Sullivan v Magness Limited (HC, 17/5/2011; Courtney J, Auckland, CIV 2010-404-007663)

In a recent decision the High Court reaffirmed the high threshold required to lift the corporate veil and hold a director personally liable for a company's actions.  Sullivan was the sole director of a property development company (DCTS).  Sullivan installed $9,845 worth of appliances supplied by Magness Limited (Magness) in a house that he was intending to sell for DCTS but did not pay for them.  Magness refrained from repossessing the appliances in reliance on a letter from Sullivan promising not to sell the property until he had made arrangements to pay the debt.  Despite his promise, the property was sold without Magness being paid.

The District Court held that Sullivan gave a "personal assurance".  In contrast, the High Court found on appeal that Sullivan was acting in his capacity as director when he sent the letter.  The Court decided that there was no evidence that Sullivan was signing in a dual capacity (i.e. as a director and on his own account) and that while Sullivan acted dishonourably, his actions were not so unsatisfactory that a departure from the usual principle of separate corporate identity was warranted.  Sullivan was therefore not held personally liable.