Case law Flashcards
(51 cards)
What were the three legal points that Salomon v Salomon & Co Ltd established
- Limited Liability
- One person company
- Holding shares doesn’t recognise a relationship of agency or trusteeship
3 key points from SALOMON V SALOMON
- It was recognised that a validly incorporated company could legitimately shield its members from liability- LIMITED LIABILITY
- Recognised validity of a one person company
- It recognised that a relationship of agency or trusteeship is not established simply because a person holds shares in the company
Piercing the corporate veil - specifically regarding the EVASION PRINCIPLE
GILFORD MOTOR CO LTD V HORNE
- Corporate personality was disregarded as company was being used to effect a fraud, facade or sham
When piercing the veil can be disregarded under COMMON LAW
Parent acting on behalf of the subsidiary
Smith, stone and knight ltd v Birmingham Corporation
Piercing the Corporate Veil
Specifically the CONCEALMENT PRINCIPLE
2 Points
PETRODEL RESOURCES LTD V PREST
where a person is under an existing legal obligation or liability or subject to an existing legal restriction which he DELIBERATELY EVADES, or whose enforcement he DELIBERATELY FRUSTRATES by interposing a company under his control
Veil may be lifted If other more conventional remedies have proved to be of no assistance
Vicarious Liability in a General Partnership
Dubai Aluminium Co Ltd v Salaam 2002
Duty of the promoter when forming a new company
ERLANGER V NEW SOMBRERO PHOSPHATE CO
The promoter owed his duty to the unformed company and can be held liable for any acts on behalf of the unformed company. He has a fiduciary duty and must not make any profit unless disclosed.
Promoter can enforce a contract
Braymist V Wise Finance Co Ltd
Amending the articles
Allen V Gold Reefs of West Africa ltd
Power to amend the articles must be exercised, not only in the manner required by law, but also bona fide for the benefit of the company as a whole
Implying terms into the articles
ATTORNEY GENERAL OF BELIZE V BELIZE TELECOM LTD.
The courts can’t add in terms to make a contract, statute or articles to make them fairer or more reasonable. It is only concerned with what the term means to a reasonable person not connected with background knowledge as to what they would think the term meant.
Outsiders can’t enforce a S.33 contract
i.e. the articles
Eley v Positive Government Security Life Assurance Co
Apparent Authority
HELY-HUTCHINSON V BRAYHEAD LTD
It was stated that ‘apparent authority is the authority of an agent as it appears to others.’
Actual Authority
EXPRESS ACTUAL AUTHORITY –
authority that has been expressly bestowed upon an agent e.g. in the articles or the board has delegated powers to the agent.
IMPLIED ACTUAL AUTHORITY
HELY-HUTCHINSON V BRAYHEAD LTD
It tends to arise when there is express actual authority e.g. buy and sell goods but it hasn’t been stated that you can enter into a contract with suppliers but you’d need to in order to buy or sell goods.
It also arises with certain job roles where that is the standard expectation of that role to follow out those tasks.
Protection for 3rd parties when entering contracts with the company
S.40 or when that isn’t applicable
INDOOR MANAGEMENT RULE aka
TURQUANDS RULE
ROYAL BRITISH BANK V TURQUARD
Company Secretaries and their authority
PANORAMA DEVELOPMENTS (GUILDFORD) LTD V FIDELIS FURNISHING FABRICS LTD
‘Chief Administration Officer’ and will have the authority to enter into contracts on behalf of the Company of an administrative nature.
Members Remedies
Unfair Prejudice claim
Exclusion from management in quasi-partnership
GHYLL BECK DRIVING RANGE LTD
Members Remedies
Unfair Prejudice claim
Buy out of shares - fair price
s.994
GRACE V BIAGIOLI
court ordered a share purchase order at a fair price to be fixed by the court
Also complained of being removed as a Director but this was not UNFAIR OR PREJUDICE as a MEMBER so was thrown out by the court
Dividend payment was made as it was UNFAIR OR PREJUDICE
Members Remedies
Unfair Prejudice claim
Members transferring business to another company they control
LONDON SCHOOL OF ELECTRONICS
Left the company with no clients
Members Remedies
Unfair Prejudice claim
Main case
FISHER V CADMAN
CA2006 s.994-996
Father left company to children - 2 brothers, 1 daughter. Company not ran properly and brothers set up another company alongside. Daughter wants brothers to buy out her share.
Must be UNFAIR TREATMENT AND PREJUDICE.
Court orders for share to be bought out by the company.
Members remedies s994
Test for section s994 to succeed
RE SAUL D HARRISON AND SONS PLC
Petitioner must show conduct complained or is both UNFAIR & PREJUDICIAL
Members Remedies
Running of Quasi-Partnerships
PHILLIPS V O’NEILL
Someone’s valid expectations of a company disappointed, as it was never a firm agreement just an expectation it was not grounds for s994.
Example of quasi-partnership
Must be UNFAIR or PREJUDICIAL as a MEMBER
Members Remedies
Petition to wind up
- leading case
E BRAHIMI V WESTBOURNE GALLERIES LTD
Insolvency Act 1986 s122
- Just and Equitable winding up
- quasi-partnership
- petition to wind up
- original director/member pushed out by newly appointed son of existing director and existing director
Members Remedies
Winding up
Quasi-Partnership Deadlock case
Yenidje Tobacco Company Limited
There was no provision for breaking the deadlock. It was JUST AND EQUITABLE to wind up.
Unanimous Assent
RE DUOMATIC LTD
duomatic principle under common law
Common law has long allowed companies to make decisions by unanimous assent: if all of the members agree on a matter, the decision will be made validly even if no meeting takes place and no resolution is passed.
