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High Court finds that directors can be liable for breach of employment contract

Most directors of companies don’t expect to be held personally liable for inducing the employer to breach an employee’s contract of employment. However, this only goes so far and the recent case of Antuzis & Ors v. DJ Houghton Catching Services Ltd & Ors [2019] EWHC 843 (QB) clearly shows the limits of that protection. In this case, the High Court concluded that Mr Houghton (director) and Ms Judge (company secretary) were personally liable for the company’s breaches of contract. The “breaches of contract” included statutory claims, in particular in relation to unpaid wages, unlawful deductions and fees and lack of holiday pay.

The Lithuanian claimants were employed in the UK by DJ Houghton Chicken Catching Services (the company) to work at various farms across the UK as chicken catchers. Their working conditions were dreadful. They worked long hours, being deprived of sleep and toilet breaks. They were paid less than minimum wage and often had pay withheld or docked for unknown reasons. No attempt was made to pay their holiday pay or overtime and they were prevented from taking holidays and bereavement leave.

The High Court applied the long established principle in Said v. Butt [1920], which states that a director is not ordinarily personally liable for inducing breach of contract where the director acts “bona fide within the scope of his authority”.

The court concluded that Mr Houghton and Ms Judge were not acting bona fide. They knew that their actions amounted to a clear breach of their duties under section 172 (duty to promote the success of the company) and section 174 (duty to exercise reasonable care, skill and diligence) of the Companies Act 2006. It was held that “what they did was not in the best interests of the company or its employees. On the contrary (…) they wrecked its reputation in the eyes of the community.” It was found beyond doubt that they did not believe that the employees’ remuneration arrangements were lawful and were therefore personally liable for the breaches of contract.

The case is a useful reminder that, whilst the company can indemnify directors against third party claims and purchase insurance to limit the risks associated with carrying out director duties, there are still situations where personal liability cannot be excluded. It is also another example of individuals being personally liable for their actions towards employees (see also our previous article regarding personal liability for subjecting employees to the detriment of dismissal arising from making a protected disclosure, available here. This case demonstrates that it can be impossible to avoid being caught for bad behaviour!

High Court finds that directors can be liable for breach of employment contract

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