Last edited on 16 January 2011, at 21:02. The covenant is too wide to be enforceable. To avoid the covenant, he formed a company and sought to transact his business through it. It appears to me that this is an agreement which must be upheld by the Court, and the plaintiff company are entitled to the protection of the Court, and the injunction must be granted. Gilford Motor Co V S Horne. He says this: “The defendant company is a company which, on the evidence before me, is obviously carried on wholly by the defendant Horne. They also sold separate parts which were handed over to the buyers for cash. o Facts: • Horne was employed as managing director of Gilford Moto. Gilford Motors Ltd v Horne [1933] Ch. Kapila Hingorani v. The courts pierced the corporate veil to reveal the sham transactions occurring behind the façade of the company. Of course, in law the defendant company is a separate entity from the defendant Horne, but 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, as, for instance, in sending out circulars as he was doing, and that he might possibly avoid that liability if he did it through the defendant company. Mr. Horne was earlier the managing director of Gilford. Horne established a business and carried it on at his own home, 170, Hornsey Lane, Highgate, and the business he had was one carried on by “E.B. LORD HANWORTH, M.R. It is intended to deal with persons who are upon their books, or with whom they deal and, in the course of dealing, earn a profit. What happened was this. Now I turn to this agreement. Having established himself, or attempted to establish himself, in that way as “E.B. Gilford Motor Co Ltd v Horne[1933] Ch 935. You can filter on reading intentions from the list, as well as view them within your profile.. Read the guide × The solicitor of the company was the writer of that letter of March 29 which I have already read. An early example of this is the case of Gilford Motor Company Ltd v Horne, where Mr Horne (who was the former managing director of Gilford Motor Company Ltd) set up a new company and began to solicit his former company’s clients in breach of a non-compete covenant which was contained in his service agreement. Mr. Horne was fired from his position and job. Content is available under CC BY-SA 3.0 unless otherwise noted. I am quite satisfied that this company was formed as a device, a stratagem, in order to mask the effective carrying on of a business of Mr. E.B. in Smith v. Hancock [(1894) 2 Ch. Gilford Motor Co V S Horne(1933) Horne was appointed Managing Director Gilford Motor Co 6-year term. The letters that passed were to this effect, that Mr. Horne tendered his resignation as a director and joint managing director of the company “on terms as arranged with you today”, and those terms are set out, that there is to be a total of £1,500. I do not quite understand the meaning of what is called a “casual customer”. Clause 9 of the agreement provided that: “The managing director shall not at any time while he shall hold the office of a managing director or afterwards solicit, interfere with or endeavour to entice away from the company any person, firm, or company who at any time during or at the date of the determination of the employment of the managing director were customers of or in the habit of dealing with the company.” The employment of the defendant as managing director was determined in November 1931, by an agreement between the parties under which the defendant was to receive a fixed sum payable in instalments. G. Change ), Navtej Singh Johar v.Union of India Through Secretary, Ministry of Law and Justice (2018) 10 SCC 1. That company is a private company, as I have already said; its primary objects are to carry on the business of factors’ agents and distributors and vendors and buyers of accessories and spare parts of all classes of vehicles, and so on and for charabancs, motor-cars, taxis, and so on. They also sold separate parts which were handed over to the buyers for cash. Gilford Motor Co Ltd v Horne. The two classic cases of the fraud exception are Gilford Motor Company Ltd v. Horne[14] in which Mr. Horne was an ex-employee of The Gilford motor company and his employment contract provided that he could not solicit the customers of the company. As Rigby L.J. I do not so read the letters or the entry in the minute book. In the case of Gilford Motor Co Ltd v Horne [1933] CH 935 1, a company cannot be used in order to avoid legal obligations or to commit fraud. l>. Covenant not to solicit Customers or Persons "in the habit of dealing March 1. with the company" — Reasonableness of Restriction. When he left he agreed that he would not solicit any of his former employers customers. His employment contract prevented him from attempting to solicit Gilford’s customers in the event that Horne left Gilford’s employ. Lindley, L.J., indicated the rule which ought to be followed by the Court: “If the evidence admitted of the conclusion that what was being done was a mere cloak or sham and that in truth the business was being carried on by the wife and Kerr for the defendant, or by the defendant through his wife for Kerr, I certainly should not hesitate to draw that conclusion, and to grant the plaintiff relief accordingly.” I do draw that conclusion; I do hold that the company was “a mere cloak or sham”; I do hold that it was a mere device for enabling Mr. E.B. Then it was provided by clause 9 in terms as follows: “The managing director shall not at any time while he shall hold the office of a managing director or afterwards solicit, interfere with or endeavour to entice away from the company any person, firm, or company who at any time during or at the date of the determination of the employment of the managing director were customers of or in the habit of dealing with the company, and also will not at any time within five years from the determination of this agreement, either solely or jointly with or as agent for any other person, firm or company, be engaged, directly or indirectly in any business similar to that of the company within a radius of three miles from any premises wherein the business of the company shall for the time being be carried on.” Now it is the interpretation to be given to that clause 9, which has to be decided between the parties in this action, and it is the first part of that clause, of which I have read both limbs, which is in question. 