2. Separate Legal Personality
• Every natural person has a legal personality
• If you incorporate a company – it will have a separate legal
personality • This is a fundamental principle of company law and what makes
companies so useful for running a business.
• Upon incorporation a company becomes a separate legal entity
distinct from its members. Thus it acquires rights, obligations and
duties which are different and distinct from those of its members.
Assets debts and obligations all belong to the company and not to
• Company is a ‘meta-physical person’ – no physical manifestation.
Capable of acting only through others. Corporate dealings can only
be carried out by human intervention – it is this aspect of corporate
dealing that most company law is concerned with
3. Quigley Meats Ltd v Hurley
 IEHC 192
• Quigleys Meats Limited owned a butcher’s shop in Cork. It was
operated by Mr Quigley and his three sons.
• It supplied a lot of meat to restaurants and hotels.
• The defendants, John & Margaret Hurley had a bar and
restaurant called “An Seanachie.”
• The Quigleys usually dealt with the chef in any given
restaurant. In this case Margaret Hurley was in charge of the
day to day running of the pub, so although the Quigleys
started out dealing with the chef they came to deal with
Margaret personally, delivering meat three times a week.
• Every month an invoice would issue at the beginning of the
month and the Hurleys were expected to pay by the end of
4. Quigley Meats
• The Hurleys became bad at paying their bills and the Quigleys
would regularly call on Margaret trying to get paid and making
arrangements for payment.
• The Quigleys thought they were dealing with the Hurleys
personally but payments were always made by cheque drawn
on an account in the name of ‘The Seanachie Cottages
• The Quigleys instructed their solicitor to pursue the Hurleys
for unpaid amounts. The solicitor carried out a search in the
CRO – found the company – The Seanachie Cottages Limited
and suggested that it should be the defendant in any court
• But a number of other factors suggested that the bar and
restaurant was not operated by the company…
5. Quigley Meats
• The Quigleys at all times dealt with Margaret Hurley
personally, the licence to the premises was in John Hurley’s
name and the principle object of The Seanachie Cottages
Limited was ‘to develop land and build townhouses.’
• The plaintiff decided to issue proceedings in the circuit court
against John and Margaret Hurley trading as Seanachie
Restaurant and obtained judgment for over €26,000.
• The Hurleys appealed, arguing that the debt was the
company’s and not theirs personally.
• Mr Justice Peart in the High Court agreed. The payment of the
account by cheques drawn on the company account was he
held, determinative of the issue. The plaintiff knew, or ought
to have known that they were dealing with a limited liability
6. Quigley Meats
• It was of course open to the plaintiff to pursue the company
for the debt, but by this stage it had gone into liquidation and
had no assets with which to discharge the debt.
• In order to protect their position the plaintiff should have
investigated who they were dealing with from the beginning
and if they were not happy to deal with a limited liability
company either not supply it with goods or seek a personal
guarantee from the individuals involved.
• This case illustrates the practical difficulties created by the
creation of the fictional identity that is a company. A company
cannot enter into contracts by itself – it has no physical
existence – someone must act on its behalf – care must
therefore be taken in business to determine who exactly one
is dealing with, the physical person or the physical person on
behalf of a limited liability company.
7. Limited v unlimited liability
• Why is it important to know who you are dealing with?
• Because companies can have limited liability – if a company has
no assets you cannot get any money from it
• People cannot have limited liability – they are fully liable for their
debts which can be enforced against all of their assets
8. Salomon v Salomon & Co
 AC 2.
The Donohue v Stevenson of Company Law
Aron Salomon had a large business manufacturing footwear and he
owned a number of warehouses in London.
In 1892 Mr Salomon set about restructuring his business which he
had run for a number of years as a sole trader. His principle
motivation was that his sons wanted to participate in the business.
He sold his business to the newly incorporated Salomon & Co
Limited for the sum of £38,782. The company was to pay him
20,000 fully paid up £1 shares and £8,782 in cash. The balance took
the form of a loan from Salomon to the company which was secured
by a floating charge over all the company’s assets.
Members of Salomon’s family received one share each (a total of 6)
– held as nominees of Salomon – effectively a one man company.
Salomon was principle shareholder and creditor of company.
