Friday 14 May 2021

UK: Supreme Court considers corporate veil piercing - again

Judgment was delivered today by the Supreme Court in Hurstwood Properties (A) Ltd & Ors v Rossendale Borough Council [2021] UKSC 16. The case provided the opportunity for the court - once more - to consider corporate veil piercing, against the background of its earlier decision in Prest v Petrodel Resources Ltd & Ors [2013] UKSC 34.

In Prest, Lord Sumption delivered the leading judgment and accepted that English law contained a principle that the corporate veil could be pierced in (very) limited circumstances - what he termed the "evasion principle".  There was, nevertheless, discussion amongst his fellow justices about whether the principle should remain - and, indeed, if it existed. 

In today's case we learn some more about current thinking.  Lords Briggs and Leggatt delivered the leading judgment (with whom Lords Reed, Hodge and Kitchen agreed) and observed:
[In Prest] Lord Walker of Gestingthorpe questioned whether “piercing the corporate veil” is a coherent principle or rule of law at all, as opposed to simply a label used to describe the disparate occasions on which some rule of law produces apparent exceptions to the principle of the separate juristic personality of a corporate body (para 106). Although this is not the occasion for reaching any final view, we are inclined to share Lord Walker’s doubts .... Even if there is an “evasion principle” which may in “a small residual category of cases” (per Lord Sumption) justify holding a company liable for breach of an obligation owed by its controlling shareholder, we are not ourselves convinced that there is any real scope for applying such a principle in the opposite direction so as hold a person who owns or controls a company liable for breach of an obligation which has only ever been undertaken by the company itself".

A summary of the case is available here and in the below recording (if the recording does not appear below, it can be viewed here): 

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