lee v lee air farming ltd.

Mr Lee was a pilot who operated a crop dusting business. Mr Lee formed the corporation, Lee's Air Farming Ltd. Its main business was aerial spraying. He was the director and owned most of the shares(he held 2999 of the company's 3000 shares). As director of the corporation, he hired himself as an employee of the corporation. As one of the administrative tasks in setting up the company, he acted as its agent in setting up insurance, including workers' compensation insurance. The corporation's plane crashed while Mr Lee was flying it as part of his work, and he was killed on the job.

His widow, the plaintiff, attempted to collect what was rightfully due to a widow of a man killed on the job. The actual defendant was the insurance company.
The main question in the case was whether a person could be both a director and major shareholder of a corporation, on the one hand, and also an employee of the corporation, on the other.

Previous cases, beginning with the Salomon case, had confirmed that a corporation has an existence separate and apart from its shareholders and directors. The exceptions to that principle are gathered under the rubric, 'Piercing the Corporate Veil.' Where a corporation is a mere sham, the law can cut through the veil of corporate legitimacy, and reach into it for the shareholders and directors.
The Lee's Air Farming case confirmed the Salomon principle. Lee's Air Farming Ltd. was not a mere sham. It was a legitimate corporation, established for legitimate purposes, and had carried on a legitimate business. His employment by the corporation was well-documented, through government records of tax deductions, workmens' compensation contributions, etc., and was not something his widow had attempted to piece together after the fact of his death. There was no reason in law why a person could not perform corporate functions and employee functions within the same corporation. it was held that Lee was a separate person distinct from that company hence compensation was due to the widow.

fun with dick and jane

"Fun With Dick and Jane" is a remake of the 1977 comedy starring Jane Fonda and George Segal, true to its storyline. Those who do not learn from history are doomed to remake it. This proves true in this comedy starring Jim Carrey as Dick and Tea Leoni as Jane. Dick is an executive of a mega corporation (think Enron), who is promoted to vice president in charge of communications, just in time to be its spokesman on live cable news as the corporation's stocks melts down to pennies a share. Jane, on the morning of his promotion quit her job. After the embarrassing meltdown on national TV, Dick is left jobless, and so is his wife.

What turned out to be a glorious affluence turned sour. They have to sell their possessions to get by. After running out of possessions, they then turn to robbery - first convenience stores and head shops, later private homes and banks - and while that pays the bills and their kid's birthday party, Dick is brewing a brilliant scheme. Namely, revenge on his old boss Jack McAllister (Alec Baldwin), the corporate shark who tanked the company, Globodyne.

McAllister has already looted whatever assets ever existed in the company, leaving with hundreds of millions while his employees face a financial meltdown. This is a typical turnout of the corporation being a separate legal entity. The fact that the company is an entirely separate entity, the directors do not have legal obligations to bail out the company or reduce their pay to help the company survive. While the helpless ex-employees are out there slaving their way through daily survival, McAllister enjoys his looted luxuries with no remorse. Come to think of it, there's the Salomon principle to be blamed for the frauds and criminal activities. Without it, none of this fiasco would have ever happened. The fallouts of Enron and WorldCom would not have taken place. Perhaps this is a time to start re-evaluating the principle so that directors would not be exempted from the meltdown of their corporations.

salomon principle - a blessing or otherwise?

The case of Salomon v Salomon & Co. Ltd has become a landmark law in setting the principle that a corporation is a separate legal entity. The unanimous ruling of the house of the Lords firmly upholds the doctrine of corporate personality. From then onwards, corporations are being treated as a distinct 'person', separated from and independent of the persons who formed it, who invest money in it, and who direct and manage its operations. It follows that the rights and duties of a corporation are not the rights and duties of its directors or members who are, most of the time, obscured by a corporate veil surrounding the company.

