July-December 2016
ISSN 2050-005X (Online); 978-1535124478 (ISBN-13); 1535124474 (ISBN-10)
Following the landmark decision of Prest v Petrodel Resourcs in 2013, it has been emphasized that it is indeed important to limit corporate veil piercing powers to very carefully defined circumstances. However, because the common law fails to clearly distinguish the circumstances under which corporate veil piercing may occur, there remains a lack of predictability in this area for those seeking justice. Furthermore, there are increased difficulties faced by victims of fraud committed by corporate groups when seeking redress, as frequently judges’ hands are tied by the need to respect the doctrines of separate legal personality and privity. It has been a much-debated topic as to whether this lack of responsibility and injustice in the law calls for development of new legal constructions to help victims achieve more practical and fairer outcomes. This paper evaluates and rejects the urgency call for development of new legal constructions and examines alternative avenues of the law that may achieve similar outcomes without requiring the corporate veil to be pierced.
Keywords: Corporate Veil, Corporate Groups, Limited Liability.
1 Doctrine of separate entity first recognized in R v Arnaud (1846) 9 Q.B. 806.
2 [1897] A.C. 22.
3 Ibid., at 30; also at 50, ‘the company is at law a different person from the subscribers to the memorandum.’
4 ss.213-215 of the Insolvency Act 1986 and s.993 of the Companies Act 2006.
5 Dignam and Lowry, Company Law (8th edn, OUP 2014) 14-17.
6 Hawke and Hargreaves, ‘Corporate Liability: Smoke and Mirrors’ (2003) 14 International Company and Commercial Law Review 14, 75.
7 French and others, Company Law (32nd edn, OUP 2015) 670-672.
8 [2013] UKSC 5.
9 The doctrine of privity confers rights and obligations to only the parties who are privy to the contract.
10 [2012] BCC 182.
11 Ibid., per Burton J, para 26.
12 Group Seven Ltd v Allied Investment Corp Ltd & Others [2014] 1 WLR 735, per Hildyard J, para 63.
13 Muchlinski, ‘Limited liability and multinational enterprises: a case for reform?’ [2010] 34 Cambridge Journal of Economics 915, 917-918.
14 Hansmann and Kraakman, ‘Toward Unlimited Liability for Corporate Torts’ [1991] 100 Yale Law Journal 1879, 1920.
15 Muchlinski, 918-919.
16 [1976] 3 All ER 462.
17 (1979) 38 P& CR 521.
18 [1990] Ch 433.
19 Ibid., 532.
20 Ibid.
21 [1939] 4 All ER 116.
22 [1998] 1 WLR 294.
23 Adams v Cape Industries plc [1990] Ch 433 at 536.
24 Yukong Line Ltd v Rendsburg Investments [1998] 1 WLR 294 at 304.
25 Ibid., per Lord Keith at 95.
26 Adams v Cape Industries plc [1990] Ch 433 at 543.
27 [1933] Ch. 935.
28 [1962] 1 WLR 832.
29 Ibid., per Russell J at 836.
30 [2001] 1 WLR 1177.
31 Ibid., para 22.
32 Ben Hashem v Ali Shayif [2008] EWHC 2380 Fam.
33 Ibid., para 199.
34 [1992] BCC 638.
35 [1998] 2 BCLC 447.
36 Creasy v Breachwood Motors Ltd [1992] BCC, per Judge Southward QC at 647.
37 Adams v Cape Industries plc [1990] Ch 433 at 536.
38 [2013] UKSC 34.
39 Ibid., para 28.
40 Ibid., para 29.
41 Prest v Petrodel Resources [2013] 2 AC 415, per Baroness Hale, para 92.
42 Antonio Gramsci Shipping Corp v Recoletos Ltd & Others [2014] Bus LR 239, per Beatson LJ, para 66.
43 Easterbrook and Fischel, ‘Limited Liability and the Corporation’ [1985] 52 University of Chicago Law Review 89, 89.
44 Millon, ‘Piercing the Corporate Veil, Financial Responsibility, and the Limits of Limited Liability’ [2007] 56(5) Emory Law Journal 1305, 1381.
45 Bainbridge, ‘Abolishing Veil Piercing’ (July 21, 2000) UCLA School of Law.
46 Ibid.
47 Ballantine, Ballantine on Corporations (Callaghan and Co 1946), 312.
48 Prest v Petrodel Resources [2013] UKSC 34, para 64.
49 Ibid., para 106.
50 Strasser, ‘Piercing the Veil in Corporate Groups’ (2005) 37 Connecticut Law Review 637, 650.
51 [2015] AC 250.
52 [2011] EWCA Civ 347.
53 Mcgrath, ‘FHR European Ventures LLP: the demise of Sinclair v Versailles and a welcome return to orthodoxy’ [2014] 7(5) Corporate Rescue and Insolvency Journal 175, 176.
54 [2012] EWCA Civ 525.
55 [1990] 2 AC 605.
56 Chandler v Cape plc [2012] EWCA Civ 525, per Arden LJ, para 67.
57 [2014] EWCA Civ 635.
58 Ibid., para 28.
† Charlotte is a final year LLB (Hons) student at the University of Leicester.
(2016). Post-Prest Corporate Group Veil Piercing: Alternative Avenues to Justice. Legal issues Journal, 4 (2), https://www.legalissuesjournal.com/article/04-02-11072016/
