Overview

The recent case of Invertec v De Mol Holding1 has highlighted the risk of directors being found personally liable for all losses flowing from fraudulent misrepresentations.

In this case, the director was ultimately liable for more than £2 million in damages.

A misrepresentation occurs when one party represents to another that something is true when it is in fact not. For example, A might represent to B that A's subsidiary company is solvent but in fact the subsidiary is insolvent.

A fraudulent misrepresentation occurs when A knows that the representation is false, does not believe the statement is true, or is reckless as to the truth of the statement. So, in the example above, if A actually knew the company was insolvent this would be a fraudulent misrepresentation.

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