Does the Statute of Frauds 1677 and Statute of Frauds Amendment Act 1828 afford a defence to the director who has promised his supplier that “the cheque is in the post”?
Since Pasley v. Freeman  3T.R.51, creditors were able to circumvent the Statute of Frauds if the representation as to another’s credit was made fraudulently. Parliament changed this with the Statute of Frauds Amendment Act of 1828 (Lord Tenterden’s Act). Section 6 provides:
“No action shall be brought whereby to charge any person upon or by reason of any representation or assurance [as to some other person]… to the intent or purpose that such other person may obtain credit, money or goods upon, unless such representation or assurance be made in writing, signed by the party to be charged therewith”.
The Court of Appeal in the case of Roder has recently unscrambled this nonsensical wording. The Act now reads:
“… to the intent or purpose that such other person may obtain money or goods upon credit” Per Longmore LJ
In order to rely on the words of section 6, the director must be making the representation to the intent or purpose that such other person may obtain money or goods upon credit.
In Roder, the claimant (C) had supplied marquee equipment to Titan (D). When pressed for payment one of D’s directors informed C that company had an insurance claim pending and would resume payment when funds were received from the claim. There was no insurance claim and the lie was an actionable deceit. Later C pressed for payment again, and the other director said that they were “selling up” the business and all creditors would be paid off. These words persuaded C not to repossess its goods under a retention of title clause in the contract of supply, or to commence proceedings.
In fact, the company had already sold its assets earlier and the Court held that the directors could not rely on section 6 because the untrue oral representations had not been made with the intent or purpose that D should obtain credit: the intent was to avoid C repossessing its goods or suing for the outstanding sums, and consequently the directors were liable in the tort of deceit.
The Roder case shows that there are circumstances where directors can be personally liable for untruths they have told to creditors pressing for payment where the “credit” has already been advanced.
/ 1st Mar 2012
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