Peeping to ignoring corporate veil

From Peeping behind the Corporate Veil, to Ignoring It Completely
Author(s): S. Ottolenghi
Source: The Modern Law Review, Vol. 53, No. 3 (May, 1990), pp. 338-353
Published by: Wiley on behalf of the Modern Law Review
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FromPeepingBehindtheCorporate
Veil,
it
to Ignoring Completely
S. Ottolenghi*
Preamble
of
in
The subject 'Lifting veil' is wellknown theliterature company
the
on
law. Theproblem
whichdeviatefromthe strict
whichauthorsface is how to explainthejudgments
rule
much
no
oftheseparate
of
legalentity thecompany.
Notwithstanding endeavour, conclusive
answerhas yetbeen given to thequestionof whenthecourtswill lifttheveil. Indeed,
theplea is often
thatthelegislature
shouldlay down
made, bothbyjudges' andjurists,2
definite
rules.3
In theabsenceof suchstatutory
it
the
to
directions, has remained taskofjurists propose
for
Let
suggestions some inroads into thisjungle of judgments.4 me outlinea few of
them.
Gower's is a verycommondictum,
namely,thatthecourtswould lifttheveil 'when
is
used as a cloak forfraudor improper
conduct.'5
corporate
personality beingblatantly
enumerates
fourinroadswhichhave been made by thelaw on theprinciple
Pennington6
of theseparate
of
two
ones,7followed
legal personality companies:thefirst are statutory
of
where protection publicinterests ofparamount
the
of
is
by 'judicialdisregard theprinciple
or
has
to
importance, wherethecompany been formed evade obligations
imposedby the
law.'8 Schmithoff
divides the authorities
undertwo headings: 'the cases in whichthe
theprincipal agentconstruction, thecases in whichthecourts
courts
and
and
lifted
applied
the corporateveil because a clear abuse of the corporateformoccurred.'9Another
definition lifting veil is thatit is 'a tacticused by thejudiciaryin a flexibleway
of
the
to counter
and illegality.'"?
Friedmansays thatcourts
fraud,sharppractice,oppression
would disregard conceptof juristicpersonality thefrustration tax evasion,the
the
in
of
*Associate
of
Israel.
Prof.,Faculty Law, Tel AvivUniversity,
Thisarticle,
basedon myPh.D. on 'Lifting veilinIsraeli
the
in
and
law', with
adaptation updating respect
ofthe
and
isa
of
with
L.C.B. Gower
English
judicature legislature, result discussions Prof.
my
during sabbatical
inLondon, whom amindebted, wellas toMrH. Rajak, reading article proposing
to
I
as
for
this
and
suggestions
foritsimprovement. are notresponsible,
for
which solelymine.
are
however, theviewsexpressed,
They
1 As, forexample,
LordParker:
'The legislature
couldpossibly, downa hard
but
lay
might, no Court
and fastrule ...'.

Daimler v Continental
Tyre& Rubber Co. [1916] 2 AC 307, 346.

2 See Wedderbur,
and
of
Law' (1984) 47 MLR 87, 90.
'Multinationals theAntiquities Company
3 Sealy,however,
does notwisha fullintervention legislator,
when points thebenefits
he
ofthe
out
of
the
the
of
where enables court counter
it
to
fraud,
'retaining flexibilitythepresent
approach,
especially
or
or
someinformality affairs small
inthe
of
oppression sharp
practice tocondone
companies' L.S.
Sealy, Cases and Materials in CompanyLaw (1985), p.44.

4 Refraining classification, Palmer
from
Lord
enumerates
the
casesinwhich veilhasbeen
simply
special
as
Palmer's
lifted, thelegislator wellas bythecourts:
ed., 1987),Ch 18-23.
Law, (24th
by
Company
5 Gower, Modern CompanyLaw (4th ed. 1979), p.137.

6 Pennington,
Law, (5thed. 1985),p.53.
Company
7 Thefirst be mentioned, 'byfar most
to
and
the
extensive' the legislation,
is tax
followed twosections
by
oftheCompanies 1985- s 24 ands 630 (nows 213 Insolvency 1986).With
Act
Act
to
regard these
see
sections, infra.
8 Pennington, Andsee also Samuels,
ibid.
the
'Lifting Veil', [1964]JBL 107.
9 Schmitthoff,
'Salomon the
in Shadow'
what courts
JBL305,at307.Thefirst
describes the
[1976]
heading
the
when.
does,whereas latter
10 Smith Keenan,
&
Law
ed
the
do mention lifting veilispractised
that
Company (7th 1987),p.19.They not
alsoinlessdramatic
and
as
&
Introduction
situations, bythe
legislature well.AndseealsoNorthey Leigh,
toCompany (4th 1987),p.20,enumerating
Law
ed
4 instances which veilwould lifted: time
in
the
be
in
ofwar,todetermine enemy
the
character thecompany; caseswhere company formed
of
in
the
was
for
a fraudulent
as
a
and
and
cases.
purpose; between holding
company itssubsidiaries; in revenue
338 TheModern
Law Review
53:3 May 19900026-7961


May 1990]

Peeping Behind the Corporate Veil

of
consideration therealpurposeof a transaction againstitslegal form, thedisguise
as
and
hand through
of the controlling
subsidiary
companies."
The conceptof 'piercingtheveil' in theUnitedStates'2is muchmoredevelopedthan
in theUK.13 The motto,whichwas laid down by Sanborn,J. and citedsince thenas the
is
law, is that'when thenotionof legal entity used to defeatpublic convenience,
justify
the
as
or
fraud, defend
crime,thelaw willregard corporation an association
wrong,
protect
of persons.'4 The same can be seen in various Europeanjurisdictions.'5
the
of
The generalnomenclature thesubjectin Englandis 'lifting veil', although'veil'
selectedby the court. Otherlabels include 'cloak', 'alias',
is but one of the metaphors
'alterego', 'agent', 'fiction','instrumentality',
'puppet', and 'sham'. 6 Can such labels
our attention
from real substance?17Cardozo, J. once said
the
or do theydivert
help us,
for
as
in
that
watched, starting devicesto liberate
thought,
'Metaphors law are tobe narrowly
theyend oftenby enslavingit."8
in
howeverdifferent
their
The courtsuse 'veil' as a metaphor variouscircumstances,
in
approachto theveil be in each case. Partof theconfusion thisarea is due to the fact
withwhichtheyaddress
betweenthevariousattitudes
thatthecourtsdo notdifferentiate
its
the companywhen lifting veil. Thus theycan in the same case bothignorethe veil
and issue injunctions
Again,
againstthecompanyas a separatelegal entity.
completely
termsforthe companymay be used side by side in a judgment- a
two incompatible
of
the
totallynegating possibility an independent
'puppet' and 'an agent"9- the first
its
the latterrecognising existenceas a separatelegal body and attributing
legal entity,
Whichof
on
and finalisea contract behalfof its principal.20
to it thepower to negotiate
thesetwo should prevail?
side
as
can
This confusion be seen in theliterature well. We oftenfindconsiderations
the
of
both forming
side withjustifications,
partof the definition 'lifting veil';2' or
by
11 Friedman,
(5th
Legal Theory. ed. 1967),p.523.
the
12 As 'lifting veil' is calledthere.
v
Co.
Gas
from
13 The 'Deep Rock'doctrine
(which
Taylor Standard & Electric (1939) 306 US
emerged
n
in
See
has
ibid,at p.137,especially 80.
307), forexample, no parallel theUK judicature. Gower,
us
to
in
States
that
remark 'experience theUnited
Andsee also Wedderburn's
surely encourage
ought
And
maskin casesof under-capitalisation'. 'our
of
with
... to experiment theremoval thecorporate
than
doctrines are theUS
into
of
afraid thisforay 'abuseof rights'
not
courts
surely to be more
ought
we
'A
Ombudsman?'
Courts'
(1960)23 MLR 663,667). In Israel tend
(K.W. Wedderburn, Corporation
of
than
rather that theUSA.
the
to follow UK trend
the
Transit 142Fed. 242, 247. Andsee alsoWormser,
Co.
14 US v Milwaukee
'Piercing Veil
Refrigerator
and
Fiction
The
ofCorporate
of
(1912) 12 Col LR 496; andWormser, Disregard theCorporate
Entity'
the
who
isby
classification Aronofsky, divides veil-piercing
Problems
Allied
(1927).Another
Corporate
distinct
into
analysis,
ego or instrumentality
by
by
veil-piercing statute, alter
groups:
responses three
the
See
or
business
an
andunder enterprise unitary
Corporate
'Piercing Transnational
theory. Aronofsky,
of
and
Veil: Trends,
(1985) 10
Analysis'
Adoption Enterprise
Widespread
Developments theNeedfor
NCJIL & Corn.
Reg. 31, 37.
the
15 e.g. Machen,
"'Lifting Veil"
(1910) 23 Harv.LR 253; CohnandSimitis,
Personality'
'Corporate
Continent'
Law of theEuropean
in theCompany
(1963) 12 ICLQ 189.
LawsofCorporations, ed. 1983),p.347. See also a longlistassembled
16 See HennandAlexander,
(3rd
as
'The Company a Separate
(1968) 31 MLR 481.
Entity'
by Pickering,
'The use of this
out
Law
French Ryanon Company (1988-89) s 5.2.2, p.100 point that
&
17 Mayson,
issues
are'. See also Stone,
the
what true
to
difficultdiscover
it
makes very
language
metaphorical
vague
the
as
known "piercing corporate
of
204 Minn.574, 578: 'The method decision
J.inRe Clark'sWill
ornate
decision.' is dialectically
It
the
veil"or "disregarding corporate
unnecessarily
complicates
entity"
trail.
and
but
andcorrectly
understanding, overa circuitous unrealistic Andsee (1982)95 Harv.
guides
LR 853.
v
Avenue 244 N.Y. 84, 94, 155 N.E. 58, 61, (1926) 50 ALR 599, 604.
18 Berkey Third
Ry.
v Moir (No.l) [1974]3 All ER 217 (CA).
MR in Wallersteiner
19 By LordDenning
is
to
as applied a subsidiary ambiguous,
'The
&
connoting
20 See Henn Alexander: term
"instrumentality"
or
either
(op
identity separateness' citp356,endof n 8).
that
continues saying it has also been
the
21 See Pennington, cit,whoafter
by
enumerating 'inroads'
op
for
or
is
a
cases that company an agent trustee itsmembers'.
in
done'by thecourts
implying certain
are
and
the
what courts doing notwhen
that is
I wouldsuggest this already
observation
the
As for first
lift
the
this
do
should it and secondly, is onlyone ofthewaysin which courts theveil.
they

