Corporate veil

November 1st, 2017 by James Goudie KC

In Persad v Anirudh Singh [2017] UKPC 32 Lord Neuberger reaffirmed, at paragraph 17, that piercing the veil of incorporation is justified only “in very rare circumstances”.  It can be justified only where 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, as made clear by the Supreme Court in VTB Capital v Nutritek [2013] 2 AC 337 and Prest v Petrodel [2013] 2 AC 415.  Lord Neuberger further reaffirmed, at paragraph 20, that the fact that a company is a “one man company” is irrelevant: Salomon v Salomon [1897] AC 22.  It is a fallacy to suppose that the Court can pierce the corporate veil where the purpose of interposing a company into a transaction is to enable the owner or controller of the company to avoid liability.  Lord Neuberger said, at paragraph 21, that use of terms such as “front” or “alias” can too easily be invoked to justify a wrong decision.  The company has a distinct legal personality. As Lord Neuberger observed, at paragraph 22, cases such as Gilford Motor Co v Horne [1933] Ch 95 and Jones v Lipman [1962] 1 WLR 832 were distinguishable.

Not only did the person who set up the company in those cases have an existing relevant legal obligation which he was trying to avoid by entering into a transaction involving the company, but also the involvement of the company was unilaterally effected by the person concerned, without the knowledge, let alone the consent, of the other party.

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