Antuzis & Ors v DJ Houghton Catching Services Ltd & Ors

A director who induces the company to breach a contract is protected by the rule in Said v Butt only when acting bona fide within the scope of the director’s authority. Bona fides concern the director’s duties towards the company, rather than duties towards the contracting third party.

The nature and consequences of the contractual breach may show whether those company duties were breached. Deliberate procurement of statutory employment-rights breaches may therefore remove the protection where the conduct damages employees, the company’s reputation and its long-term interests. Personal liability then arises where the director actually knows that the conduct will breach the company’s contracts and intends the breach as an end or means to an end.

Lithuanian chicken catchers alleged that their corporate employer systematically underpaid statutory agricultural wages, omitted overtime, travelling time and holiday pay, charged unlawful work-finding and accommodation fees, and withheld wages as punishment or leverage.

The court heard an application for summary judgment against the employer and tried a preliminary issue concerning whether its sole director and company secretary were personally liable for inducing its contractual breaches. The statutory wage entitlements formed terms of the employment contracts.

The central questions were whether the employer had any realistic prospect of defending the specified claims and whether the individual defendants could rely upon the protection afforded to company officers acting bona fide within their authority.

1. Summary judgment was entered for the claimants. The evidence demonstrated a deliberate and systematic operation in which the hours on payslips were fictional, actual working and travelling hours were not recorded, overtime was disregarded, and chicken catchers worked far longer than the recorded hours. The employer had no realistic prospect of defending the claims for underpayment, unlawful work-finding fees, excessive accommodation deductions or unpaid holiday pay. Loss was to be quantified at an assessment of damages.

2. The rule in Said v Butt protects a company officer from liability for inducing the company’s breach of contract only where the officer acts bona fide within the scope of authority. The bona fide inquiry focuses upon the officer’s conduct and intention in relation to duties owed to the company. The character and consequences of the contractual breach remain relevant because they may demonstrate a breach of those company duties.

3. A contractual breach having a statutory element may indicate failure to comply with a director’s duties and thereby support personal liability for inducing the breach. It does not automatically do so. The conclusion depends upon the circumstances. Here, the employment terms protected vulnerable workers against exploitation. The sustained and deliberate breaches were contrary to the interests of employees, caused catastrophic reputational and commercial harm, and breached the duties under sections 172 and 174 of the Companies Act 2006.

4. Although the director and company secretary acted within their formal authority, neither acted bona fide towards the company. They knew that the chicken catchers were not receiving minimum wages, overtime or holiday pay and that the challenged deductions and withholding of wages were unlawful. Their purpose was to maximise the company’s profits, but the scheme ultimately destroyed its reputation and substantially reduced its business.

5. The requirements identified in OBG Ltd v Allan [2007] UKHL 21 were satisfied. Each individual actually realised that the conduct caused the company to breach its contractual obligations. The breaches were an intended means of operating the business, rather than merely foreseeable consequences. Judgment on the preliminary issue was therefore entered for the claimants: the director and company secretary were jointly and severally liable for inducing the employer’s breaches of contract.

This was a first-instance determination. By an order dated 8 August 2018, Master Yoxall directed the trial of a preliminary issue concerning the personal liability of the second and third defendants and provided for the claimants’ summary judgment application to be heard immediately afterwards.