339


The Modem Law Review

[Vol. 53

of
the definition the whole subject-matter addressingonly a partof it.22
by
is
we
My proposition thatbeforeaskingwhenthe veil is lifted, shouldanalysewhat
or
stillwhatis actuallydone, by the courtsand the
is actuallymeantby thisterm better
The function lifting veil is not always detrimental the company
of
to
the
or
legislature.
it
as
in
benefit well. It is suggested in 'lifting
that
itsshareholders.
Sometimes results their
towardsthe company,each one used in
the veil' we can detectfourdifferent
attitudes
and
circumstances fordifferent
different
reasons.
As themetaphor the veil is of such long standing, is incorporated the names
of
it
in
the
which
reflect differences attitude
of
towards company.
the
Thesecategories,
ofcategories
in a progressive
the
order,are 'PeepingbehindtheVeil', 'Penetrating Veil', 'Extending
the Veil' and 'Ignoringthe Veil'.23

The FourCategories
1. PeepingBehindtheVeil
withrespectto the separateentity
The first
theory.We
categoryis the least offensive
the
can regardthisattitude an act of curiosity: veil is lifted
as
to get information
only
the
the
what
involving personswho control company,suchas who are the shareholders,
of
and whatis theirinter-relationship regard the
is theproportion their
with
to
holdings,
control the company?
of
thisinformation, veil is thenpulleddown
the
Havinggathered
and once more thecompanyis treated a separatelegal personality, whichspecial
as
to
in
are
characteristics now attributed consequenceof that'curiosity'.
of
a
The definitions a 'holding company',24 'wholly owned subsidiary'5 or an
furnish
'associatedcompany',26
of a statutory
good examples
'peepingbehindtheveil.'
The veilis lifted theshareholders their
and
and
in
to
relationship
investigated, order ascertain
how to classify company,to whattypeit belongs.27
the
The same act of peepingbehind
a
the veil takes place whenever statute
to
refers 'control' of a company.28
The courtstoo peep behindtheveil and conclude fromtheshareholders, fromthe
or
of
aboutthenature thecompany.The most
of
people in control thecompany,
something
famousexample is the Daimler case.29The questiontherewas whether defendant,
the
22 See for
Gore-Browne Companies BoyleandSykes,
on
(ed.
44th
example
ed., 1986,supp.1987),1.3.1.:
' "lifting veilofincorporation", is toignore setaside separate personalitya
the
that
or
the
of company
legal
... thecourts notallowthecorporate
will
form be usedforthepurposes fraud, as a device
to
of
or
to evadea contractual other
or
and
Law
legalobligation,' see also Boyle& BirdsCompany (2nded.
1987),p.17.
23 Themore
common
for
the
the
the
expressions 'Lifting Veil' are 'Piercing Veil' or 'Disregarding Veil'.
I havedeliberately
decided choose
to
other
names theproposed
for
so
from
categories as to differentiate
thecommon
which
used
with
nomenclature, is generally synonymously thewholesubject-matter.
24 As onewhich
holds
more
than oftheequity
half
share
of
the
controls
(its
capital another 'subsidiary'),
of
boardofdirectors is a holding
or
of
composition thelatter's
company another
holding
company
s 736(1)oftheCompany 1985.Thedefinitionaltered s 144oftheCompanies 1989,by
Act
is
Act
by
which news 736is substituted theold. See also s 21 oftheCompanies 1989which
a
for
Act
introduces
a newdefinition parent subsidiary
of
and
for
undertakings accountancy
purposes.
25 As a company which theshares,
of
all
and
are
in
or
voting non-voting, vested theholding
company its
nominees s 736(5) of theCompanies 1985.Thisdefinition, is nowchanged; n 24.
Act
see
too,
26 Section
and
Taxes Act 1988.
13(4) oftheIncome Corporation
27 Andsee also a 'closecompany' 'closeinvestment-holding
and
in
company' ss 414(2C) and13Aofthe
Income Corporation
and
Taxes Act 1988.
28 As, forexample, 416 and 840 oftheIncome Corporation
ss
and
TaxesAct 1988,or s 346(5) ofthe
Act
Companies 1985.
v
29 Daimler Continental Co. [1916]2 AC 307 (HL). It is cited suchnotonlyintheUK literature
as
Tyre
butalso intheUS. See, for
Administration
Soberman,
Easson,TheLaw andBusiness
example,
Smyth,
in Canada(5thed., 1987)674; andalso Fink,'ThatPierced
Veil - Friendly
Stockholders Enemy
and
(1953) 51 Mich.LR 651.
Corporations'

340


May 1990]

Peeping Behindthe Corporate Veil

a
a British
registered
company,even though
company,shouldpay theplaintiff, British
were Germanresidents.
The lowercourtsruled
and
all thelatter'sdirectors shareholders
in favourof theplaintiff the Proclamation
as
againstTradingwiththe EnemyAct 1914
attaches
that
bodies, enemycharacter
onlyto those
stipulated 'in thecase of incorporated
in an enemycountry.'The House of Lords, however,allowed theappeal
incorporated
whichliftsthe
thatthe partof thejudgment
It
on a pointof fact.30 is clear, therefore,
the
veil of theplaintiff
Nevertheless, case is recognisedby
companyis obiterdictum.3'
of
the
for
the
many
juristsas thereference lifting veil to determine character a company.
the
that'whenthelaw prescribes place of registration
Lord Shaw stressed
In hisjudgment,
a
as thedecisive factordelineating companyas enemyor alien - no recourseis to be
that plaintiff an
the
was
However otherlaw lords considered
made to otherresources.'32
of
said
Lord Parker,to whose judgmentthe lifting the veil is attributed,33
enemy.
in
or
...
character ifitsagents thepersons defactocontrol
an
mas
a company assume enemy
shareholders
of
...
in
...
ofitsaffairs areresident an enemy
country Thecharacter individual
material
be
of
...
affect character thecompany [it]may,however, very
the
cannot itself
of
of
control itsaffairs,
in
or
the
whether company's
onthequestion
agents, thepersons defacto
This
of
the
under control enemies.
instructions or acting
arein fact
from,
to,
adhering taking
and
who
of
the
will
with number shareholders areenemies thevalueoftheir
materiality vary
holdings.34
out
was nothappywiththisconclusion,and pointed thedifficulties
Lord Parkerhimself
whichit evokes.35
standinfront
the
In factonlyhis finalwordsreallyconstitute
lifting veil. The directors
been regarded
actions
is
there no needto unveilthem.Notonlyhave their
that
of theveil so
as
mindhas been regarded thecompany's,incases
but
as thoseofthecompany, also their
or
whereknowledgeor will are required,as forassessingthe negligence36 criminality
There is no reason why this should not be so for the purpose of
of the company.37
of
the
establishing character the company.38
the
to
The same appliesto thetendency consider directors'
meeting
place as determining
is
whena company registered
for
of residence fiscalmatters,
ihecompany's
especially
place
It
the
in
and
in one country makesitsprofits another.39 has been held that place of control
this
and
for
factor suchquestions that place is determined
is
and supervision thegoverning
are
is
meetings
thestatewherecontrol exercised,e.g. theplace wherethedirectors'
by
tostart proceedings
lacked
that
of war company
30 Allthe
Lords
authority legal
secretary
agreed because the the
name.
in thecompany's
the
can
'that legalentity, company, be
the
as
to
refused go anyfurther he didnotthink
31 LordAtkinson
as
its
of
or
with
identified itsshareholders themajority them, to maketheir
so completely
nationality
or
are
because
character
its
or
or
status status, itan enemy
they alienenemies, to give
nationality their
character'
havethat
character
becausethey
itan enemy
(p327).
32 ibid,p333.
him.
and
as
in
33 LordParamoor hisjudgement, wellas Viscount
agreedwith
Mersey LordKinnear
of
34 op citp345. Suchwas also theopinion Lord Paramoor
(p354).
35 op citp346.
Co.
Petroleum [1915]AC 705, HL.
Co.
36 Lennard's
Carrying v Asiatic
malice
to
out
has
the
v
Bank[1900]1 QB 22. Eventhough court pointed that attribute
37 Corford Carlton
to
subtleties thelaw.
is
to
or intent a company to bring
metaphysical
of directors
to character the
the
MR
in
38 Indeed, a later
case,LordCozens-Hardy limited examinationthe
Rubber
Re
irrelevant: Hilches, Muchesa
in
of shareholders
the
exp
alone, character the
being, hisopinion,
the
that
the
also
Ltd.
Plantation [1917] 1 KB 48. Gore-Browne expresses opinon 'forcertain
purposes,
or
the
havetreated conduct
of
the
whilerespecting separate
courts,
legal personality a company,
This
tothe
as
or
itself. attribution
ofits
characteristics directors,
managers members attributable company
what
with
the
senseinvolve
doesnotinthetrue
(op
"lifting veilofincorporation".' citp1005).I concur
this
to
it
As
or
to directors managers. tothe
is saidwith
members,seems methat is anexample
regard the
of
of lifting theveilof thefirst
category.
to
Reference Income
with
of
and
'The
39 See for
Goldstein, Residence Domicile Corporations Special
example
Tax' (1935) 51 LQR 684.
341



