Company Law 案例(苏格兰)

What was Lee v Lee's Air Farming Ltd case?

Mr Lee was a pilot who operated a crop dusting business. Mr Lee formed the corporation, Lee's Air Farming Ltd. Its main business was aerial spraying. He was the director and owned most of the shares(he held 2999 of the company's 3000 shares). As director of the corporation, he hired himself as an employee of the corporation. As one of the administrative tasks in setting up the company, he acted as its agent in setting up insurance, including workers' compensation insurance. The corporation's plane crashed while Mr Lee was flying it as part of his work, and he was killed on the job. His widow, the plaintiff, attempted to collect what was rightfully due to a widow of a man killed on the job. The actual defendant was the insurance company.

The main question in the case was whether a person could be both a director and major shareholder of a corporation, on the one hand, and also an employee of the corporation, on the other.

Previous cases, beginning with the Salomon case, had confirmed that a corporation has an existence separate and apart from its shareholders and directors. The exceptions to that principle are gathered under the rubric, 'Piercing the Corporate Veil.' Where a

corporation is a mere sham, the law can cut through the veil of corporate legitimacy, and reach into it for the shareholders and directors.

The Lee's Air Farming case confirmed the Salomon principle. Lee's Air Farming Ltd. was not a mere sham. It was a legitimate corporation, established for legitimate purposes, and had carried on a legitimate business. His employment by the corporation was well-documented, through government records of tax deductions, workmens' compensation contributions, etc., and was not something his widow had attempted to piece together after the fact of his death. There was no reason in law why a person could not perform corporate functions and employee functions within the same corporation. it was held that 'L' was a separate person distinct from tha company hence compensation was due to the widow

What happened during the case for Jones v Lipman 1962

In this case Lipman agreed to sell land to Jones but before completion of the contract sold the land to a company of which he and another were the sole directors and shareholders. The judges ordered specific performance against Lipman and the company. The company was described as a device and a sham, a mask

which Lipman held before his face in an attempt to avoid recognition by the eye of equity.

The Jones v Lipman case is a classic example of lifting the veil of incorporation, that the company was used to evade legal obligation or commit fraud.

(b) Fraud

A court will not allow itself to be an instrument of fraud or illegality. Thus, Professor Ford observed that the main point in Gilford Motor Co v Horne [1933] Ch 935, was that the veil of incorporation will be overlooked if there is an ‘unrebutted inference that one of the reasons for the creation of an intervening company was to evade a legal or fiduciary obligation.’

In Gilford Motor Company v Horne, H had promised in his contract of employment as managing director of G that he would not at any time solicit G’s clients. H subsequenlty formed a company (‘Z’) with his wife. Z then solicited G’s clients. The court held that the defendant’s assertion, that the business Z’s rather than H’s, was a mere ‘sham’ or ‘cloak’; especially since one of the reasons for Z’s creation was so that H could evade his covenant