Contex Drouzhba Ltd v Wiseman & Anor

Section 6 of Statute of Frauds (Amendment) Act 1828 does not preclude a deceit claim where a fraudulent representation concerning a company's ability to pay is implied from the terms of a written agreement signed by the director to be charged. The statutory requirement is met although the representation is implied rather than express.

A director who signs for the company may be personally liable for that fraud, and the signature made on the company's behalf can satisfy the statutory requirement. The result depends on the document and circumstances. A representation made solely by conduct, rather than contained in writing, would not satisfy section 6.

The claimant garment manufacturer entered a framework agreement with Scott Daniel Ltd. Mr Wiseman, the company’s active director, signed it. The agreement provided for payment within 30 days of shipment.

Irwin J held that Mr Wiseman fraudulently implied that the company could meet those payment obligations, although he knew it was insolvent and had no prospect of obtaining capital. The judge awarded damages for deceit and held that section 6 of Statute of Frauds (Amendment) Act 1828 did not provide a defence because the representation was in writing and signed by Mr Wiseman.

Mr Wiseman appealed only on that statutory issue. The central question was whether the implied representation arose from the written agreement or merely from conduct.

1. Appeal dismissed. The judge was entitled to find that the framework agreement contained a fraudulent representation in writing concerning Scott Daniel Ltd’s ability to pay, and that it was signed by Mr Wiseman as the person to be charged.

2. Section 6 of Statute of Frauds (Amendment) Act 1828 applies to an implied, as well as an express, representation. The statutory purpose is evidential: it requires written proof of representations about another person’s credit or ability. It does not excuse fraud. A representation inferred from the terms of a written document may therefore satisfy the section, whereas a representation arising from conduct alone would not.

3. A director who is the effective mind of a company and knowingly makes a fraudulent representation is personally liable for that fraud, even though the company may also be liable. Following Standard Chartered Bank v Pakistan National Shipping Corp [2003] AC 959, signing on behalf of the company did not prevent personal liability. Nor did it prevent the director’s signature from being a signature for the purposes of section 6.

4. The promise in the signed framework agreement to make payment within 30 days was its material feature. In its context it clearly implied that the company had the capacity to meet the agreed payment terms. The claimant relied on that term before accepting future orders. Mr Wiseman knew the representation was false. The court stressed, however, that not every contract signed by a director carries such an implied representation; the issue is fact-sensitive.

5. The availability of remedies under sections 213 and 214 of Insolvency Act 1986 did not affect a creditor’s independent cause of action in deceit against a fraudulent director.

• Court of Appeal (Civil Division): Dismissed Mr Wiseman’s appeal and affirmed the conclusion that section 6 of Statute of Frauds (Amendment) Act 1828 was satisfied.

• High Court of Justice, Queen’s Bench Division: Irwin J held Mr Wiseman liable in deceit: [2006] EWHC 2708 (QB).