Defendant was 99% shareholder of company, and a director.
Signed a fire insurance form with some insurers, as a result of which the insurers repudiated liability for a fire at company’s premises; fire caused £174,000 of damage.
Liquidator brought action against Defendant under Insolvency Act 1986 (under equivalent provisions to those in s.175).
If document is huge and in legal prose, is not breach of duty for Defendant to sign it on advice of solicitor
However here, document was small and simple, plus Defendant was best person to sign it
Thus by failing to read it prior to signing it, Defendant was not reasonably diligent
Nevertheless, is appropriate for court to relieve liability (under predecessor to s.1157)
Defendant is majority shareholder:
Thus more reasonable for him to run the risk
Only person’s interests he endangered were him and his wife
Defendant’s misconduct was not gross
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