Gilford Motor Co Ltd v Horne [1933] Ch 935

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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)


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