Failing to clearly show that a livestock contract was signed on behalf of his company meant director Scott Donaldson was personally liable to pay a $473,400 company debt.
The High Court was told Mr Donaldson was farming in the West Coast and mid-Canterbury regions through the 2019/2020 season under the company name SLD Agriculture Ltd. Livestock were sourced from nation-wide company Progressive Livestock Ltd under several lease agreements. One year on, Mr Donaldson was disputing payments due. Progressive sued.
An immediate legal complication was sloppy paper work evidencing the lease arrangements. The original contracts named as lessee ‘Scott Donaldson trading as SDL Agriculture.’ The name of Mr Donaldson’s business ‘SLD Agriculture Ltd’ was incorrectly recorded on the written contracts as ‘SDL Agriculture.’
Justice Osborne ruled lease payments were not company debts; the contracts were with Mr Donaldson personally. To avoid personal liability for a company debt, Companies Act rules require the company name be clearly and correctly stated on any contract.
The paper work signed by Mr Donaldson not only transposed his company initials SLD into SDL but also left off the critical designation ‘Ltd.’ The abbreviation ‘Ltd’ signals to potential creditors that the contracting party is a limited liability company; owners accept no personal liability for debts of the business.
Progressive Livestock Ltd v. Donaldson – High Court (10.05.23)
23.062