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Seperate legal personaltiy - Coggle Diagram
Seperate legal personaltiy
benefit of incorporation
able to sue and own property in own name
Stein v Blake
plaintiff and defendant both owned 50% shares each, defendant sole director and transfered company assets to another company - plaintiff objected - court company was proper plaintiff
perpetual succession
distinct legal entity
limited liability - amount paid in (unless personal guarantee)
shares
transferable
source of revenue
Salomon v Salomon
set up company, gave loan, secured by charge, sold business to newly incorporated business, in which he set up with 6 family members. They got 1 share each he got the rest. done to gain priority.
House of Lords - seperate legal entity, motive not important - companeis act protected small businesses and large
irish example
shinkwin
plaintiff injured at work, sued company but no insurance or assets so also sued sole shareholder and operator - court - only duty owed by company and not shareholder (although neighbour principle due to tort applicable)
Veil of Incorporation
once comply with statutory formalities, veil placed over company
roundabout ltd v beirne
company didn't want unionised staff, closed pub and dismissed staff, transferred to new company, re-appointed those not in union as directors - picketing attempt - court held - distinct - new business
Macura v Northern Assurance
court distinguished between company and director who insured assets in own name - insurance invalid as seperate legal personality
Lee v Lee's Air farming
majority shareholder and sole working director killed while working - could be classified as employee - so entitled to workers beenfit
ballintubber heights
husband and wife living beside property, incorporated company to make legal challenge to granting planning permission - company didnt have locus standi as didn't own property
sweeney v duggan
quarry worker injured in work, no insurance, sued quarry owner - issue if liable due to failure to have company insured - not liable (flood gates)
disregarding corporate veil
piercing
Prest v Petrodel Resource
marriage dispute, divorce - a lot of husbands property in company
SC - corporate veil should not be pierced ut found companies could be ordered to transfer properties to ex-wife had held them on resulting trust for husband - limited to true exceptions
obiter - piercing possible - seperate legal entity part of foundation of english law - but can be pierced - wrongdoing or dishonest purpose
terms sham or facade replaced by concealment and evasion principles - concealment (conceal identiy, courts can identify by loooking behind to see what corporate structure concealing), evasion principle (disregard veil if legal right against person in control - evading enforcement) - piercing remedy of last resort - didn't pierce here - as beneficial owner but still transfered half
o'donnell v bank of ireland
noted Prest but didn't follow it
courtney - disregard better - metaphorical language used by courts can be unhelpful
can be done to achieve justice
Re a company
, by agreement of members or direcotrs (personal guarantee), by court, by statute
misuse or fraud or improper purpose or avoiding legal obligations
avoiding legal obligations
Gilford Motor Company v Horne
restraint of trade clause in employment contract, left employment, defendant set up company, wife and son as directors and shareholders - company used to solicit customers from former employer - court lifted veil
Jones v Lipman
Company formed purely to avoid existing legal liability, agreement to sell house, changed mind, so acquired house through a company, company sole purppose to avoid contractual oblgiatio - sham - Specific performance granted
cummins v stewart
licence arragnemnt entered then transfered to avoid paying royalties - SLP denied
Creasey v Breachwood Motors
- company sought to avoid judgment for damages for wrongful dismissal by forming new company and transferring all assets and liabiltieis to that company - court held new company bound by judgment debt
FG Films
US film company wanted subsidy only british films got, incorporated british company for that subisdiary to be able to call it british - court lifted corproate veil - not english, mere nominee of american company
fraud
Bugle Press
majority shareholders (90%) transfered shares to company owned by them, meant to trigger compulsory purchase of remaining 10% - court lifed corporate veil - sole purpose of getting minority shares
elton homes
mere mismanagement not within fraud exception
lazarus estates v beasly
fraud unravels everything, vitiates all transactions
prest
need relavent wrongdoing - concealment principle and evasion principle
noted but not adoptedi n ireland
agency
Firestone Tyre and Rubber v Llewellin
US company formed subsidiary in UK, claimed seperate entity from UK company - acted as agent of US company - US company fixed price
Smith, Stone and Knight v Birmingham Corporation
subsidiary carried out business but holding company owned property which was subject of compulsory purchase order - issue if entitled to compensation for loss of business subsidiary owned and ran under direction of holding company - profits treated as profits of parent - dispute over whether parent entitled to be paid compensation due - court held - subsidiary agent of company, holding company entitled to compensation
factors - atkinson
if profits of subsidiary treated as profits of holding
if persons conducting business appointed by holding company
brain and controlling mind
if holding company's skill and direction made the profit
if holding company in effective and constant control
Fyffes v DCC
HC reaffirmed existence of agency principle
