Piercing The Corporate Veil Recent Developments. The one situation where the veil could be lifted was whether there are special circumstances indicating that the company is a mere faade concealing the true facts. WOOLFSON v. REGIONAL COUNCIL Compulsory purchase Compensation Compensation for disturbance "Occupier" of acquired premises Occupier a trading If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. Continue with Recommended Cookies. This argument was rejected by the court for the reasons given in the opinion of the Lord Justice-Clerk. Food Distributors Ltd. v. Tower Hamlets London Borough Council [1976] 1 W.L.R. This case is jurisdiction for the legal principle that an incorporated company is a separate legal entity from its directors and principal shareholders. From 1962 till 1968 Campbell paid rent to Solfred in respect of Nos. facts (impropriety)21 can the veil be pierced according to Woolfson v Strathclyde Regional Council.22 In Gencor ACP Ltd v Dalby (Gencor)23 and Trustor AB v Smallbone (No.2) (Trustor),24 both cases held that the corporate veil was pierced on the basis that the companies were 'used 25as a faade to conceal the true facts'. Food Distributorscase (supra) is, on a proper analysis, of assistance to the appellants argument. The whole of the shop premises was occupied by a company called M. & L. Campbell (Glasgow) Limited ("Campbell") and used by it for the purpose of its business as costumiers specialising in wedding garments. He said that DHN was easily distinguishable because Mr Woolfson did not own all the shares in Solfred, as Bronze was wholly owned by DHN, and Campbell had no control at all over the owners of the land. Having examined the facts of the instant case, the Lord Justice-Clerk reached the conclusion that they did not substantiate but negatived the argument advanced in support of the unity proposition and that the decision in theD.H.N. The grounds for the decision were (1) that since D.H.N. [i] Daimler Company, Limited Appellants v Continental Tyre and Rubber Company (Great Britain) HL [1916] 2 AC 307, [ii] In re FG (films) Ltd, [1953] 1 WLR 483, [iii] Gilford Motor Co. Ltd. V. Home, (1933) Ch. . Cape Industries plc., and on an observation by Lord Keith in the House of Lords decision in Woolfson v. Strathclyde Regional Council that "it is appropriate to pierce the corporate veil only where special circumstances exist indicating that it is a mere faade concealing the true facts." The House considered the compensation payable on the compulsory purchase of land occupied by the appellant, but held under a company name. (156) Ibid 561. These cookies will be stored in your browser only with your consent. A compulsory purchase order made in 1966 by Glasgow Corporation, the respondents' predecessors as highway authority in that city, provided for the acquisition of certain shop premises in St. George's Road, the date of entry being 29th January 1968. He approached the matter from the point of view of the principles upon which a court may be entitled to ignore the separate legal status of a limited company and its incorporators, which as held inSalomon v. Salomon &Co. Ltd.[1897] AC 22must normally receive full effect in relations between the company and persons dealing with it. No rent was ever paid or credited in respect of No. The whole of the shop premises was occupied by a company called M. & L. Campbell (Glasgow) Limited (Campbell) and used by it for the purpose of its business as costumiers specialising in wedding garments. Except where otherwise indicated, Everything.Explained.Today is Copyright 2009-2022, A B Cryer, All Rights Reserved. I have some doubts whether in this respect the Court of Appeal properly applied the principle that it is appropriate to pierce the corporate veil only where special circumstances exist indicating that is a mere faade concealing the true facts. Lord Keith observed that it is appropriate to pierce the corporate veil only where special circumstances exist indicating that it is a mere facade concealing the true facts. Where the evidence shows that a company has been used as a vehicle or device for receiving monies wrongly paid out of a claimant company in breach of a defendants duty to that company, the receipt by the third party vehicle will be treated as the receipt by the defendant. Subscribers are able to see the list of results connected to your document through the topics and citations Vincent found. (160), 20Adam (n.18) [536] and [542]. Food case to be clearly distinguishable on its facts from the present case. A company may assume an enemy character when persons in de facto control of its affairs are residents in an enemy country. in support of this ground of judgment and, as to the first of them, to some extent also by Lord Denning, M.R., do not, with respect, appear to me to be concerned with that principle. . 