Litigation: 23 March 2019
In this case a concreter, whose company had a credit line with a supplier, was asked by a friend for permission to use his account to obtain a concrete on credit for his jobs. The concreter accepted the request and the arrangement was a casual one with no paperwork or documentation.
Before long the friend had run up a $50,000 debt on the account. The concreter contacted him to ask him for payment. He was told that he would be paid in a week or two, during which the friend claimed a further $30,000 of supplies on credit. When confronted with legal action, the friend told the concreter that he needed further supplies to complete jobs that would allow him to trade out of the debt. He also said that if he was cut off from the account he would refuse to pay the debt. He subsequently purchased $40,000 more stock on the account.
Shortly after, the supplier instituted proceedings to reclaim the $120,000 debt from the concreter's company. The concreter was unable to pay and, to make matters worse, his father had acted as guarantor, potentially putting the family home in jeopardy.
As sole director of the debtor company, the concreter had duties to act in the company's best interests and for a proper purpose, as well as duties to keep proper books and records. Allowing a third party to use the company's account breached all of those duties.
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