Piercing the Corporate Veil Flashcards
Daimler Co Ltd v Continental Tyre & Rubber Co
Company incorporated in England for the purposes of selling tyres made in Germany by a German company, who held the bulk of the shares in the English company. War between Germany and the world broke out. Court were required to look behind the veil at the characteristics of the members of the company.
Re FG (Films) Ltd
American film company attempted to register their film as British but failed as the court decided to look behind the veil at the characteristics of of the members.
‘Their undertaking was so small as to be practically negligible and the British members acted, in so far as they acted at all in the matter, merely as a nominee of and agent for the American company.
Salomon v A Salomon
Separate legal personality
Broderip v Salomon
Piercing the corporate veil
MacAura v Nothern Assurance Co Ltd
MacAura controlled a company where he was the majority shareholder. He was the owner of a forest and he decided to transfer ownership of the forest to the company. MacAura had insured the forest against possible damage or loss, but when the company became its owner MacAura failed to transfer the responsibility for insuring the forest to the company. Unfortunately for MacAura, the forest later burned down and he tried to enforce the insurance policy. However, the insurance company argued that MacAura was no longer the owner of the forest and that he did not have an insurable interest. The person who did have an insurable interest in the forest and who should have protected it against damage or loss was the company, it’s new owner. Held: although MacAura remained the majority shareholder in the company he had transferred ownership of the forest to the company. Therefore, the company should have insured the forest. It had not and the insurance company did not have to pay out and the company were completely separate persons in the eye of the law and should be treated as such.
Lee v Lee’s Air Farming Ltd
Lee had set up a company where he was the owner of all but one of the shares. Lee was the company’s only director and he had appointed himself as the company’s chief pilot. Tragically, Lee was killed in an air accident while on company business and his wife later sued the company for compensation for his death. Held: Mrs Lee was entitled to compensation from the company. Again, Lee and the company were to be regarded as completely separate people in the eyes of the law. One person (Lee) an employee of another person (the company) had been killed in the course of his employment and under current rules his widow was entitled to receive compensation from the company.
Gilford Motor Co Ltd v Horne
Man was a managing director of Gilford Motors and his contract contained a restrictive covenant. It was held that by going into business again selling spare parts for cars was a breach of the covenant.
Where a company has been set up to avoid a pre existing obligation.
Jones v Lipman
Where the company has been set up to avoid a pre existing obligation
DHN Food Distribution ltd v Tower Hamlets LBC
In deciding whether compensation for disturbance is payable to a company trading from premises which are the subject of a compulsory purchase order but which are in fact owned by a subsidiary of the trading company, the court is entitled to pierce the corporate veil and give effect to the reality of the situation. The group of companies were a single economic unit and thus were entitled to the compensation.
Woolfson v Strathclyde Regional Council
It is appropriate to pierce the corporate veil only where special circumstances exist indicating that it is a mere facade concealing the true facts.
Adams v Cape Industries Plc
Until 1979, Cape, an English company, mined and marketed asbestos. It’s worldwide marketing subsidiary company was another English company, Capasco. It also held a U.S. marketing subsidiary incorporated in Illinois. In 1974 some 462 plaintiffs sued Cape, Capasco, Naac and others in Tyler, Texas for personal injuries allegedly arising from the installation of asbestos in a factory. These actions were settled. Between 1978 and 1979 a further 206 similar actions were commenced and default judgements entered against Cape and Capasco. In 1978 NAAC ceased to carry on business and other subsidiaries replaced it. The plaintiffs sought to enforce the judgments in England. The defendants denied that the Texas court had jurisdiction over them for the purpose of English law. Held that the defendants were neither present within the U.S. Nor had they submitted to the jurisdiction there. Actions dismissed.
Chandler v Cape Plc
The court outlined the circumstances in which it could impose responsibility on a parent company for the health and safety of employees of subsidiary company which was no longer in existence. In the instant case, the parent company owed a duty of care to the subsidiary’s employees, who had developed asbestositis after exposure.
Prest v Petrodel
I conclude that there is a limited principle of English law which applies when a person is under an existing obligation or liability or subject to an existing legal restriction which he deliberately evades or whose enforcement he deliberately frustrates by inter posing a company under his control. The court may then pierce the corporate veil for that purpose, and only for the purpose, of depriving the company or its controller of the advantage that they would otherwise have obtained by the company’s legal separate personality.
VTB Capital v Nutritek International
There were no grounds on which the bank could “look behind” the borrowing company to sue its owners in contract.