39 Referring to the opinion of Lord Keith in Woolfson v. Strathclyde Regional Council (6), they pointed out that that exception is ([1978] SLT at 161) ". Woolfson also owned 20 of the 30 issued shares of company 'B', with the other 10 being owned by his wife. 17]. The position there was that compensation for disturbance was claimed by a group of three limited companies associated in a wholesale grocery business. The third company, also a wholly owned subsidiary of D.H.N., owned as its only asset the vehicles used in the grocery business, and it too carried on no operations. Sham companies. Following Adams v Cape Industries Plc, further extracts from which are set out, it is below, it is clear that the faade concealing the true facts test has become the primary reference point for any lawyer investigating whether it is possible to pierce the corporate veil and even the same judgment was held in the case of Ord & Another v Belhaven Pubs Ltd[ix]. Note that since this case was based in Scotland, different law applied. An example of data being processed may be a unique identifier stored in a cookie. They had twenty and ten shares respectively in Solfred Ltd. Mr Woolfson and Solfred Ltd claimed compensation together for loss of business after the compulsory purchase, arguing that this situation was analogous to the case of DHN v Tower Hamlets LBC. 2427356 VAT 321572722, Registered address: 188 Fleet Street, London, EC4A 2AG. Subscribers are able to see any amendments made to the case. Adams v Cape Industries plc and Another (1991) A worked for a US subsidiary of CI, which marketed asbestos in the US. country. This website uses cookies to improve your experience. (49) Woolfson v. Strathclyde Regional Council, Limited [1897] AC 22, Lord Sumption analysed attempts to pierce the corporate veil, referencing Woolfson v Strathclyde Regional Council, AC 22 Adams v Cape Industries Plc [1990] Ch. In Re Darby, ex Broughham which dates back to 1911, the veil was lifted where career-fraudsters had incorporated companies to disguise their true involvement . Manage Settings My Lords, for these reasons, I would dismiss the appeal. Case: Woolfson v Strathclyde Regional Council [1978] UKHL 5 Prest v Petrodel Resources Ltd & ors [2013] WTLR 1249 Wills & Trusts Law Reports | September 2013 #132 Michael Prest (husband) and Yasmin Prest (wife) were married for 15 years and had four children before the wife petitioned for divorce in March 2008. Denning refers to the subsidiaries as . It was maintained before this House that the conclusion of the Lord Justice-Clerk was erroneous. Woolfson v Strathclyde Regional Council UKHL 5 is a UK company law case concerning piercing the corporate veil. Moreover, the House of Lords indicated that the decision in DHN Food Distributors was incorrect. Statutes Noticed: Expropriation Act, R.S.B.C. 159 HOUSE OF LORDS (Lord Wilberforce, Lord Fraser of Tullybelton, Lord Russell of Killowen and Lord Keith of Kinkel) 15 February 1978 29. The veil will be lifted only where 'special circumstances exist indicating that it is a mere facade concealing the true facts': Woolfson v Strathclyde Regional Council (1978) Gilford Motor Co Ltd v Horne (1933) court. It carried on no activities whatever. was in a position to control its subsidiaries in every respect, it was proper to pierce the corporate veil and treat the group as a single economic entity for the purpose of awarding compensation for disturbance; (2) that if the companies were to be treated as separate entities, there was by necessary implication from the circumstances an agreement between D.H.N. 57 and 59/61 St. George's Road were owned by the first-named appellant Solomon Woolfson ("Woolfson") and Nos. Held: The House declined to allow the principal shareholder of a company to recover compensation for the . However, in Woolfson v.Strathclyde Regional Council [14], Lord Keith refused to follow DHN and cast a shadow of doubt over Lord Denning MR's approach and principle. 33 (3), sect. References Cape Industries plc., and on an observation by Lord Keith in the House of Lords decision in Woolfson v. Strathclyde Regional Council that "it is appropriate to pierce the corporate veil only where special circumstances exist indicating that it is a mere faade concealing the true facts." A significant fallout of the decision in Hashem v. The position there was that compensation for disturbance was claimed by a group of three limited companies associated in a wholesale grocery business. Woolfson v Strathclyde Regional Council [1978] UKHL 5 is a UK company law case concerning piercing the corporate veil. The case Salomon v Salomon & Co Ltd [ 2] (1897) is one of the cases that illustrated of the separate legal entity principle. 