Kerry Underwood

LIQUIDATION: INDIVIDUALS BEHIND LIMITED COMPANY: INDUCING BREACH OF CONTRACT AND UNLAWFUL MEANS CONSPIRACY

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In October I am delivering my new course – Getting the Retainer Right – in 7 cities – details and booking form here.

In Palmer Birch (A Partnership) v Lloyd [2018] EWHC 2316 (TCC)

the Technology and Construction Court  upheld economic tort  claims by a building contractor against two individuals who directed the affairs of the limited company with which the building contractor had contracted under a JCT contract.

 

The judge found that:

 

  • The first defendant and the second defendant had committed unlawful means conspiracy by colluding to bring about the limited company’s liquidation so that it could escape the contract and avoid having to pay the building contractor for the work done.
  • The first defendant, who was the limited company’s sole funder, though not a director, had induced the limited company’s breach of contract.

 

The contract concerned the renovation of a house in which the limited company had a leasehold interest and where the freehold was held by a company beneficially owned by the first defendant, whose English residence it was.

The first defendant was non-UK domiciled and had deliberately not become a director of the limited company so as to distance himself from the limited company’s affairs and by interposing the limited company between himself and the property, he benefitted financially.

However, he behaved throughout as the effective client under the contract, and the key decision-maker.

The first defendant’s decision to divert his funding away from the limited company persuaded the judge that he had crossed the line from “merely preventing” the contract to inducing its breach.

The first defendant had treated the works as a “pay as you go” arrangement, not a contractual commitment and the second defendant was denied the protection of the corporate veil regarding the conspiracy element.

He had acted neither constitutionally nor in good faith.

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Written by kerryunderwood

October 15, 2018 at 7:24 am

Posted in Uncategorized

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