Liability of Director

Trustor AB v Smallbone and Others (Ch D SJ 4 May LB99)

The first defendant, in breach of his duty as the managing director of the claimant company, transferred substantial sums belonging to the claimant to the second defendant, a sham company of which the first defendant was the controlling mind. The claimant was not only entitled to judgment against the sham company on the grounds of its knowing receipt of the money, it was also entitled to judgment against the director on the grounds that he had used the sham company as a device to conceal the true facts thereby avoiding or concealing the liability of the first defendant and therefore the court was entitled “pierce the corporate veil” and recognise receipt by the second defendant company as receipt by the first defendant.