United Kingdom The doctrine of veil piercing is an extremely convoluted one, and a historical analysis of this doctrine shows the evolution of the many different grounds used to justify it. One of the grounds of veil piercing that courts have adopted is ‘where justice requires’, as employed in Creasey5. However, it was subsequently rejected in Ord6 as a “wrong adoption of the principle of piercing the corporate veil”, and is now a defunct ground. When asserting jurisdiction to piercing the veil between parent and subsidiary companies, courts have adopted several grounds in the past. The agency exception – where there is an agency relationship between a parent and subsidiary company – was employed in Smith, Stone and Knight7. But as it was difficult to establish, it was criticised and rejected by Toulson J in Yukong8. Similarly, Lord Denning’s argument in DHN9 that corporate groups should be treated as a single economic unit was rejected in Adams v. Cape10. Instead, the court accepted the ‘mere façade’ argument. This argument – first articulated by Lord Keith in Woolfson11 - gave the courts discretionary jurisdiction to pierce the corporate veil where special circumstances existed indicating that the company was a mere façade concealing the true facts. Until recently, this seemed to be the dominant ground of veil piercing, accepted and applied in the subsequent cases of Gilford12, Jones13, Gencor14 and Trustor15. Ben Hashem16 provided further guidance, as Munby J ruled that other than being used as a ‘façade or device, the “twin features of control and impropriety” had to be present. However, despite the popularity of this ground, Lord Sumption in Prest stated that “reference to a ‘façade’ or ‘sham’ (begs) too many questions to provide a satisfactory answer.”17 Ultimately, the doctrine of veil piercing has been heavily criticised for being “unprincipled, unpredictable and arbitrary”,18 conferring judges with wide discretion and resulting in “uncertainty and lack of predictability,
Source: Lim Xiao Wei
in the UK and Singapore. While Singapore’s case law on veil piercing has diverged from UK law, it has similarly developed in an equally convoluted manner. However, hope for a clear approach may be found in the recent UK Supreme Court case of Prest v. Petrodel Resources Ltd. While Prest has proved to be an important case, it does not seem to sufficiently clarify the case law on veil piercing. Thus, it is submitted that the approach taken by Singapore courts, building on Prest, instead offers a better way forward for this messy area of company law. I. DEVELOPMENT OF THE DOCTRINE OF VEIL PIERCING
5 6 7
Creasey v. Breachwood Motors Ltd [1993] BCLC 480 Ord v. Belhaven Pubs Ltd [1998] 2 BCLC 447
Smith, Stone and Knight Ltd v. Birmingham Corporation [1939] 4 All ER 116
8
Yukong Lines Ltd of Korea v. Rendsburg Investments Corporation of Liberia, The Rialto No 2 [1998] 1 WLR 294
9
Distributors Ltd v. Tower Hamlets London Borough Council [1976] 1 WLR 852
10 11 12 13 14 15 16 17 18
Adams v. Cape Industries plc [1990] Ch 433 Woolfson v. Strathclyde Regional Council [1978] UKHL 5 Gilford Motor Co Ltd v. Horne [1933] Ch 935 Jones v. Lipman [1962] 1 WLR 832 Gencor ACP Ltd v. Dalby [2000] EWHC 1560 Trustor AB v. Smallbone (No 2) [2001] EWHC 703 Ben Hashem v. Ali Shayif [2008] EWHC 2380 (n 3) [28]
David Cabrelli, ‘The Case Against ‘Outside Reverse’ Veil Piercing in Company Law, University of Edinburgh School of Law Working Paper No. 2010/03
101