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Company Law

Analysis - guidance - compliance

28 JAN 2014


Court of Appeal


Richards LJ, Tomlinson LJ, Lewison LJ


29 October 2013


The Court of Appeal drew a distinction between piercing the corporate veil and making a non-party costs order against the sole director and shareholder of a company that was liable in an action for breach of an employment contract and had subsequently become insolvent.  



[1]        Between February 2003 and September 2008 Mr Threlfall was employed by ECD.  He brought an action for breach of contract against ECD and its sole director and shareholder, Mr Whitney.  In his action Mr Threlfall alleged that ECD was in breach of contract.  The contract in question was his contract of employment, which he said had been varied by agreement by him and Mr Whitney.  Mr Threlfall said he was entitled to a 20% share in the equity of ECD, share dividends, a termination payment and a bonus payment.  ECD denied the claim and counter-claimed, alleging breaches by Mr Threlfall of his obligations of fidelity and also of restrictive covenants in his contract of employment.  Mr Whitney was joined as a party to the action, because any order in Mr Threlfall’s favour for specific performance of his entitlement to the 20% equity would have either required a transfer of shares by Mr Whitney himself or would have had to have taken the form of requiring ECD to issue and allot shares to him, thus diluting Mr Whitney’s sole shareholding.  

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