Ratio Decidendi
The corporate veil will be pierced where a company is used as a mere cloak or sham to evade an existing legal obligation such as a restrictive covenant.
Facts
Mr Horne, a former managing director of Gilford Motor, was bound by a non-solicitation covenant. He formed a company to solicit Gilford's customers, arguing the covenant bound him personally but not the company.
Judgment Summary
The Court of Appeal held the company was formed as a device to evade the covenant. The injunction was granted against both Mr Horne and his company.
Key Quotes
"The company was formed as a device, a stratagem, in order to mask the effective carrying on of a business by the defendant."
— Lord Hanworth MR
Subsequent Treatment
Good law
Classic example of veil-piercing for evasion, approved in Prest v Petrodel.