Directors - The Risk of Personal Liability

Those involved in running a business will often be well-advised to set up a limited company to minimise the risk of incurring personal liabilities. However, it must always be remembered that a Director who is personally guilty of wrongdoing will not necessarily be shielded from liability.

In the recent case of R. V. Dhaliwal, D was the sole shareholder and director of a company that operated a skip service on a plot of land near a service station on a motorway. Both D and the company were convicted of offences under the Environmental Protection Act 1990 relating to the depositing of controlled waste without a licence and the keeping of controlled waste otherwise than in accordance with a licence. In the Crown Court, D was fined a total fine of £25,000 and ordered to pay a further £25,000 towards the prosecution’s costs. No separate fine was imposed on the company.

The Court of Appeal dismissed D’s appeal. D had been dishonest. Given that dishonesty, the Judge had been entitled to fine D personally rather than the company. The fine was not manifestly excessive. Fines had to be sufficiently severe to deter profiteering by those operating unlicensed tips and to protect the public from such tips.

In many ways this was an extreme case. D’s conduct was blatant. He made no attempt to co-operate with the authorities. Had he done so, the level of fine may have been much reduced, or he may have avoided personal liability altogether. The case does, however, underline the importance of Directors resisting the temptation to regard statutory regulations as being so much irksome red-tape which can be safely ignored.

If you would like to know more, please contact David Dees or Nick Crook.

Filed: 05/09/2008 12:02:20