[Vol. 53

In
held, theplace wherethepolicyof thecompanyis decidedetc.40 myview, however,
of
to
as long as thesecases refer theplace of theofficial
meetings thecompanytheydo
and
of
of
a
notconstitute lifting theveil: boththemeetings theboard of directors those
of
are
of thegeneralassembly functions theorgansof thecompany.These acts are overt,
to
of
and no lifting theveil is required unveilthem.Peepingbehindtheveil takesplace
desireto unveilthosewhoreally
these
bodies
or
govern
onlywhenthecourts thelegislature
and give theminstructions.41
of
it
thatthereis no lifting theveil whenrecourseis made to
Therefore is suggested
as
are eitherregarded an organof thecompany,its alter ego, or as
thedirectors:
they
Act 198642
thatpartof section213 of the Insolvency
whichdeals
its agents.Similarly,
cannotbe an exampleof lifting veil.43
the
withfraudulent
Nor
by
trading the director,
in
of
can section
Act,which case ofa misdescription thecompany's
349(4) oftheCompanies
to
of
name imputesa personalliability any officer the companyor a personactingon
inflict
The
itsbehalf.44 merefactthatbothsections
uponprivate
persons
personalliability
does notmeanthatipso facto theyconstitute lifting the
a
foracts done by a company
of
veil.45
caveatdirected
a
as
measures, sortof statutory
Theyare better
regarded 'punitive'
to
that company
the
would
at thosewhopurport act in thenameof thecompany,
knowing
not honourtheiracts.46
itself
however,enablestheCourtto satisfy
Peepingbehindtheveil at thecorporators,
to
of
as to thetruelegal situation thecase,47 makean orderagainstthecompanyitself,48
of
40 De Beers ConsolidatedMines Ltd v Howe [1906] AC 455. And see Young, 'The Legal Personality

a Foreign
(1906) 22 LQR 178.
Corporation'
v Moir(No. 1) [1974]3 All ER 217: 'It is plainthat Wallersteiner
Dr
41 As inthecase of Wallersteiner
of
as
to
trusts other
or
usedmany
legalentities ifthey
companies,
belonged him.He was incontrol them
of
and
is
the
as
as much any "one-man
company" under control themanwhoownsall theshares is
of
MR
behind
and
director' descriptionLordDenning atp237).Thepeeping
the
chairman managing
(the
It
it
it.
to
theveilgave thisinformation.is up to thecourt decidewhat is goingto do with
in
of
Act
as
42 Replacing630 oftheCompanies 1985mentioned someoftheliterature an example lifting
s
theveil.
be
would looked as thepersons wereknowingly
who
to
as
43 Whereas faras themembers
at,
parties the
it
for
be
as
on
purposes, wouldundoubtedly considered penetrating
carrying ofthebusiness fraudulent
&
French Ryan, citp110 (s 5.3.2).
theveil. See Mayson,
op
44 Mayson,
this
&
abstain
from
of Companies 1985as anexample
Act
French Ryan
considering section the
if debt not
is paidbythe
oflifting veil,as the
the
arises
itself.
only the
personal
Although
liability
company
of
it
the
their
the
I agreethat is notan example lifting veil,I do notagreewith
reasoning:
lifting veil
'a
of
on
is notalways denial orencroachmentcorporate
(op
personality' cits 5.2.2.2, plO1). It canbe
the
manifested inpenetrating veil,when responsibilitythemembers addedto that the
also
the
of
of
is
company.
in
45 Indeed, latter notincluded Penningtonhischapter
the
is
titled
to
by
'exceptions theruleofseparate
However doesinclude former p54). Only author
he
the
one
doesnotmention
(at
any
legalpersonality'.
in chapter lifting veil- Cane,Guide Company (2nded., 1987),plO.
the
on
Law
to
ofthese
sections the
v
46 Farrarcites the case of Winkworth Edward Baron DevelopmentCo. Ltd. [1987] 1 All ER 114 (HL),

the
case
to
the
as 'a recent where HouseofLordsseemed
veil
willing pierce corporate or usethealter
in
this
the
to
owedbythedirectors
(op
ego approach equity' citp64). However, case dealswith 'duty
of
to
and
thecompany tothecreditors thecompany ensure theaffairs thecompany properly
that
of
are
its
is dissipated exploited the
or
administered that propertynot
and
for benefit the
of directors
themselves
to theprejudice thecreditors' LordTempleman,18). With respect, seemsto methat
of
all
it
(per
p
the
for
own
when
breach basic
this
imposing the
upon directors personal
responsibilitytheir actions
they
has
to
the
duty, nothing do with
lifting veil.
in
v
47 As, for
HolstSouthern [1980]2 All ER 471, when topeeping
Ltd.
due
example, Simpson Norwest
behind veilthecourt
the
to
was ready accept explanations theplaintiffs
the
of
solicitors to whyit
as
for
to
who
wasso difficult them discover wasthe defendanttheir
in
real
claim damages. consequence,
for
In
itallowed claim,
the
it
eventhough was filed
after limitation
the
of
Andsee,as another
period 3 years.
Works[1920] 1 Ch 466, CA, and Parker & Cooper Ltd.
example,the cases of Re ExpressEngineering

v Reading
the
Ch
were
that same
were
the
directors
[1926] 975,where courts satisfied the
persons both only
andshareholders thecompany that
of
so
their
decisions
taken one configuration be regarded
in
could
as taken theother.
by
48 As inB v B [1979]1 AllER 801,when
behind veildisclosed thehusband the
the
that
of plaintiff
peeping
wasoneofthemajor
shareholders thedirector) a company. information sufficient
of
(and
This
was
for
thecourt issuean order disclosure
to
of
the
itself.
against company
342



May 1990]

frommakingthe requiredorder.49 mentioned,
or to refrain
As
peepingbehindthe veil
can also resultin an advantageto the company.Such was the case, forexample, of a
were trustees a charitabletrust.Danckwerts,
of
J.50
held
companywhose shareholders
thatthecompanycould claim to be exemptfrom
payinga development
chargebecause
of thischaritablestatus.5'
that
the
It is evident,
therefore, peepingbehind veil is notthestepwhichleadsto personal
for
of
liability theshareholder thedebtsofthecompany.It is onlythefirst butessential
- step by which thecourtsexaminecertainfeatures the company:its composition,
of
control,type(holding,subsidiary,
etc.), character
(alien), residence(fortax purposes)
the
etc. After
thisinformation, courtsdecide whatto do withit - whether
to
collecting
withit and adjudicateon the companyalone, or to move up the ladder of
be satisfied
the
lifting veil, to more serious repercussions.

2.

the Veil
Penetrating

the
A second category lifting veil is more operativewithregardto theshareholders.
of
the
The courtsreachthrough veil and graspthecontrolling
shareholders
The
personally.
the
of penetrating veil is to imposeupon theshareholders
forthe
purpose
responsibility
or
in
company's acts52 to establishtheirdirectinterest the company'sassets.
The mostprominent
example is section24 of the Companies Act 1985, by whicha
for
is
unlimited
shareholder
liability thecompany's
obligations imposed
uponevery
personal,
to
withfewerthanthe minimum
if the companycontinues tradefor6 months
number
and theremaining
are
of
It
of members,
members cognisant thefact.53 maybe notedthat
to
is
shareholder onlyto thecontrolling
not
there stipulation addressed everyremaining
the
as
in
shareholder is usuallythecase. Howeverthisis now immaterial view ofthereduction
numberof membersto two.54
of the minimum
the
Co.
Ltd. v ShellPetroleum Ltd. [1980] 1 WLR 627. Havingspecified complex
49 As in Lonrho
for
reached conclusion noorder disclosure
the
that
Lord
of various
companies, Diplock
shareholdingsthe
controlled
was completely
as this
the
could
ofdocuments begiven
company not
against defendant, subsidiary
Multinational v Multinational Services
Gas
Gas
And
[1983]2 Ch 258
company. compare
byitsholding
(CA).
of
as
50 Thisjudgewasproclaimed K.W. Wedderburn 'theleading
exponent "piercing
moder judicial
by
TheProblem the
of
and
veil" inmoder cases' (see 'Corporate
thecorporate
Personality SocialPolicy:
in
was
to
for
(1965) 28 MLR 62, 70. Thiscompliment given him hisjudgement Re
Quasi-Corporation'
in
the
behind veilresulted favour
Ltd.
London
Greater
peeping
Properties [1959]1 WLR 503, inwhich
a
of theapplicant, subsidiary
company).
and
Ltd.v Ministry Local Government Planning
Wells
Malvern
51 TheAbbey
[1951]Ch 728.
of
that
which
for
circumstances,
52 See theproposal the9thEEC Directive,
holding
contemplates in certain
of
subsidiaries.
for
will
companies haveliability thedebts their
Act
of
that section theCompanies 1985
who
are onlywriters maintain this
French Ryan the
&
53 Mayson,
of
as
be
of
doesnotconstitute
personality
lifting theveil: 'Thiscanhardly regarded a denial a corporate
as
this
be
to
and
its
liablefor debts, itmay best regard provision nothing
itself
when company remains
the
this
a
morethan denialoflimited
liability' cits 5.2.2.2, p101). It seemsto me that passageis a
(op
the
issue from
the
whatis lifting veil as a separate
of
of
good illustration theimportance defining
four
is
one
it.
which
circumstances would
categories;
personality'only ofthe
justify 'Denialofa corporate
losesitsseparate
neither
the
In
are
theothers notso drastic! penetrating veilthecompany
personality,
case is an additional
in
Theresult thepenetrationthis
of
its
from
noris itexonerated paying owndebts.
of
obligation itsmembers.
the
seven
were minimum
for
were
two
enacted members required a private
54 When
only
company whereas
are
two
of
both
of
the
for formation anyother
Today,for
types company members required
company.
the
when than minimum
less
Act
therefore, today,
why
(s 1(1) oftheCompanies 1985).It is obvious,
the
of
for
be
should heldpersonally
that
one
means person, onemember
responsible covering debts 'his'
wishes
if
with
motivation:a person
this
one
Indeed, maysaythat toois a stipulation a punitive
company.
ofthe
to
he
adhere all the
via
limited
toobtain
requirements Companies
by
liability acting a company, must
is
This
of
number members. personal
that
only
upon
liability inflicted him
Act,including ofa minimum
does
the
of
alone.In fact, holding all theshares one person
he
in
after months, which wasacting
six
by
even
5
EEC Directive)
of
dissolution thecompany
the
about automatic
notbring
(Article oftheSecond
it
though is a causeforitsrequest.
343



