whether Michael breached his duty of care. Option 5 is incorrect because the severity of Lucy’s injury is relevant to damages but does not determine whether Michael breached his duty of care.
Therefore, the correct answer is that the court will consider whether Michael’s actions were reasonable in addressing the risk created by the wet floor and the partially obstructed warning sign.
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Dr Ioannis Glinavos
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