The High Court has ordered two former directors of TLT (International) Limited to pay HSBC Invoice Finance (UK) Limited €2,937,914.56 each under personal undertakings, and to pay a further €100,000 jointly under a guarantee.
In a judgment delivered on 6 October 2015, Mr Justice Haughton found that TLT breached its invoice finance agreement with HIF and that the directors breached their undertakings. The case followed a 15-day plenary hearing after summary proceedings began in November 2013. The court made no finding on separate allegations concerning stock removal and payments to family members after a receiver was appointed, saying it was unnecessary to decide them.
The court found that TLT had previously routed some customer payments through Coget, an Italian business run by one of the directors, and had notified HIF of debts owed by Coget despite those debts being non-notifiable under the agreement. HIF elected in June 2013 to continue the agreement despite known or suspected earlier breaches. The judge therefore ruled that those past breaches could not alone support a later termination, while making clear that the election did not excuse future breaches.
A central later finding concerned 11 payments from customer Baumann, totalling €838,592, which went to TLT’s Bank of Ireland account in July 2013 instead of the HIF trust account. TLT’s ledger recorded them as payments from Coget. The judge rejected explanations that the payments and ledger entries were mistakes, finding that the directors had probably orchestrated the arrangement to disguise the source of the funds and use them for TLT’s operations.
The court also found that TLT issued unusually large credit notes in September and October 2013, repossessed stock and resold it through Coget. It was not satisfied that HIF had proved the cancelled invoices had been pre-funded. However, it found that the credit-note scheme, combined with the resales, removed debt owned by HIF and directed proceeds away from the trust account. TLT also failed to provide requested records and details of credit notes promptly, materially breaching the agreement.
The judge held that these breaches entitled HIF to terminate the agreement and demand the outstanding debt. The defendants’ liability under their personal undertakings was not capped at the guarantee’s €100,000 limit. The resulting judgments were made against each director separately for €2,937,914.56, alongside the joint and several €100,000 guarantee judgment.