Separate Legal Personality - Essay & Deeper Research

Question 1

How have the courts felt about disregarding the SLP since Solomon?

Answer 1

Reluctance

Question 2

Is the principle fundamental to company law?

Answer 2

Yes

Question 3

What is a consequence of the SLP?

Answer 3

Limited liability

Question 4

Where can the SLP always be disregarded?

Answer 4

Where legislation permits. Keane notes that the legislature allows the corporate veil to be pierced and can do so with greater legitimacy, given that the legislature has powers beyond that of the courts.

Question 5

What is considered to be the least controversial reason permitting the judiciary to pierce the corporate veil?

Answer 5

Fraud

Question 6

What is an important consideration for fraud allegations?

Answer 6

Some form of impropriety

Question 7

What case is a good demonstration of the fraud exception?

Answer 7

Re Darby; ex parte Brougham

Question 8

What happened in Re Darby; ex parte Brougham?

Answer 8

Here, the two undischarged bankrupts raised finances on the foot of debentures, and the funds were distributed directly to themselves.
When one of the companies failed, the liquidator claimed for the secret profits made by Darby.
The court allowed the liquidator’s claim and rejected the argument that the profits had been made by the company and not Darby himself

Question 9

What case is authority for the fact that the court will disregard the SLP where the company attempts to expropriate the minority?

Answer 9

Re Bugle Press

Question 10

What happened in Powers v Greymountain Management Ltd?

Answer 10

The Irish courts reaffirmed that the existence of fraud and illegality will result in the lifting of the corporate veil.
In this case, the court felt that due to the detriment suffered by the plaintiff (and possibly countless others), it would be unjust to allow the directors to escape liability, even though the fraud was perpetuated by the two shadow directors.

Question 11

Aside from outright fraud and illegality, why are the other situations where the veil may be pierced vague?

Answer 11

It is due, in part, to a reluctance to formulate any set criteria by which the SLP would be disregarded

Question 12

What did the court suggest in Re a Company?

Answer 12

That the SLP could be disregarded ‘in the interests of justice’

Question 13

Where may the ‘interests of justice’ argument influence the law?

Answer 13

In clear-cut cases of a controlling member attempting to avoid their existing legal obligations (Jones v Lipman)

Question 14

What is Jones v Lipman authority for?

Answer 14

The courts would be permitted to pierce the corporate veil where a company is a ‘device or sham’ (See also Guilford Motor Co v Horne)

Question 15

Do the courts treat the avoidance of future legal obligations the same way?

Answer 15

No

Question 16

How can corporate structures be established?

Answer 16

Purely with the objective of enabling one company to avoid prospective liabilities.

Question 17

In what UK case did the courts attempt to redefine the scope of the ‘interests of justice’ reasoning?

Answer 17

Prest v Petrodel

Question 18

What happened in Prest v Petrodel?

Answer 18

Here, the husband effectively controlled two companies and it was claimed that he was attempting to avoid his matrimonial obligations.
The courts refused to allow the corporate veil to be pierced as ownership of the properties was vested in the companies while the marriage was intact and there was no evidence to suggest that his intention was to evade the obligation to his wife.

Question 19

What was the view of Lord Sumption in Prest?

Answer 19

He notably considered finding out the identity of persons controlling a company as separate from piercing the corporate veil, though many commentators consider it to at the very least be ‘peeping’ behind it. It could be said, however, that the decision was a necessary strict approach to the doctrine.

Question 20

Is the ‘interests of justice’ argument a strong one?

Answer 20

Without any tangible evidence of impropriety the ‘interests of justice’ argument is a weak one and could lead to instances of the SLP being ignored far beyond that which was envisaged in Solomon v Solomon.