Facts
- Mr Horne was a former managing director of Gilford Motor Home Co Ltd (Gilford).
- His employment contract prevented him from attempting to solicit Gilford’s customers in the event that Horne left Gilford’s employ.
- Horne was fired and he subsequently set up a competing company which undercut Gilford’s prices.
- Gilford did not have any legal restraints upon Horne’s company, only Horne himself.
- Gilford commenced proceedings against Horne individually, claiming that Horne’s company was an attempt to evade legal obligation (not soliciting customers).
Issues
- Had Horne violated his non-compete clause by setting up his competing company?
Held
- The English Court of Appeal held that the company was set up to evade Horne’s contractual obligations.
- The Court “pierced the corporate veil” and ordered an injunction against Horne.
- Courts can “pierce the corporate veil” if a company is simply a mere device to evade legal obligations, though this is only in limited and discrete circumstances.
Quote
“I am quite satisfied that this company was formed as a device, a stratagem, in order to mask the effect carrying on of a business of Mr EB Horne. The purpose of it was to enable him, under what is a cloak or sham, to engage in business which, on consideration of the agreement…”
(Lord Hanworth MR)
-- Download Gilford Motor Co Ltd v Horne [1933] Ch 935 as PDF --
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