Salomon v Salomon [1897]
original principle of separate personality in English company law
Lord Sumption in Prest v Petrodel [2013]
piercing the veil refers to when a company’s separate legal personality is disregarded
veil-piercing limited to two specific circumstances
a] company itself is a sham or facade (“concealment principle”)
b] sham or facade to evade existing legal obligations (“evasion principle”)
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Salomon v Salomon [1897]
original principle of separate personality in English company law
Lord Sumption in Prest v Petrodel [2013]
piercing the veil refers to when a company’s separate legal personality is disregarded
veil-piercing limited to two specific circumstances
a] company itself is a sham or facade (“concealment principle”)
b] sham or facade to evade existing legal obligations (“evasion principle”)
Lonhro v Shell [1980]
piercing the veil is a fundamental principle of English company law
Margaret Blair, The Four Functions of Corporate Personhood
limited liability has 4 essential functions for large-scale enterprise:
i] continuity
ii] identifiable persona
iii] asset partitioning
iv] governance structure
statutory veil piercing
not actually veil piercing —>
group accounting CA 2006
fraudulent/wrongful trading in IA 1986
Woolfson v Strathclyde Regional Council [1978]
established sham/facade as grounds for veil-piercing
Gilford Motor Co. Ltd. v Horne [1933]
established evasion of obligation as grounds for veil-piercing
other remedy existed besides veil-piercing
DHN Food Distributors v Tower Hamlets LBC [1976]
veil-piercing could occur when companies are acting as a “single economic group” —> analogy to consolidated accounting for group companies
Creasey v Breachwood Motors [1993]
veil-piercing allowed in the “interests of justice” —> directors themselves blatantly ignored legal personality by transferring assets
Ord v Belhaven Pubs Ltd. [1998]
rejected “interests of justice” as a basis for veil-piercing, overturned Creasey
VTB Capital Plc. v Nutritek International Corporation [2013]
doubted existence of veil-piercing principle in English law —> only authority up until then was Lord Keith’s HoL obiter in Woolfson
Ross Grantham, The Corporate Veil; An Ingenious Device
law adopted a clear and formalistic approach in Prest
necessity of facade being used at time of relevant transaction is an artificial distinction —> incentivizes one to “plan one’s abuses well ahead of time”
Lady Hale in Prest v Petrodel [2013]
doubtful whether all veil-piercing cases came under principles of evasion and concealment —> just examples of a broader principle of law preventing people from using companies for “unconscionable conduct”
Lord Mance in Prest v Petrodel [2013]
likely that exceptions exist beyond the evasion principle
Akzo Nobel v Competition Commission [2013]
Prest did not rule out the possibility of future expansion of veil-piercing
Anna Musk, Piercing the corporate veil: post-Prest [2022]
evasion principle is described as a last resort, but it hasn’t actually been applied that way
other remedies existed in Prest itself, as well as as Gilford Motor Home Co. v Horne [1933] + Jones v Lipman [1962] + Akhmedova v Akhmedov [2021]
Lord Neuberger in Prest v Petrodel [2013]
“not a single instance in this jurisdiction where the doctrine had been invoked properly and successfully”
Wood v Baker [2015]
evasion principle applied when “no legitimate freestanding business” existed —> erodes the distinction between concealment and evasion principles
other remedy existed
Lord Briggs + Lord Legatt in Hurstwood Properties (A) Ltd. and ors. v Rossendale Borough Council and Another [2021]
“piercing the corporate veil” might not even be a coherent rule of law/principle at all
Lord Walker in Prest v Petrodel [2013]
unlikely that veil-piercing is an actual rule of law/principle
Slade LJ in Adams v Cape Industries [1990]
affirmed Woolfson v Strathclyde Regional Council [1978]
rejected Lord Denning’s analysis in DHN Food Distributors v Tower Hamlets LBC [1976] —> point of a group structure is to avoid liability
rejected idea that “interests of justice” exception exists
Trustor AB v Smallbone (No. 2) [2001]
“mere impropriety” is not enough, fraud must specifically abuse the corporate structure
Ben Hashem v Ali Shayif [2008]
summarized law up to that point
i] ownership and control need to exist, but not solely sufficient
ii] impropriety of a specific type —> company structure to avoid/conceal liability
iii] company must be used as a facade at time of relevant event
Easterbrook & Fischel
contractarianism —> limited liability is a default rule of contract law since it is part of the ideal “hypothetical bargain” parties would agree to in order to limit agency and transaction costs
Ben Pettet, Limited Liability — A Principle for the 21st Century [1995]
limited liability encourages moral hazard and externalises loss to 3rd parties who can’t contract otherwise (involuntary tort creditors)
P. Halpern, M. Trebilcock & S. Turnbull, An Economic Analysis of Limited Liability in Corporation Law [1980]
informational asymmetry and externalization of cost represents a legitimate market failure, thus justifying veil-piercing (displacing default rule of limited liability)
Chandler v Cape [2012] + Vedanta Lungowe [2020]
parent companies can hold tortious liability for subsidiaries on application of regular tort principles
Antonio Gramsci Shipping Corporation v Aivars Lembergs [2012]
common law doctrine that needs a consistent, coherent principle in order to grow
R v Sale [2013]
affirmed importance of Prest even though veil piercing comments were obiter