Lloyd's Maritime and Commercial Law Quarterly
SKIRTING AROUND THE ISSUE: THE CORPORATE VEIL AFTER PREST V PETRODEL
William Day*
Orthodox private law principles of contract, tort and unjust enrichment can be used to “skirt around” the separate legal personality of a company so as to impose liability on those behind it. The Salomon principle requires no modification of these causes of action in the corporate veil context. Indeed, the principle demands that corporate personality is treated no differently to natural personality, even for controversial causes of action such as joint tortfeasance and the tort of procuring a breach of contract. If these private law stratagems are given their due recognition, litigants seeking to reach directors and shareholders should seldom rely upon the special company law doctrine of “veil piercing”, which itself is now narrowly confined after the decision in Prest.
I. introduction
The recent decision of the Supreme Court in Prest v Petrodel Resources Ltd
1 has clarified and restricted the circumstances in which the corporate veil between those dealing with companies and those operating them can be pierced so that the latter can made liable to the former instead of liability stopping with the company itself. Their Lordships narrowed the doctrine to an “evasion principle”, triggered only when “a person is under an existing legal obligation or liability or subject to an existing legal restriction which he deliberately evades or whose enforcement he deliberately frustrates by interposing a company under his control”.2 This position was made possible by reinterpreting cases previously thought to be examples of veil piercing as being instead instances where
* Trainee Solicitor, Allen & Overy LLP. This article represents the view of its author and not necessarily those of Allen & Overy LLP. I am very grateful to Paul Davies, Graham Virgo and Sarah Worthington for comments on earlier drafts. All errors are my own.
The following abbreviations are used in the footnotes:
Clerk & Lindsell: M. Jones (ed.), Clerk and Lindsell on Torts, 20th edn (Sweet & Maxwell, London, 2010);
Goff & Jones: C Mitchell (ed.), Goff and Jones, The Law of Unjust Enrichment, 8th edn (Sweet & Maxwell, London, 2011).
1. [2013] UKSC 34; [2013] 2 AC 415. See generally H Tjio, “Lifting the veil on piercing the veil” [2014] LMCLQ 19; E Lim, “Salomon Reigns” (2013) 129 LQR 480 and A Sawyer, “Family Division, 0; Chancery Division, 1: piercing the corporate veil in the Supreme Court (again)” (2013) 72 CLJ 511.
2. [2013] UKSC 34, [35] per Lord Sumption and [81] per Lord Neuberger.
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