Jones v Lipman [1962] 1 WLR 832

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Facts

  • Mr Lipman contracted to sell a house with freehold title to Jones for £5,250.00.
  • Pending completion, Lipman changed his mind and instead sold and transferred the land to a company, which he and a law clerk were the sole directors and shareholders of, for £3,000.00.
  • The company had been set up for the sole purpose of receiving this land.
  • $1,554.00 of the £3,000.00 was borrowed by the company from a bank and the rest remaining owing to Lipman.

Issues

  • Was Lipman’s company an attempt to avoid a pre-existing legal obligation?

Held

  • The English High Court held that the company was a sham or facade which Lipman intended to use to evade a pre-existing obligation.

Quotes

“The defendant company is the creature of the first defendant, a device and a sham, a mask which he holds before his face in an attempt to avoid recognition by the eye of equity.”

(Russell J at page 835)


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