- 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.
- Was Lipman’s company an attempt to avoid a pre-existing legal obligation?
- The English High Court held that the company was a sham or facade which Lipman intended to use to evade a pre-existing obligation.
“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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