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Paying chicken feed renders company’s officers liable for inducing breach of contract

30th May, 2019

Sue Austin of the Employment and HR department considers the decision in Antuzis v DJ Houghton Catching Services Ltd [2019] EWHC 843 (QB) in which employees successfully brought claims of inducing breach of contract against the directors of a company.

DJ Houghton Catching Services Ltd (“D1”) operated as a gangmaster, employing chicken catchers at various farms. The claim was brought by a number of Lithuanian nationals for breaches of contract by D1 including:

underpayment of minimum wage rates;
deduction of work-finding fees;
deduction of accommodation fees;
unpaid wages; and
unpaid holiday pay.

The trial was limited to liability only, including whether or not D1’s director (“D3”) and secretary (“D2”) were personally jointly and/or severally liable to the claimants for inducing the breaches of contract of D1.

As regards personal liability of D3 and D2, the general principle is that directors of a company will be liable for the torts of the company committed at their direction. However, if the directors acted bona fide within the scope of their authority, they will not be liable for inducing breach of contract. The Court had to have regard to the officers’ conduct and intentions in relation to their duties to the company, not towards the third party, when considering whether or not their actions were bona fide within the scope of their authority.

Mr Justice Lane referred to Sections 172 (duty to promote the success of the company) and 174 (duty to exercise reasonable care, skill and diligence) of the Companies Act 2006 and found “beyond doubt that D2 and D3 acted in breach of sections 172 and 174. What they did was not in the best interest of the company or its employees. On the contrary…they wrecked its reputation in the eyes of the community”.

As to whether or not D3 and D2 were acting bona fide vis-a-vis D1, the judge found “..that they were not. In the light of the evidence, I find that neither D2 nor D3 honestly believed (i) that they were paying chicken catchers the minimum wage (ii) that they were paying required overtime and holiday pay and (iii) that they were entitled to withhold payments..” and “I am in no doubt whatsoever.. that both of them actually realised that what they were doing involved causing D1 to breach its contractual obligations towards the claimants”.

Accordingly judgment was entered for the claimants with quantification of the loss to be determined at an assessment of damages hearing. D2 and D3 were jointly and severally liable to the claimants for inducing the breaches of contract of D1.

This case illustrates that company directors may become personally liable for their company’s breaches of contract if they do not act in the best interests of the company.

Please contact the Employment and HR team for more information on this subject, or to ask a question.

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