[Vol. 53

The otheraspect of penetrating veil is the recognition a directinterest the
the
of
of
in
shareholder thecompany'sassets. An exampleof such an attitude thepartof the
on
is
for
of
legislature taxation.5There are, for instance,stipulations the apportionment
certainincomeof a 'close company'56
or
members
among its participators,57 requiring
ofa closecompany paytaxon transfers
to
madebythecompany, valuebeingapportioned
the
themaccordingto theirrespective
interests thecompany.58 members
in
The
are
among
hereas ifthey
ownportions thecompany's
of
Another
regarded
privately
property.
example
is section6 of the Law of Property
Act 1969, whichregardsthe interest a company
of
in premises theprivateinterest itscontrolling
as
of
thusenablinghimto get
shareholder,
rid of a protected
tenant.59
The courts,on theother
to
thisdirectrelationship
between
hand, were reluctant infer
theshareholder thecompany'sassets. Well knownare theremarks theMacaura
and
in
has
to
case:60'no shareholder any right any itemof property
ownedby thecompany,
for
he has no legal or equitableinterest
therein';61 further 'the corporator
and
on:
even ifhe
holdsall thesharesis notthecorporation neither noranycreditor thecompany
and
he
of
has any property
Macaura's
rights
legal or equitablein theassets of thecorporation.'62
claim was dismissed,therefore, the groundthathe had no insurableinterest the
on
in
assets.63
The courtswere notalways of thisstrict
attitude
approach.An exampleof a different
is to be foundin the illustration
givenby Lord Halsburyin theDaimler case, i.e. gold
the
beinghandedover to enemiesin an Englishmanufactured
bag.64Regarding money
to thecompany beingactually
as
to thehandsofitsshareholders a clearexample
is
paid
paid
of penetrating veil. It shouldbe pointedout thatpenetration notnecessarily
the
was
the
directand only resultof peepingbehindthe veil and thus establishing company's
the
character 'an alien enemy'(due to thecharacter its controlling
as
of
The
shareholders).
House of Lords could have adoptedthe approachthat'because of its enemycharacter
itlost its rights
as
hostilities, would a natural
during
personwho was an enemyalien.'65
Another
to
in
the
approachcould havebeen to orderthedefendant deposit money a closed
accounttilltheend of thewar.66 bothorders,theseparatelegal entity thecompany
In
of
would have been maintained,
withno penetration.
55 'In this
field legislature indeed
the
has
cracked
Gower citp121).
shell',writes
openthecorporate
(op
56 Defined s 414 of theIncome Corporation
in
and
TaxesAct 1988ands 104oftheFinance
Act 1989
forthepurposes theTaxesActs.
of
57 Section ofthe
423
and
Income Corporation
TaxesAct1988andseedetails Sched19tothis
in
Act.These
wererepealed theFinance
Act 1989,s 103 and Sched17.
provisions
by
58 Andsee Gower'sremark,
the
of
also
as
member
criticising application this
stipulation tothedissenting
well (op citp257).
59 Thisstipulation
would
havehelped landlord Turstallv Steigman
the
in
[1962]2 QB 593, CA, andmay
havebeenenacted
becauseof remarks thejudgesin that
case.
by
60 Macaurav Northern
Assurance [1925]AC 619 (HL).
Co.
61 ibid.p626at LordBuckmaster.
62 ibid.p633byLordWrenbury. an argumentcontrario,
As
a
Gower
citesthe
in
judgment Lee v Sheard
the
the
[1956] 1 QB 192,CA, where court
interest thecompany's
in
It
recognised plaintiffs
profits.
that
can
seems,
the
however, a distinction be madebetween twocaseson theground inLee itwas
that
that
diminished a result theaccident,
as
of
acknowledged theplaintiffs in thecompany's
part
profits
whereas
Macauraclaimed recovery moneys
the
of
under
insurance
in name the
of company,
policies the
i.e. heclaimed the
as beneficiary policies ifthe
ofthe
as
was
v
property his.And
compare
Malyon Plummer
3
the
the
[1962] AllER 884,where court
of plaintiff result interruption
as a
of
recognised lossofincome the
ofthecompany's
business toherhusband's
due
death.
Andseealso Esso Petroleum Ltd.v Mardon
Co.
[1976]QB 801 (CA).
63 According Smyth,
to
Soberman Easson,this
and
caseis an example carrying logicofSalomon's
of
'the
casetoabsurd
...
from
Salomon's that shareholder noinsurable
case
a
has
interest
lengths Howitfollows
from
(as distinguished ownership) theassetsofa wholly-owned
in
is
the
corporationbeyond writers'
comprehension' citp673).
(op
64 op citp316.
65 Smyth,
Soberman Easson,op citp674.
and
66 See sucha judgment Jansen Driefontein
in
v
Consolidated
MinesLtd. [1902]AC 484 (HL).
344


May 1990]

Peeping Behindthe Corporate Veil

In wartime tendency
the
is
the
certainly to penetrate veil. The case ofR v LondonCounty
Council67 an illustration.
is
Here a local authority
refusedto renew a cinematograph
licenceheld by a companyincorporated England,because a substantial
in
of
majority its
shareswere held by Germannationalsand threeout of its six directors
were Germans.
The court
the
or
that control at leasttheinfluence
whichenemy
upheldtherefusal,
holding
of
exertover theactivities thecompanyin exhibiting
nationals
films
was a relevant
might
wartime.
matter
it
for
Bray,J. said that is 'clearly
during
permissible thecouncilto consider,
when a companyis the applicant,who are the personswho controlthecompany.If it
clearlyappeared thatsuch personswere not fitto have the licences, thelicences ought
The
notto be granted.'68 approachhere is to considerthesituation iftheshareholders
as
wereto obtain licencein their
the
and
to
the
personal
capacity then decidewhether company
oughtto obtain it in its name.69
the
A special mode of penetrating veil is by way of declaringan agencyrelationship
between controlling
the
and
It
shareholder 'his' company. was VaughanWilliams,J.who,
in theSalomoncase, based hisjudgment an agencyrelationship,
that
on
stating thecompany
morethantheagentof Salomon theman.
had no personality its own, being nothing
of
it
The House of Lordsfound contradiction: thecompany an agent, had a personality
a
was
if
of
of itsown. As a consequence, House ofLordsdeniedtheexistence sucha relationship.
the
The current
wisdomis thatagency is one of thecases in whichthe courtwill liftthe
veil.70
But surelyagencydoes notprecede lifting veil, it is theotherway round.In
the
consequenceof peepingbehindthe veil, the courtsreach the conclusionthatan agency
exists between the controllingshareholder
and 'his' company. Agency,
relationship
the
the
is
therefore, onlya way by whichthecourtspenetrate veil: theyconstruct direct
in
of
interest the shareholders theircontrolled
by
company'sacts and property way of
between company itscontrolling
the
and
whether
shareholder,
imputing
agencyrelationship
a private
personor a holdingcompany.71Agencyis nottheaim, butthemeans of lifting
the veil.72The courts thus 'impose' an agency relationship which may be called
therefore
on
'implied' or 'constructive
agency'.73 This agencymustbe construed factual
wheretheholding thesharesis onlyone of thekey factors thatdecision.74
for
of
findings,
Ltd. [1915]2 KB 466.
Electric
Theatres
ex
67 R v LondonCounty
Council, p London& Provincial
68 ibid,at p472.
a
owned a German
to
the
with
of courts penetrate veilwhen ship
this
69 Compare judgment a refusal the
by
that
on
claimforitsrelease theground they
the
was
rejected shareholders'
company seized.Thecourt
bank
The
in
interest thecompany's
hadnodirect
case, where
[1948]P 205. In another
property: Unitas
over
and
the
was
were
held a Hungarian
shares
citizen, bank's
Hungarian
property seized handed tothe
by
nor
had
of
The
heldinfavour thebank:theadministrator nojustification
administrator. court
property
BankVoorHandelen Scheepvaart
of
the
for
company:
authority holding property a Dutchregistered
of
of
NVv Slatford
[1953] 1 KB 248. On thesamelineswas also the
judgment theFederalCourt the
343
&
Re
circumstances: International
US insimilar
Corporation, US 156(1952).
Telephone Telegraph
Benefit'
the
for
Andsee criticism Berger,
(1955) 55
Entity Stockholders'
by
'Disregarding Corporate
Col LR 808, 811.
and
Soberman Easson,op citp674.
70 See,for
op
op
example,
Pennington, citp53; Farrar, citp60; Smyth,
to
&
Co.
71 Firestone
having pay
[1957] 1 WLR 464, HL (a holding
company
Tyre Rubber v Llewellin
Ltd. [1953] 1 All ER 615 (a British
Re
of
taxeson theprofits itssubsidiary); F.G. (Films)
company
as
of
the
hence
of
considered agent itsAmerican
as
shareholder,
negated registrationitsfilm British).
the
of
and
Soberman Eassonas 'themost
Thelastcase is brought Smyth,
striking
example howfar
by
will
courts go' in thisarea (op citp675).
is
for
'a
as
72 Itseems
that
Caneis ofthesameopinion: company
acting agent itsshareholderonemethod
on facts' cit 1).
to
would
the
the
ofeffectively
(op pi
relationship have beproved the
"lifting veil",but agency
or
to
an
haveseemed
notice'.andsee Farrar:'The courts
73 A la 'constructive
willing construe express
of
for
(op
implied
agency thecompany itsmembers' citp61).
Ltd. v
Stone& Knight
in
as
74 See theother
for
considerations agencyrelationship delineated Smith,
with
of
one
suggestionsKahn-Freund regard
[1939]4 AllER 116.Indeed, ofthe
Birmingham
Corporation
of
ReflectionsCompany
as
he
case
of
decision which denominates'calamitous' 'Some
tothe
Salomon (the
not
as
could considered Salomon's
be
the
LawReform'
agent because
(1944)7 MLR 54) is that company
of factual
but
of
ofthe
Kahn-Freund,
'Corporate
relationship:
composition itsshare-holdings, because the
(1940) 3 MLR 226.
Entity'

