What’s in a name? Separate legal personality and issuing against small companies

As a litigant in person they are plenty of pitfalls if you’re dealing with the courts. Not only do you have to learn as much of the ins and outs of the law as you can. You also have to deal with often tricky legal documents, making sure they’re sent to the right parties, and that you’ve established the merits of your claim.

This can be a particularly acute problem when dealing with small companies. Although there are tens of thousands of companies actively trading in the UK, the big boys you hear about, with their hundreds if not thousands of employees, are very much in the minority.

Plenty of active companies can count their staff on the fingers of one hand. Some take this small size even farther, and are essentially one person operating as a company. This one person being the director and employee of the company all in one handy package.

For example you contract with Fred Smith to come install a new roof. He shows up, looks at your roof, and gives you a quote. All as Fred Smith. When it comes to the contract though, you notice the words ‘Fred Smith Ltd’ in the top corner. Same on the invoice Fred gives you after the job is done. You pay it and think nothing more of the matter.

Then the roof leaks. You complain to Fred. He doesn’t respond. You make a claim against Fred. He doesn’t respond. You get a default judgment. You try to enforce it only to find out that you should have claimed against Fred Smith Ltd.

Odd as it may seem, but Fred Smith and Fred Smith Ltd are not the same. Oh they look the same, sound the same. They even seem to do the same work. But Fred Smith Ltd is the party you entered into the contract with. The company having been granted the right to enter into contracts in its own capacity by the doctrine of separate legal personality. Fred himself is merely the employee of that company.

So when you claimed against Fred Smith, and not Fred Smith Ltd; you claimed against the wrong party. The Judgment you obtained not being worth the paper it is printed on.

While, thankfully, this is not an overly common occurrence, it is something that happens. For that reason, it’s best to seek legal advice from experienced litigators, such as the team at Askews Legal LLP. Not only do you have the benefits of representation to take care of the various technicalities, but you can rest assured that the claim is being issued against the right party.