Statute
Under certain circumstances, statute may permit the veil to be pierced and liability imposed on the directors and/or members.
State of National Emergency
See Daimler v Continental Tyre & Rubber Co
Agency
In some situations, a proper analysis of the business arrangements may reveal an agency agreement between a parent and subsidiary company. However, it is not sufficient to show that economically the two companies are inter-dependent:
“[Counsel] suggested… that it would be technical for us to distinguish between parent and subsidiary company in this context; economically, he said, they were one. But we are concerned not with economics but with law. The distinction between the two is, in law, fundamental and cannot here be bridged”.
Rather, what must be shown is an express agency agreement – Adams v Cape Industries
Under certain circumstances, statute may permit the veil to be pierced and liability imposed on the directors and/or members.
State of National Emergency
See Daimler v Continental Tyre & Rubber Co
Agency
In some situations, a proper analysis of the business arrangements may reveal an agency agreement between a parent and subsidiary company. However, it is not sufficient to show that economically the two companies are inter-dependent:
“[Counsel] suggested… that it would be technical for us to distinguish between parent and subsidiary company in this context; economically, he said, they were one. But we are concerned not with economics but with law. The distinction between the two is, in law, fundamental and cannot here be bridged”.
Rather, what must be shown is an express agency agreement – Adams v Cape Industries
Justice
Over time, the courts’ acceptance of ‘justice’ as a reason for lifting the veil has changed.
Lord Denning was a particular proponent of this approach, which he can be seen developing in the cases of Wallersteiner v Moir, and DHN Food Distributors Ltd v London Borough of Tower Hamlets.
However, a retreat of some kind can be seen by the House of Lords in Woolfson v Strathclyde Regional Council . Here, their Lords said that the veil should only be pierced in special circumstances, although they did not define exactly what would constitute ‘special circumstances.
Over time, the courts’ acceptance of ‘justice’ as a reason for lifting the veil has changed.
Lord Denning was a particular proponent of this approach, which he can be seen developing in the cases of Wallersteiner v Moir, and DHN Food Distributors Ltd v London Borough of Tower Hamlets.
However, a retreat of some kind can be seen by the House of Lords in Woolfson v Strathclyde Regional Council . Here, their Lords said that the veil should only be pierced in special circumstances, although they did not define exactly what would constitute ‘special circumstances.
This approach was followed in the Canadian case of Transamerica Life Assurance Co of Canada v Canada Life Assurance Co, where it was said that “the cases and authorities… indicate that it will be difficult to define precisely when the corporate veil is to be lifted, but that lack of a precise test does not mean that a court is free to act as it pleases on some loosely defined ‘just and equitable’ standard”.
Similarly, in the ‘mammoth judgment’ of Adams v Cape Industries, Slade LJ said “save in cases which turn on the wording of particular statutes or contracts, the court is not free to disregard the principle of Salomon… merely because it considers that justice so requires”.
Conclusion
As a consequence, the courts are rarely willing to life the corporate veil. This has led some academics and judges to voice concerns about the strictness and potential inflexibility of the present rules:
“It is perhaps permissible under modern commercial conditions to regret the existence of these principles. But it is impossible to deny, ignore or disobey them” - As per Roskill LJ, The Albazero [1977]
Similarly, in the ‘mammoth judgment’ of Adams v Cape Industries, Slade LJ said “save in cases which turn on the wording of particular statutes or contracts, the court is not free to disregard the principle of Salomon… merely because it considers that justice so requires”.
Conclusion
As a consequence, the courts are rarely willing to life the corporate veil. This has led some academics and judges to voice concerns about the strictness and potential inflexibility of the present rules:
“It is perhaps permissible under modern commercial conditions to regret the existence of these principles. But it is impossible to deny, ignore or disobey them” - As per Roskill LJ, The Albazero [1977]
