Gilford Motor Co., Ltd.

v. Horne (1933)
Ch. 935

Ayush Tripathi
2021-24
LLC Sec-B
 Facts of the Case
01
GILFORD MOTOR CO LTD HAD ITS
REGISTERED OFFICE IN HOLLOWAY
ROAD, LONDON. MR HORNE WAS A
FORMER DIRECTOR OF THE
PLAINTIFF COMPANY, APPOINTED
FOR A TERM OF SIX YEARS.
BEFORE THE COMPLETION OF THE
TERM, HE WAS FIRED. CONTRACT
OF HIS EMPLOYMENT CONTAINED A
NON – COMPETENT CLAUSE, WHICH
PROHIBITED HIM FROM SOLICITING
ITS CUSTOMERS IN THE EVENT HE
LEFT THE COMPANY.
02
HOWEVER, AFTER HE WAS FIRED,
HE SET UP A COMPANY NAMED J.M.
HORNE & CO. LTD WHICH
UNDERCUT GILFORD MOTOR CO’S
PRICES.
HE ALSO SOLICITED THE
CUSTOMERS WHOM HE KNEW
WHILE WORKING WITH GILFORD.
HE ALSO SENT OUT CIRCULARS TO
VARIOUS PERSONS IN WHICH IT
WAS STATED THAT THE DEFENDANT
WAS READY AND, IN A POSITION, TO
SUPPLY SPARE PARTS FOR GILFORD
VEHICLES. 
03
SINCE THE CONTRACT WAS WITH
HOLMES, GILFORD COULD NOT SUE
HIM AS PER SEPARATE LEGAL
PERSONALITY OF A COMPANY.
HOWEVER, HE CONTENDED THAT
THE COMPANY WAS USED AS AN
‘INSTRUMENT OF FRAUD’ TO
CONCEAL MR HOLMES’S ACTIONS.
 Issue

01
THE MAIN ISSUE IN THE CASE WAS:
WHETHER THE COMPANY WAS USED AS A CLOAK
BY THE DEFENDANT TO COMMIT BREACH OF
THE CONTRACT?
 Judgement
01
THE COURT FOUND THAT THE COMPANY IN
QUESTION HAD BEEN ESTABLISHED WITH THE
SOLE OR PRIMARY INTENTION OF
EVADING THE NON-COMPETITION CLAUSE. IT
WAS WILLING TO CONSIDER BOTH MR. HORNE
AND THE COMPANY TO BE LEGALLY
OBLIGATED TO COMPLY WITH IT.
AS AGAINST THE DEFENDANT’S PLEADING,
THE COURT SAID THAT “THE COVENANT WAS
NOT WIDER THAN WAS REASONABLY
NECESSARY FOR THE PROTECTION OF THE
PLAINTIFF COMPANY’S TRADE AND WAS
THEREFORE ENFORCEABLE BY INJUNCTION.”
02
THE COURT SAID THAT THE DEFENDANT’S
COMPANY IS OBVIOUSLY CARRIED ON
WHOLLY BY THE DEFENDANT HORNE. IT WAS
USED AS THE CHANNEL THROUGH WHICH THE
DEFENDANT HORNE WAS CARRYING ON HIS
BUSINESS. 
IT HELD THAT THE NEW COMPANY IS NOTHING
BUT A SHAM OR CLOAK, FOR MERELY
ENABLING THE DEFENDANT TO COMMIT A
BREACH OF THE CONTRACT. SUBSEQUENTLY,
LORD HANDWORTH GRANTED AN INJUNCTION
TO THE DEFENDANT’S BUSINESS.
 Case Analysis

01
THIS CASE SETS THE
02
IT WAS CLEAR THAT THE
03
THE CORPORATE VEIL
04
IF A PERSON FORMS A
BEST PRECEDENT OF COMPANY WAS A SHAM MUST BE LIFTED UP IN COMPANY WITH THE
‘LIFTING THE TO COVER THE ACTS OF CASES WHERE A INTENTION OF EVADING
CORPORATE VEIL’. THE THE DIRECTORS WHO COMPANY IS SPECIFIC PERFORMANCE
COURT IN THE CASE WERE THE DEFENDANT INCORPORATED AS A OF HIS CONTRACTS, THE
TOOK INTO AND HIS FAMILY DEVICE OR STRATEGY COURT WILL ORDER
CONSIDERATION, THE MEMBERS. WITH THE INTENTION OF SPECIFIC PERFORMANCE
PURPOSE FOR WHICH THEY MASKED THE CONCEALING THE TO BE CARRIED OUT BY
THE COMPANY WAS ‘SEPARATE LEGAL IDENTITY OF THE THE COMPANY.
INCORPORATED. PERSONALITY’ OF A PERSON WHO IS THE
COMPANY FOR PERPETRATOR OF THE
VIOLATION OF THE FRAUD.
CONTRACT AND TO
PRODUCE UNFAIR
COMPETITION.
 Conclusion

01
THE COURT HAS TO BE CAUTIOUS
WHILE DEALING WITH THE CASES;
THE FACTS IN DIFFERENT CASES
HAVE TO BE PROPERLY ANALYSED.
THERE SHOULD BE A NECESSARY
BALANCE BETWEEN THE INTEREST
OF THE PUBLIC AND THE
CORPORATE PERSONALITY.  AND FOR THIS, THE COURTS MUST
02
THERE CANNOT BE A SINGLE RULE
FOR THE DOCTRINE OF CORPORATE
VEIL.
SINCE NO RIGHT IS ABSOLUTE,
LIFTING OF CORPORATE VEIL TO
DISREGARD LIMITED LIABILITY OF
MEMBERS SHOULD BE EMPHASISED
STICK TO A SET OF STATUTORY
STANDARDS.