UK: England and Wales: piercing the corporate veil

Earlier this year, in Antonio Gramsci Shipping Corp v Stepanovs [2011] EWHC 333 (Comm), Burton J. held that that there was a good arguable case that the veil of incorporation should be pierced in order to make liable under various charterparties the ultimate beneficial owners of companies which had been formed for the perpetuation of fraud. In reaching this decision, he observed that there was "no good reason of principle or jurisprudence why the victim cannot enforce the agreement against both the puppet company and the puppet who, all the time, was pulling the strings. ... I accept ... that the puppeteer can be made liable, as a party to the contract, but that as a matter of public policy he cannot enforce the contract" (at paras. [26] and [27]) .

Last week, in VTB Capital Plc v Nutritek International Corp [2011] EWHC 3107 (Ch), Arnold J. declined to follow much of Burton J.'s reasoning, observing that the decision was "not so much a decision to pierce the corporate veil as a decision to ignore privity of contract ... Neither in Gilford v Horne [1933] Ch 935 nor in Jones v Lipman [1962] 1 WLR 832 were damages awarded against the puppet for breach of the puppeteer's contract. Rather, equitable relief was granted against the puppet to stop the puppeteer evading his own contractual liability. Thus the puppet was not treated as being party to the puppeteer's contract" (para. [101]).