Crystalens Ltd v White

A director or agent who acts bona fide and within the scope of authority ordinarily incurs no personal liability for procuring the company to breach its contract. Personal liability may arise where the director acts outside that authority or ceases to act bona fide, particularly where additional features such as conspiracy or dishonesty are present. On a summary judgment application, the court may determine that a proposed amended claim has no realistic prospect of success, while leaving the underlying contractual breach undecided. A late allegation of bad faith must have credible evidential support.

Crystalens alleged that Dr White, as managing director of C.R.L., procured C.R.L. to breach a collaboration agreement concerning the development of prototypes. Dr White applied under CPR 3.4 and CPR 24.2 and 24.4 to strike out the claim or obtain summary judgment.

The pleaded case did not allege that Dr White acted outside his authority or otherwise than bona fide. Crystalens accepted that amendments were needed, but relied on evidence suggesting that Dr White had acted in his own interests and those of C.R.L.’s holding company. The central issues were whether such a claim was legally maintainable and whether the evidence gave it a realistic prospect of success.

1. Application granted. The Particulars of Claim were struck out in their entirety. Summary judgment would also have been given against Crystalens on the proposed amended case.
2. The court followed the principle in Said v Butt [1920] 3 KB 497, as approved in D.C. Thompson v Deakins [1952] 1 Ch 646 and Welsh Development Agency v Export Finance Co Limited [1992] BCLC 148. A director or agent acting bona fide and within the ambit of authority has no personal liability for procuring the company to breach its contract. The director is also under no duty of care to the contractual counterparty to ensure that the company performs.
3. The rule is consistent with limited liability. Personal liability may nevertheless arise where the director acts outside the scope of authority or ceases to act bona fide. The court accepted that additional features such as conspiracy or dishonesty may be relevant.
4. The authorities relied on in Clerk and Lindsell did not establish a contrary general rule. Evans v Spritebrand 1 W.L.R. 317 concerned copyright and the specific statutory wording. Mancetter Developments v Garmanson Limited [1986] 1 Q.B. 1212 concerned liability for authorising a tort. Meridian Global Funds v Securities Commission [1995] 2 A.C. 500 concerned attribution of knowledge to a company.
5. Although Crystalens could theoretically amend its pleading, the evidence did not credibly support the late allegation that Dr White acted in bad faith or outside his authority. The court did not decide whether Crystalens or C.R.L. had breached the collaboration agreement. It decided only that the proposed tort claim had no realistic prospect of success.