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Directors Who Misled Creditor Personally Liable

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When a supplier to a marquee company was not paid for goods it had supplied, one of the Directors told the supplier that the company was waiting for an insurance claim to be settled, after which payments would be made as usual.

hlw Keeble HawsonIn reality, there was no insurance claim pending. Another Director of the marquee company then claimed that it was being sold and that when the sale went through, the creditors would be paid.

When the supplier remained unpaid, it not only claimed against the marquee company but also sought damages from the two Directors.

The supplier argued that both the representations made to it were false and that it relied on them to its detriment, because it had, as a result, not issued proceedings earlier. In particular, it had not exercised its rights under a Retention of Title Clause.

The Judge rules that the first representation was made falsely and the second was made recklessly because it was made without regard to whether the company could or could not pay its creditors. The supplier had suffered as a result because it had relied on the representations as the actions of the Directors had dissuaded the supplier from repossessing its goods or suing for the outstanding sums due to it.

Accordingly, the Directors had committed a deceit on the supplier and were personally liable to it for the sum it would have been able to recover under its Retention of Title Clause.

For further information on this case or for any advice on any insolvency issue, please contact Richard Fergusson on 0113 3993485 or Matthew Dixon on 0114 2521414

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