Company Law (overview od development of company law in cwc Caribbean)
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THE SALOMON PRINCIPLE OF WHAT RELEVANCE
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- Re A company
- Trustor AB v Smallbone
| Read: Adams
Solomon v Solomon Held in first instance: the concepts of separate legal personality and limited liab of corporations operated under a one man company to allow for the creation of fraud on creditors of a company Reversed in HOL on appeal: where both concepts were said to operate in mr solomon’s favor to insulate him from liability on the part of creditors ( debenture holders on the facts of Solomon) In terms of sep leg pers the HOL held mr S as the one man entity ( natural person) was a separate person fro the company, Solomon and Company, Limited Liabilty point: in addition, the court held the MR S as a shareholder who had a personality separate from his company could not be made liable for the debts of the company Lord Norton: compliance with registration descriptions in the company act brings down the veil of incorporation protecting the shareholder from the liabilities of the corporation Concerns articulated by Lord Williams at first instance, concerns tha ltd liab and sep legal personality might allow for a fraud on the part of crediotrs…still lasted beyond decision of HOL Same concern underpins tension in the law and tells us what are the ltd. circumstance in which the court will allow the veil of incorporation to be lifted. The veil of incrop is only lifted in exceptional circumstances Australian case: Briggs v James hardey & Co. 1989 NSWLR 549 Decision of court at 567 judgement of Rogers Justice of Appeal; Circumstances where veil is lifted “No common unified principle which underlies the occasional decisions of courts to peirce the corporate veil although an adhoc explanation may be offered by the court which so decides there is no principle approach to be derived from the authorities”- WRONG there is a principle according to cases where the courts will lift the veil Adhoc Explanations where the veil of incrop will be lifted Series of well defiend tests well facade test Wilson v scottide 1959 (Scottish case) lord kief held that the veil would only be lifted by way of exception where special circumstance exist to indicate that the company is a “mere façade” concealing the true facts N.B. ONLY OPERATES BY WAY OF EXCEPTION….Then go on to show the special circumstances Adams v. Cape industries PLC: decision of COA 1190 chancery Lord Justice Slade; mere accepts mere façade test which is set out by way of exception by Lord Kief was “ the one well recognized exception to the rule prohibiting the piercing of the corporate veil” Even in this formulation he speaks of the mere façade test as operate by way of exception Held: mere façade test described to be a no. of evidence such as “shame” “device” “puppet “ mass “creature” and “stratagems” The person who wants to lift veil is up to no good What precise circumstances would give rise to Well Facade test by way of exception Exceptional circumstances Special cirumstances Categories 1.When the D by the use of the device of the corporate stricture attempts to evade limitations posed by his conduct by law Adam says this is an exceptional case where special circumstances exist ( lifted by way of general principles- first two categories) Use corp structure as a device to evade limitations imposed on conduct by law Jones v Lipman 1962: proper example of a case where the courts lifted the veil precisely because the corp structure was being used or tempted to evade limitations imposed by the D by law Facts: Jones sold a house to Lipman by written contract, cannot be evaded by transferring to a separate company, an order for specific perf will be allowed against the co. , because the co. on these facts is a “creature, device, sham of jones”- also a mask Jones saw to hold before his face “to avoid recognition by the eye of equity” …by way if exception….and because of special circumstances veil will be lifted… Gilford Motor Co v Home 2. When the D by the device of the incorp is attempting to evade (vested) rights of relief against him which a 3rd party already possesses When that position is present by way of exception will allow for the lifting of the veil Use of the corp strustcure as a device to evade rights of relief which are already possessed by 3rd parties( vested rights) In Adams, COA also accepted in this category of case it was legitimate for the court by way of exception where special circumstances existed to permit the veil of incorp to be lifted, in Re A company, the english COA applied the principle where proceedings against the D had been instituted by the Plaintiff and the D then sought/ attempted to use a chain of companies to insulate assets from the reach of the P’s held corp veil will be pierced to allow P’s to obtain assets; courts said it was a classic use of corp structure as a device to evade rights of relief already possessed by third parties (right to sue) D seeks to use a chain of companies in order to get out of a vested right, a chosen action, being pursued against him by his P, court held by way of exception it is a case of exceptional special circum which would allow veil to exist In Trustor AB v Smallbone 39M pounds went missing from company owned by C, 20M pounds ended up in I ltd. which was a company which was essentially a front for Mr. Smallbone, managing director of claimant To pursue his claim agasint smallbone, the 20M which beleongs to him, the C sought to, and required to pierce the veil of corp to show that the seat by I litd. Was in law received by smallbone Held: veil could be lifted in these circumstances because I ltd. was a device used soley for the receipt of the claimants money by Smallbone Download 154.95 Kb. Share with your friends:
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