A group of Lithuanian employees worked for a poultry farm as chicken catchers. The farm was a limited company, with two officers: a sole director and a company secretary. The employees brought a claim in the High Court for breach of their employment contracts arising from alleged unpaid wages, unlawful deductions, imposition of unlawful employment penalties and fees and no holiday pay. The court held that there was no realistic prospect of the defendants - the company, the director and the company secretary - succeeding in their defence at trial and awarded summary judgment to the employees. The question then was whether the officers as well as the company were liable.
The employees argued that they had been employed by the company in an exploitative manner, working extremely long hours and being paid less than the statutory minimum wage. The court ruled that the sole director and secretary of the company were jointly and severally personally liable to the employees, for inducing the company's breaches of contract, because they had not been acting in good faith in relation to the company and they had both 'actually realised' that what they had been doing had involved causing the company to breach its contractual obligations towards the employees. The court drew on statutory provisions of the Companies Act which require officers to act in good faith, taking a variety of interests into account including those of their employees and of the wider community, and to exercise reasonable skill, care and judgement in performing their duties.
Although the circumstances were extreme this case illustrates that, where directors act in flagrant and deliberate breach of the law they may well face personal liability. The directors’ breaches in this case were particularly invidious but there are many more benign potential breaches, particularly relating to employment law, and if an officer of a company makes the wrong call they could on the basis of this case be exposed to personal liability.