Corporate Case Brief – Daimler Co Ltd v. Continental Tyre & Rubber Co Ltd

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Facts:

Continental Tyre and Rubber Company was incorporated in England, but the holders of all its shares except one, and also all the directors, were Germans, residing in Germany. 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 1(2) Trading with the Enemy Act 1914. After the outbreak of the First World war, Continental Tyre Company brought an action against Daimler Co. Ltd. to recover trade dept.

Issue:

Whether the character of a company’s corporators is relevant to determine the character of the company; is the company capable of acquiring enemy character?

Ratio:

“I think that the analogy is to be found in control, an idea which, if not very familiar in law, is of capital importance and is very well understood in commerce and finance. The acts of a company’s organs, its directors, managers, secretary, and so forth, functioning within the scope of their authority, are the company’s acts and may invest it definitely with enemy character… it must at least be prima facie relevant… Certainly, I have found no authority to the contrary.”

The court said that the actions and character of the members of the company are capable of changing the nature of a company and a company can acquire enemy character on the basis of the character of its members.

Holding:

The House of Lords held that though the Continental Tyre Company was incorporated in England, its effective control was in the hands of Germans and, therefore, the company had acquired the enemy character.

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