The following are examples of circumstances where the

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The following are examples of circumstances where the corporate veil would be, and have been, lifted or pierced. 20.5.1 WHERE THE COMPANY IS A SHAM, FRAUDULENT OR ILLEGAL The veil or incorporation would be lifted where a company is a sham or set up for an illegal or fraudulent purpose. The following cases provide illustrations. Gilford Motor Co v Horne [1933] Ch. 935 – The claimant company employed H, who undertook in his contract not to canvass or solicit for the customers of the employer if he left their employment (restrictive covenant). Upon leaving the claimant’s employment, however, H formed a company with his wife and the company went about soliciting the customers of the claimants. It was held that the claimants were entitled to enforce the agreement against H and his company and that the company was a sham or alias of the H. Jones v Lipman [ 1962] 1 All ER 442 – The defendant (L) entered into a contract to sell land to the claimant (J). L however sold the land to another person. To avoid specific performance of the contract with J, L formed a new company and transferred the land to it. It was held that L and his company were bound to perform the contract with J. The company to which he purportedly transferred the land was a sham or cover to escape his contractual obligation. Download free eBooks at bookboon.com
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BUSINESS ORGANISATIONS AND AGENCY 375 CORPORATE PERSONALITY Gencor ACP Ltd v Dalby [ 2000 ] BCLC 734 – Mr Dalby, the director of the claimant company made secret profits which he caused to be paid into the account of another company he set up and controlled. It was held that the director must render an account to the claimant. According to the court, the director’s new company was in substance little other than Mr Dalby’s offshore bank account held in a nominee’s name’, and simply … the alter ego through which Mr Dalby enjoyed the profit which he earned in breach of his fiduciary duty to ACP.” Trustor AB v Smallbone (No. 2) [2001] 1 WLR 1177 – S as the managing director of the claimant company transferred the equivalent of £39 Million from the claimant’s account into the account of Introcom Ltd., a company owned by him. It was held that S was personally, along with Introcom, liable to refund the money to the claimant. See also Re Darby, Ex Parte Brougham [1911] 1 KB 95. 20.5.2 WHERE THE COMPANY IS USED TO EVADE LEGAL OBLIGATIONS The court will not allow the corporate structure to be used as a means to avoid an existing and binding legal or contractual responsibility. See Gilford Motor Co v Horne [1933] Ch. 935; Jones v Lipman [1962] 1 All ER 442 (above). 20.5.3 WHERE THERE HAS BEEN AN ABUSE OF LEGAL PROCESS The corporate structure should not be used to undermine the provisions of the law. If an attempt is made to use it for such a purpose, the veil could be lifted.
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