Case Studies Flashcards
Khan v Miah (2000)
topic: partnership must exist to commence business activity
A group of individuals formed a partnership to open a business
One of the partners left the business before the restaurant opened, then later tried to claim a share of the obtained profit
The remaining partners felt they were not entitled as they left before trading
A partnership had existed and the estranged partner was entitled to a share of profit because:
All partners had engaged in activities that were required as part of the partnership, including obtaining a business loan
Also, this was a joint venture with a view to profit
Don King Productions Inc v Warren
topic: duty to not compete
King and Warren (two boxing promotes) set up a partnership to promote and manage boxers in Europe
Warren subsequently neutered into personal contracts with some of the boxers
Decision: Warren had breached the duty to not compete, therefore the partnership was entitled to the profits from the personal contracts (PA1890 s30)
Salomon v Salomon & Co (1897)
topic: company is its own legal entity
Mr Soloman formed a company of which he was the majority shareholder
He also had a debenture (loan) on the company, secured by a floating charge
Company later fell bankruptcy
As a secured creditor, Mr Salomon could recover money loaned, but unsecured creditors not happy
The company was a separate and dictinty legal entity away from Mr Salomon as an individual
As Mr Salamon was a separate person, he was entitled to recover the money lent to the company
Macaura v Northern Assurance Ltd (1925)
topic: company as its own entity
Manager of a timber estate company took out an insurance policy on the company’s assets
But the policy was taken out under his own number
When the timber was destroyed in a fire, he was ineligible to make a claim as he had no ownership of the companies assets
The company and him were legal entities, so the policy should have been under the company’s name
Kelner v Baxter (1866)
topic: pre-incorporation contracts
Three hotel promoters were intending to form a company at a later date
Three hotel promoters were intending to form a company at a later date
Whilst still unincorporated, they purchased £900 of wine from the claimant - the contract was made under the company name
Company later went into liquidation
Verdict: As the wine was purchased when the company had not yet formed, the company did not have the capacity to enter into the contract. The three promoters were personally liable for the amount
Even if a company incorporates at a later date, any contracts entered before the date of incorporation cannot be ratified by the company once they are incorporated
Croft v Day (1943)
topic: business name
Mr Croft owned a business that made Day & Martin boot polish
Later on, Mr Day & Mr Martin started a business in the same profession and established the same business name as the existing company
Verdict: The court deemed that Mr Day & Mr Martin had attempted to mislead customers by passing their business off as the existing company owned by Mr Croft
Gilford Motor Co Ltd v Horne (1933)
topic: lifting the veil of incorporation
Mr Home was former Managing director of Gilford Motor Co Ltd (he was fired)
There was clause in his contract stating that, should he leave the role, he could not solicit Gilford’s customers
He originally set up his own business undercutting Gilford before his lawyer recommended he stop
Mr. Home the set up a company, JM Horne & Co LTD
His wife and friend were the sole shareholders & directors
Sent out fliers advertising spares and services for all Gilford vehicles
Court of appeal ruled that JM Horne & Co Ltd was formed poorly as a device the circumvent the contract clause
Jones v Lipman (1962)
topic:
Lipman entered into a contract to sell land to Jones, but changed his mind before the contract was completed
To incapacitate the sale, Lipman created accompany (with him as the sole shareholder and transferred the land to tat company)
He then claimed he would not sell the land to Jones as he no longer owned the land
The court ruled that the company was setup purley for the purpose of evading performance of the contract, therefore was a sham
Lipman was ordered to e transfer the land to Jones per the original contract
Hickman v Kent or RMSBA (1915)
topic: binding power of constitution
Company articles stated that any dispute between a shareholder and the company should go to arbitration before court proceedings commence
Mr Hickman was aggrieved that the company refused to register his sheep, so threatened court action
Company applied to have the court action suspended
Mr Hicjman was bound by the articles and had to take the matter to arbitration
Self-Cleansing Filter SYndicate Co Ltd v Cuninghame (1906)
A 55% majority of company shareholders want to sell the company’s assets to another firm, passed an ordinary resolution
Directors were opposed to this move as they saw it not in the company’s best interest, declined to comply with resolution
Articles stated that directors had general power of management
Based on the articles, the views of the directors could not be disregarded
SHareholders would require a special resolution to pass an amendment to the articles
Pender v Lushington (1977)
topic: binding power of constitution
Company articles stated every shareholder gets 1 vote per 10 shares, but is capped at 100 shares maximum
Pender owned 1,000 shares, so transferred them to other nominees so that they could vote for a resolution he wanted to pass
Chairman refused to accept the votes of the nominees
company was bound by rights of the shareholders, had to accept the votes
Wood v Odessa Waterworks Co (1889)
topic: binding power of the constitution
Articles stated that, with approval of the general meeting, directors had the power to declare a cash dividend
Directors recommended a long-term bond be awarded instead
Recommendation pass by ordinary resolution at GM
Shareholder argued that this action breached the articles
The company and its members were bound to the articles, and as the bonds are not payment in cash, they indeed breach the articles. The bonds proposal was not valid