57 and 59/61 St Georges Road were owned by the first-named appellant Solomon Woolfson (Woolfson) and Nos. VTB Capital plc v Nutritek International Corp [2013] UKSC 5. United Kingdom. 3 Woolfson v. Strathclyde Regional Council [1978] SLT 159, confirmed by the Court of Appeal in Adams v. Cape Industries Plc [1990] 2 WLR 657. Facts; Judgment; See also; Notes; References; External links; Facts. These premises were owned by Bronze, which had originally been the wholly owned subsidiary of a bank which had advanced money for the purchase of the premises, but which had later become the wholly owned subsidiary of D.H.N. It is the first of those grounds which alone is relevant for present purposes. 22Woolfson v Strathclyde Regional Council. Mr Woolfson had 999 shares in Campbell Ltd and his wife the other. In the recent case Prest v Petrodel Resources Ltd[x], it was held that evasion is piercing. Prest Piercing The Corporate Veil? Salomon v Salomon [1896] UKHL 1. A bridal clothing shop at 53-61 St George's Road was compulsorily purchased by the Glasgow Corporation. The activities of subsidiary companies are an integral part of the activities of the group of companies to which they belong. In Woolfson v Strathclyde Regional Council, the House of Lords disapproved of Denning's comments and said that the corporate veil would be upheld unless the company was a faade. Or Going Around? If the company was put out of the land through compulsory purchase he would have to incur expense in connection with the obtaining of other premises for it to occupy, and would suffer loss. .Cited Prest v Petrodel Resources Ltd and Others SC 12-Jun-2013 In the course of ancillary relief proceedings in a divorce, questions arose regarding company assets owned by the husband. In Woolfson v. Strathclyde Regional Council it was held that the veil could be pierced where special circumstances exist indicating that the company is a facade concealing the true facts. We and our partners use data for Personalised ads and content, ad and content measurement, audience insights and product development. Woolfson v Strathclyde Regional Council[viii] that the House of Lords considered that there is one circumstance in which the corporate veil can pierce, namely when there is one circumstance in which the corporate veil can be pierced, namely when there are special circumstances indicating a faade concealing the true facts. Note that since this case was based in Scotland, different law applied. Topic 3 Corporate Personality 1 PART A SEPARATE LEGAL PERSON PRINCIPLE 2 The Salomon case: separate legal entity Company is a legal In Scotland, the principle was applied initially, in the case of Mackintosh v. Mackintosh, but it came to an end in RHM Bakeries v. Strathclyde Regional Council. Usually, a corporation is treated as a separate legal person, which is solely responsible for the debts it incurs and the sole beneficiary of the credit it is owed. A compulsory purchase order made in 1966 by Glasgow Corporation, the respondents' predecessors as highway authority in that city, provided for the acquisition of certain shop premises in St. George's Road, the date of entry being 29th January 1968. 116. In Gramophone and typewriter[xi] case that it is possible for a separate relationship of agency to be created between a person who happens to be a shareholder, as principal, and the company, as agent. Search. For the reasons stated in it, I also would dismiss this appeal. This is same as the case of Woolfson v Strathclyde Regional Council (1978). Statements. You can use it as an example when writing your own essay or use it as a source, but you need 40 Nbr. In these circumstances, the appellants jointly claimed a sum of 80,000 as compensation for the value of the heritage under section 12 (2) of the Land Compensation (Scotland) Act 1963 and a further sum of 95,469 in respect of disturbance under section 12 (6) of that Act. The court looked to the reality of the situation ignored the transfer, and ordered that the company should convey the land to J. LORD KEITH OF KINKEL.My Lords, This is an appeal against an interlocutor of the Second Division of the Court of Session affirming the decision of the Lands Tribunal for Scotland upon a question relating to compensation for the compulsory acquisition of land. 12 89 Ord v Belhaven Pubs Ltd [1998] BCC 607, CA 90 Woolfson v. Strathclyde Regional . But however that may be, I consider the D.H.N. Find something interesting to watch in seconds. What people are saying - Write a review. Bronze had the same directors as D.H.N. The business in the shop was run by a company called Campbell Ltd. that in the circumstances Bronze held the legal title to the premises in trust for D.H.N., which also sufficed to entitle D.H.N. 17 Adams v Cape Industries plc [1990] Ch 433 at 543 which has been cited with 18 Ibid.% atp. 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