Tamsin contracts to sell her warehouse to Harbourside Ltd. Before completion she changes her mind and, to avoid completing the sale, transfers the warehouse to Coastline Ltd, a company she has just formed and of which she is the sole director and shareholder. Harbourside Ltd seeks an order for specific performance against both Tamsin and Coastline Ltd. Is the court likely to make the order against Coastline Ltd?

Correct answer: D) Yes, because the company is a device used to evade Tamsin's existing legal obligation, so the court may look behind it

Explanation

The courts will look behind the corporate veil where a company is interposed to evade an existing legal obligation (the evasion principle, Prest v Petrodel Resources). In Jones v Lipman, on similar facts, a seller transferred land to a company he controlled to avoid completing a sale, and specific performance was ordered against both him and the company. Separate personality does not protect a company used as a sham to evade a legal duty, and the price Coastline paid is not the test.