The fact that the corporation is a separate legal entity in its own right has birthed many criticisms. What was supposed to be granted as a privilege for legal and business convenience, has turned into a way to commit fraudulent activities and get away with it. The increase of companies going into a state of bankruptcy, workers getting laid off and the poor keep getting poorer are somehow a produce of directors and owners exploiting the Salomon principle. They have billions of dollars stacked away in bank accounts, enough to sustain their succeeding generations of heirs, while the companies are left for doom. This is due to the fact that corporations may have incurred huge losses, but the assets of the directors are to be left untouched as they do not represent the corporation.

Professor Kahn-Freund described the decision of the House of Lords in the case as "calamitious" and called for the abolition of private companies. In his article in the Modern Law Review, he mentioned that the impact on the society by a failing economy and corporations and uses two main approaches whilst at this; first that the interests of the community itself in the distribution, investment of profits of the concern, the prevention of fraudulent transactions affecting the community at large and the measure of publicity should be taken into consideration. The second by the abuse of the principle of a corporate entity and undermining of the company’s capital as a ‘guarantee fund’ by the issue of shares and buy outs in exchange for over valued assets.

The conniving minds of the directors caused the downfall of Fannie and Freddie Mac in the U.S, and now the whole world economy. Such a problem does not call for a legal remedy, but an economic one. Any slight possibility of looking at a legal solution, will be countered by the decision in Salomon.

There is therefore still a debate as to whether the Salomon principle should be applied in a modern legal environment, with directors manipulating the principle for their own good use. Many have referred to this principle as a 'double edged sword', endowing companies with the attributes to be a powerhouse of capitalism yet promoting fraud and the evasion of legal obligations. So what is the final verdict? Yay or nay to the Salomon principle?

Reference:
A Two-Edged Sword: Salomon and the Separate Legal Entity Doctrine
Wikipedia
The Social Blog

holdings and subsidiary

A subsidiary, in business matters, is an entity that is controlled by a separate higher entity[citation needed]. The controlled entity is called a company, corporation, or limited liability company; and in some cases can be a government or state-owned enterprise, and the controlling entity is called its parent (or the parent company). The reason for this distinction is that a lone company cannot be a subsidiary of any organization; only an entity representing a legal fiction as a separate entity can be a subsidiary. Contrary to popular belief,[by whom?] a parent company does not have to be the larger or "more powerful" entity;[citation needed] it is possible for the parent company to be smaller than a subsidiary,[citation needed] or the parent may be larger than some or all of its subsidiaries (if it has more than one).[citation needed] The parent and the subsidiary do not necessarily have to operate in the same locations, or operate the same businesses, but it is also possible that they could conceivably be competitors in the marketplace. (Hewlett Packard is the parent company of Compaq, but both compete against each other in the sale of desktop computers.) Also, because a parent company and a subsidiary are separate entities, it is entirely possible for one of them to be involved in legal proceedings, bankruptcy, tax delinquency, indictment and/or under investigation, while the other is not.

The most common way that control of a subsidiary, is achieved is through the ownership of shares in the subsidiary by the parent. These shares give the parent the necessary votes to determine the composition of the board of the subsidiary, and so exercise control. This gives rise to the common presumption that 50% plus one share is enough to create a subsidiary. There are, however, other ways that control can come about, and the exact rules both as to what control is needed, and how it is achieved, can be complex (see below). A subsidiary may itself have subsidiaries, and these, in turn, may have subsidiaries of their own. A parent and all its subsidiaries together are called a "group", although this term can also apply to cooperating companies and their subsidiaries with varying degrees of shared ownership.