9. Salomon v Salomon & Co
• The debentures held by Salomon were later mortgaged by
Salomon to Edmund Broderip as a security for a loan.
• Unfortunately the business went downhill due to a general
recession and industrial unrest. In October 1898, an order was
made for the winding-up of the company, at which date the
company’s liabilities exceeded its assets by £7,773. If the
debenture holder was paid, the unsecured creditors would get
• The liquidator promoting the interests of the unsecured
creditors argued that the floating charge was invalid on the
grounds of fraud.
• The High court, and the Court of Appeal ordered that Salomon
should pay the creditors personally saying that the ‘pretended
sale to the company was an utter fiction’
10. Salomon v Salomon & Co
• The Court of Appeal was overturned by the House of Lords who
pointed out that (per Lord McNaughten)
• The company is at law a different person altogether from the
subscribers to the memorandum; and, though it may be that after
incorporation the business is precisely the same as it was before, and
the same persons are managers, and the same hands receive the
profits, the company is not in law the agent of the subscribers or a
trustee for them. Nor are the subscribers as members liable, in any
shape or form, except to the extent and in the manner provided by
the Act. That is, I think, the declared intention of the Act.
• Although Mr Salomon was a director and shareholder of the
company that did not make him liable for the company’s debts.
• Further because he was also a secured creditor of the company he
was entitled, similarly to any other secured creditor, to be repaid his
debt in priority to unsecured creditors.
11. Salomon v Salomon & Co
• The principle in Salomon is known as the veil of incorporation.
The law will not go behind the separate personality of the
company to get at members – except in some exceptional
circumstance that we will talk about later.
• The sole trader can limit his liability to the amount which he
has invested in the company and can protect this investment
by subscribing for secured debentures, rather than shares, so
as to rank in priority to subsequent debenture holders,
unsecured creditors and other shareholders.
12. Roundabout Ltd v Beirne & Ors
•  IR 423.
• A limited company, Marian Park Inns Limited, operated a pub.
Most of the staff of the pub joined a trade union at the same
time. The controllers of the company were unwilling to
employ unionised staff and the company closed the pub and
dismissed all the staff.
• The union legally picketed the pub
• The controllers of the company then set up a new company,
Roundabout Limited, and leased the pub from the Marian
Park Inns Limited to it. Three non-union barmen were
appointed directors of the new company. The new company
could not be classed as an employer because all of the staff
were directors therefore it could not be subject to a trade
13. Roundabout Ltd v Beirne & Ors
• Roundabout then sought an injunction restraining the strikers
from picketing the premises. Dixon J granted the injunction in
the High Court stating:
• The new company is in law a distinct entity, as is the old company.
Each company is what is known as a legal person. I have to regard
the two companies as distinct in the same way as I would regard
two distinct individuals. I must, therefore, proceed on the basis
that a new and different person is now in occupation of the
premises and carrying on a business there’
14. Tunstall v Steigman
•  2 QB 593.
• Florence Steigman owned a butchers shop and the shop next
door. Harriet Tunstall rented the next door shop. When
Tunstall’s three year lease was coming to an end, Steigman
told her that it wasn’t going to be renewed. Tunstall applied to
the county court for a new lease (as she was entitled to do
under landlord and tenant law) and Steigman opposed the
application, saying that she wanted to extend the butcher’s
shop into the next door premises.
• The relevant landlord and tenant law provided that a landlord
could refuse to grant a new lease on the basis that he
intended carrying out his business in it.
• But Steigman operated her business through a limited liability
company – she owned the property personally!
15. Tunstall v Steigman
• The Court of Appeal held that Steigman could not say, as
required by the Act, that she intended to carry out her
business from the premises, because she was not intending to
do business there, the company was.
• The landlord was Steigman personally and as she carried out
her butchers business through a company she was not free to
say that she – the same person who owned the property –
was expanding her business.
16. DPP v Rosberry Construction
• Unreported Court of Criminal Appeal, 6th February 2003
• The defendant was a limited liability construction company
which operated a site building houses in Newbridge. A worker
was killed on the site whilst digging a trench . Both the
company and one of its directors were prosecuted for failing
to prepare a safety statement.
• They were both fined in the Circuit Court.
