Question

During the classic period the court lifted the veil on a number of occasions - from the list below select the correct answers (you may choose more than one answer)

Group of answer choices

When groups of companies should be viewed as one single entity. (DHN Food Distributors)

Defendant set up a company to solicit customers he was prohibited from soliciting due to previous employment contract (Gilford Motor Co v Horne)

Setting up a company to avoid an estate contract (Jones v Lipman);

Setting up a company to force compulsory purchase of minority shareholdings (Re Bugle Press).

Dealing with the enemy (Daimler v Continential Tyre);

Lord Denning argued in DHN Food Distributors v Tower Hamlets that groups of companies should be viewed as one single entity.

Group of answer choices

True

False

The key question in the case of Adams v Cape Industries was ?

Group of answer choices

It is possible for a company to be held as a mere facade even though it was not originally set up as a sham.

The company was used for some impropriety unconnected to the corporate form.

If there was an existence of an agent-principal relationship.

Whether Cape, the parent company, had a presence in the US through it subsidiaries.

The three situations where the case of Adams v Cape limited veil lifting to are :-

1. Where the interpretation of a statute or document shows that the group of companies is to be treated as one;
2. Where a company is being used as a sham or mere facade;
3. Where there is no agent-principal relationship

Answer 1

1. Cases where the corporate veil was lifted by courts

• DHN Food Distributors v. Tower Hamlets London Borough Council
• Gilford Motor Company Limited v Horne
• Jones v. Lipman
• Daimler Co. Ltd. v. Continental Tyre and Rubber Co.

2. True. In the case of DHN Food Distributors v. Tower Hamlets London Borough Council, LordIDenning has remarked thatIwe knowIthat in “manyIrespects a group of companiesIareItreatedItogetherIfor theIpurposeIof accounts, balance sheet, and profit and loss accounts”. TheInature of shareholdingIand control wouldIbe indicatorsIwhether the courtIwould pierce theIcorporate veil.

3. In the case of Adams v Cape Industries plc, the key questions were

• It is possible for a company to be held as a mere facade even though it was not originally set up as a sham.
• Whether Cape, the parent company, had a presence in the US through it subsidiaries.

4. Adams v Cape Industries plc is limited to where the interpretation of a statute or document shows that the group of companies is to be treated as one.

• Gilford Motor Company Ltd v. Horne and Jones v. Lipman. are classic cases of prevention of fraud or misconduct by lifting corporate veil
• R.G. Films Ltd is the classic example of when the company acts in agent principal relationship for its shareholders..