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RECENT CASES |
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Company’s culpability in health and safety prosecution See CLM: ¶623 |
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R v Switchgear Services Ltd [2007] Lawtel 10/10/2007 |
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C Ltd ran a steelwork factory. It sub-contracted the maintenance work in the factory to P Ltd, which in turn engaged SS Ltd to perform specialist maintenance on a particular piece of machinery. SS Ltd’s employees had been working on the site when one of them was fatally electrocuted. The employees had not been given proper instructions, they had not been supervised and, crucially, they had not been made aware that part of the electrical equipment on which they were working was still live. The court found that all 3 companies were guilty of breaches of health and safety law and were ordered to pay fines and costs. SS Ltd appealed against the level of the fine imposed on it. The Court of Appeal agreed that the fine and costs that SS Ltd should pay should be reduced, taking into account: » the relatively greater culpability of C Ltd and P Ltd (who, at the initial hearing, had been fined £100,000 and were ordered to pay £18,000 costs each); » the fact that SS Ltd had fully co-operated with the HSE’s investigation and had pleaded guilty at an early stage; and » the financial means of the three companies. SS Ltd was a small local business with a modest turnover, compared to the other two, which were multi-national companies. The original fine and costs order was likely to close SS Ltd down. SS Ltd’s fine was reduced from £35,000 to £10,000, and it was ordered to pay £10,000 in costs (reduced from £30,000). |
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Director personally liable for litigation costs See CLM: ¶7156 |
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Sims v Hawkins [2007] EWCA Civ 1175 |
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Mr and Mrs H were the only shareholders in a construction company. They were also its sole director and secretary. The company was sued by Mr S who had bought a property developed by the company. The property was alleged to have various defects and inadequate remedial works. The litigation dragged on for 5 years. By 2005, the company had little funds available, so Mr and Mrs H paid for the costs of the first trial. Mr S won and Mr and Mrs H were joined as parties to the action and made liable for the costs from shortly before the start of the trial. Mr S appealed on the ground that Mr and Mrs H should have been made liable for more of the costs. The Court of Appeal upheld the order making Mr and Mrs H liable for the company’s costs at trial but declined to extend it. The Court also warned of the dangers of extensive litigation over comparatively small sums (Mr S had only been awarded £15,000 in damages). |
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Directors personally liable under a guarantee See CLM: ¶4700+ |
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Van der Merwe v IIG Capital LLC [2007] EWHC 2631 (Ch) |
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Mr and Mrs V were the directors of HPIE Ltd, which borrowed $23 million from IIG. The loan agreement was secured by a debenture over HPIE Ltd’s assets. Mr and Mrs V also personally guaranteed HPIE Ltd’s obligations under the loan agreement. HPIE Ltd defaulted under the loan agreement, so IIG demanded payment under the personal guarantees. Mr and Mrs V wanted to raise defences to their liability under the guarantees that would have been available to HPIE Ltd if it had been sued for defaulting under the loan agreement. The court looked closely at how the guarantees were drafted. There were a number of features that pointed to the fact that Mr and Mrs V had no defence to IIG’s claim under the guarantees: » in order to claim under the guarantee, IIG had to issue a certificate of how much was “due and payable”. Mr and Mrs V were then obliged to pay this amount. The certificate only certified how much was due and payable by Mr and Mrs V under the guarantees (not how much was due and payable by HPIE Ltd under the loan agreement). Therefore, the extent of HPIE Ltd’s liability under the loan agreement was not relevant; » the definition of the guaranteed sum was drafted extremely widely. It included sums “expressed to be due, owing or payable”. This therefore included the sums “expressed” in IIG’s certificate; and » Mr and Mrs V were “principal obligors”. In addition, the guaranteed money had to be paid “on demand” (i.e. without the need to prove liability under the underlying loan). This created a separate obligation from the loan agreement. Normally, there is a presumption that such a meaning can only be implied in documents issued by a bank, but the presumption was overcome here by the express wording of the guarantee. |
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Director personally liable for debts of insolvent company See CLM: ¶2448 |
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Contex Drouzbha Ltd v Wiseman and another [2007] EWCA Civ 1201 |
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Mr W was a director of SD Ltd. He caused SD Ltd to enter into a contract that contained a promise that SD Ltd would pay for goods ordered in the future but Mr W knew that it would not be able to do so. The contract had been in writing, and signed by W. He was held personally liable to the other party to the contract because of this fraudulent misrepresentation. Mr W appealed against the judgment. The Court of Appeal upheld the judgment that Mr W had made a fraudulent misrepresentation. By the terms of the contract, Mr W had made representations about the solvency of SD Ltd. It is likely that the company was also liable, but it was insolvent so the point was not pursued. s 6 Statute of Frauds Amendment Act 1826 creates liability for written representations of creditworthiness or solvency. Mr W would not have been liable under the statute for verbal representations. However, the tort of fraudulent misrepresentation does include verbal misrepresentation. This case is the appeal hearing of the case mentioned in ¶2448/mp. |