Copy of Q 6 Zone B 2014 SLP and PIC Problem PDF

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Q 6 Zone B 2014In 2011, Parent Plc incorporated Gluesub Ltd, to manufacture a new type of glue. Gluesub is wholly owned by Parent. Two days before Gluesub was incorporated, Theresa, a director of Parent, signed a lease for a factory that Gluesub was to occupy. On the lease, above her signature, Ther...

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Q 6 Zone B 2014 In 2011, Parent Plc incorporated Gluesub Ltd, to manufacture a new type of glue. Gluesub is wholly owned by Parent. Two days before Gluesub was incorporated, Theresa, a director of Parent, signed a lease for a factory that Gluesub was to occupy. On the lease, above her signature, Theresa wrote ‘signed for Gluesub and without personal liability’. By December 2013, sales of the glue were very disappointing, and Gluesub was running at a substantial loss. Worse still, a number of employees of Gluesub had become ill as a result of the unsafe working practices that Gluesub was using. Many of these working practices were designed by Parent in an attempt to cut Gluesub’s production costs. In an effort to keep Gluesub trading, in February 2014 Parent persuaded Vulturefinance Plc to make an unsecured loan of £500,000 to Gluesub. Parent told Vulturefinance that Gluesub was about to win a substantial new order, although Parent knew this was unlikely. Gluesub is now in insolvent liquidation. Advise: (a) John, an employee of Gluesub, whether he could bring an action against Parent for the illness he sustained whilst working for Gluesub; and (b) Vulturefinance, whether it could force Parent to repay the loan made to Gluesub; and (c) Theresa, whether she has any personal liability in respect of the obligations under the lease signed in 2011. There are several issues at hand among them are: 1) John an employee of Gluesub whether he could bring an action against parent for the illness he sustained whilst working for Gluesub 2) VultureFinance weather it could force Parent to repay the loan made by Gluesub 3) Theresa weather she has any personal liability in respect of the obligations under the lease signed in 2011 1) John v Parent Ltd -

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John would want to bring an action against Parent as he was working for Gluesub Ltd a subsidiary of parent ltd. A number of employees at Gluesub has become seriously ill as a result of the unsafe working conditions, many of these working conditions were designed by Parent in attempt to cut Gluesub’s production costs. The general rule as the case of Salomon v Salomon 1897 HOL is that the company director and the company are two distinct entities. This has been extended to parent subsidiary companies, where the Parent and the Subsidiary are separate entity. ( Adams v Cape 1996 COA) Adams v Cape (1996) COA Cape mined and marketed asbestos and had a US marketing company called NAAC. NAAC was in Texas and it was sued for personal injury over 200 claimants. A JID was given against Cape( The parent company in London) The Courts did not allow the claim to be in London.

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Single Economic Entity. The act of Cape was to minimize its presence in the US for tax purposes and other liabilities. Courts held- Whilst it is immoral there is nothing illegal of it” So there is no Single Economic Entity. Mere Façade A subsidiary company was created with the sole purpose of deceiving the world at large. Agency Principle Proving Day to Day Control. To apply the above precedent it is unlikely that the courts will lift the corporate veil to hold Parent Plc liable, however we can try to establish day to day control as it is clear that the parent company has control over its subsidiary, the fact that the parent company had designed many of the working practices of Gluesub to reduce cost is an element of control Chandler v Cape Plc 2012 COA David Chandler had been employed by a wholly owned subsidiary company of Cape plc for just over 18 months between 1959 to 1962. In 2007 Mr Chandler discovered that, as a result of exposure to asbestos during that period of employment, he had developedasbestosis. The subsidiary no longer existed and had no policy of insurance covering claims for damages for asbestosis. Mr Chandler brought a claim against Cape plc, alleging it had owed (and breached) a duty of care to him. Cape plc denied that it owed a duty of care to the employees of its subsidiary company The Court of Appeal stated that Cape plc assumed responsibility to Mr Chandler and owed a direct duty of care to Mr Chandler which it breached. The Court of Appeal stressed that the duty of care from a parent company to subsidiary employees did not exist automatically and only arose in particular circumstances. Court of Appeal identified parallel duties of care between the parent company and subsidiary employees and the subsidiary company and its employees. This was because (i) the parent company and subsidiary had relatively similar businesses; (ii) the parent company knew (or ought to have known) that the subsidiary’s system of work was unsafe; and (iii) The parent company knew (or ought to have foreseen) that the subsidiary or its employees would rely on its using that superior knowledge the employee’s protection. OTF we can establish that since the parent company was aware that the work systems of Glubsub was designed by Parent Plc, and a reasonable person can foresee that the employees of the subsidiary will seek an action towards the parent company.

