Lexi Holdings plc v Luqman
Non executive directors who failed to disclose a co-director's criminal convictions for dishonesty, and failed to supervise him, were liable for the losses caused by his misappropriation of money.
Facts
Mr Luqman was the managing director of Lexi Holdings, a property lending company. His two sisters were also directors, but they took no part in running the company. Mr Luqman misappropriated about £60 million from the company. The sisters knew that he had criminal convictions for offences of dishonesty, but did not tell the company's auditors or bank, and did nothing to supervise him. The company sued the sisters for breach of duty.
Legal principle
The Court of Appeal held that the sisters were liable. They were in breach of their duty to the company, because they had done nothing to supervise their brother or to protect the company from him, despite knowing of his past dishonesty, and had failed to disclose his convictions. If they had taken action, by disclosing the convictions to the auditors or the bank, the misappropriations would have been prevented. They could not escape liability by saying that they had been directors in name only.
Related cases on directors' duties: powers, judgment and care
- Bamford v Bamford [1970] Ch 212
- Re Barings plc (No 5) [1999] 1 BCLC 433
- BTI 2014 LLC v Sequana SA [2022] UKSC 25, [2024] AC 211
- Re City Equitable Fire Insurance Co Ltd [1925] Ch 407
- Re D'Jan of London Ltd [1994] 1 BCLC 561
- Dorchester Finance Co Ltd v Stebbing [1989] BCLC 498
- Eclairs Group Ltd v JKX Oil & Gas plc [2015] UKSC 71
- Hogg v Cramphorn Ltd [1967] Ch 254
Studying company law? Our tutors help you understand and apply cases like this in essays, problem questions and exams. Request a quote or browse our law notes.
This summary is for study and revision and is not legal advice. Although our case summaries are checked for accuracy, we do not guarantee that they are free from errors or omissions. Always read the full judgment for the court's reasoning.
