Case Study: Company Law
Systems Pity Ltd. After 1 July 2007 Computers Pity Ltd reorganized their company and now called Software Pity Ltd. The problem is whether the Computers Pity Ltd can seek a court injunction to prevent Systems Pity Ltd from soliciting its customers. Now please discuss this issue with the people around you for the few minutes.
Then we talk about that. For this question, who think the Computers Pity Ltd need seek a court injunction to prevent Systems? And who think not? Our group research that few relevant cases and try to find the answer on this problem.
The first one Is Guilford Motor Company Limited v Horned [1 933] CHECK. This case is very similar to the case of Computer and Chug. In the case of Guilford Motor Company and Horned, Horned was a managing director of the Guilford Motor Co Ltd.
His employment contract stipulated (clause 9) not to solicit customers of the company if he were to leave employment of Guilford Motor Co. Mr.. Horned was fired, thereafter he set up his own business and undercut Guilford Motor CO’s prices. He received legal advice saying that he was probably acting in breach of contract.
So he set up a many, JAM Horned & Co Ltd, in which his wife and a friend called Mr.
Howard were the sole shareholders and directors. The High Court held that Mr. Horned would not break the covenant with Guilford Motor Company. Therefore, In the case of Guilford Motor Company Limited v Horned [1933] CHECK, the defendants company was carried on wholly by Horned. Whereas Systems Pity Ltd Is carried out by Chug’s wife, thus not In a breach of Chug’s contractual obligations to Computers Pity Ltd. Corporate veil was lifted in Guilford Motor Company Limited v Horned [1933] CHECK on the basis avoidance f legal obligations.
Also, in the case of Industrial Equity Ltd v Blackburn (1977) 137 CLC 567, the parent company argued that the court should treat the group as a single entity and therefore this course of action was permissible. The subsidiary company argued that the parent company could not treat the subsidiary’s profits as its own profits before the subsidiary formally distributed those profits to the parent company. The high court rejected the argument of the parent company, relying on the outcome from Salomon and Walker v Whalebone. To conclude, that each company in the group remained a separate legal entity.
Although ten corporation Act requires ten preparation AT group accounts, ten court reached this decision. In the case of Computers Pity Ltd and Chug, Chug could argue that the contract between Chug and Computers Pity Ltd does not exist anymore because Computers Pity Ltd no longer exists.
Also Software Pity Ltd is a separate legal entity from Computers Pity Ltd and is not a party in the contract. Therefore, Our recommendation to Computers Pity Ltd is to not seek a court injunction to prevent Systems Pity Ltd from soliciting its customers.
As it will be an unsuccessful attempt. Now we do the conclusion, it is the important theory review. Company is a separated legal entity Upon registration the company acquires the legal capacity and powers set out on SASS.
The company can enter into contracts, sue and be sued in its own name and issue shares. SASS is the statutory source of capacity and power of a company which the company may exercise immediately upon registration. For the corporate veil, once registered the company become a legal entity separate from its members, directors and secretary.
The concept of the corporate veil stems from the separate legal identity of the company coupled with the fact that, generally speaking; the courts will look behind the company’s certification of registration to determine the motives for its formation or make the people liable for the acts of the company. However, in some situation, the corporation veil will be lifting, either under the Corporation Act or at the common law; the law will look behind the certificate of incorporation to determine why the company was incorporated or to ascribe right and liabilities to others.
