ABSTRACT
Salomon v Salomon & Co Ltd (1897) A company is a person separ ate from its share hold ers and direct ors Macaura v Northern Assurance (1925) A share holder had no insur able interest in company prop erty Lee v Lee’s Air Farming (1961) A share holder who is also an employee of the company will have all stat utory rights against the company
LIFTING THE VEIL OF INCORPORATION
JUDICIAL APPROACHES TO LIFTING THE VEIL
Gilford Motor Co Ltd v Horne (1933) Evasion of restraint of trade clause in contract Jones v Lipman (1962) An attempt to evade an order of specific perform ance: an example of the company being a ‘sham’ DHN Food Distributors Ltd v Tower Hamlets LBC (1975) Three compan ies in a group treated as a ‘single economic unit’ FG Films Ltd (1953) FG Films Ltd held to be an agent of American company
Recent cases:
Adams v Cape Industries (1990) The Court of Appeal reviewed the argu ments for lifting the veil and declined to lift the veil in this case, marking a return to the strict application of the Salomon prin ciple Ord v Belhaven Pubs Ltd (1998) Where there was no fraud or attempt to misuse the corpor ate form the veil will not be lifted Trustor AB v Smallbone (No 2) (2001)
The veil will be lifted in cases where the company is mere façade, an abuse of the corpor ate form Chandler v Cape (2012) VTB Capital plc v Nutritek International Corpn and others (2013) The veil will not be pierced so as to make a non-contracting party liable just because he owns and controls the company A parent company owed a direct duty of care to employ ees of a foreign subsidiary: the court emphasised that this was not an instance of lifting the veil Prest v Petrodel Resources Ltd (2013) While the power to lift the corpor ate veil exists, it may only be used in very limited cases
CORPORATE LIABILITY
DIRECTORS’ LIABILITY IN TORT
Williams v Natural Health Foods Ltd (1990) and MCA Records Inc v Charly Records Ltd (2003) A director, acting for the company, will not be liable in tort unless he had assumed personal respons ibility for the act MCA Records Inc v Charly Records Ltd (2003) A director will not be liable as joint tort feasor with the company if he is doing no more than his constitutional duty Standard Chartered Bank v Pakistan National Shipping Corp (Nos 2 and 4) (2002 and 2003) A director will be personally liable for torts such as deceit or fraudulent misrepresentation
CORPORATE LIABILITY FOR CRIME
Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd (1915) HL Bolton (Engineering) Co Ltd v TJ Graham & Sons Ltd (1957) The court applied the iden tification theory in both cases Tesco Supermarkets Ltd v Nattrass (1972) A company can commit a crime requir ing mens rea, but may be able to rely on the defence that the act was commit ted by ‘another person’, not the directing mind and will of the company Meridian Global Funds Management Asia Ltd v Securities Commission (1995) The knowledge of employees in committing an offence may be attributed to the company R v Kite (1996) A director was the direct ing mind and will of the company and was convicted of manslaughter. Note now the Corporate Manslaughter and Corporate Homicide Act 2007
2.1 Salomon v A Salomon & Co Ltd [1897] AC 22
Key Facts
S carried on a busi ness as a leather boot manu fac turer as a sole trader. He decided to form a company to run the business and A. Salomon & Co Ltd was registered under the Companies Act 1862. S, his wife and five chil dren became the only share holders, taking one share each, and S and his two sons were the direct ors. Once incor porated, the company purchased the busi ness from him. The purchase price was set at £39,000 although it was really only worth about £10,000. The company paid for the busi ness partly by issuing S with 20,000 £1 shares and also issuing him £10,000 in deben tures (a docu ment issued by a company to evid ence a loan). The deben ture was secured by a float ing charge over the company’s assets. Following a depres sion in the boot trade the company went into liquida tion. There was only £1,055 to satisfy the un secured debts of £7,773 plus S’s deben ture. As a secured deben ture holder, S claimed to be entitled to the £1,055.
