Daimler Co Ltd Vs Continental Tyre and Rubber Co Ltd

This case is regarding the concept of control and enemy character of a company. This case is used as
an example for lifting the corporate veil.

Facts of the Case

1. All except one of Continental Tyre and Rubber Co Ltd’s shares were held by German residents and
all directors were German residents.

2. The secretary was English.

3. 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.

4. Daimler brought the action to determine if payment could be made, given that it was the First
World War.

Judgement Made

At first the decision was approved and was allowed without undergoing a trial. According to Lord
Reading CJ stated that the company did not change its character because of the outbreak of war and
that it remains an English company regardless of the residence of its shareholders or directors either
before or after the declaration of war. The house of lords unanimously reversed the decision and did
not allow the secretary to take any actions as they believed that the company may acquire enemy
status.

Laws Used

1. The artificial legal person called the corporation has no physical existence. It exists only in
contemplation of law. It has neither body, parts, nor passions. It cannot wear weapons nor serve in the
wars. It can be neither loyal nor disloyal. It cannot compass treason. It can be neither friend nor
enemy. Apart from its corporators it can have neither thoughts, wishes, nor intentions, for it has no
mind other than the minds of the corporators. These considerations seem to me essential to bear in
mind in determining the present case.

2. 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.