O 2 were the persons conducting the business

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o 2) Were the persons conducting the business appointed by the HC? o 3) Was the HC the head and the brain of the trading venture? o 4) Did the HC govern the adventure, decide what should be done and what capital should be embarked on the adventure? o 5) Did the HC make the profits by its skill and direction? o 6) Was the HC in effectual and constant control? However note that it has been made abundantly clear that mere ownership and control of a company will not itself create an agency relationship between s/h and company {Walker v Wimborne} B.2 Company as an Instrument of Fraud This only catches extreme conduct but it refers to the use of a company by its controllers in an attempt to avoid an existing legal obligation that otherwise falls on the controller personally Needs to be clear that the corporate group has exploited the corporate veil and the separate legal entity status of the companies in order to get around their claimants { Gilford Motor Co Ltd v Horne} This is particularly so where there is clear evidence that a company has been incorporated with the purpose of carrying the fraud or misrepresentation of its directors {Re Derby} Setting up a paper company to avoid a legal obligation may result in the court lifting the veil and granting an order of specific performance {Jones v Lipman } It is only where the company is used to avoid an existing obligation that the court will pierce the veil and hold the controllers liable o This should be contrasted with situation where the original liability is incurred by the company itself – here the veil remains in tact B.3 Tort Victims If a company has a foreseeable obligation and does not maintain sufficient assets to meet those obligations (regarding tortuous liability) then it may be possible for a tort victim to claim against the holding company Australian courts have been more willing to lift the veil in torts cases than in contract cases o This is because torts victims have not choice about how and by whom they are injured o Their relationship with the company is purely voluntary and some victims will encounter limited liability companies and others will get lucky and be injured in the premises of a defendant with unlimited liability Hadi Mazloum [email protected]
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This exception was discussed in {Briggs v James Hardie} but has not been taken up in any subsequent cases B.4 Corporate Groups Main advantage of having a corporate group is limiting liability to the Subsidiary Company rather than imputing it back to the Holding Company
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