377, 385], it would not be possible to object to the injunction going against the company. Farwell J. heard the evidence about that company and had these documents before him. 1418.] This page was last edited on 16 January 2011, at 21:02 (UTC). It does not go so far as to cover customers who become customers after the managing director has left, and it was a covenant entered into by him with full knowledge of what he was doing, and with full knowledge of who were the persons included in that phrase, and it is in respect of them that he is debarred from solicitation, interference or enticing away. Daimler Co Ltd v Continental Tyre and Rubber Co Ltd [1916] 2 AC 307 is a UK company law case, concerning the concept of "control" and enemy character of a company. That is right, is it not?” and Sir Walter Greaves–Lord says: “That is right.” So that the learned judge was on sure ground when he said there was a clear admission that these two defendants were soliciting the customers of Gilford Motors; and, as Farwell J., puts it: “Admittedly the defendant Horne 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; and, in fact, he did supply spare parts and at prices which were, I gather, considerably lower that those charged by the plaintiff company, so that in a sense he was what is known as undercutting the plaintiff company.” In other words, there is no defence at all to the claim made in this action unless the conduct of the two defendants can be excused on one of two grounds: firstly, that the covenant is unenforceable in law by reason of the width of its terms, or, secondly, that it has ceased to be operative by reason of the terms which were arranged between the company for the discharge or the release of the managing director from that position on November 17, 1931. Case: Gilford Motor Co Ltd v Horne [1933] Ch 935. However, shortly after he left the employment at Gilford Motor Vehicles, he set up a small business in his personal residence, under the name J.M. If you click on the name of the case it should take you to a link to it Restraint of Trade — Agreement between Company and Managing Director — p i og . ... Daimler Co Ltd v Continental Tyre and Rubber Co Ltd [1916] 2 AC 307. Setting a reading intention helps you organise your reading. That is, the company has a corporate personality which is distinct from its members. Lord Watson has pointed out in the case of Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co. [(1894) A.C. 535], that the opinion of the judges of this age as to matters of public policy may differ very much from that of judges of a bygone age when the circumstances of the world were different. 935 58 11. The defendant, Edward Bert Horne, in May, 1929, was of primary importance in the business, and on that date the company made an agreement with him whereby he was appointed a managing director, with a right to hold that office for a term of six years from September 1, 1928; that is to say, the span for which he was engaged terminated on September 1, 1934. A person is not allowed to use his or her own company to abstain from contractual obligation. It appears to me that the purpose of the second agreement was to deal with the question of the shortening of the term of the employment, and the compensation to be paid in consequence of that shortening, and was not intended to deal with or release the defendant from the restrictive covenant. Gilford Motor Co Ltd v Horne: CA 1933. 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 Company, Limited v. Horne (1933) Ch. William C. Leitch Bros Ltd., (1932) 2 CH 71 (ChD). Mr. Horne was earlier the managing director of Gilford. The question whether in any particular case some casual purchaser from the defendant may cause the defendant to be in danger of further action by the Court is quite a different question. '}ğx=$ÆäÚµ¢XbÅ_â„cÎ,‡�ÓÈÇz¸O51×ñ¾ÜÕ8úàbÇêñ¾ğîªæRR;/�—���-€¯Ñ.+BÉ‘˜=T›˜BS;à d9ç>�tlÌ®Œşrl峺y©t1|ïÆ\“}ö�q�R’„š=Móˆ×š’\A ŒDšF”qQŸk²‹ã ÅÆwÍÙË ÀáüŠ"ş]j#‹3¸Zó 0ŞÚÍâ„ã,¥±�À{œº_¥†J³?â©ğº%�FW02.ûPRiq�FWʲmh0@1hB¦c+Ohg�5�”o6ğRĞï|l'È5V×®–RC™Ä˜qvZŞÄ_�Eç2G"f˜¯.¤vÜ—Fï[’�8Õ��MàªÏ-�‹÷í²Ş ´#@.ANàsÎíXğ5x~1%†Ñ�ÎONà3 Ȩs“}Y€W(�õ- ^+ƆÜÂåvá*g.~±ËÀÀUJ8^É"àz€£UdΘ+. Text is available under the Creative Commons Attribution-ShareAlike License; additional terms may apply. Admission has been made quite frankly and candidly in this Court, as it was made below, that there have been circulars sent out to the customers of the Gilford Motor Company. Horne’s company was held to be subject to the same contractual provisions as Horne was himself. In his employment contract, he was prohibited from soliciting the customers of Gilford in case he leaves their employment. Objection is taken that these words “customers of or in the habit of dealing with the company” either have no meaning or are tautological. I think the two words are mutually antagonistic: I think a “customer” is a person who, as I said, frequents the shop; a casual purchaser seems to be a different person. This principle may be referred to as the ‘Veil of incorporation’. Change ), You are commenting using your Google account. Following upon that reply of March 30, 1932, on April 8 a limited company under the title of “J.M. The company also reconditioned surplus World War I lorries, and made adaptions to customer's choice. The son, whose initials are ‘J.M.’, is engaged in a subordinate position in that company, and the other director, Howard, is an employee of the company. Jones v Lipman [1962]1 WLR 832. Change ), You are commenting using your Facebook account. 935 GILFORD MOTOR COMPANY, LIMITED v. HORNE. Horne’s copy of the original service agreement with this company was left with the writer for safe custody; therefore we have pleasure in enclosing it herewith.” Thus the solicitor was on March 30 placed in possession of the agreement of which I have read some and indicated other portions of the terms. The decision in Gilford Motor Co Ltd v Horne was overruled by the Supreme Court in Prest v Petrodel Resources Ltd. Horne’s company was held by the court to be a sham company. Horne, the late joint managing director of your company, and I understand that he entered into certain agreements with your company as to service and for sale. Corporate personality which is distinct from its members event that Horne left ’! Customer 's choice Limited v. Horne ( 1933 ) Horne was earlier managing... That way as “ E.B 1916 ] 2 AC 307 minute book v. Hancock [ ( 1894 ) 2 71... 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