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Alice completed her training at Beauty Bliss Ltd. and subsequently left to start her own business. During her employment, she had agreed not to solicit Beauty Bliss Ltd.'s clients or set up a competing beauty business within a five-mile radius for two years after leaving. Alice established a new company, Lovely Petals Ltd., operating just over five miles away but heavily targeting former clients. She is the sole shareholder and director.
Can Beauty Bliss Ltd. prevent Alice from breaching her agreement?
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The court may lift the veil of incorporation and treat the business as if it were run by the individual if it is satisfied that the company is being used to evade legal obligations. This principle was established in the case of Gilford Motor Company Ltd v Horne (1933). Thus, Beauty Bliss Ltd. can seek enforcement of the agreement against Alice personally if it can be shown that she is using the company to avoid her restrictive covenants.
Key Point: Courts can pierce the corporate veil if the company is being used as a sham or facade to evade legal responsibilities, ensuring that individuals cannot misuse the corporate structure to avoid personal obligations.
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