Subsidiaries are separate, distinct legal entities for the purposes of taxation and regulation. For this reason, they differ from divisions, which are businesses fully integrated within the main company, and not legally or otherwise distinct from it.

excerpt from wikipedia

There are many companies which decide to have subsidiary companies. For example,

i) KFC Holdings (Malaysia) Berhad

ii) Telekom Malaysia Berhad

iii)Berjaya Corporation Berhad

iv) Unilever

v) Fraser & Neave Holdings Berhad

shortcut to happiness

'Shortcut To Happiness' is an adaptation of the 1941 classic 'The Devil and Daniel Webster. Starred by the gifted and impeccably good looking for a 50 year old, Alec Baldwin, Anthony Hopkins, who by the way still give me the creeps after watching Hannibal, and the beautiful, sultry Jennifer Love Hewitt. This movie tells a tale about the hapless, luckless writer, played by Baldwin, who tries hard to make a breakthrough in the literary world. A failure who only has a dollar fifty in his checking account and whose manuscripts got stolen, hurls a typewriter out the window in a fit of frustration. Baldwin,as desperate as a clingy girlfriend is, reluctantly offers to sell his soul to trade places with his friend who is just about to launch his career. The Beezlebub in this movie is played none other than the bewitching Jennifer Love Hewitt, agrees to make Baldwin a literary success in exchange for a 10-year-lease on his soul.

Baldwin finally gets to be the bestselling author as he has always dreamed of, but is deprived of friends and joy and contentment. After realising that he has made a huge mistake shaking hands with the Devil, he turns to regal publishing magnate Anthony Hopkins, a masterful orator who has battled the Devil and emerged victorious on multiple occasions. As it is clear that Baldwin has breached the contract, a trial is held so that Hewitt still gets her fair share of the bargain. The contract is written in a way that there are no loopholes and Baldwin's signature is clearly forged at the end of the agreement, so it is obvious that Hopkins is going to have to think out of the box to save Baldwin from the evil grasp of Hewitt.

In desperation and out of patriotism, Hopkins states that Baldwin is an American citizen and no American citizen will be forced into the service of a foreign prince. He bellows of freedom and independence and even calls upon an American jury and an American judge. Hopkins persuades by orating on all of the simple and good things of the American life, and how mankind has done wrong, but argues that something new and good had grown from it. He then goes on to saying that 'mankind got tricked and trapped and bamboozled, but it was a great journey, something no demon that was ever foaled could ever understand.'

The jury, in awe of Hopkin's eloquence of speech, finds that Baldwin is not binded to the contract and is a free man. This movie has gotten plenty of bad reviews due to the bad production, but it still provides a good lesson somehow, that there is never a shortcut to pleasantry, and even if you're bound to the Devil, there's always a way out. Eloquence and persuasion will do it.

How Many Lawyers Does It Take to Change a Light Bulb?

* Such number as may be deemed to perform the stated task in a timely and efficient manner within the strictures of the following agreement: Whereas the party of the first part, also known as 'The Lawyer', and the party of the second part, also known as 'The Light Bulb', do hereby and forthwith agree to a transaction wherein the party of the second part (Light Bulb) shall be removed from the current position as a result of failure to perform previously agreed upon duties, i.e., the lighting, elucidation, and otherwise illumination of the area ranging from the front (north) door, through the entry way, terminating at an area just inside the primary living area, demarcated by the beginning of the carpet, any spillover illumination being at the option of the party of the second part (Light Bulb) and not required by the aforementioned agreement between the parties.
* The aforementioned removal transaction shall include, but not be limited to, the following steps:
1. The party of the first part (Lawyer) shall, with or without elevation at his option, by means of a chair, stepstool, ladder or any other means of elevation, grasp the party of the second part (Light Bulb) and rotate the party of the second part (Light Bulb) in a counter-clockwise direction, said direction being non-negotiable. Said grasping and rotation of the party of the second part (Light Bulb) shall be undertaken by the party of the first part (Lawyer) with every possible caution by the party of the first part (Lawyer) to maintain the structural integrity of the party of the second part (Light Bulb), notwithstanding the aforementioned failure of the party of the second part (Light Bulb) to perform the aforementioned customary and agreed upon duties. The foregoing notwithstanding, however, both parties stipulate that structural failure of the party of the second part (Light Bulb) may be incidental to the aforementioned failure to perform and in such case the party of the first part (Lawyer) shall be held blameless for such structural failure insofar as this agreement is concerned so long as the non-negotiable directional codicil (counter-clockwise) is observed by the party of the first part (Lawyer) throughout.
2. Upon reaching a point where the party of the second part (Light Bulb) becomes separated from the party of the third part ('Receptacle'), the party of the first part (Lawyer) shall have the option of disposing of the party of the second part (Light Bulb) in a manner consistent with all applicable state, local and federal statutes.
3. Once separation and disposal have been achieved, the party of the first part (Lawyer) shall have the option of beginning installation of the party of the fourth part("New Light Bulb"). This installation shall occur in a manner consistent with the reverse of the procedures described in step one of this selfsame document, being careful to note that the rotation should occur in a clockwise direction, said direction also being non-negotiable.
* NOTE: The above described steps may be performed, at the option of the party of the first part (Lawyer), by said party of the first part (Lawyer), by his heirs and assigns, or by any and all persons authorized by him to do so, the objective being to produce a level of illumination in the immediate vicinity of the aforementioned front (north) door consistent with maximization of ingress and revenue for the party of the fifth part, also known as 'The Firm'.

