LAW AND COMMERCE
as highlighted above, the Court of Appeal had used the words “lifting” and “piercing” indiscriminately to mean the same thing. This shows that the Singapore Courts is less concerned with the language used to define the justification for piercing of the corporate veil. Thus, it can be concluded that, the Singapore Courts were not as concerned with the issue of sophistication where it pertains to language and classification. B. Appreciation for Liability the Salomon Principle Protects The idea that the Salomon principle only protects the interposed company and the party that controls it is one-dimensional. In Prest, the Supreme Court has made it clear that the evasion must be a pre-existing legal obligation that the controller has and that the piercing must not merely attempt to hold the controller liable for what in truth is an obligation of the company. Even before Prest, Toulson J in Yukong Line v Rendsburg Investment27 rejected any jurisdiction to pierce the corporate veil for that case and reasoned that the wrong that the Courts needed to correct was the breach of contract. Making the controller personally liable would render a perfectly incorporated company innocent for an act that was no doubt the company had done. The reasoning in Prest went a step further, where Lord Sumption reasoned that even if there is a personal obligation tied to the controller of the company, if it is not necessary to pierce the veil, then it is not appropriate to do so.28 This reasoning is also lined with public policy considerations and essentially endorsed Lord Neuberger’s reasoning in Nutritek. In Nutritek, Lord Neuberger reasoned that the courts could only pierce the corporate veil if there is no other solution to correct the injustice.29 This restrictive scoping of the jurisdiction of the Courts to pierce the corporate veil, even in the presence of a personal obligation, shows that the UK courts had a nuanced appreciation for the need to protect the Salomon principle. At the start of this article, it was highlighted that the benefit of the Salomon principle is primarily the limited liability for the members, shareholders, and the investors of the company. However, it is clear from the jurisprudence of the UK Courts that there are other more nuanced reasons for the protection of the Salomon principle. From both the reasoning of Yukong Line and Nutritek, it is also clear that protecting the sanctity of the Salomon principle also protects the principle of privity of contract. Opening up the jurisdiction for piercing the corporate veil, the issue of the controlling party could be considered a third party to the contract and the courts 27
Yukong Line v Rendsburg Investment [1998] BCLC 485.
28
Prest (op cit n 3) at [35].
29
Nutritek (op cit n 10).
would run into the issues of privity of contract. Also, if piercing the corporate veil becomes more open, then companies that have been caught with wrongdoing could offer up an individual that could bear the personal liability for the wrong. Lastly, which will be discussed in the next section, this jurisprudence is also layered with the fact that the Courts are aware of the fact that there are other ways to reverse the injustice that was suffered and therefore there is less of a need to completely dilute the Salomon principle by opening up exceptions. In Tjong, in both the High Court and Court of Appeal, it seems clear that the Courts were determined to pin the actions of the company on its controller. As discussed before in the previous section, the Courts were less concerned with language punctilious discourse and was more concerned with just defining the justification for piercing the corporate veil and the correction of the harm. The same was the case for the appreciation for the legal obligation that might stem from the Salomon principle. By referring to the interposed company in Tjong as the “alter ego” of the controller, the Courts are essentially reasoning that the controller was the party to the contract. In that case, this was very much the scenario due to the agreed upon facts, however, one might postulate that this certain kind of reasoning causes issues with the privity of contract if the controller was not factually a party to the contract. Also, there is the issue that this alter-ego principle creates a parallel principle to the application of general rules of agency.30 However, it can be seen that the Singapore Courts are trying to keep the principle simple and certain, which has its advantages especially for the purpose of reversing the injustice that was suffered. As a comparison, the appreciation for the liability beyond the Salomon principle is varied between Singapore and UK Courts. The UK Courts appreciated that the dilution of the piercing principle would lead to other problems in other realms of the law. Its reaction was therefore to be nuanced and reason for a very specific circumstance for piercing the corporate veil. The Singapore Courts are more focused on the wrong that was done and reversing the injustice done. Therefore, apart from clarifying the fact that the principle is not characterising the company as a “sham, mere device or façade” the Singapore Courts were more concerned with trying to determine if the company was an alter ego of the controller or not. C. Issues of Remedies The issue of remedies is important and interesting when 30
Yeo and Yeo (op cit n 18).
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