Gilford Motor Co Ltd v Horne [1933] Ch 935

Facts

  • Gilford Motor Company employed Mr. Horne as managing director under a contract containing a restrictive covenant barring him from soliciting the company's customers or competing after his employment ended.
  • After leaving the company, Mr. Horne established J.M. Horne & Co Ltd.
  • J.M. Horne & Co Ltd directly competed with Gilford Motor Company and solicited its former clients, despite the restrictive covenant.
  • Evidence showed that Mr. Horne controlled J.M. Horne & Co Ltd and used it as a vehicle to circumvent his contractual obligations.
  • Gilford Motor Company brought legal action, arguing Mr. Horne used the company as a device to avoid his employment contract restrictions.

Issues

  1. Whether the corporate veil of J.M. Horne & Co Ltd could be disregarded because the company was being used as a sham to evade Mr. Horne's restrictive covenant.
  2. Whether Mr. Horne should be restrained from using the company to breach his contractual obligations to Gilford Motor Company.

Decision

  • The Court of Appeal found in favor of Gilford Motor Company.
  • The court determined that J.M. Horne & Co Ltd was a mere façade created by Mr. Horne specifically to evade the restrictive covenant in his contract.
  • An injunction was granted against both Mr. Horne and J.M. Horne & Co Ltd, preventing further breach of the restrictive covenant.
  • The court held that the company was not a legitimate independent entity in this context but an instrument for evasion of personal contractual obligations.

Legal Principles

  • The courts may pierce or disregard the corporate veil where a company is used as a sham or façade to avoid legal duties or perpetrate fraud.
  • Separate legal personality, as established in Salomon v A Salomon & Co Ltd [1897] AC 22, is not absolute, and does not protect improper or dishonest misuse of the company structure.
  • The “sham” or “façade” exception requires clear intention to use the company to circumvent pre-existing individual obligations.
  • Gilford is distinguished from cases like VTB Capital plc v Nutritek International Corp [2013] UKSC 5, where the corporate veil was not pierced to add a controller as a contracting party, and is cited alongside Jones v Lipman [1962] 1 WLR 832 as a specific instance of proper disregard of the corporate veil.

Conclusion

Gilford Motor Co Ltd v Horne established that the courts may look beyond the separate legal personality of a company where it is used as a device to avoid personal contractual obligations, demonstrating that legal protection of the corporate form does not extend to its misuse for improper purposes.

The answers, solutions, explanations, and written content provided on this page represent PastPaperHero's interpretation of academic material and potential responses to given questions. These are not guaranteed to be the only correct or definitive answers or explanations. Alternative valid responses, interpretations, or approaches may exist. If you believe any content is incorrect, outdated, or could be improved, please get in touch with us and we will review and make necessary amendments if we deem it appropriate. As per our terms and conditions, PastPaperHero shall not be held liable or responsible for any consequences arising. This includes, but is not limited to, incorrect answers in assignments, exams, or any form of testing administered by educational institutions or examination boards, as well as any misunderstandings or misapplications of concepts explained in our written content. Users are responsible for verifying that the methods, procedures, and explanations presented align with those taught in their respective educational settings and with current academic standards. While we strive to provide high-quality, accurate, and up-to-date content, PastPaperHero does not guarantee the completeness or accuracy of our written explanations, nor any specific outcomes in academic understanding or testing, whether formal or informal.
No resources available.

Job & Test Prep on a Budget

Compare PastPaperHero's subscription offering to the wider market

PastPaperHero
Monthly Plan
$10
Assessment Day
One-time Fee
$20-39
Job Test Prep
One-time Fee
$90-350

Note the above prices are approximate and based on prices listed on the respective websites as of May 2025. Prices may vary based on location, currency exchange rates, and other factors.

Get unlimited access to thousands of practice questions, flashcards, and detailed explanations. Save over 90% compared to one-time courses while maintaining the flexibility to learn at your own pace.

All-in-one Learning Platform

Everything you need to master your assessments and job tests in one place

  • Comprehensive Content

    Access thousands of fully explained questions and cases across multiple subjects

  • Visual Learning

    Understand complex concepts with intuitive diagrams and flowcharts

  • Focused Practice

    Prepare for assessments with targeted practice materials and expert guidance

  • Personalized Learning

    Track your progress and focus on areas where you need improvement

  • Affordable Access

    Get quality educational resources at a fraction of traditional costs

Tell Us What You Think

Help us improve our resources by sharing your experience

Pleased to share that I have successfully passed the SQE1 exam on 1st attempt. With SQE2 exempted, I’m now one step closer to getting enrolled as a Solicitor of England and Wales! Would like to thank my seniors, colleagues, mentors and friends for all the support during this grueling journey. This is one of the most difficult bar exams in the world to undertake, especially alongside a full time job! So happy to help out any aspirant who may be reading this message! I had prepared from the University of Law SQE Manuals and the AI powered MCQ bank from PastPaperHero.

Saptarshi Chatterjee

Saptarshi Chatterjee

Senior Associate at Trilegal