ARTICLES: GUEST WRITER 1
This is a question of attribution, not lifting the corporate veil. Thus, for instance, in New Line Productions Inc v Aglow Video Pte Ltd [2005] SGHC 118 (High Court) New Line owned the copyright in three films. It sued the defendants essentially for breach of copyright. Most of the defendants were companies in the “TS Group”. Each company operated one outlet and kept separate accounts. All had a common registered office with TS Laser and TS Entertainment. The marketing manager of TS Laser testified that the TS Group were independent companies operating together in a loose arrangement (in other words, not a group in the legal sense). Each company had its own directors and shareholders and maintained its own accounts. The group was started by D20, who expanded by buying other companies; each company operated one outlet. The directors and staff reported to D20 and took instructions from him. Most of the companies were owned by D20, his wife and brother. Tay Yong Kwang J found that far from being a loosely-knit group, the TS Group were ‘little pieces of mosiac forming a complete mural, glued together by the four directing minds’. TS Laser was the parent or nerve centre. The companies shared many common directors and shareholders, and took instructions from D20, who appeared to be beneficial owner of practically all of the companies. Given these facts, Tay J held that the entire group were liable for dealing with infringing products. Although Tay J treated this as an instance of lifting the corporate veil, it is better to see it as an example of attribution. All the companies “knew” that the videos were counterfeit, because the people who controlled those companies had that knowledge. One has to look to human beings to determine what a corporate entity knows. Thirdly, where the “company” does not exist. This is often referred to as a sham. A distinction must be made between a sham company and a sham transaction between existing companies. A fraudster may purport to contract in the name of a company; anyone can run off a letterhead on a good printer. If the company has not been
incorporated anywhere in the world, then clearly it is the fraudster who is liable for whatever transactions have been entered into. Fourthly, a company may hold assets on trust for its controllers. This is a question of evidence. Companies are often used to hide assets from the tax authorities (almost invariably illegal) or wives (not very nice, but usually not illegal per se). Obviously, the intent of the controller is to use the assets as if they were his own, despite the legal fiction that the company owns them. In such a case, a trust may be inferred. Needless to say, it is unnecessary to ignore the Salomon rule, as a company may be trustee of assets for the benefit of its controller. Fifthly, a company may act as an agent for its controller. Often a businessman negotiates with professional (an architect, for instance) for the provision of services. He does this because the professional has expertise and a reputation. But when it comes to billing, the professional sends the invoice in the name of a company that he controls. This does not change the essential nature of the contract, which is between the professional and the client. It does not absolve the professional of liability for misrepresentation or negligence. The company in such a case is only an agent for collection of money for the professional. It is unnecessary to ignore the separate legal personality of the company. With this in mind, one can consider the situations in which the Salomon may be ignored by the courts. In the Singapore context, there are three broad situations in which a court may be induced to ignore the Salomon rule: • Purposive interpretation of a statute • Court exercising an equitable or analogous discretion • Company acting as controller’s alter ego
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