Daimler Co Ltd v Continental Tyre & Rubber Co (Great Britain) Ltd

Facts

• Continental Tyre & Rubber Co (Great Britain) Ltd was incorporated in England.
• All shares except one were held by German nationals residing in Germany.
• All directors were German subjects.
• The company's secretary, who held one share, was the only British subject connected with it.
• During World War I, the company sued Daimler Co Ltd for payment of a trade debt.
• Daimler raised the defence that the plaintiff company was an alien enemy.

Issue

1. Whether a company incorporated in England can be treated as an alien enemy based on the nationality of its controllers; whether the court can look behind the corporate personality to determine the true character of a company during wartime.

Held

• The House of Lords held that while a company is prima facie a legal entity of the country of its incorporation, the court can look behind the corporate form to determine its real character in wartime. A company is to be regarded as an enemy company if its agents or persons in de facto control are alien enemies. Since all effective control was in German hands, the company was an alien enemy and could not sue in British courts.
• Lord Parker stated that the artificial character of a persona ficta should not be allowed to obscure the real character of the persons behind it when issues of national security are at stake.

Ratio Decidendi

The corporate veil may be lifted to determine the enemy character of a company during wartime. Where the persons who control a company are subjects of a nation at war with the forum state, the company takes on enemy character regardless of its place of incorporation. This is a judicial exception to the Salomon principle based on public policy and national security.