Gilford Motor Co Ltd v Horne

Ratio Decidendi

Facts

E.B. Horne had been managing director of Gilford Motor Company and, under his service agreement, was bound by a covenant not to solicit the company's customers after leaving. After his employment ended, and to get around the covenant, he set up a company (nominally run by his wife and an associate) through which he carried on a competing business and solicited Gilford's customers. Gilford sought an injunction against both Horne and the company.

Judgment Summary

The Court of Appeal granted an injunction against both Horne and the company he had formed. The court held that the company was a mere cloak or sham — 'a device, a stratagem' — set up so that Horne could carry on business and solicit the customers in breach of the restrictive covenant while pretending that it was the company, not he, that was doing so. Because the company was being used deliberately to evade Horne's existing legal obligation, the court looked through the separate corporate personality and restrained both Horne and the company from soliciting Gilford's customers. Lord Hanworth MR, with Lawrence and Romer LJJ, treated the incorporation as an attempt to mask the reality that Horne himself was competing in breach of his covenant.

Key Quotes

Subsequent Treatment