Daimler Co. Ltd. v. Continental Tyre & Rubber Co. Ltd. (1916) 2 AC 307

Quick Summary

This case asks: can an English company be treated like an “enemy” in wartime? The House of Lords said yes—if enemy nationals control the company, paying it may be trading with the enemy. In war, courts can “look behind” the company and check who gives orders. In peace, the normal rule of separate corporate personality stands.

Citation

(1916) 2 AC 307

Court

House of Lords

Keywords

Enemy character, veil lifting, Trading with the Enemy Act 1914

Issues

• Was the company effectively an “alien/enemy” company during World War I?
• Would paying the company amount to trading with the enemy?
• Can courts lift the corporate veil in emergencies like war?

Rules

• Companies legislation: Company is a separate legal person from its members.
• Trading with the Enemy Act 1914: Prohibits trade with entities controlled by the enemy in wartime.
• Emergency veil lifting: Courts may look at controllers and agents to decide enemy character.

Facts (Timeline)

Arguments

Judgment (House of Lords)

• Enemy character test: If controllers/agents are enemy nationals during war, the company may be treated as enemy for trading purposes.
• Veil in emergencies: In wartime, courts may lift the veil to prevent indirect enemy trade.
• Peace vs war: In peace, shareholder nationality normally does not change corporate personality; war makes control decisive.

Ratio

Corporate personality is separate, but in wartime courts may look at those who control and direct the company. If control is with the enemy, dealing with the company can be trading with the enemy.

Why It Matters

• Shows how public policy in war shapes company law.
• Explains veil lifting when national security is at stake.
• Guides payments and contracts with cross-border corporate groups in conflict times.

Key Takeaways

1. Company’s separate personality remains the rule.
2. In war, control matters more than place of incorporation.
3. Courts may block payments that aid the enemy.
4. Veil lifting is exception-based and policy-driven.

Mnemonic + 3-Step Hook

Mnemonic: W-A-R — Wartime lens, Analyze control, Restrict enemy trade.

1. Spot wartime context.
2. Check who controls and directs the company.
3. Decide if payment equals enemy trade.

IRAC Outline

Issue: Can an English company be treated as enemy in WWI, making payment trading with the enemy?

Rule: Trading with the Enemy Act 1914; separate personality; veil lifting in emergencies.

Application: Controllers were enemy nationals; paying risked aiding the enemy; veil lifting justified.

Conclusion: Company may have enemy character in war; payment barred if it amounts to enemy trade.

Glossary

Enemy Character

Status of being treated as an enemy for trading rules during war.

Corporate Veil

The legal separation between company and its members/controllers.

Veil Lifting

Court looking beyond the company to identify true controllers.

Student FAQs

Related Cases

• Cases on veil lifting for public policy and national security.
• Decisions on company nationality and control tests.