Overview

In the recent case of Lindsay v O’Loughnane it has been held that a director who deliberately lied to a company’s customer about the company’s financial position was liable to the customer for the tort of deceit and that he could continue to be liable until he corrected the position.

The defendant was a director and principal shareholder of a company offering foreign exchange services. Pursuant to the company’s terms of business, customers’ money was held in a trust account. The defendant director had, for some time, been using client funds for his own purposes. Towards the end of the company’s trading, the director started to use funds from one longstanding customer to purchase currency for other customers, in effect using it as a personal bank account. The director then forwarded the claimant customer’s foreign exchange currency to him when the funds became available. When the claimant asked why there was a delay before he received the funds, the defendant emailed him and falsely said that it had been caused by an error on the part of the company’s bank. The claimant made two further trades with the company in September 2008 and unsurprisingly, his money vanished.

The customer brought an action directly against the director on the basis of the tort of deceit and alternatively on the basis that the court should pierce the corporate veil.

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