Director personally responsible for company’s unpaid invoice

A director has been held personally liable to pay the full market value of products that had been supplied to her company shortly before it went into liquidation.

The claim against the director arose from her company’s failure to pay for a cargo of sunflower oil sold to it by a supplier in October 2012.

The supplier submitted that it had entered into the contract on 21 September 2012 based on the director’s assurance that her company could pay for the oil. After entering into the contract, it acquired the sunflower seeds and extracted the oil.

It dispatched the cargo after receiving messages via the SWIFT international payment network indicating that the company had made the payment. By the time the supplier discovered that those messages were forgeries, it had lost control of, and title to, the oil.

The company did not pay for the oil and went into liquidation shortly afterwards.

The supplier sought damages from the director on the basis that her representations had been false and it had entered into the contract in reliance on them.

The judge found the director liable and awarded damages based on the market value of the oil obtained by the company because of the deceit.

The Court of Appeal has upheld that decision.

Please contact Sing Li if you would like more information about the issues raised in this article or any aspect of contract law.