Tuesday 9 April 2019

UK: England and Wales: director liability for inducing breach of contract by their company

Judgment was given yesterday in Antuzis & Ors v DJ Houghton Catching Services Ltd & Ors [2019] EWHC 843 (QB).The judgment is noteworthy because of the discussion it contains of what has become known as the rule in Said v Butt [1920] 3 KB 497 - that a director will not be liable for inducing breach of contract by their company if they act bona fide within the scope of their authority - and the linked discussion of the duty imposed on directors to promote the success of the company under section 172 of the Companies Act 2006. It is also noteworthy in providing an example of a company secretary being found in breach of duty.

The facts of this and an earlier case have been well publicised by the media and involved, in the UK, the exploitation of people from Lithuania: see here. Employed by a company, DJ Houghton Catching Services Ltd, the Lithuanian workers - the claimants in the case - received less than the statutory minimum prescribed wages, worked extremely long hours, had payments withheld as a form of punishment, did not receive holiday pay and were subject to other unlawful deductions.

The trial judge (Mr Justice Lane) found, as a preliminary issue, that the director and company secretary were jointly and severally liable to the claimants for inducing the breaches of contract by the company. With regard to Said v Butt, Lane J. held that it was "the officer's conduct and intention in relation to his duties towards the company - not towards the third party - that provide the focus of the 'bona fide' enquiry" (para. [114]). The director and company secretary had, in the judge's view, acted in breach of section 172 and section 174 of the Companies Act 2006.

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