increasing transaction costs.”19 Also, there have been few reported successful cases of veil piercing in previous years, with a clear trend in English company law to limit the grounds upon which the corporate veil may be disregarded. This culminated in VTB, a Supreme Court case decided a few months before Prest, in which the judges questioned whether veil piercing actually exists. Prest v. Petrodel In view of the incoherence and confusion surrounding the doctrine of veil piercing, the House of Lords, in recent case of Prest, attempted to form a coherent doctrine in this area of law. Affirming the existence of the doctrine, this guidance - albeit imperfect - does provide some clarification, and is the leading case with regards to veil piercing. In this case, Ms Yasmin Prest issued a claim for ancillary relief against her husband, the sole owner of a number of complexly structured offshore companies. She alleged that her husband had used the company to hold legal title to properties that belonged beneficially to him. However, Mr Prest failed to comply with orders for the full and frank disclosure of his financial position, and the company, which were joined as parties to the proceedings, failed to file a defence and refused to comply with orders for disclosure. The court refused to pierce the veil, and instead used trust law to remedy the situation, achieving the same result as they would have had they pierced the veil. In so doing, the court laid down the principle that veil piercing should be used as a last resort. In most cases, the same result can be enforced with other legal mechanisms. Undertaking a re-examination of past veil piercing cases, the court identified different sorts of ‘relationships’ that led to the result – agency, trust (the Prest case itself ); deceit and conspiracy (VTB Capital Plc v. Nutritek International Corp); so-called ‘knowing receipt’ (Gencor and Trustor); and tortious liability (Chandler v. Cape). However, Lord Sumption went one step further and explained that when deciding whether or not to pierce the veil, the term ‘façade’ or ‘sham’ was too vague. Instead, cases should be distinguished based on whether there was concealment or evasion. Only in evasion cases – where the company was interposed to deliberately evade an existing legal obligation – could the corporate veil be pierced. The court could then disregard the corporate veil and deprive the company or its controller of the advantage they would have otherwise obtained by the company’s separate corporate personality. Singapore
19
Stephen M Bainbridge, ‘Abolishing Veil Piercing’ (2001) 26 Journal of Corporate Law 470-535
102
Similar to pre-Prest English company law, there is conflicting case law and a lack of rigorous reasoning for judicial veil piercing in Singapore20, making it extremely difficult to ascertain any clear principles. However, textbooks and academics have distinguished certain commonly accepted grounds of veil piercing. These grounds include evading existing legal obligations (Children’s Media Ltd21), agency (Win Line22), façade or sham (Children’s Media, NEC Asia23), alter ego (TV. Media v. De Cruz24, NEC, Tjong25), and the possible ground of the controller acting unconscionably and in bad faith (Raffles Town Club26). Furthermore, it must be highlighted that the latter two grounds – the alter ego exception, and cases where the controller is acting unconscionably in bad faith – are unique to Singapore. More focus would be placed on the alter ego ground, as it is arguably where Singapore’s law on veil piercing has most notably diverged from English law. II. THE GROUND OF ALTER EGO Alwie Handoyo v. Tjong Very Sumito Decided at about the same time as Prest, the court in Tjong did not have the opportunity to refer to the principles laid down in that case. However, it is interesting to note how the two cases reveal the extent to which Singapore law on veil piercing has diverged from UK law. The case of Tjong concerned the payment of the purchase price of shares in an Indonesian company by the parties involved. The particular transaction involved was made convoluted due to the interposition of layers of legitimate transactions, thus apparently masking the true nature of the transaction. Tjong, the plaintiff, then claimed that the purchase price should be paid to him personally, instead of the companies Overseas Alliance Financial Limited (OAFL) and Aventi, who were third party beneficiaries. In so doing, he sought to get the court to pierce the corporate veil of OAFL, and hold Alwie personally liable. In the High Court (reported under Tjong Very Sumito v. Chan Sing En27), the veil was pierced on the basis that Alwie was OAFL’s alter ego, and it was said that there were two justifications for piercing the corporate veil: “first, where the evidence shows
20
Puchniak, Varottil and Wee, National University of Singapore Law Faculty Part A Bar Course 2014 6
21
Singapore Tourism Board v. Children’s Media Ltd and Others [2008] 3 SLR 981
22
Win line (UK) Ltd v. Masterpart (Singapore) Pte Ltd [2002] 2
23
NEC Asia Pte Ltd v. Picket & Rail Asia Pacific Pte Ltd [2011]
24
TV. Media Ptd Ltd v. De Cruz Andrea Heidi [2004] 3 SLR
25 26
Alwie Handoyo v. Tjong Very Sumito [2013] 4 SLR 308
27
Tjong Very Sumito v. Chan Sing En [2012] 3 SLR 953
SLR 98 2 SLR 565 543
SLR 374
Raffles Town Club Pte Ltd v. Lim Eng Hock Peter [2013] 1