Radio presenter wins appeal over liability for legal fees as company director could not bind fellow directors

Sheriff Principal Brian Lockhart
Sheriff Principal Brian Lockhart

A company director who was sued for more than £3,000 in professional fees by a law firm which was instructed by another director to act on the company’s behalf in a legal dispute has won an appeal after a court ruled he was not liable to pay the sum sued for.

Radio presenter Scottie McClue, a former director of L107 FM Ltd, challenged a sheriff’s ruling that he was “jointly and severally liable” with the other directors and the company for the £3,270 sued for by solicitors’ firm Freelands, which was instructed by the director responsible for the day-today running of the business, Alan Shields, after a worker took the company to an employment tribunal.

Sheriff Principal Brian Lockhart (pictured) allowed the appeal after ruling that there were no findings in fact to the effect that Mr McClue accepted personal responsibility for this debt incurred by the company on the instruction of Mr Shields, and that in any event a director of a private limited company could not bind fellow directors personally for the trading debts incurred by the company.

Hamilton Sheriff Court heard that the pursuers sought recovery of £3,270 with interest in respect of representing L107 FM Ltd in the employment tribunal, which took place during May and July 2009, and that Mr Shields had instructed the firm to take on the case for them.

The firm’s standard terms of business, which were accepted by the company, included a condition 7, which stated that, “if we are given instructions by a private limited company then…all of the directors of the company are jointly and severally liable along with the company and each other for payment of all of our fees, expenses and outlays and any interest”.

After completing the work, the firm submitted an account to L107 FM Ltd in July 2009 for £3,270 for its services, but the account went unpaid.

An action was raised by the firm against Alan Shields, S McClue and Derek McIntyre and L107 FM Ltd, but the case only proceeded against Mr McClue.

The sheriff found in law that Mr McClue was jointly and severally liable with the other directors and with 107 FM Ltd and accordingly found him liable for the sum sued for with agreed expenses of £360.

However, Mr McClue appealed on the ground that the findings in fact did not support a “contractual relationship” between him and the firm, and that since he had not been sent the firm’s terms and conditions, the onerous clause ought to have been “drawn specifically to his attention”.

Delivering his decision, Sheriff Principal Lockhart said: “It is quite clear from the findings in fact that the day-to-day running of the business affairs of the company was entrusted to the director, Alan Shields, who is the first defender. In so doing, the first defender is acting on behalf of the company. The second defender is a director of the company.

“The duties of a director are set out in the companies acts. Nowhere is there any provision that a defender is personally liable for the debts and liabilities of his company to any party with whom his company contracts.

“In this case there are no findings in fact to the effect that the second defender accepted personal responsibility for this debt incurred by the company on the instruction of the first defender.

“While it is quite clear that the sheriff was entitled to conclude…that it was an established practice of L107 FM Ltd that Alan Shields acted as an authorised agent for the company in the day-to-day running of the business, however, this could only extend to the liability of the company to a creditor.

“In my opinion, for there to be liability on the part of the second defender, the nature of condition 7 would have required to have been brought to his attention and he would require to have accepted that liability. This is not the case here. The appellant accordingly succeeds on their first ground of appeal.”

Although it was academic, the sheriff principal took the view that Mr McClue also succeeded on his second ground of appeal.

He added: “One director of a private limited company has no prima facie authority to bind fellow directors personally for the trading debts incurred by the company.”

Other judgments by Sheriff Principal Brian Lockhart