This was followed by the enactments by House of Lords in 1897 in Solomon v. Solomon & Company. The concepts of corporate entity and limited liability were incorporated in English law in the same period. In this case, the head court announced that a company is a separate legal individual completely different from the members or shareholders.
From this announcement, we can say that a company is a separate legal entity having a separate life, different from its members. A company can be an owner of any property, can sue anyone, can be sued by anyone and has a life just as any going concern. It is a commonplace of the law, is a very heavy veil drawn between the two can be lifted in many cases; it seems that only a limited number of changes is based on current judicial thinking.
2.2 Some doctrines about Corporate Veil
The Court does not always apply the principles established in Salomon v. Salomon & in many cases, the court will or will ignore the piercing of corporate veil, to reveal the real person or the form and characteristics of the company. The reason behind this may be that the law will not allow the abuse of corporate form or for the purpose of the statute is set. In this case, the court held that the corporate form is being abused, will tear through the corporate veil and expose the true character and nature of its main provisions of the House of Lords by ignoring the Solomon principle.
In Bodrip v. Solomon case, justice Vaughan Williams said the company is only an agent of Solomon. "This business is Mr. Solomon's business and no one else, that he chose to employ as an agent limited liability company, which he bound to compensate the agency, and this agency, the company has a lien on the assets "However, in the appeal to the court ruled that companies do not automatically become the agent of the shareholders, even if it is the House of Lords one man company and other shareholders, they were dummies.
Have the ability to act as agent of a company can do all of its parent company or any agency or individual members, so if it or they are authorized to do so. If this is the parent company or members will abide by his agent, so long as these actions in the actual or apparent scope of authority. But no relationship between the parties expressly agrees that the case will be difficult to establish a presumption. Try to do in Cape Town failed. In cases validity of the agency agreement and the parties have expressly agreed to such an agreement, they will be the corporate veil is lifted; the agent should be one of the main acts.
The court has more time to prepare the piercing felt, or may have committed fraud behind the veil. Solomon, principle cannot be allowed by court to be used as an engine of fraud. The two classic cases of fraud exception are Guilford Motor Company v. Horn and Jones v. Lipman Limited.
In the first case, Mr. Horn, a former employee of Guilford Motor Company was bound by an employment contract in which it was mentioned that he could not solicit the company's customers. To defeat this, he set up a limited liability company in his wife's name and asked for the solicitation of company's customers. The company brought action against him. The Court of Appeal was of the opinion that he formed this company as a device a strategy to Mr. Yangaihuoen the effective implementation of the business form. The main purpose of the company was to indulge into a new committed fraud. Therefore, the appellate court held that it is just a fake to cover up their unlawful activities.
In the second case of Jones v. Lipman, they signed an agreement to sell their land, and then changed their mind in order to avoid a concrete manifestation of their property for their transfer to the company. In the second case of Jones v. Lipman, they signed an agreement to sell their land, and then changed their mind in order to avoid a concrete manifestation of their property for their transfer to the company. Russell Judge specifically mentioned that in Horn v. Guilford decision, there is a "mask (Mr. Lippman) in front of him trying to avoid the equity holders of the eye recognition" of specific performance, he also opposed the grant of Mr. Lipman and the company. In any case, the court allowed the company form, forms of abuse, and the abuse of the court when the ants will occur in the Penn steps and Jenny in her article lists three of frauds, which requires the company to concentrate on before the corporate veil can be lifted. These are as under:
A) What is the fraud-related motivation? Whether some standard is necessary to deceive the needs of the decision or not? In the case of Hilton v. Plustile Limited use of the plaintiff and the defendant agreed to the lease arrangements for a company to avoid the behaviour of 1977.The rental application to the Court of Appeal held that the plaintiff not entitled to lift the veil, because he always fully aware of this issue. But another interesting question is: what is the effect of other people there cheated. In order to resolve the issue, Adams census industries consider whether to adopt the corporate form plc. Or not? In such a way as to prove that the corporate veil has been lifted, the court noted that the discussion group of companies on the proper test is whether the company has as One application of this test j, Slade said, "the motivation of the perpetrators can be very significant," the classic case is meant to deceive the plaintiff, "is just the facade to conceal the truth" is used in ever how is not Adams census industry. Therefore, the issue is the need to determine whether the exemption is necessary motivation for the existence of fraud. But to get any answer, it's very important to identify the nature of the deprivation of legal rights, which are being denied to plaintiff.
B) the nature of legal obligations is to be avoided on?
The courts want the limited companies to prevent the use of corporate form to avoid the contract or legal obligation. But there arises a question whether this obligation will affect the ability of the court to lift the corporate veil. In the typical case, the defendant sought to avoid the inclusion of pre-existing legal obligations, the company set up the main motive is to avoid in Adams v. Cape Town to fulfil legal obligations need to discuss some of the veil has been cancelled in order to prevent its participation in the sale of asbestos in the United States propaganda angle, avoid tort liability for failing to prevent the attendant risks of asbestos trade any of the Group's interests in U.S. real cloak. However, tort liability is pure speculation. For the existence of fraud exception, the plaintiff must reject the defendant's legitimate right to exist. If there is no legal right to exist as part of the plaintiff against the defendant with intent to deceive must be speculative in nature, and thus substantially reduced. If the legal rights of crystallization but if the contrary, if the problems, whether in this case, psychological factors can be met prior to the psychological factor is the time to meet the company. The answer is that if an appropriate legal rights after the establishment of a corporation, but in the use of corporate form to avoid the crystallization of the rights of the law, should meet the fraud exception
C) Is the timing of the incorporation of the device company relevant?
In Clay v. Breachwood Motors Limited, the failure of the fraud exception is that for fake company set up time. Here, Mr. Craig has brought to his employer for wrongful dismissal action against biological weapons. Weight as a defence, but four months later, he was served notice that the company bankrupt. Plaintiff received the order for damages and interest received, however, in his winding-up without any weight will dissolve. Plaintiff sought an order of substituent's on the grounds of justice weight bone marrow. In this case, the facts may be similar to Adams v. Cape, Richard Southwell, but as the industries outstanding Guildford and Horne and Jones v. Lipman sitting in that, in these cases, the fake company has formed the view the basis of fraud. In the present case, the bone marrow equipment company has been in the business and takes care of its own business. This is a very controversial case, should have decided on the basis of the classic case, as it should be established regardless of equipment, the company is to avoid legal liability, or whether there. Craig should have been just another possible reason for the decision.