Professional Services firm misled by Director of insolvent company. 100% recovery under The Australian Consumer Law.

The client was a professional services firm that had provided advice to directors of an insolvent company. The client relied on a number Service Agreements issued to the company and naming 2 of its directors as guarantors as security for payment of their fees.

In the course of providing the professional services the directors of the company made personal payments towards fees owing and negotiated payment arrangements from time to time. The directors led the client to assume that they had personally guaranteed the company’s obligation to pay the client’s fees under the Service Agreements.

After the service had been completed the directors denied liability as guarantors and asserted that they had not received or accepted the Service Agreements.

Roberts Legal brought a claim against the directors for recovery of approximately $55,000.00 under the guarantee in the Service Agreement and on the basis that the directors had engaged in misleading and deceptive conduct and were liable under Section 52 of the Trade Practices Act (now Section 18 of The Australian Consumer Law)

The case was heard over three (3) days in the Local Court with the Court finding that whilst the unsigned Service Agreement was unenforceable against the directors, the directors had engaged in misleading and deceptive conduct. Judgment was entered in favour of the client for the full amount claimed plus costs.

By Sam Roberts,
Managing Director, Accredited Specialist (Commercial Litigation)