990
Year 990 ( CMXC) was a common year starting on Wednesday (link will display the full calendar) of the Julian calendar.
Events
By place
Europe
* Al-Mansur, ''de facto'' ruler of Al-Andalus, conquers the Castle of Montemor-o-Velho (mode ...
Ch 433 is a
UK company law
The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary lega ...
case on
separate legal personality
In law, a legal person is any person or 'thing' (less ambiguously, any legal entity) that can do the things a human person is usually able to do in law – such as enter into contracts, sue and be sued, own property, and so on. The reason for ...
and
limited liability
Limited liability is a legal status in which a person's financial liability is limited to a fixed sum, most commonly the value of a person's investment in a corporation, company or partnership. If a company that provides limited liability to it ...
of shareholders. The case also addressed long-standing issues under the English
conflict of laws
Conflict of laws (also called private international law) is the set of rules or laws a jurisdiction applies to a case, transaction, or other occurrence that has connections to more than one jurisdiction. This body of law deals with three broad ...
as to when a
company
A company, abbreviated as co., is a legal entity representing an association of people, whether natural, legal or a mixture of both, with a specific objective. Company members share a common purpose and unite to achieve specific, declared ...
would be resident in a foreign jurisdiction such that the English courts would recognise the foreign court's jurisdiction over the company. It has in effect been superseded by '' Lungowe v Vedanta Resources plc'', which held that a parent company could be liable for the actions of a subsidiary on ordinary principles of tort law.
The decision's significance was also limited by the House of Lords decision in '' Lubbe v Cape plc'' and the groundbreaking decision in ''
Chandler v Cape plc
''Chandler v Cape plc'' Cape Industries plc was a UK company, head of a group. Its subsidiaries mined asbestos in South Africa and shipped it to Texas, where a marketing subsidiary, NAAC, supplied the asbestos to another company in Texas. Employees of the Texas subsidiary became ill, with asbestosis. They sued Cape and its subsidiaries in a Texas court. Cape was joined and argued there was no jurisdiction to hear the case. Judgment was still entered against Cape for breach of a duty of care in
negligence
Negligence (Lat. ''negligentia'') is a failure to exercise appropriate and/or ethical ruled care expected to be exercised amongst specified circumstances. The area of tort law known as ''negligence'' involves harm caused by failing to act as ...
to the employees.
The tort victims tried to enforce the judgment in the UK courts. The requirement, under
conflict of laws
Conflict of laws (also called private international law) is the set of rules or laws a jurisdiction applies to a case, transaction, or other occurrence that has connections to more than one jurisdiction. This body of law deals with three broad ...
rules, was either that Cape had consented to be subject to Texas jurisdiction (which was clearly not the case) or that it was present in the US. The question was whether, through the Texas subsidiary, NAAC, Cape Industries plc was ‘present’. For that purpose, the claimants had to show in the UK courts that the veil of incorporation could be lifted and the two companies be treated as one.
Scott J held that the parent, Cape Industries plc, could not be held to be present in the United States. The employees appealed.
Judgment
The Court of Appeal unanimously rejected three allegations: that Cape should be part of a single economic unit, that the subsidiaries were a façade and that any agency relationship existed. All these were rejected " on the facts". Slade LJ (for Mustill LJ and Ralph Gibson LJ) began by noting that to ‘the layman at least the distinction between the case where a company itself trades in a foreign country and the case where it trades in a foreign country through a subsidiary, whose activities it has full power to control, may seem a slender one….’ He approved Sir Godfray’s argument ‘save in cases which turn on the wording of particular statutes or contracts, the court is not free to disregard the principle of Salomon… merely because it considers that justice so requires.’ On the test of the ‘mere façade’, it was emphasised that the motive was relevant whenever such a sham or cloak is alleged, as in '' Jones v Lipman''.
A company must be set up to avoid existing obligations, not future and hypothetical obligations not yet arisen. The court held that one of Cape's subsidiaries (a
special purpose vehicle
A special-purpose entity (SPE; or, in Europe and India, special-purpose vehicle/SPV; or, in some cases in each EU jurisdiction, FVC, financial vehicle corporation) is a legal entity (usually a limited company of some type or, sometimes, a limited ...
incorporated in
Liechtenstein
Liechtenstein (), officially the Principality of Liechtenstein (german: link=no, Fürstentum Liechtenstein), is a German language, German-speaking microstate located in the Alps between Austria and Switzerland. Liechtenstein is a semi-constit ...
) was in fact a façade, but on the facts, it was not a material subsidiary such as to attribute liability to Cape. Cases like ''Holdsworth'', ''Scottish Coop'' and ''DHN'' were distinguishable on the basis of particular words on the relevant statutory provisions. It noted that ''DHN'' was doubted in ''Woolfson''.
The court separately had to consider whether Cape had established a presence within the United States, such that the English court should recognise the jurisdiction of the United States over Cape, and enforce a US judgment against it (one of the criticisms made of the decision by US lawyers is that the Court of Appeal fundamentally misunderstood the nature of the federal system in the US, but that misunderstanding does not affect the general principles laid down by the court). The Court of Appeal held that for a company to have a presence in the foreign jurisdiction, both of the following must be established:
#the company has its own fixed place of business (e.g. a branch office) in the jurisdiction from which it has carried on its own business for more than a minimal time.
#the company's business is transacted from that fixed place of business.
On the facts, the Court of Appeal held that Cape had no fixed place of business in the US such that recognition should not be given to the US judgment awarded against it.
Significance
After the decision (which has been followed), English law has suggested a court cannot lift the corporate veil except when construing a statute, contract or other document; if a company is a "mere façade" concealing the true facts or when a subsidiary company was acting as an authorised
agent
Agent may refer to:
Espionage, investigation, and law
*, spies or intelligence officers
* Law of agency, laws involving a person authorized to act on behalf of another
** Agent of record, a person with a contractual agreement with an insuranc ...
of its parent, and apparently not so just because "justice requires" or to treat a group of companies as a single economic unit. In the case of tort victims, the House of Lords suggested a remedy would, in fact, be available. In '' Lubbe v Cape plc'' Lord Bingham held that the question of proving a duty of care being owed between a parent company and the tort victims of a subsidiary would be answered merely according to standard principles of negligence law: generally whether harm was reasonably foreseeable.
In ''
Chandler v Cape plc
''Chandler v Cape plc'' [2012EWCA Civ 525is a decision of the Court of Appeal which addresses the availability of damages for a tort victim from a parent company, in circumstances where the victim suffered industrial injury during employment by a ...
'', it was held that the corporate veil was not relevant in tort cases, thus effectively circumventing ''Adams''. In ''VTB Capital plc v Nutritek International Corp'', Lord Neuberger remarked, "In addition, there are other cases, notably ''Adams v Cape Industries plc''
990
Year 990 ( CMXC) was a common year starting on Wednesday (link will display the full calendar) of the Julian calendar.
Events
By place
Europe
* Al-Mansur, ''de facto'' ruler of Al-Andalus, conquers the Castle of Montemor-o-Velho (mode ...
Ch 433, where the principle f piercing the corporate veilwas held to exist (albeit that they include ''obiter'' observations and are anyway not binding in this court)."UKSC_5 _[127.html" ;"title="013 UKSC 5 [127">013 UKSC 5 [127/ref>
See also
*
UK company law
The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary lega ...
and US corporate law
*''Lubbe v Cape Plc'' [2000] 1 WLR 1545
*''Berkey v. Third Avenue Railway'' 244 N.Y. 602, 155 N.E. 914 (1927) a well known corporate veil case in US corporate law, concerning tort victims