The Gazette 1984

GAZETTE

APRIL. 1984

Roundabout Ltd. -v- Beirne 16 In this case a flagrant attempt to avail of the corporate entity principle was allowed to succeed. Premises were closed down in circumstances giving rise to a trade dispute. Then the premises were leased (with an option to purchase) to the plaintiff company, the directors of which were the owners of the premises, their accountant and three barmen. When the licensed premises were subse- quently re-opened for business by the plaintiff company, the entire work was carried out by the directors them- selves. The barmen-directors were paid a fixed yearly sum by way of directors' remuneration in such irregular intervals and in such irregular proportions as was found convenient. The barmen were at the mercy of the other directors in relation to security of tenure. Dixon J. decided that the plaintiffs had accomplished a successful subterfuge and further picketing of the premises was restrained. The trade dispute did not attach to the premises and so the provisions of the Trade Dispute Act, 1906 were rendered inoperative. The earlier Irish case of Ferguson -v- O'Gorman 11 where Meredith J. refused to be deceived by a similar ploy was distinguished on somewhat unconvincing grounds. In Ferguson -v- O'Gorman, unlike in the present case, the premises had been taken over as a going concern. Furthermore in Roundabout Ltd. -v- O'Beirne the new company did not employ anyone so that there were no workmen on whom pressure could be brought to bear by picketing the premises. Roundabout Ltd. -v- O'Beirne is a case in which legal technicalities were allowed to prevail over industrial realities and commonsense. In Examite Ltd. -v-

Lifting the Veil The doctrine of separate corporate entity is not applied as a rigid inflexible rule. The Holmesian dictum that the life of the law has not been logic but experierice, springs to this mind on this occasion. A variety of techniques have been employed to circumvent the principle embodied in Salomon's case when its unrestricted application would undermine some overriding interest. As Professor Gower states in these exceptional instances the law either goes behind the corporate personality to the individual members, or ignores the separate personality of each company in favour of the economic entity constituted by a group of associated companies. 11 It is difficult, however, to formulate a set of coherent propositions from the numerous judicial decisions. 12 In most cases the authority of Salomon's case is accepted without question as it was in Smallman -v- O'Moore and Newman. 13 In Smallman's case the defendants had carried on a partnership business as building contractors. Later they decided to incorporate, which transformation was effected. Notice of the formation of the company was circulated to the suppliers of the partnership and published in two trade gazettes. After the registration of the company, business was continued in the partnership name so that cheques were paid by a director and the secretary of the company upon forms displaying the company name. The plaintiffs had been suppliers of the defendants prior to the formation of the company and continued, as they thought, after its formation, to supply goods to the defendants. Davitt P. found, however, that the parties were not ad idem. The plaintiffs believed they were supplying the goods to the partnership while the defendants believed they were being supplied to the company. In these circumstances a claim for the price of the goods failed and the plaintiffs were burdened with the responsibility of having to institute fresh proceedings. This was a most unjust result. It does not appear to have been suggested that the court should pierce the corporate veil. Arguably the court ought to have recognised the continued identity of the business when the company took over from the unincorporated firm especially when there was a great potential for customers being misled. On the other hand the facts of Smallman -v- O'Moore and Newman bear a strong similarity to those in the English case of Davies -v- Elsby Bros. Ltd. 14 where the court reached much the same result. In the latter case again a company had taken over from an unincorporated firm. Legal proceedings were instituted against the wrong defendant and it was held the court had no power to allow the writ to be amended by substituting the right defendant once the limitation period had expired. Smallman -v- O'Moore and Newman is to be contrasted with the recent decision in Chemical Bank -v- McCormack . 15 This case concerned an order for inspection of bank accounts under the Bankers' Books Evidence Act, 1879 (as amended). It was argued that the order should be amended by deleting the reference to two companies on the ground that notice had not been given to them. Carroll J., without elaboration, said this contention failed to take account of the relationship of the defendant with the companies. The defendant had been formally notified of the order through his solicitor. As the defendant and the companies were in reality one and the same, notice would be deemed to be sufficient. This line of reasoning was undoubtedly inspired by a determination to defeat the claims of a less than meritorious party.

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