Legal aid oyo journal of legal issues vol. 1, Issue 1, 2017
CASES WHERE THE COURTS HAVE LIFTED THE VEIL OF INCORPORATION
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Company Law Notbeook
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- Jones v Lipman (1962) 1 WLR 832
- Smith, Stone Knight Ltd v Birmingham Corp) 4 All ER 116
| CASES WHERE THE COURTS HAVE LIFTED THE VEIL OF INCORPORATION INCLUDES, Gilford Motors Co Ltd v Horne (1933) 1 Ch D 935where the defendant was employed under a service contract as managing director of the plaintiff company. As part of this contract he was forbidden, when ceasing his employment with the company, from taking away the plaintiff's customers. The defendant left the plaintiff company, formed a competitive business and a company in which he was one of three shareholders. The new company solicited the plaintiff's customers and the plaintiff sought an injunction restraining this conduct. The defendant argued that he was not soliciting customers of the plaintiff and that if there was any solicitation, it was from a separate legal entity, namely the new company which had no contract with the plaintiff. This argument was rejected by the Court. Jones v Lipman (1962) 1 WLR 832,where Lipman agreed to sell land to Jones. Before completion of the contract, Lipman transferred the land to a company of which he and a clerk employed by his solicitors were the only shareholders and directors. Jones brought an action for specific performance of the contract against both Lipman and the company. The Court held that the company was a sham and ordered specific performance of the contract. Smith, Stone & Knight Ltd v Birmingham Corp) 4 All ER 116where Birmingham Corporation, a local council, compulsorily acquired premises owned by the Birmingham Waste Co. Ltd. This company was a wholly-owned subsidiary of Smith, Stone & Knight Ltd. Indeed, of the 502 issued shares in the waste company, 497 were held by Smith, Stone & Knight and the other 5 were held on its behalf. The Waste Company had no staff, no separate In Qintex Australia finance Ltd v Schroders Australia Ltd (1991) 9 ACLC 109, Rogers CJ suggested that the whole issue of the separateness of the corporate legal entity be reexamined in the light of the so-called tension between the realities of commercial life and the applicable law. Although his Honour in the case at hand had to determine which company in the Qintex group of companies should be able to claim the benefit of the contract entered into, a number of more general remarks were made concerning the separate legal entity doctrine. According to his Honour, (at pit maybe desirable "for Parliament to consider whether this distinction between the law and commercial practice should be maintained. This is especially the case today when the many corporate collapses of conglomerates occasion many disputes" |