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When is a Director Personally Liable?

3 May 2019

 

When can a Director be found to be personally liable for its breaches of an employment contract?

 

The High Court recently considered this question in Anzutis and DJ Houghton Catching Services Ltd. In this case, the claimants argued that they were employed by DJ Houghton Catching Services Ltd in an exploitative manner, commonly working extremely long hours and being paid less than the statutory minimum wage.  The claimants further contend that they were frequently not paid the sums which were recorded as being due to them on their respective pay slips, which had in any event been calculated on a fictional basis. Payments were often withheld as a form of punishment for alleged transgressions. The employer made no attempt to pay the claimants holiday pay, to which they were entitled, or to pay overtime at the prescribed rates. Nor was a claimant permitted to take absence on account of bereavement. Deductions were made in respect of so-called employment fees and for rent, in respect of premises at which the claimants were effectively required to reside, with the rent being in excess of the maximum permitted under legislation. It was the claimants case that the Dorectors should be found to be personally liable for these breaches as they had induced the Company into committing the breaches. 

 

The general principle is that the directors of a company shall not be liable for a breach of contract where they are acting bona fides for the company. However, in this case, the Judge found that the Directors had induced the breaches of contract knowing that they were breaching the statutory obligations placed upon the Company. The Judge was in no doubt that the Directors "actually realised" that what they were doing involved causing the Company to breach its contractual obligations towards the claimants. What they did was the means to an end and found that the Directors should be personally liable for the breaches committed by the Company. 

 

 

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