345


TheModemLaw Review

[Vol. 53

are
It seemsthat
theserelationships established thecourtswiththesole aim of finding
by
for
theprincipal
is
judgment that
responsible theacts of his 'agent'. The basis fortheir
to
his
theprincipal manipulated agentto act according his specificinstructions,
has
thus
Not all juristsare happywiththis
'the agent' of any willpowerof its own.75
depriving
technique:
and
to
from
control
on
must shown theevidence exist maynotbe inferred
be
merely
agency
of
to
an
from
the
ofa company ownership itsshares... ifa judgewerefree infer agency
or
the
would that veilcouldbe lifted
be
the
more lessat will,then result
or
fact
mere ofcontrol,
as often he choseandthelaw wouldbe unpredictable.76
as
is
The technique imposing agencyrelationship used by thecourtswhentheyare
of
an
whichis consideredreal lifting veil.77
the
to
The
reluctant ignorethe veil completely,
afteragreeingthatthe
is
dictumof Lord Denningin Wallersteiner a good illustration:
were
commercial
whichwereoperated Dr Wallersteiner separate
concerns
by
legal entities,
he added:
of
He
were
Evenso, I am quiteclearthat
they
puppets Dr Wallersteiner. controlled
justthe
No
to
He
the
their
movement. danced hisbidding. pulled strings. oneelsegotwithin
Each
every
his
to
reach them.
of
into
Transformed legallanguage, were agents do as he commanded.
they
He wasthe
I
that court
should aside corporate
behind
them.amofthe
the
pull
principal
opinion the
he
veilandtreat
these
concerns being creatures for
as
whosedoings should andis,
his
be,
responsible.78

from statement the
the
that
One can noticetheelegantway in whichLord Denningshifts
of
own,to thelaterstatement
companies'werejust thepuppets'i.e. havingno entity their
that'theywere his agents.' In otherwords,by peepingbehindthe veil and discovering
and
thetruerelationship
betweenthecontrolling
shareholder thecompanies,theveil is
in
to
of
an
shareholder
penetrated theform creating agency
relationship, makethecontrolling
for
responsible the acts of the company.
Another
a
resemblea partnership,
the
aspectof penetrating veil is by making company
and byparalleling close relationship
the
the
to
of
Lord
between partners that shareholders.
Halsburydid so in a famouspassage in theDaimler case:
... what this
is
It
a
in
which described a 'corporation'? is, in fact, partnershipall
is
as
thing
that
constitutes
a partnership
the
the
of
who
and
except names, insomerespects position those
I shallcall themanaging
partners.79
This modeofpenetration manifest winding-up
is
in
cases. Whenthecourtis confronted
with application wind-up company theground itwouldbe justand equitable
an
to
a
on
that
to do so, it examineswhether liquidation
a
orderwould have been granted the same
in
to
circumstances a partnership. interpretation thesame term
The
of
withreference that
to
in partnership does not amount a penetration theveil. However, equatingthe
law
of
to
75 'theagency
in
construction
affords many
a convenient
circumstances
means escapefrom straitto
the
of rigid
ofthe
it
the
case. In fact, is probably most
convenient
jacket the
interpretation ruleinSalomon's
means
from practical
the
of
in
law
of
point view,to giveeffect English to themodern
theory parent
and subsidiary an economic
as
unit,'saysSchmitthoff,citat 309, andI cannot
op
agreemore.
76 L.S. Sealy,
CasesandMaterials Company (1985),p51.Smith,
in
Law
&
Ltd.
Stone Knight v Birmingham
as
for
[1939]4 All ER 116 serves an example that.
Corporation
77 See, forexample,
LordDenning's
of
of
for
quotation theargument counsel Dr Wallersteiner,
saying
that we wereto treat
'If
eachofthese
concerns beingDr Wallersteiner
as
himself
under
another
hat,
weshould be liftingcorer ofthe
a
not
veil.We should sending upinflames'
be
it
Wallersteiner
corporate
v Moir(No. 1) [1974]3 All ER 217, 238 (CA).
78 ibid(itallics
Thisis a very
of
'what
comes
down
added).
goodexample Latty's
recapitulation: theformula
of
about
is
to,onceshort verbiage
control,
instrumentality, andcorporate
agency
entity, that
liability
is imposed reach equitable
to
an
result.'
Subsidiaries Affiliated
and
(1936),p191).
(Latty,
Corporations
79 op citat p.316.

346


May 1990]


between shareholders that
the
to
which
existsbetween
and
relationship
partners adjudicating
does. The mostfamouscase in thiscategoryis Re Yenidje.80
Here the two
accordingly,
shareholders
werenoton speaking
and
the
for
terms, one ofthem
petitioned court a winding
order.81
Lord Cozens-HardyMR said:
up
Thisis nota partnership
...
not
the
to
strictly Butought precisely sameprinciples applyto
a case likethiswherein substance is a partnership theform theguiseof a private
it
in
or
company?82

the
the
Here,thecourt
goes toofar.Havingpeepedbehind veilanddiscovered composition
of thecompany,the courtshouldhave treated as a distinct
it
Otherwiseit
legal entity.
a
is
whenever company composedof sucha smallnumber shareholders,
of
mayseem that
an automatic
in
adherenceto partnership imperative.83
is
Certainly Re Yenidje,thecourt
had to beginfrom statutory
the
phrase'just and equitable'. But, as Lord Wilberforce
says
in the Westbourne
is
case,84'a company,howeversmall, howeverdomestic, a company
or
and
nota partnership evena quasi-partnership itis through just and equitableclause
the
commonto partnership
come in.'85The special character
thatobligations,
relations,
may
in
ofthecompany emphasised thefact
is
that somecases thecourt
it
mayfind impossible
by
the
in
to liquidate company, spiteof thecloselyheldshares,becauseofa specialstipulation
in the articlesof the company.86
Extending the Veil87
A third
the
techniqueof lifting veil is by its extensionso thatit embracesa bunch of
is
Here, the veil of each one of the components lifted- only to draw it
companies.88
Such is the case when a group of legal
again over a large numberof components.89
instead referring each one separately,
to
a
of
entities conducting common
is
so
activity, that
one can regard them all as a single going concern, under one extended veil of
Each
does notconcernus any more: it is 'the enterprise
entity
incorporation.90 corporate
entity'on which we focus attention.91
The technique
can be used in othercircumstances, illustrated the Gilford
as
case.92
by

3.

