Company Law Cases

Need company law cases to help you write essays? Use the following influential cases in your essays.

NEW: Relationship between the case of R. v Dudley & Stephens and Corporate Social Responsibility: Click here

 

Hickman v Kent or Romney Marsh Sheep-Breeders' Association [1915] 1 Ch 881

‘Outsider rights'

The question of whether a person who is not a member of the company has rights to sue on the ‘statutory contract' provide by what is now section 33 of the Companies Act 2006 was considered.

It was held that an outsider to whom rights are purportedly given by the company's articles in his capacity as an outsider cannot sue in that capacity, whether he is also a member of the company or not.

Salomon v A Salomon and Co Ltd [1897] AC 22

Corporate separate personality

Salomon conducted his business as a sole trader. He sold it to a company incorporated for the purpose called A Salomon and Co Ltd. The only members were Mr Salomon, his wife, and their five children. Each member took one £1 share each. The company bought the business for £39,000. Mr Salomon subscribed for 20,000 further shares. However, £10,000 was not paid by the company, which instead issued Salomon with series of debentures and gave him a floating charge on its assets. When the company failed the company's liquidator contended that the floating charge should not be honoured, and Salomon should be made responsible for the company's debts.

Lord Halsbury LC stated (at 30-31):
“… it seems to me impossible to dispute that once the company is legally incorporated it must be treated like any other independent person with its rights and liabilities appropriate to itself, and that the motives of those who took part in the promotion of the company are absolutely irrelevant in discussing what those rights and liabilities are.”

From this case comes the fundamental concept that a company has a legal personality or identity separate from its members. A company is thus a legal ‘person'.

Macaura v Northern Assurance Co Ltd [1925] AC 619

Members have no interest in a company's property

The owner of a timber estate sold all the timber to a company which was owned almost solely by him. He was the company's largest creditor. He insured the timber against fire, but in his own name. After the timber was destroyed by fire the insurance company refused the claim.

The House of Lords held that in order to have an insurable interest in property a person must have a legal or equitable interest in that property. The claim failed as “the corporator even if he holds all the shares is not the corporation… neither he nor any creditor of the company has any property legal or equitable in the assets of the corporation.” (per Lord Wrenbury, at pg 633).

DHN Food Distributors Ltd v Tower Hamlets London Borough Council [1976] 1 WLR 852

Piercing the corporate veil – groups of companies

The corporate veil may be pierced where groups of companies can be treated as partners.

DHN was the holding company in a group of three companies. There were two subsidiaries, wholly owned by DHN. One subsidiary owned land used by DHN, the other owned vehicles used by DHN. The land was subject to compulsory purchase, and DHN sought compensation for disturbance of its business.

In the Court of Appeal, Lord Denning MR said:
“These subsidiaries are bound hand and foot to the parent company and must do just what the parent company says… This group is virtually the same as a partnership in which all the three companies are partners. They should not be treated separately so as to be defeated on a technical point.” (at 860)

It was therefore held that DHN was entitled to claim. The separate corporate personality doctrine was overridden. However, this is likely to only be followed where the subsidiaries are wholly owned and serve no purpose other than to own the parent company's assets. The case has not been applied to make one company in a group liable for the debts of another – Re Southard and Co Ltd [1979] 1 WLR 118.

Bhullar v Bhullar [2003] EWCA Civ 424

Corporate opportunity doctrine

Duty to avoid conflicts of interest = duty to communicate opportunities

A director owes a duty to avoid conflicts of interests, including through the exploitation of a corporate opportunity.

In this case the company operated grocery stores, but also owned a commercial property which it let to tenant. The tenants used part of an adjacent property as a car park. One of the company's directors saw a ‘fore sale' sign on the adjacent property. He caused a company which he controlled to buy the land without telling the other directors of the company. It was held that he was under a duty to communicate the opportunity to the company because it would have been a ‘worthwhile' opportunity for the company.

Click here for a list of Company Law case titles that you can research.

 


Secure your law degree, order your Company Law essay right now!