A long and dreary contract summed up by lawyers just to fix a broken light bulb. Makes you feel like thanking your electrician for his speedy work and no-nonsense attitude, yes? I know I do. Contract laws, however lengthy and a nuisance it can be, does serve a useful purpose, in appropriate situations that calls for a formal agreement. For example, an agreement to change ownership of a piece of land, or to buy an agreed amount of items for an agreed price. You know, the usual ho-hum. It does scare me though, the thought of lawyers on the rise, the over saturation of lawyers. There can only be a limited amount of cases to handle, and only a handful of good ones. Also a raise of hands of those who want to go pro bono. Alright i see none. So what happens to the rest of the unemployed, uncreamed of the crop lawyers? They become your handyman. And once they do be prepared to be slammed with a contract as the above. Lesson learnt? Go create a fiasco and hire a lawyer. Give them an itch to scratch so that your other itch, eg. broken lightbulb, could be scratched by the necessary people at no hassle.

to sue or not to sue?

One day, Jay saw a banner hanging in front of her favorite cassette store outlet in Alamanda which reads: " BIG SALES! LATEST TOO PHAT'S ALBUM IS UP FOR GRABS WITH 50% DISCOUNT! LIMITED STOCK! HURRY, HURRY, HURRY!". After reading it, Jay immediately jumped in the outlet and said she wanted that album at the said discounted price. But to her disappointment, the shop owner said that the cassette is now sold at normal price. Can Jay sue the shop owner for breach of contract? Discuss according to Contracts Act 1950 and relevant decided cases(s).

The issue at stake here is whether an offer existed between Jay and the store owner. At a glance, it may have seemed like the owner had offered to sell the album at half the retail price, and Jay accepted the offer. However, the banner displayed was just an invitation to treat, or invitatio ad offerendum in Latin. It simply means that the owner who was making an invitation to treat does not intend to be bound as soon as it is accepted by the person to whom the statement is addressed. Invitation to treat includes the display of goods; the advertisement of a price or an auction; and an invitation for tenders (or competitive bids. Therefore, Jay is not in a position to sue as there was no legally binding agreement between her and the owner. Although she did offer to purchase the album, the owner did not accept. In order for a contract to be legal and valid, it must have offer [Section 2(a) of Contract Act] and acceptance [Section 2(b) of Contract Act] which the acceptance must be absolute and unqualified [Section 7(a) of Contract Act].

A similar case as the above would be Partidge v Crittenden (1968). It was held that where the appellant advertised to sell wild birds, was not offering to sell them. The judge commented that it did not make 'business sense' for advertisements to be offers, as the person making the advertisement may find himself in a situation where he would be contractually obliged to sell more goods than he actually owned.