Any transfer of liability: Ltd > Personal?

[Zumanji]

Hi Folks,

I posted a few weeks ago about some trouble I was having with an ex-client.

Essentially (very very briefly); I took the decision to cease trading a limited company of which I am sole director. Sold assets to try to keep running on a skeleton basis, failed, and business is due to be struck off in June.

Some stock that we manufactured and held for clients was damaged in an accident (shelving broke overnight causing damage to quite a lot of stock stored on those units). We have informed all clients, and our insurers, who say we were covered at the time.

Two clients threatening to take me to task personally for the damage as they claim they have had legal advice suggesting that I had a personal duty of care, and that I did not exercise that properly and therefore, if the insurance does not cover them to their satisfaction then they will pursue me personally.

Is it possible that I have a personal level of liability for this accident? The storage units were maintained properly and were new; so I don't see what else I could have done!

One ex-client has got particularly nasty and have had to report her to the police for harassment. Any thoughts appreciated! Thanks

 

[kulture]

I would have thought that if the insurance company thought you personally were negligent then they would not pay out. Secondly they would pay what they consider the stock was worth, unless you were underinsured, so I cannot see what basis the clients can sue you.

Likewise I would have thought that the company had the insurance, not you, nor the clients, so the insurance will pay the company and then the company should pay all creditors not just the idiot clients.

 

[mhall]

It's very tempting to just tell the clients to go and take a running jump. As Kulture says, if you have convinced the insurance company it's the Limited Company that is insured, you are/were an employee of the Limited Company. It is not a personal thing

 

[arcon5]

They will be correct with regards to the duty of care.. but I cannot for the life of me see why they can see you personally and not the company.

They will probably say what they have to in order to recover some of their losses, so maybe see your own solicitor and get a more impartial opinion.

 

[lockyer]

Unfortunately the clients solicitor is right. Since the amendments to the companies act 2006 (effective 2008), directors can be held personally responsible for many things, and the corporate veil has been lifted to a certain extent.

It becomes event more relevant if, but not limited to:

1. you have traded insolvently
2. if the director did the job that caused the damage, or personally supervised it.

They typically go after the director now if the company doesn't have enough assets of cash to pay the claim.

It is also illegal for the company to fund the defence of the lititgation against the director unless there is a directors and officers policy to claim against.

This is an extreme example, but its been ongoing this week

http://www.journallive.co.uk/north-...objectid=30832368&siteid=61634-name_page.html

 

[kulture]

There is a world of difference between killing a worker through negligence and loosing stock because shelves collapsed. It is going to be tough to prove that the director was negligent.

How much money is under dispute? I suspect that after the insurance pays up it would not be worth solicitors etc. it is more likely the customers are just angry and bluffing.

It is best to insist that all communication is by letter only, and suggest that it is pointless doing anything before the insurance company pays.

 

[lockyer]

One thing I would say is:

1. urgently send the letters to your broker/insurer
2. do not enter into any other communication with the otherside apart from acknowledging the receipt of their letter, and that you have passed it to your insurers.
3. pass all correspondence to your insurers unanswered

 

[Alan R Price]

Unfortunately the clients solicitor is right. Since the amendments to the companies act 2006 (effective 2008), directors can be held personally responsible for many things, and the corporate veil has been lifted to a certain extent.

It becomes event more relevant if, but not limited to:

1. you have traded insolvently
2. if the director did the job that caused the damage, or personally supervised it.

They typically go after the director now if the company doesn't have enough assets of cash to pay the claim.

It is also illegal for the company to fund the defence of the lititgation against the director unless there is a directors and officers policy to claim against.

This is an extreme example, but its been ongoing this week

http://www.journallive.co.uk/north-...objectid=30832368&siteid=61634-name_page.html

As an insolvency practitioner I am very interested in what you say although I struggling to understand why or how any of it is correct or relevant in the circumstances OP describes. Can you please take me through the relevant sections of the legislation or case law, since I must be missing something.