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A director has been found guilty of the tort of deceit for signing a framework agreement which included provisions as to payment by his company to a supplier, which he knew the company could not keep. The court held that it could not be right that his position as director should shield him from this liability. Mr W was a director of SD Ltd. SD Ltd had a long-standing relationship with suppliers in Bulgaria. SD Ltd was a habitual late payer, and its financial position deteriorated as a large debt to the supplier accumulated. It entered into a framework agreement with the supplier which included a provision that it would make payments to the supplier’s account not more than 30 days after shipment of the goods. Mr W signed the agreement as SD Ltd’s managing director. However, SD Ltd never paid off its debt to the supplier, nor did it comply with its obligations to pay for new orders within 30 days of shipment. The court found that Mr W had committed deceit in signing the framework agreement. His activities and those of SD Ltd were so closely mingled that they could not be separated. Mr W had made almost all of the representations about SD Ltd’s credit to the supplier, making them both personally and procuring SD Ltd to make them. Mr W was therefore personally liable to the supplier for the loss it suffered as a result of this deceit. |
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Director found guilty of deceit See CLM: ¶2448+ |
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Contex Drouzhba Ltd v Wiseman and another [2006] EWHC 2708 (QB) |
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Directors disqualified for maximum 15 years See CLM ¶ 3013 |
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Re Vintage Hallmark plc; Secretary of State for Trade and Industry v Grove and Gunter [2006] EWHC 2761 (Ch) |
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Two directors have been disqualified on the ground of unfitness for the maximum period of 15 years. Mr G1 and Mr G2 were both directors of VH plc. In 2000, Mr G1 was the only director. VH plc acquired the business of a partnership, of which Mr G1, Mr G2 and Mr L were the partners. By the end of 2000, all three were also directors of VH plc. In 2002, Mr G1 resigned from office and Mr G2 and Mr L were removed from office by the shareholders; VH plc went into CVL at the beginning of 2003. The secretary of state applied to disqualify Mr G1and Mr G2 on the ground of unfitness (Mr L died shortly after the company went into liquidation). The court found that Mr G1 and Mr G2 had procured VH plc to acquire the business knowing it to be hopelessly insolvent and knowing that VH plc had no prospect of honestly discharging its huge liabilities (of nearly £52M, as opposed to its assets of around £5M). In their defence, Mr G1 and Mr G2 denied any dishonesty and argued that since they were not accountants themselves, they had relied on experts such as Mr L (who was a qualified accountant). However, the court asserted that every director had a duty to the company to inform himself about its affairs and supervise the business along with the other directors. These were inescapable personal responsibilities. The court would look at the facts of each case, assessing the competence of a director according to his role, duties and responsibilities in relation to his company. However, the court found that Mr G1 and Mr G2 had actual knowledge of, or had deliberately turned a blind eye to, all of the matters relied on by the secretary of state as amounting to unfitness. They would each be disqualified for the maximum period of 15 years. |
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