A company sold reclining armchairs. It was accused of selling these armchairs in an aggressive and intimidating manner to elderly, vulnerable, people.
It was also accused of using high pressure sales tactics to try to prevent customers from withdrawing from unfair transactions.
In this case, an elderly lady cancelled her order the day after it was made. The company initially promised her a refund of her deposit but later sent her a letter which said she would only receive a partial refund.
The company and one of its directors were prosecuted for “aggressive commercial practices” which are contrary to consumer protection regulations.
Under the regulations, if an offence is committed by a company, a director can be prosecuted as well if the offence was committed with his “consent or connivance”. The test of “consent or connivance” is a common one in legislation that imposes individual liability on directors where an offence is committed by a company.
Both the company and the director were found guilty. Both appealed, the director arguing that it hadn’t been proved that he had “consented and connived”.
The Court of Appeal refused the appeals. It confirmed the legal basis for the director’s personal liability. It must be proved that the director:
- knew the material facts that constituted the offence by the company; and
- agreed to its conduct of business on the basis of those facts.
In this case, it was the director himself who sent the letter regarding the partial refund so there was no doubt that consent and connivance was established.
It won’t always be so clear cut. Many companies carry out their sales activities entirely through a sales force with no direct involvement of directors.
That doesn’t necessarily get a director off the hook, though.
If a director knows there are poor sales practices going on, and does nothing about it, he may still be found to have agreed to the business being conducted on that basis.
If your company deals with consumers, you will probably already know that there’s a raft of consumer protection legislation out there. Directors can minimise the risk of personal prosecution if they ensure that:
- policies and procedures are in place to regulate sales activity, and are kept under review;
- their management and staff are trained so that they understand what they can and cannot do; and
- they regularly monitor what’s going on so that any problems are identified and resolved at an early stage.
Case: R v Waters