DCC bought shares in Fyffes, passed shares to subisidary, DCC CEO on board of Fyffes, sold shares in subsiidary at high price (insider information) prohbiited by leigslation if price sensitive info, CEO of DCC but not of subsidiary - issue if subsidiary was agent - Laffoy held - may be agent if otherwise lead to injustice - any inference needs to be factually justified - held shares independently from DCC
can infer based on facts
adams v cape industries
not agent despite strong links - not automatically inferred from ownership or control
munton brothers
court less likely to imply agency between company and natural person - if acting as alter ego SLP falls away - only dealt with parent company and made no profit - not independent business
single economic entity
DHN Food Distributors v London Borough
parent had 2 subsidiaries - 1 owned property, other conducted business on the property - local authority compuslorily acquired the land - plaintiff sought compensation - court held - should be treated as one entity - entitled to compensation (factors - held all shares)
approved by
bray travel
feezing injunction granted after evidence transfer properties to subsidiaries at gross undervalue
courtney
still correct in IReland
Power Supermarkets v Crumlin Investments
if justice of case so requires, can treat 2 or more companies as single entity (shopping centre agreement plaintiff sole grocery unit, dunnes bought shopping centre, open new store, Dunnes case) granted injunction to enofrce covenant as formed single entity - had to adhere to agreement made by its parent - if justice require
Adams v Cape Industries
group structure, judgment in texas, tried to enforce in England, court - can't disregard Salomon just because justice requires (for better or worse) - purpose of structure to stop legal liability falling on another member 0 entitled to avoid future obligations by forming tax efficient companies
reluctance to recognise single economic entities post power supermarkets
State (McInerney ) v Dublin Conty council
court refused to consider 2 subsidiaries as single economic entity, no recognised legal relationship between them. court - purpose that loss doesn't spread can't lift when beneficial 0 corporate structure used to maxime benefits from distinct personalities - couldn't lift went suited - arm to lift was of justice
Allied Irish Coal Supplies v Powell
- Salomon still applicable - didn't allow subsidiary (wholly owned, but own board and prepared own accounts) to join legal proceedings - can't just use parent's assets to meet subsidiary's debts. subsidiaries credtiors would be getting priority over parent's creditors
Rex Pet Foods v lamb bros
plaintiff subsidiary, reciever argued business and assets be treated as one, holding company had 52% shareholding, crossover of directors, defendants distributors for subsidiary, seperate accounts mainained - seperate legal personality - occasionally discharging debts and sole distributor of products not sufficient
DCC v Fyffes
2005 decision - insider trading claims - 5 principles - Salomon still law(company and shareholder seperate) incorproation doesn't allow fraud, illegal or improper purpose, can infer agency if otherwise lead to injustice, court may treat group as one entity if otherwise unjust consequences for outsiders, court can look at individual members to determine character- held -could be treated as single economic entity otherwise injustice
relavent in competition law
Goldman Sachs Group v European Commission
- competition violations by portfolio companies, goldman sachs found to have decisive influence over subsudiary- jointly liable
purpose
agency exception regards as seperate entities - holding company not responsible for tortious acts of subsidiary
statutory
DPP v Roseberry
- health and safety, workers died, director and company fined seperately
taxation offences - finance act 1983
companies act s. 49
s297 - personal liable if fraudulent or reckless trading
140 - closely relate companies may
wrongs of subsidiaries
AAA v Unilever
kenyan nationals brought tort claims against unilever for actions of subsidiary - SC refused as no good arguable case - no real issue to be tried
Okpabi v Royal Dutch Shell
- tort claims in england against both english parent and non-uk subsidiary - english parent comany owed duty (based on degree of control and de facto managment of the subsidiary) - SC
arguable based on degree of control and de facto managemen
t owed duty of care
lungowe v vedanta
suffered personal injury and damage due to discharge from mine - went to UK courts from Zambia for legal action against holding company - arguable case for liability for parent company
legal representation cases
Battle v Irish Art Promotion Centre Ltd
ltd company can't be represented by managing director or any other officer - effect of seperate legal personality
Allied Irish Bank v Acqua Fish
confirmed rule applies in Ireland - companies can't be represented by non-lawyer directors or shareholders - unless maybe in exceptional circumstances
only company itself can sue for loss suffered by company
stein v blake
plaintiffs loss reflection of company's loss - no personal action available
drawbacks
unless lawyer can't self represent
battle v irish art promotion
insurance in company's own name -
Macura
shares right of pariticpation can't sue for reduced value of shares
O'Neill v Ryan
- ryanair wanted to sue for reduce value because of loss suffered by company
can be fined twice
DPP v Roseberry Construction
company and one direcotr convicted and fined for breaching health and safety - appeal against severity of sentence = clamed double punishment - court - purpose of seperate legal personality - distinct from each other
additional costs and formalities
personal liability
for fraudulent trading
s610
Hunting Lodges
directors of company persoanlly liable
reckless trading
breach of directors duties
Mehigan v Duigan