Lee v Lee Air Farming Co.

In Re, Kondoli Tea Co.

Catherine
Lee v LeeLeeAir
v Lee’s Air Farming
Farming Co.Ltd
(1961) UKPC 33, (1961) AC 12
 Lee v Lee’s Air Farming Ltd
“It was never suggested…that the
Co. was a sham / a mere simulacrum.
Mere fact that someone is a director
of a Co. - No impediment to entering
into a contract to serve the Co.
Respondent Co. was a legal entity…
No reason to challenge the validity of
any contractual obligations which
were created between the Co. & the
deceased...
Dr. Dayananda Murthy C P
 Lee v Lee’s Air Farming Ltd
Deceased could not both be under the duty
of giving orders & also be under the duty
of obeying them?
It would be the Co. & not the deceased that
would be giving the orders. Control would
remain with the Co. whoever might be the
agent of the Co. to exercise...
… a man acting in one capacity can make a
contract with himself in another capacity.
Co. & deceased - Separate legal entities.
Dr. Dayananda Murthy C P
In Re: The Kondoli Tea Co. Ltd.
(1886) ILR 13 Cal 43
 W C Petheram, Pigot, Trevelyan  
 “I think that is a fallacy. Whoever the SH’s in KTCL,
were, I think KTCL was a, separate person, a
separate body, & a conveyance to KTCL of property
which was the property of the sharers in their
individual capacity, was just as much a conveyance, a
transfer of the property as if SH’s in the Co. had been
totally different persons.
 …KTCL is a separate body; & for the purpose of seeing what
their transactions are, I do not think it is possible to look at the
Register of SH’s to ascertain who the SH’s were; &,
 Although the conveying parties here were SH’s of the Co., there
was just as much a sale & transfer of the property & a change of
ownership as there would have been if SH’s had been different
persons. Dr. Dayananda Murthy C P
John Foster and Sons v Commissioners of Inland Revenue
(1894) 63 LJ QB 173 (176) Lord Justice Lindley
Referred in CIT v Associated Clothiers Ltd., AIR 1963 Cal 629

 Can you call it?

a gift;
an exchange;
a partition;
a mortgage.
Redistribution of property
 Is it a conveyance on a sale?
 To constitute a sale:
 It is an entire transfer of property from one set of
people to another body altogether
For – Money - Purposes of the Stamp Act - Stock /
marketable security.
Dr. Dayananda Murthy C P
 Salomond’s Jurisprudence
 A JSC / a Municipal Corp. is a person in legal contemplation.
 Only a fictitious - Not a real person; but it is not a fictitious man.
 It is personality that is fictitiously attributed by the law to bodies
corporate & Not human nature
 Legal persons are beings, real / imaginary, to whom the law
attributes personality by way of fiction, when there is none in
fact.
Natural persons –
Persons in fact as well as in law;
Legal persons –
Persons in law but not in fact
 The thing personified may be termed the corpus of the legal
person so created (German - Substratum or Unterlage of the
fictitious person.
 It is the body into which the law infuses the animus of a fictitious
personality.
Dr. Dayananda Murthy C P
Registered Co. Sovereign
(Consisting of all SH’s) Postmaster-General
Municipal Corp. The Solicitor to the
(Consisting of the Treasury
inhabitants of the Area) The Secretary of State
for War
Dr. Dayananda Murthy C P
 A company
 Different from its SH’s / Members
 Property of the Co. - Not the property of
SH’s ?
 Debts & Liabilities of the Co. - Not attributed
to its members?
 Co. may become insolvent - while its members
remain rich?
 Contracts may be made between - Co. & a SH ?
Entirely distinct from each other?
 Being established by statute - Can be dissolved
only in manner provided by the statute
Dr. Dayananda Murthy C P
 COMPANY
 Is an Assn. of persons - Either human beings / legal
persons / both
 Juristic Personality – Persona Juridica - Persona Ficta
 Personality by fiction of law
 Is a Fiction “just as much” a person as a real man?
 Rly. Co. is a mere abstraction of law? - Lord Selborne
(1872)
 Co. / Corp. really has no physical existence - It is a mere
“abstraction of law”
 Formed to conduct business / other activities -
 In the name of the Assn.
 Incorporated by registration U/T/C/A.
 Also called ‘Corp.’ - Meaning a Co. / any other body
incorporated under law (& not
Dr. Dayananda Murthy Municipal
CP Corp)
 New theory –
 Corporate personality as a Reality & not a fictitious
construction of the law.
 A Corp. - It is said, is nothing more, in law / in fact, than the
aggregate of its members conceived as a unity, &
 This unity (Organisation of human beings) is a real person & a
living organism -
 Possessed of a real will of its own &
 Capable of actions &
 of responsibility for them
 Just as a man is
 Will of a Co. is in reality nothing but the wills of a majority of its
directors / SH’s.
 Ten men do not become in fact one person, because they
associate themselves together for one end
 (Any more than 2 horses become one animal when they draw the same cart)
Dr. Dayananda Murthy C P
 Agents - Beneficiaries & Members of a Corp.
 Although Corp. are fictitious persons – The
Acts & interests - Rights & Liabilities -
Attributed to them by the law are those of
real / natural persons
 Every Corp. - involves - Some real person /
persons
 Whose interests are fictitiously attributed
to it &
 Whose acts are fictitiously imputed to it.

