Reference no: EM133089500

Case Law 1 

Mr. Robert Morgan was a sole proprietor dealing in the manufacture of sanitizers. He owned a factory with machinery and equipment, which he financed from his personal savings as well as a loan from Loans a Lot Bank Ltd.

After years of operating as a sole proprietor and after repaying the loan to the Bank, he decided to form a company so that he could get the benefits of a separate legal personality and limited liability. Mr. Morgan, therefore, incorporated "Morgan's Chemicals Ltd.," with Mr. Morgan as the sole shareholder and director.

In an effort to expand the production of the newly formed company, Mr. Morgan decided to take another loan, this time in the company's name, from Loans a Lot Bank Ltd. to purchase a large number of raw materials and buy additional machinery. He also decided to insure the machinery with Disadvantage General Insurance Company.

Shortly after purchasing the raw materials and taking the loan, there was a rapid improvement in the Covid-19 situation and so the demand for sanitizers had all but disappeared. Morgan's Chemicals Ltd was therefore not able to repay the loan or any other company debt.

To add insult to injury, very shortly after the fall in demand for the Company's products, a fire destroyed the machinery and other company assets.

The Bank is now taking legal action against Mr. Morgan and going after his personal assets saying 'this one-man company, that has little or no assets is really an agent for Mr. Morgan."

Mr. Morgan also approached the insurance company asking that the proceeds of the policy be paid to him directly and not to the liquidators of the company that they were planning to pay because he is the one who had built the business. The insurance company is refusing his request and he wants to take legal action against them.

Required

Using case law, provide advice to Mr. Morgan on -      

The likelihood of success of his action against the insurance company.