• The company sought leave to appeal the severity of the fines.
One argument made was that as the director and the
company were essentially the same thing two separate fines
could not be imposed. Ie the failure to prepare the safety
statement was the failure of one of them only – not both.
17. DPP v Rosberry Construction
• Hardiman J held that this was entirely wrong because it failed to
recognise that the two were separate legal entities
• If someone sued Mr McIntyre in respect of the liabilities of the
company, one can assume Mr. McIntyre or his lawyers would be
quick to point out that these are two completely different entities.
He has drawn down the veil of incorporation, the effect of which is to
render him, except in restricted circumstances under the Companies
Act, safe from liability for the companies debts.
• Is this a little unconvincing? Can a company have criminal intent?
• In Ireland corporations are generally liable for criminal acts only
under regulatory statutes that specifically provide for it. Legislation in
Rosberry specifically provided for double liability.
• In England, Wales & NI – Corporate Manslaughter and Corporate
Homicide Act 2007 – ‘corporate manslaughter’ is committed where
the way in which a corporation’s activities are managed or organised
causes death, or amounts to a gross breach of duty by the
organisation to the deceased.
18. Directors as employees
• In a lot of small companies the work which the company performs is
carried out by a director or a shareholder and often by someone
who is both a director and a shareholder. The question can then
arise as to whether a contract of employment exists between the
company and the director/shareholder worker.
• Lee v Lee’s Air Farming Ltd  AC 12
• Mr lee was a pilot and had a crop spraying business which he
operated through a limited liability company. He owned all the
shares and was the controlling director. He was also employed by
the company as a pilot. He was killed whilst flying on company
business. His wife sought compensation under NZ Workman’s
Compensation Act as the widow of a ‘worker.’
• The case made it all the way to the House of Lords (NZ had dominion
status at the time)
19. Lee v Lee’s Air Farming Ltd
• A ‘worker’ was defined as ‘any person who has entered into or
works under a contract of service…with an employer..
.whether remunerated by wages salary or otherwise’
• The insurance company argued that as Mr Lee was the
controlling shareholder and governing director of the
company he couldn’t be an employee.
• The House of Lords held that the pilot was in a contractual
relationship with the company, which was a separate legal
entity. Even though his duality of roles could lead Lee, as
governing director, giving orders to himself as employee.
20. Lee v Lee’s Air Farming Ltd
• Lord Morris
• The work that was being done was being done at the request of
farmers whose contractual rights and obligations were with the
company alone. It cannot be suggested that that when engaging
in the activities above referred to [spraying crops] the deceased
was discharging his duties as a governing director
• Would the decision have been different if he was killed
carrying out more ‘directorial’ tasks?
• How is a company to get anything done unless an actual
person does it? What then is a company’s legal relationship
with all these people who do things for it? Principle Q of
21. Secretary of State for Trade &
Industry v Bottrill
•  2 BCLC 448.
• Bottrill was the only shareholder in a company called
Magnatech Limited. There was one other director and two
other people who were specifically employees.
• It was intended that the American company that supplied
Magnatech Limited would eventually take 80% of the shares in
the company but before this happened Magnatech became
insolvent and Mr Bottrill was made redundant.
• The company was unable to pay outstanding wages and
• Mr Bottrill applied to the Department of Trade and Industry
for redundancy pay but they argued that because he was a
director and the sole shareholder of the company it had been
within his control to stop the company dismissing him.
22. Secretary of State for Trade &
Industry v Bottrill
• Therefore he was outside the class of ‘employee’ entitled to
have their redundancy payment paid by the state.
• He took his case to an industrial tribunal – it was defended by
the department all the way to the Court of appeal.
• Lord Woolf MR
• Mr Bottrill’s status as a sole shareholder was only temporary and
any control which he had of the company was only theoretical.
The actual control was held by the American group. The industrial
tribunal laid stress on the fact that Mc Bottrill had paid National
Insurance Contributions and tax as if he was an employee, was
entitled to sick pay, worked fixed hours and had a contract with
Magnatech that was described as a contract of employment.
23. Next Lecture
• Disregarding Separate Legal Personality
• Chapter 5 Courtney, Chapter 3 Thuillier.
• Tutorial question – on Moodle Wednesday.