80 Re Yenidje
TobaccoCo. Ltd. [1916]2 Ch 426 (CA).
it
from economic
of
that
81 Eventhough wasprosperous the
point view.(Thecourt
explained itwasmanaged
bythecleversecretary.)
more
between shareholders:
the
directed judgment totherelationship
his
82 ibidat p432. LordWarrington
'It is true
of
of
but
are
on
company, in
by
they carrying thebusiness means themachinery a limited
Brothers [1965]2 All ER 692.
Ltd.
substance are partners'
they
(p434); and see Re Lundi
to
even
it
to
83 Thusitseems the
that court a tendency
has
automaticallyresort this
practice, when is totally
v
in
such
unnecessary thecircumstances, as in thecase ofRayfield Hands[1958]2 All ER 194. Here
which
the
to
a shareholder
basedhis claimon thearticles association,
of
obligated directors purchase
J.
that
to
theshares
a
to
from member
Vaisey, mentioned 'it is material remember
wishing sell them.
to
which
that private
is
classofcompanies
bearsa closeanalogy a partnership;
this
company oneofthat
I can'tseethe
relevance such comparison
of
of
in
well-known
With respect,
all
seethe
passage Re Yenidje.'
in thismatter.
v
84 Ebrahimi Westboure
Galleries
Ltd. [1973]AC 360 (HL).
85 op citat p380.
86 As in thecase ofRe Cuthbert
Cooper& SonsLtd.[1937]2 All ER 466; or In re K/9MeatSupplies
Ltd.
(Guilford) [1966] 1 WLR 1112(Ch d).
in
Law' in K. Hopt(ed),
of
to
the
87 Referred as 'piercing veil' byPrentice,
'Groups Companies English
in
Laws (1982), p99, 101.
of
Groups Companies European
and
to
Act
88 Referred in Sched4 to theCompanies 1985as 'group
by
companies' changed the1989Act
to 'group
undertakings'.
to
89 Referred in Sched2 to the1989Actas 'theconsolidation'.
in
See
must given themultinational
be
to
90 Specialregard
respect. Aronofsky, cit,and
op
companies this
cited
thereferences therein.
of
venture' 'associated
and
definition 'joint
91 Andsee alsothe
defining
special
compositions
undertaking',
of suchgroups Sched2, paras. 18 and 19 to the1989Act.
92 Gilford
MotorCo. Ltd.v Home [1933]Ch 935, CA.
347


The ModernLaw Review

[Vol. 53

enteredinto a covenantnot to solicit customersfromhis
Here, a managingdirector
a
The Court
He
of
employers. formed company his own and used itto solicitcustomers.
of Appeal heldthathis company
was a mereshamto cloak his wrongdoings an order
and
the
was issuedagainsthim.Howeverthecourtalso issuedan injunction
against company,
even though defendant neither member itsdirector.93 orderagainstthe
the
a
nor
was
The
if
its
how can it issue
companyis interesting: thecourtis to disregard separateentity,
an orderagainstit? Indeed, thisdisregard thecompany'sentity unnecessary, is
of
is
as
revealed thefinal
orderofthecourt.Thisextended veil: itdidnotmaketheartificial
the
by
distinction who may act in breach of the covenant- the defendant
of
or
himself the
the
themto be one unitcompany.It contained injunctions
againstboth,considering
like an enlargedlegal entity.94 question arises whether
The
thisjudgmentshould be
as 'penetrating veil.' Certainly, is thecase of a sole ownerof the shares
the
it
regarded
withhis companyas comparedto a groupof companies- sometimes is
it
together
difficult distinguish
to
between two.A distinction
the
baseduponthedirection thepointer
of
is suggested:whenit is the shareholder
whomwe wantto catch,while the companyis
stillregarded a separatelegal entity,
as
thenwe are penetrating veil - thedirection
the
of thevectoris from companyto theshareholders.
the
Howeverwhenit is thecompany
whichwe wantto catchby reachingit through shareholders,
thenwe are extending
its
theveilto engulf company well - thedirection thevector from shareholders
the
as
of
is
the
to the company.95
however,the veil is extendedin thecase of severalcompanies.The most
Generally,
notableexampleof legislation provisionin theCompaniesAct, accordingto whicha
is
mustincludein its accountstheprofits
earnedor losses suffered its
holdingcompany
by
withthecollectiveassets and liabilities- groupaccounts.96
This
subsidiaries,
together
also in theCorporation Acts.97
of
Tax
The extension theveil
groupaccountis recognised
can also ensue in an advantageforthecompany,as in thecase of dividendspaid by one
memberof the groupto another98 in the claim forgroup relief.99
or
The courtshave started follow suitand in some cases have takenthisapproachto
to
a groupof companies,without
too
to
attributing muchimportance the separateentities
00
of itsvariouscomponents. This has sometimes
been done whenthegroupwas identicto
as
the
the
Nevertheless court
the
to
93 He gothiswife form company.
regarded company hisdevice mask
on
in
of
theeffective
carrying of hisbusiness breach his covenant.
true
Deeds [1940]Ch 777: 'It is no doubt to
J
Trust
94 See also Farwell inRe London
Society's
Housing
of word,
and limited
the
are,
legal
separate entities,
company inonesense the
society the
saythat registered
and
structure a different
with
and
the
are
but... they insubstance intruth
exactly samething a different
of
with question thissort... is
a
...
the
way
machinery In myjudgment, onlypractical ofdealing
...
in
costume'.
the
to treat thispurpose twothings as thesamething different
for
Ltd.
Ltd
Alec
95 See, as another
Britain) [1985] 1 WLR 173:
example, Lobb(Garages) v TotalOil (Great
to defendant
would leased the
be
financial
difficulties agreed itsproperty
itwas
that
the
tosolve company's
to
was
The
for number years leased
a
of
backtothe
and
company. lease-back granted itstwoshareholders
that
maintained
The
a
andonly
rather tothe
than
directors,
company,
includingtieprovision. defendant
was
of
this provision notin restraint trade
tie
was
becausethelease-back notto thecompany.
Dillon,
a
the
'The
to
L.J.rejected allegation: court ample
this
has
veil,
power pierce corporate recognizecontinued
of
of
and
that
quoad restraints
identity occupation hold,as it should, Totalcanbe in no better
position
to company'
if
the
trade granting lease-back MrandMrsLobbthan ithadgranted lease-back the
the
to
by
to
and
(belown 111) was notmentioned).
(p178, referring Guilford D.H.N. Notethat
Woolfson
96 Section oftheCompanies 1985.Andsee also Sched2 to the1989Act,to become
227
Act
Sched4A
to the1985Act,andSched3 (substituted Sched5 to theCompanies 1985). The term
for
Act
'group
is
of European
there
inconformity the Directive the
with 7th
companies' substituted by'group
undertakings',
Communities
(83/349/EEC).
'the
in
favour Salomon hasbeen
the
rule
97 As Gower
outside
creditor whose
states, only
mitigated
substantially
is theRevenue' citp120).
(op
98 Section oftheIncome Corporation
247
and
Taxes Act 1988.
IV
99 See Chapter oftheIncome Corporation
and
Taxes Act 1988.
of
100 See 'Liability a Corporation Actsofa Subsidiary Affiliate'
for
or
(1958) 71 HarvLR 1122.

348


May 1990]

the
Veil
Behind Corporate
Peeping

ally or wholly owned.'0' When the court was satisfied,however, that the holding
it
companydid not have fullcontrolover the subsidiary, did not regardthemas one
02
entity.
Ltd. v London Borough of Tower
is
A good illustration DHN Food Distributors
Hamlets.'03 Here a company claimed compensationfor disturbanceowing to the
of
to
the
of
company, shareholders which
expropriation land. Yet thelandbelonged another
about
Gower'sdictum
LordDenningagreedwith
to
wereidentical thoseof thetwoothers.
a
entities thevariouscompanieswithin group,
of
to
thetendency ignoretheseparate
legal
of
to
havingregardinstead theeconomicframework thegroupas a whole. He emphasised
that
...
of
a
ownsall theshares thesubsidiaries
the
thisis especially case when parent
company
the
do
to
and
and
are
hand foot theparent
Thesesubsidiaries bound
company must justwhat
be
as
for
should, present
purposes, treated
says ... The three
companies
company
parent
one.104
in
to
It is interesting analyse the court's attitude thiscase havingregardto our four
of
the
was peepingbehind veil to see theshareholdings thethree
Its first
step
categories.
of
at stake. It revealedthatthe shareholders
(and directors) all threewere
companies
the
of
identical.05This is actuallya penetration theveil, by recognising directinterest
Then it proceededto penetrate
in
of each of thecomponents theassets of theenterprise.
the
the veil, by applyingthe partnership
approach: 'the group is virtually same as a
in which all the threecompanies are partners.''06 The thirdstep is the
partnership
of
extension the veil to cover the entiregroup,seeing it as one, comprehensive
entity:
not
to
'These companiesas a groupare entitled compensation onlyforthevalue of the
for
land but also compensation disturbance.'107
to
himself the specificfacts,agreed that'this is a case in which
Goff,L.J., limiting
and
of
to
veil."'08
one is entitled look at therealities thesituation to piercethecorporate
held thepremisesin
that
was based upon thefactualfinding one company
His judgment
the
for
trust the plaintiff.'09
Shaw, L.J. emphasised factthatthe companiescould have
it
Therefore was
so
manner as to legitimately
acted in another
qualifyforcompensation.
in
be
should relationship ignored a situation
this
should
benefit;
'Whythen
they
only
justthat
and
JBL218. AndseeRe Courage
'The
Owned Controlled
101 See C. Schmitthoff, Wholly
[1978]
Subsidiary'
v
Ltd.[1987] 1 All ER 528, Ch D: 'A
and
Schemes.
Pension
Ryan Imperial
Brewing Leisure
Group's
of
but the
of
not the
is
scheme established for benefit a particular
company, for benefit those
pension
to
the
be
can
and
in
undertaking; provision properly madefor scheme continue
employed a commercial
from
is transferred one company
ofthe
the
their
benefit on a reconstruction group, undertaking
for
if,
the
and
within group, remains
the
to another
J.).
identically same' (at p531,perMillett,
to
the
Gas
Gas
102 Multinational v Multinational Services
[1983]2 Ch 258 (CA). It also refused extend
it.
restricted
ofthe
when interpretation statute
the
was
the
veil,eventhough sameownership involved,
as
of
owner' thevessel,itwas construed
to
the
Thus,when statute
applied
specifically the'registered
of
vesselsownedby separate
to
of
the
companies thesame
negating possibility itsapplication other
MR.
of
The
shareholder: EvpoAgnic
[1988] 1 WLR 1090at p1097,perLordDonaldson Lymington
103 [1976]3 All ER 852.
2
Ltd.
&
see
at
104 ibid p860.And Holdsowrth
[1955] WLR352,mentioned
(Harold) Co. (Wakefield) v Caddies
in hisjudgment.
vehicles
of
was
a
and
was
105 Onecompany importing marketing
groceries,second theowner thebusiness'
to first,
them the
and
the
owned premises lent
and third which
the
with transportation,the
anddealt
one,
of
was in theminds
'What
was
The
was later
by
purchased thelatter. wholetransaction complicated.
to
it
modeofproceeding is difficult fathom',
this
in
advisers adopting tortuous
D.H.N.'s professional
remarked
Shaw,L.J. (at p866).
the
between
the
of
M.R. The difficulty establishing realrelationship
106 ibidat p860,by LordDenning
that
said
them
here:
is
having beforehand they
although
companies manifested regarding tobe partners,
to
were'boundhandand foot theparent
company'.
107 ibid.
108 ibidat p861.
of
the
in
interest thelanddoes notevoke,however, lifting theveil.
of
109 Thisfinding an equitable

