''Daimler Co Ltd v Continental Tyre and Rubber Co (Great Britain) Ltd''

916 __NOTOC__ Year 916 ( CMXVI) was a leap year starting on Monday (link will display the full calendar) of the Julian calendar. Events By place Europe * Sicilian Berbers in Agrigento revolt and depose the independent Emir Ahmed ibn Kh ...

2 AC 307 is a

UK company law The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary lega ...

case, concerning the concept of "control" and enemy character of a company. It is usually discussed in the context of

lifting the corporate veil Piercing the corporate veil or lifting the corporate veil is a legal decision to treat the rights or duties of a corporation as the rights or liabilities of its shareholders. Usually a corporation is treated as a separate legal person, which is ...

, however it is merely an example of where the corporate veil is not in issue as a matter of company law, since the decision turns on correct interpretation of a statute.

Facts

All except one of Continental Tyre and Rubber Co Ltd's shares were held by German residents and all directors were German residents. The secretary was English. Continental Tyre and Rubber Co Ltd supplied tyres to Daimler, but Daimler was concerned that making payment might contravene a common law offence of trading with the enemy as well as a proclamation issued under s 3 (1) Trading with the Enemy Act 1914. Daimler brought the action to determine if payment could be made, given that it was the

First World War World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was List of wars and anthropogenic disasters by death toll, one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, ...

Judgment

At first instance, Scrutton J approved the decision of the master, that the contracts were valid, for summary judgment without proceeding to trial.

Court of Appeal

Lord Reading CJ, Cozens-Hardy LJ, Phillimore LJ, Pickford LJ and Kennedy LJ, affirmed the decision too, holding there would be no offence. They held the company did not change its character because of the outbreak of war. The say it, "remains an English company regardless of the residence of its shareholders or directors either before or after the declaration of war." Mr Gore-Browne argued, for Daimler Co Ltd, that the technicality should be swept aside in time of war. But Lord Reading CJ replied that the fact of incorporation was not just a ‘technicality’. The company, he said, He relied on '' Janson v Driefontein Consolidated Mines'', where Lord Macnaghten, Lord Brampton and

Lord Lindley Nathaniel Lindley, Baron Lindley, (29 November 1828 – 9 December 1921) was an English judge. Early life He was the second son of the botanist Dr. John Lindley, born at Acton Green, London, Acton Green, London. From his mother's side, he was de ...

, holding that a foreign corporation does not become British because its means all are. Buckley LJ delivered a dissenting judgment, would have held that though the company is a legal person existing apart from its corporators, that it still had enemy character.

House of Lords

The House of Lords unanimously reversed the decisions below, saying the secretary was authorised to commence no action. It held the company was capable of acquiring enemy character. Lord Parker said, Just like a natural person can have enemy character though born in the UK, so can a legal person. The Earl of Halsbury LC, Lord Atkinson, Viscount Mersey, Lord Kinnear and Lord Sumner concurred. Lord Shaw and Lord Parmoor concurred in the result but dissented on this point.

Significance

Around the start of

World War II World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the World War II by country, vast majority of the world's countries—including all of the great power ...

the

Trading with the Enemy Act 1939 The Trading with the Enemy Act 1939 (2 & 3 Geo 6 c 89) is an Act of the Parliament of the United Kingdom which makes it a criminal offence to conduct trade with the enemy in wartime, with a penalty of up to seven years' imprisonment. The bill ...

section 2(1)(c) was implemented to state the position in ''Daimler'', namely "so long as the body is controlled by a person who, under this section, is an enemy". In '' Bermuda Cablevision Ltd v Colica Trust Co Ltd'' Lord Steyn made the point that, "Expressions such as ‘control’ and ‘controlling interest’ take their colour from the context in which they appear. There is no general rule as to what the word ‘controlled’ means.... The expression must be given the meaning which the context requires." The concept of a company's character was also seen in the ill-fated Merchant Shipping Act 1988 said that only fishing vessels registered as ‘British’ were eligible to fish for the UK quota, and a ‘British’ company had to be 75% British owned. However, in '' R (Factortame) v Secretary of State for Transport (No 3)'', 992QB 680 the

European Court of Justice The European Court of Justice (ECJ, french: Cour de Justice européenne), formally just the Court of Justice, is the supreme court of the European Union in matters of European Union law. As a part of the Court of Justice of the European U ...

held that this was contrary to art 52 TEC, and the right to freedom of establishment.

Notes

* This case law has also been mentioned in the "Companies Act, 1956" of India.

References

* {{DEFAULTSORT:Daimler Co Ltd V Continental Tyre And Rubber Co (Great Britain) Ltd United Kingdom company case law House of Lords cases 1916 in case law 1916 in British law United Kingdom in World War I Economic warfare Daimler Company