Company Directors’ Liability for Company Cheques and Presentation

In the case of Florentino Comm Giuseppe Srl v Farnesi and Anor, heard in the Chancery Division of the High Court, two company directors of the claimant drew cheques for the benefit of the Italian company claimant.

The cheques omitted the word “Limited” and its permitted substitute “Ltd”.

The Claimant argued that by the effect of s 349(4) of the Companies Act 1985, the defendants remained liable for the sums set out on the cheques.

Section 349(4) made an officer of the company or a person authorised to sign a cheque on behalf of a company whose name does not appear on the cheque personally liable to the holder of the cheque for the amount unless the amount was duly paid by the company. When the cheque was presented to the claimant’s bank, payment had been refused and therefore the cheque had not been ‘duly paid’ for the purposes of the section.

A dispute arose when the second and third cheques were not presented by the claimant when the first cheque did not clear. The operation of section 45 of the Bills of Exchange Act 1882 required that a bill (a cheque falls under the operation as they are within the meaning of a bill of exchange), must be presented in order to be paid. However section 46(2) provided the presentation of the cheque was dispensed with, in essence, where the drawer has no reason to believe that the bill would be paid if presented and there remained an immediate right of recourse against the drawer of the cheque. Presentation of the cheque was therefore dispensed with, and the claimant directors were liable for the amounts set out on the second and third cheques.

It is important for directors of companies to realise that technical imperfections on cheques will not absolve them of personal liability for instruments signed in their capacity as company directors.