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{{Short description|1933 UK company law case}}
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{{Infobox Court Case
{{no references|date=August 2023}}
{{Use dmy dates|date=April 2022}}
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{{Infobox court case
| name = Gilford Motor Co Ltd v Horne
| name = Gilford Motor Co Ltd v Horne
| court = Court of Appeal
| court = [[Court of Appeal of England and Wales]]
| image = Hampstead Heath 7.JPG
| date decided =
| date decided =
| full name =
| full name =
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}}
}}


'''''Gilford Motor Co Ltd v Horne''''' [1933] Ch 935 is a [[UK company law]] case concerning [[piercing the corporate veil]]. It gives an example of when courts will treat shareholders and a company as one, in a situation where a company is used as an instrument of fraud.
'''''Gilford Motor Co Ltd v Horne''''' [1933] Ch 935 is a [[UK company law]] case concerning [[lifting the corporate veil]]. It gives an example of when courts will treat shareholders and a company as one, in a situation where a company is used as an instrument of fraud.


==Facts==
==Facts==
Mr EB Horne was formerly a managing director of the Gilford Motor Co Ltd. He agreed in writing (clause 9) to not solicit customers of the company when he left employment. Then he was sacked. He set up his own business and undercut their prices. Then he got legal advice saying that he was probably acting in breach of contract. So he set up a company, JM Horne & Co Ltd, in which his wife and a friend called Mr Howard were the sole shareholders and directors. It took over Horne’s business and continued. He sent out fliers saying,
Mr EB Horne was formerly a managing director of the [[Gilford Motors|Gilford Motor Co Ltd]]. His employment contract stipulated (clause 9) not to solicit customers of the company if he were to leave employment of Gilford Motor Co. Mr. Horne was fired, thereafter he set up his own business and undercut Gilford Motor Co's prices. He received legal advice saying that he was probably acting in breach of contract. So he set up a company, JM Horne & Co Ltd, in which his wife and a friend called Mr Howard were the sole shareholders and directors. They took over Horne’s business and continued it. Mr. Horne sent out fliers saying,


{{Cquote|Spares and service for all models of Gilford vehicles. 170 Hornsey Lane, [[Highgate]], N. 6. Opposite Crouch End Lane... No connection with any other firm.}}
{{Cquote|Spares and service for all models of Gilford vehicles. 170 Hornsey Lane, [[Highgate]], N. 6. Opposite Crouch End Lane... No connection with any other firm.}}


The company had no such agreement with Gilford Motor about not competing, however Gilford Motor brought an action alleging that the company was used as an instrument of fraud to conceal Mr Horne's illegitimate actions.
The company had no such agreement with Gilford Motor about not competing, however Gilford Motor brought an action alleging that the company was used as an instrument of fraud to conceal Mr Horne's illegitimate actions.


==Judgment==
==Judgment==

===High Court===
===High Court===
Farwell J held that the covenant that Mr Horne would not compete was broken. ‘I cannot help felling quite convinced that at any rate one of the reasons for the creation of that company was the fear of Mr Horne that he might commit breaches of the covenant in carrying on the business…’ But because the covenant was too wide and against public policy (restraint of trade?) he refused to enforce it. Gilford Motor appealed.
[[Christopher Farwell|Farwell J]] held that the covenant Mr Horne would not compete was broken. ‘I cannot help feeling quite convinced that at any rate one of the reasons for the creation of that company was the fear of Mr Horne that he might commit breaches of the covenant in carrying on the business…’ But because the covenant was too wide and against public policy, he refused to enforce it. Gilford Motor appealed.


===Court of Appeal===
===Court of Appeal===
[[Ernest Pollock, 1st Viscount Hanworth|Lord Hanworth MR]] granted an injunction, so that Horne was forced to stop competing through the company.
⚫
Lord Hanworth MR granted an injunction. ‘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…’ was one the former employers would object to.


⚫
{{Cquote|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…}}
⚫
Lawrence LJ and Romer LJ concurred.

⚫
Lawrence LJ and [[Mark Romer, Baron Romer|Romer LJ]] concurred.


==See also==
==See also==
{{Clist personality}}
{{Clist personality}}
*''[[Jones v Lipman]]''
*''[[Jones v Lipman]]''

==Notes==
{{refs|2}}


==References==
==References==
*

==External links==
*
*


[[Category:United Kingdom company case law]]
[[Category:United Kingdom company case law]]
[[Category:United Kingdom corporate personality case law]]
[[Category:Court of Appeal (England and Wales) cases]]
[[Category:1933 in case law]]
[[Category:1933 in British law]]

Latest revision as of 06:42, 11 January 2024

Gilford Motor Co Ltd v Horne
CourtCourt of Appeal of England and Wales
Citation[1933] Ch 935
Court membership
Judges sittingLord Hanworth, MR Lawrence LJ and Romer LJ
Keywords
Fraud, lifting the veil

Gilford Motor Co Ltd v Horne [1933] Ch 935 is a UK company law case concerning lifting the corporate veil. It gives an example of when courts will treat shareholders and a company as one, in a situation where a company is used as an instrument of fraud.

Facts

[edit]

Mr EB Horne was formerly a managing director of the Gilford Motor Co Ltd. His employment contract stipulated (clause 9) not to solicit customers of the company if he were to leave employment of Gilford Motor Co. Mr. Horne was fired, thereafter he set up his own business and undercut Gilford Motor Co's prices. He received legal advice saying that he was probably acting in breach of contract. So he set up a company, JM Horne & Co Ltd, in which his wife and a friend called Mr Howard were the sole shareholders and directors. They took over Horne’s business and continued it. Mr. Horne sent out fliers saying,

Spares and service for all models of Gilford vehicles. 170 Hornsey Lane, Highgate, N. 6. Opposite Crouch End Lane... No connection with any other firm.

The company had no such agreement with Gilford Motor about not competing, however Gilford Motor brought an action alleging that the company was used as an instrument of fraud to conceal Mr Horne's illegitimate actions.

Judgment

[edit]

High Court

[edit]

Farwell J held that the covenant Mr Horne would not compete was broken. ‘I cannot help feeling quite convinced that at any rate one of the reasons for the creation of that company was the fear of Mr Horne that he might commit breaches of the covenant in carrying on the business…’ But because the covenant was too wide and against public policy, he refused to enforce it. Gilford Motor appealed.

Court of Appeal

[edit]

Lord Hanworth MR granted an injunction, so that Horne was forced to stop competing through the company.

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…

Lawrence LJ and Romer LJ concurred.

See also

[edit]

References

[edit]
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