2) Vulture Finance v Parent Plc -

Vulture Finance has given a loan of £500,000 to Gluesub (unsecured) and was told by Parent Plc that Gkuesub will be obtaining a new order although Parent new that this was unlikely Vulture Finance would not bring an action against Gluesub as it is now insolvent in liquidation The best option is to bring an action against the parent company. Williams v Natural Life Health Foods 1998 Mr Williams and his partner approached Natural Life Health Foods Ltd with a proposal. They wanted to get a franchise for a health food shop in Rugby (i.e. they wanted to use the Natural Life brand to run a new store and pay Natural Life Ltd a fixed fee). Mr Williams was given a

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brochure with financial projections. They entered the scheme. They failed, and lost money. So Mr Williams sued the company, alleging that the advice they got was negligent. However, before the suit could be completed, Natural Life Health Foods Ltd went into liquidation. So Mr Williams sought to hold the company's managing director and main shareholder personally liable. This was Mr Mistlin, who in the brochure had been held out as having a lot of expertise. Mr Mistlin had made the brochure projections, but had not been in any of the negotiations with Mr Williams. HOL A company director was not personally reliable in negligence for bad advice given by him as director unless it could clearly be shown that he had willingly accepted such personal responsibility. Here both parties had never meet and there was no personal meeting, Mr Williams relied on the brochure of financial projections but there was no Voluntary Assumption of Responsibility. OTF we can argue that there was VAR as Parent Ltd had persuaded Vulture Finance to enter into the loan transaction by a representation that Gluesub will obtain a new substantial order. This will hold the Parent to be personally liable. VTB Capital v Nutritek International 2013 SC In 2007, VTB Capital plc (“VTB”), an English incorporated bank (which is part of one of thelargest Russian banks), entered into agreements with a Russian company, RAP, under which provided a loan of US$225,050,000 for the purchase of various assets from Nutritek International Corp (“Nutritek”). In 2008, RAP defaulted on the loan. VTB alleged that it was induced in London to enter into the agreements by misrepresentations made by Nutritek; and sought to hold Nutritek, its ultimate owner and controller, Mr Konstantin Malofeev (a Russian businessman resident in Moscow), and various associated companies jointly and severally liable for the alleged misrepresentations. VTB obtained permission to serve its claims outside the jurisdiction. Following service, the defendants applied to have that permission set aside. In response, VTB sought to amend its pleading to claim breach of contract against Mr Malofeev and the associated companies on the basis that RAP’s corporate veil should be pierced, and Mr Malofeev and the associated companies treated as jointly and severally liable for the misrepresentations. VTB also obtained a worldwide freezing injunction on Mr Malofeev’s assets Supreme Court dismissed the appeal by the claimant bank VTB Capital Plc (“VTB”) on both points. On the corporate veil issue, the Court (Lords Neuberger, Mance, Clarke, Wilson and Reed) was unanimous: there were no grounds on which the bank could “look behind” the borrower company to sue its owners in contract, and the precedent established by the High Court in theAntonio Gramsci case was expressly overruled. To apply this on the facts it is unlikely that Vulture Finance will be successful in lifting the veil of Parent Ltd, but it has a better action to hold Parent Ltd liable for negligent misstatement instead of lifting the veil of the subsidiary company. 3) Theresa Personal Liability

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Theresa a Director of Parent Ltd had signed a lease for a factory that Gluesub were to occupy. But she wrote “without personal liability If a contract was made under S 51 CA 2006 one acting on behalf of the company as a agent is personally liable on the contract Phonogram v Lane [1982], before incorporating a company called Fragile Management Ltd.L contracted with the Plaintiff for a loan of 12,000 to finance a pop group called Cheap, Mean & Nasty. The Plaintiff wrote to L in which reference was made to him undertaking to pay. He

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neverthelss was required to sign and return a copy for and on behalf of Fragile Management Ltd. The Company was never performed and the group never performed. The Court held that the defendant was personally liable to repay the money advanced. However if the action has gone through “ Novation” for the new company to reenter into a similar agreement on the same term, then the initial person would not be liable. OTF there is no mention weather Gluesub has gone through a process of novation, if not Theresa will be personally liable....