349


The Modern Law Review

[Vol. 53

in whichto do so does notprevent
in
abuse butwouldon thecontrary
result whatappears
to be a denial of justice?'10
withregard land, the
In thelatercase of Woolfson,"'also concerning
to
compensation
House ofLordscastsomedoubton whether CourtofAppeal intheDHN case 'properly
the
thatit is appropriate piercethecorporate
to
veil onlywherespecial
appliedtheprinciple
that
circumstances
exist,indicating it is a merefacadeconcealingthe truefacts.'"2This
the
onlyagainst shareholders.
presumably
expressesLord Keith'sview, that veil is lifted
However, the DHN case is only one of manyin which the veil is also liftedin their
favour.13 Goff,L.J. said, 'the realitiesof the matter
should decide the case.'"4
As
The practiceof extending veil is muchmore developed in the US."5 The results
the
ofextending veilto include general
the
are
the
affiliated
entity numerous:
holding
enterprise
conductof one of
transport
companiesliable in tortfor damages caused by negligent
the holdingcompanyas responsiblefor the acts of its subsidiary;"7
them;16 treating
the
claimbecauseitsholding
was
in
rejecting subsidiary's
company involved thedetrimental
act caused by a third
the holdingcompany'sclaim in the bankruptcy
party;118
rejecting
of
of
the
proceedings its subsidiary;"9
preventing circumvention theHapbur Act,known
as the Commodities
Clause; and manyothers.
In theUK, however,'thejudicial innovations even moretimid
are
thanthelegislative',
in Gower's words.'20The Cork Committee'2'stressed the necessityfor reforming
in
withregardto outsidecreditors'rights bankruptcy a
in
of
legislation thenear future
but
of
which
subsidiary
company, withtheexception itsproposalfor'wrongful
trading',
was includedin the InsolvencyAct 1986, its proposalshave notbeen implemented.
110 ibidat p867. The senseofjustice to 'lifting veil' in itsthree
led
the
distinct
to
categories, thebenefit
of thecompanies
themselves.
v
Council1978SLT 159,38 P & CR 521 (HL).
111 Woolfson Strathclyde
Regional
112 PerLordKeith Kinkel p526.However distinguished
of
at
he
between two
the casesonthe
basis control:
of
intheDHN case,thecompany
which
owned landwasthewholly
the
owned
of
subsidiary thecompany
that
carried thebusiness, latter
on
the
also in complete
of
In
control thesituation. theWoolfson
being
was
total
control the
of company
the
the that
case,there notsuch
owning land.Moreover, fact theclaim
was brought thepart one oftheshareholders,
on
of
shares,
holding
only2/3ofthecompany's
proves
thedisparity
between shareholders
the
and
themselves between main
the
shareholder thecompany.
and
See tooNational
DockLabourBoardv Pinn& Wheeler [1989]BCLC 647, where
Ltd
was
Woolfson
on.
relied
113 Indeed,
LordDenning states
MR
not
so
'They
categorically: should be treated
separately as tobedefeated
on a technical
not
of
which
should
be
point.
Theyshould be deprived thecompensation
justly payable
for
disturbance' p860).AndShaw,
L.J.stresses point 'Ifeachmember thegroup regarded
the
that
of
is
(at
as a company isolation,
in
at
in
calls
nobody all couldhaveclaimed
compensationa case which
plainly
forit' (p867).
114 Farrar also of thisview: 'Thereseemsto be a general
is
to
reluctance apply [Salomon]
the
principle
in a pedantic where result causeinjustice' citp65).
the
will
way
(op
115 See '"Merger" Agency a Subsidiary
or
of
as
of Liability the
of Parent
CorporationGrounds the
Corporation
forActsof itsSubsidiary'
of
(1927) 27 Co LR 702; Berle,'The Theory Enterprise
(1947) 47
Entity'
Col LR 343.
116 Ross v Pennsylvania Co., 106 NJL536; Berkey Third
RR
v
Avenue
Ry.,244 NY 84.
117 Costanv ManilaElectric
Co., 24 F (2d) 383.
118 RapidTransit
Construction v City NY, 182 NE 145.
Co.
Subway
of
v
119 Taylor Standard & Electric 306US 307. Forother
Gas
Co.
references this
on
see
above.
subject Latty,
Andseealsothe
debate
between Landers, Unified
J.M.
'A
to
Affiliate
Approach Parent
Subsidiary
questions
inBankruptcy' U ChL Rev589 (suggestingremedies case ofbrankruptcya subsidiary,
42
3
in
of
with
claims theholding
of
with
claims:veilpiercing,
the
company
competing third
party
enabling creditors
ofthesubsidiary gettheir
to
claims
from holding
the
subordinationtheholding
of
company;
company's
claims those third
to
of
and
of assets the
of subsidiary the
and holding
parties; consolidationthe
companies
intoone pool in favour thecreditors) R.A. Posner,'The Rights Creditors Affiliated
of
and
of
of
U Ch L Rev499 (objecting suchprocedure
43
to
from
economic
of
Corporations'
point view)andthe
answer Landers,
of
'Another
Word Parent
on
Subsidiaries AffiliatesBankruptcy'U ChL Rev527.
and
in
43
120 Gower, citp133.Andsee theremark Templeman, inRe Southard Co. Ltd.[1979]1 WLR
of
L.J.
&
op
1198, 1208.
121 Insolvency and Practice:
Law
Committee
Report theReview
of
(1982) Cmnd8558.
350


Peeping Behind the CorporateVeil

May 1990]

4. Ignoring Veil
the
Themost
extreme oflifting veilis when courts
form
the
the
it
This
ignore completely.'22
is as a sanction which courts when
to
the
turn
think thecompany
that
was
approach
they
notfounded commercial other
for
or
sound
butonlyas a means defraud
or
to
grounds,
or
defeat
creditors to circumvent
laws.
Thecourts many
have
names describe company
to
a
which not genuine 'Cloak',
is a
one.
are
'scheme','puppet'or 'bubblecompany' buta few.'23
'sham',
'instrumentality',
the
of
shareholder contemptible,is
is
it
However,
although behaviour thecontrolling
of
the
that
has
suggested thismethod disregarding company's
separate
entity gonetoo
far. only itagainst legalsystem:
Not
the
taken
is
it
the
themselves
literally,deprives courts
ofthepossibility issuing
of
orders
thecompany such,ifandwhen
as
deem
against
they
for
when court
the
fit.
that company nomore
states the
was
than device
'a
Thus, example,
he
a
his
anda sham, maskwhich holdsbefore facein an attempt avoidrecognition
to
it
its
issuedlateron against same
this
by theeye of equity,"24 contradicts ownorder
125
company.

does notalwaysdo justice,
the
to
of
The desire thecourt ignore company
especially
conventional
in
can
In
are
other
when
cases,a remedy befound a more
parties affected. such
to
of
a transferland a controlled
for
action.
the
to
Thus, instance,
namely nullify hurtful
way,
of
contract sale when
of
in
to
itsowner order evadeexecution a personal
by
company
the
or
without
can
has
itsprice increased be repudiated,
condemning ignoring company
Act
dealt
to
is
This
itself. approach analogous thesituations with theInsolvency 1986;
by
'shall
the
to
the
of
a
creditors, court
when transfer assetsis madewith intention defraud
it
havebeen
to
the
fit
as
makesuchan order itthinks forrestoring position what would
The
into
had
individual notentered that
transaction.'"26 samecan be said of a
if that
be
would
the
to
of
transfer property - or from a controlled
remedy
company: right
to
itsassets a shareholder
'If
itself. a corporation
thetransfer
as
todeclare void
conveys
of
on
be
the
of
infraud creditors, assets
conveyance,'
may reached principles fraudulent
of
to
If
Hennand Alexander.'27 a contracting tries avoidtheexecution the
write
party
of
is
that
mayorder
contract,
maintaining a company theproprietor theland,thecourt
the
to
to
shareholder havetheresolutions
him thecontrolling
as
necessary complete sale
his
a
transfers assets
hand person
28
authorities.If on theother
thecompany's
by
passed
the
seizure thecreditors, court
so
his
under control as to avoidtheir
to a company
by
as
in
of
him
disposing hisshares thecompany,
mayissuean injunction
restraining from
assets.Thereis no need
of
thedisposition these
himfrom
wellas restraining
procuring
to ignorethe separateexistenceof the company.'29

the
or
and
calledbythecourts theauthors
is
122 Thisis what being
'disregarding' 'ignoring' veil.As those
of
an
to
to
I
the
describe entire
names
subject havedecided dedicate thiscategory epithet itsown.
Caramel
v
Trustee Patent
In
123 See, for
[1899]1 QB 612; Gonville's
exp
example, re CarlHirth, Trustee
v
Regional
Co. Ltd. [1912]KB 599; In re Fasey,ex p Trustees
[1923]2 Ch 1; Woolfson Strathclyde
1979 SC (HL) 90. Andsee also supra,n 14.
Council
v
124 Jones Lipman
[1962] 1 WLR 832.
the
both contracting
of
decreed
later
party
125 Thecourt
performancethesale ofthelandagainst
specific
of
nowtheowner the
havebeenexecuted thecompany,
As
andhiscompany. thesale should
being
by
the
in
the
shows flawin theprevious
fact
disregarding
by
approach thecourt totally
land,this initself
the
that
this
of
Sealysummarises case,saying 'Ignoring veil,Russell,
legalentity thecompany.
separate
the
It
that use of
and
the
both defendant hiscompany'. seems
J. ordered
against
performance
specific
this
the
of
the
'penetrating veil' instead 'ignoring veil' wouldhaveremoved inner-contradiction.
239. Andsee also s 240.
126 Section
That
law
from
with
starts
&
corporate principles'.
127 Henn Alexander, citp.347. Thischapter
'Apart
op
and
is
the
or
that
too
authors think ignoring rejecting company unnecessary; see also
that
means these
ibid
references n 15.
their
Ltd.
&
128 As in Elliott Elliott
(Builders) v Pierson[1948]Ch 452.
form
that
remarks 'thetechnical oftheinjunction
Ltd.
129 Re a Company [1985]BCLC 333. Gore-Browne
and
of
concerned' cit 1.4.3).
form theEnglish foreign
(op
the
companies
respected corporate
351


