8/3/2019 Argument in Support for (Moot Project)-1

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For the principle highlighted from the case of The Albazero, the principle in short identified

where there is no general principle that all companies in a group of companies are to be regarded

as one, as each company in a group of companies is a separate legal entity possessed of separate

legal rights and liabilities. From the case of  Lee v Lee’s Air Farming , it became evident from the

 judgement that the company were 2 separate entities; there was no impediment to them being the

parties to a contract. The principle of corporate personality identifies a company as existing on

its own, where it can sue or be sued itself in its own name. Furthermore, the company holds its

own property and is by itself liable for its own debts, as the benefit of limited liability is

guaranteed to the shareholder.

In the case of  Macaura v Northen Assurance Co Ltd , held all the shares in a company, the House

of Lords held that, when Macaura sold property to the company, he ceased to enjoy any legal or

equitable interest in it. The property was wholly and completely owned by the company. Since

shareholders have no rights in property owned by the company, they cannot take out an

insurance policy in respect of it. So, here, when the property was destroyed by fire, it was held

that Macaura could not claim on his insurance policies as they were invalid.

The Court of Appeal (reversing the decision of David Eady QC) in the case of  Barakot Ltd v

 Epiette Ltd, held that a sole, beneficial shareholder and the company were separate legal entities

and were not to be treated as privies for the purpose of the doctrine of res judicata (a matter

(already judged). This meant, in effect, that, simply because proceedings which a shareholder

had brought against a third party for the recovery of certain sums of money had been dismissed,

did not preclude the company bringing proceedings itself against the third party in respect of the

same money. Both the shareholder and the company had claimed separate agreements with the

third party, which they sought to enforce.

The separation of the shareholders from the company also underlies decisions such as Kuwait 

 Asia Bank EC v National Mutual Life Nominees Ltd, where it was held that the shareholders,

when appointing or nominating directors to the board, owe no duty of care to third parties who

may deal with the company and suffer loss as a result of the negligence of those directors, and

 Northern Counties Securities Ltd v Jackson & Steeple Ltd, where it was held that shareholders

owe no duty to the company when voting in general meeting and could not be compelled to vote

in a particular way, even though the resolution passed as a result of the vote may put the

company in contempt of court.