Facts

The plaintiff, [R.], is a creditor of the public limited company [P. SA], whose headquarters is in Lausanne. The company was declared bankrupt on 7 March 1983. The plaintiff obtained from the bankruptcy estate the assignment of rights against the persons responsible for the foundation, administration, management or control of the company. He brought an action against V., the sole director of [P. SA], and G. for payment of the sum of 600,000 fr., plus 5% interest. Subsequently, [R.] increased his claims to 1,727,224 fr. 25. The Civil Court of the Cantonal Court of the canton of Vaud dismissed R.'s claims. The plaintiff filed an appeal against this judgment.

The facts of the case are as follows: V. accepted being the sole director of [P. SA] in replacement of K. without participating in the management of the company, leaving carte blanche to [J.], the company's director. V. never read the articles of association of [P. SA] and did not even know the company's purpose. [J.] promised clients that he would obtain funds for them in exchange for a commission, but the clients never received the desired credits or recovered their advance. An investigation was opened in September 1982 after a criminal complaint was filed for fraud. It turned out that [J.] had already been convicted several times for various offenses.

Considerations

The liability of the sole director of a public limited company is governed by articles 754 and 722 of the Code of Obligations (CO). The director must exercise all due diligence in the management of the company's affairs and supervise the persons responsible for management and representation. In the event of valid delegation, the director is not personally liable for the faults committed by his subordinates, but only for the "cura in eligendo, instruendo et custodiendo".

In this case, the defendant V. failed to fulfill his duty of diligence by not exercising any supervision over [J.] and not removing him from the management of the company's affairs from the beginning of 1981. V. was aware of the wanted notice of [J.] broadcast in the program "Aktenzeichen XY ungelöst" in January or February 1981, but did nothing to avoid damage to the company and its creditors. The cantonal court violated federal law by…