TheModemLaw Review

[Vol. 53

Commentary
to
therecan be no numerus
It is impossible listthe cases in whichtheveil will be lifted:
dictum theveil willbe lifted
whenitis used to perpetrate
that
clausus. Indeed,thegeneral
of
or
a
or
fraud to circumvent statute, whentheenemy
character thecompanyis relevant,
is both insufficient inaccurate.As forthe last, it has been shownthattainting
and
the
is
ones, in
statutory
companywithan alien character one of manyexamples,including
whichthe courtpeeps behindthe veil and looks at the corporators,
and
only to return
to
As forthetwoother
addressitself thecompany a separate
as
reasonsgiven
legal entity.
a
forignoring veil - perpetrating fraudor circumventing statute theapproach
the
a
as
seems neither
necessarynor right, other,less rigorousremediesare at hand.
to
Generally,the courtsare less reluctant extendtheveil whendealing witha group
of companiesthanto penetrate whendealingwithone company.130
it
When a groupof
is conducting amalgamated
one
eventhough onusofproofis upon
the
business,
companies
of
theplaintiff is seekingtheextension theveil, it seemsthatthecourtsare satisfied
who
with
betweenthecompanies. Then they
primafacie proofon his partof theconnection
tendto demandstrong
evidencefrom defendants provethateach of thecompanies
the
to
and
was managed itsownboardofdirectors that did notreceiveordersor instructions
it
by
and intensive of management decision
from others.If thecase is one of firm
the
ties
and
and thesubsidiary whollyownedby theholdingcompany, courtstendto
is
the
making,
them one goingconcern,
as
to
a
by
generally attributing them 'constructive'
regard
agency
relationship.
Much morethanthat neededforpenetrating veil whendealingwitha closelyheld
is
the
Here as wellthemodusoperandi thecompany an important A strong
of
has
role.
company.
of
shareholder as distinct
fromthe director
personalinvolvement the controlling
in thebusinessof thecompany
mustbe showntojustify
Such circumstances
penetration.
withtheformal
laid
maybe: non-compliance
requirements downin theCompaniesActs;
inadequacy of capitalisationof the company; 'milking' the company by its shareand intermingling theaffairs thecontrolling
of
of
with
shareholders
holders;'3association
those of the company,etc.
of
examination thefacts thecase, reference
of
must made
be
However,besidea careful
to further
matters
whichthe courtsconsider.These include:
or
(1) thetypeof company a closelyheldcompany,
subsidiary holding
company;'32
the motivesfor formation the company- commercialones, as opposed to
of
(2)
fraudulent
creditors,
purposes,like defeating
evadinglaws, etc;
etc;'33
(3) the typeof legal action - a claim in tort,contract,
bankruptcy,
of
of
(4) theidentity thepersonseekingthelifting theveil - an aggrievedthird
party
or the controlling
shareholder
himself.'34
v
130 Compare
TunstallSteigman
2
a landowner's would
claim
have
amounted
[1962] QB 583(where
granting
to lifting veilinherfavour)
the
v
with
Willis Association UniversitiestheBritish
Commonwealth
of
of
with
of
In
on
case
[1964]2 WLR 946 (similar
situation, a group companies). hiscomment thelatter
out
'thedecision theWillis
in
case appears givegroups "entities",
to
of
such
Wedderburn
points that
as holding subsidiary
and
treatment
with
and
companies,
preferential
compared thesmallincorporator
hisone-man
(28
company' MLR 62, at70).
more
than
131 Thisis a consideration in use in theUS judicature in theUK. See Henn& Alexander,
op
citp349,references n 21.
in
132 The explanation Landers thefact thecourts more
of
of
that
are
inclined lift veil with
to
the
to
regard
a subsidiarythenotion thecorporate protects shareholders
is
that
form
the
and
against
personal
liability;
of corporate
fiction the
in context related
'sincedisregard the
of
does
additional
corporations notinvolve
for individual
the
behind
limited
remains
undisturbed'
liability the
stockholder, basicpolicy
liability
(J.M.
'A
to
affiliate
in
Landers, Unified
41
Approach Parent
Subsidiary
Questions Bankruptcy', U ChL Rev
589, 622.
133 'in matters property contract, courts
of
and
the
should
be
hesitant lift veilinresponse
to the
surely most
to superficial
considerations "common
of
sense"or "reality" "fairness"',
or
writes
Sealy,op citp.45.
352


May 1990]


and
of
the
now thegeneraldescription lifting veil in theliterature,
Let us re-examine
about which
see how it fitsintoour categories.Let us take the statement Farrar,'35
by
the case as I've
to
an Australian
judge says: 'This is as good an attempt summarise
the
seen."36Farrarliststhe main legal categoriesunderwhichthe cases of lifting veil
may be headed as follows:
(1)
(2)
(3)
(4)
(5)
(6)
(7)

agency;
fraud;
group enterprises;
trusts;
enemy;
tax;
the companieslegislation.
Fromour viewpoint,
thislistis composedof thejustifications lifting veil, the
for
the
considerations thecourtsand themeansby whichtheveil is actually
of
lifted. analyse
To
thelistin moredetail: 'agency' and 'trusts'are butways of penetrating veil; 'fraud'
the
for
the
is one of thejustifications lifting veil; 'group enterprises' the case in which
is
the veil be extended;'enemy' is one of the cases in whichpeepingbehindthe veil is
of
necessary,witha possible penetration the veil as a result;'tax avoidance' is one of
of
the considerations the courtsforlifting veil, eitherby merelypeepingbehindit
the
or in specificinstances,
ones, also penetrating and the last - 'the
it;
mainlystatutory
enactments
containing
provisions
companieslegislation'- is but one of the legislative
forlifting veil in all of the first
the
threecategories.
is
to
The description Charlesworth also relevant our categorisation:
by
in
Thereare exceptions theprinciple Salomon's
to
the
and
case, where veil is lifted thelaw
the
and
instead the
to economic
realities
behind legal
the
entity paysregard
disregards corporate
the
In
to
facade. these
cases,'thelaweither behind corporate
exceptional
personality the
goes
ofeachcompany favour the
in
of economic
or
the
individual
members, ignores separate
personality
of
constituted a group associated
concerns'.'37
by
entity
thispassage is generally
used fordescribing
whenthecourtswill lifttheveil,
Although
we can detectin it the answerto the questionhow it is done. Indeed, it covers almost
of
the
to
is
all thecategoriesof lifting veil: thefirst be mentioned thetotaldisregard the
of
and
veil, followedby thepenetration, thelast is theextension theveil. Each of these
the
whether company
the
necessitate peepingbehindtheveil as itsfirst
step,to ascertain
treatment.'38
in questionmeritsfurther
that
To conclude,itis suggested our four
mayhelpto providea better
insight
categories
in
each category
the
and
intothestatutory judicialprocessoflifting veil,bearing mindthat
and
will have its own appropriate of considerations justifications.
set

Gower
of
for
of
&
134 See Henn Alexander, citCh.149: 'Disregard Corporateness Benefit Shareholders'.
op
from
an
toprotect incorporator theunforeseen
intervention
that
disadvantageous
suggests 'Legislative
one
mentions suchcase - s 6 of
is rare',op citp136. Yet he himself
of
consequences incorporation
have
the
are
there cases in which courts
Act
theLaw of Property 1969.Andin theIsraeli
judicature
themselves.
of
and
the
lifted veil upontherequest forthebenefit themembers
Law
135 Farrar's
Company (2nded., 1988)p60.
J.
Ltd
Services v Velnah Ltd.(1986) SC(NSW) 11 ACLR 108, 177,byYoung,
Concrete
136 Pioneer
Pty
is
Law
Gower, citp112. Andsee
137 Charlesworth,
op
ed., 1987),p27. The citation from
Company (13th
and
also a similar
by
approach Northey Leigh,op citp20.
is
situation often
of
merely
138 Thelastphrase Gower's
above)is 'Thelatter
summing (op citpi 12,cited
up
certain
individualised characteristics
after
in
casesthe
of former.'
anexample the
court, having
Indeed, both
of
latter
result itsinterest
to company; inthe
to
itself the
case,the
ofthe
shareholders
returns address
only
of
is
in theshareholderstheelongation theveilovera new,different
body.
353


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