Dr. Dayananda Murthy C P

 Company
 Whatever a Co. is reputed to do in law is done in fact
 By the directors / SH’s as its agents & representatives.
 Whatever interests, rights, / property it possesses in law are
 In fact those of its SH’s, & are held by it for their benefit.
 Every legal person - has corresponding to it –
 Certain agents / representatives by whom it acts, &
 Certain beneficiaries on whose behalf it exists & fulfils its
functions.
 Its representatives may / may not be different persons from its
beneficiaries, for these two capacities may / may not be united in
the same individuals.
 SH’s of a Co. are not merely the persons for whose benefit it
exists; they are also those by whom it acts.
 In the case of a Corp. established for charitable purposes it is
otherwise, for the beneficiaries may have no share whatever in
the management of its affairs.
Dr. Dayananda Murthy C P
 Som Prakash Rekhi v Union of India
AIR 1981 SC 212
 Corporate personality is a reality & not an
illusion / fictitious construction of the law.
 It is a legal person…, “a legal person” is any
subject-matter other than a human being to
which the law attributes personality.
 Corp’s are one species of legal persons invented
by the law & invested with a variety of
attributes so as to achieve certain purposes
sanctioned by the law.
 For those purposes, a Corp. / Co. has a legal
existence all its own.
Dr. Dayananda Murthy C P
 TELCO v State of Bihar, (1964) 34 Comp Cas 458 (SC) (Para 41)
Gajendragadkar, P.B. (Cj), Wanchoo, K.N., Shah, J.C., Ayyangar, N. Rajagopala,
& S.M.Sikri
 Corp. in law is equal to a natural person & has a legal
entity of its own.
 Entity of the Corp. is entirely separate from that of its
SH’s;
 It bears its own name & has a seal of its own;
 Its assets are separate & distinct from those of its
members;
 It can sue & be sued exclusively for its own purpose;
 Its creditors cannot obtain satisfaction from the
assets of its members;
 Liability of the members/SH’s is Ltd. - To the capital invested by
them - Creditors/Members have no right to the assets of Corp.
Dr. Dayananda Murthy C P
 Corporation may be held liable for wrongful acts?
 Liability extends to
Malice ?
Fraud ?
Other wrongful motive/intent is a necessary element?
Libel, Malicious Prosecution, / Deceit ?
 Responsibility civil only ?
 Corp. are within reach of the arm of the criminal law?
 May be indicted / prosecuted for a breach of their
statutory duties?
 Can Co. commit crimes like “Perjury - Bigamy - Capital
Murder” - Persona dicta being a creature of a fiction?
 Punished by way of fine & forfeiture?
“CAN YOU HANG ITS COMMON SEAL?”
Dr. Dayananda Murthy C P
 Continental Tyre and Rubber Co. (G.B.) Ltd. v. Daimler
Buckley L.J. in the CA [1915] 1 K.B. 893

 Artificial legal person called the Corp. has no

physical existence.
Exists only in contemplation of law?
Has neither body, parts, nor passions ?
Cannot wear weapons nor serve in wars ?
Can be neither loyal nor disloyal ?
Cannot compass treason ?
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 ?
Dr. Dayananda Murthy C P
 Blackstone’s
 “It can neither maintain / be made defendant to, an
action of battery / such like personal injuries:
 For a Corp. can - Neither beat, nor be beaten, in its
body politic.
 Corp. cannot commit treason, a felony, / other crime, in
its corporate capacity…
 Not liable to corporal penalties, nor to attainder,
forfeiture / corruption of blood…
 Neither can it be committed to prison ?
 For its existence being ideal, no man can apprehend /
arrest it ?
 Therefore also it cannot be outlawed ?
 Neither can a Corp. be excommunicated ?
Dr. Dayananda Murthy C P
“A juristic person cannot marry &
procreate, but it is certainly capable of
owning property.”
Akhil Deshastha Rigvedi Brahman Madhyawarti Mandal
v Joint Charity Commissioner, Maharashtra (1973) 43
Comp Cas 361 (Bom).
Dr. Dayananda Murthy C P