A recent High Court decision has highlighted a circumstance in which the ‘veil of incorporation’ can be lifted and an agent of a limited company can be held personally liable. Vintage Bentley dealer Stanley Mann was held to be personally liable for losses incurred by a purchaser of a mis-described car, even though the sale contract was formed with Mr Mann’s company, Stanley Mann Racing Limited (SMRL).
In holding Mr Mann personally liable, Judge Anthony Thornton QC took into account the fact that SMRL’s name was only used by Mr Mann on his invoices and official letters, and then only in small letters at the foot of the page. SMRL’s name was not referred to on Mr Mann’s website or advertisements. Instead Mr Mann used his trading name, Stanley Mann Racing.
The purchaser (who was buying the car through a hire purchase arrangement with a leasing company, which was held to be jointly and severally liable with Mr Mann and SMRL) was herself a solicitor. However, Judge Thornton rejected the defendant’s submission that she should have been aware, through her professional qualification, that Stanley Mann Racing was the trading name of a limited company and not an individual: he observed that many specialised businesses are still run by individuals.
Judge Thornton accepted that the purchaser had understood that Mr Mann had given warranties as to the condition of the car in his personal capacity and held that Mr Mann remained liable under those warranties, even though the contract for the sale of the car was made in the name of SMRL.
The case highlights the risk, particularly in relation to small businesses, of individuals ‘holding themselves out’ as acting in their personal capacity. If you are trading through a private limited company, be sure to make it clear to any prospective contractor that you are acting as agent for a company and to disclose the name of that company. To remove the possibility of any confusion, the name of the company, including the suffix ‘Limited’, should appear clearly on the website (particularly on the homepage), as well as on official letterhead, email sign-off and promotional material.