To Pierce or Not To Pierce

To pierce or not to pierce?
A doctrinal reappraisal of judicial

responses to improper exploitation of the corporate form

Journal of Business Law

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© 2021 Thomson Reuters.

To pierce or not to pierce? A doctrinal reappraisal of..., J.B.L. 2018, 7, 559-583
For educational use only

To pierce or not to pierce? A doctrinal reappraisal of
judicial responses to improper exploitation of the
corporate form
Gregory Allan*

Table of Contents
Introduction
Suggested taxonomy of cases
The pre-piercing era—1840s to Salomon
The formative era of veil-piercing—Salomon to Gilford Motors
The primacy of veil-piercing—Gilford Motors to Prest
The “post-piercing” era? Prest onwards
Rationalising the law
Conclusion
Journal Article

Journal of Business Law
J.B.L. 2018, 7, 559-583

Subject
Company law

Keywords
Agency; Concealment; Corporate personality; Fraud; Resulting trusts
© 2021 Thomson Reuters. 2

Cases cited
Salomon v Salomon & Co Ltd [1897] A.C. 22; [1896] 11 WLUK 76 (HL)
Petrodel Resources Ltd v Prest [2013] UKSC 34; [2013] 2 A.C. 415; [2013] 6 WLUK
283 (SC)

*J.B.L. 559 Introduction

In respect of the pivotal question of the extent to which the courts are constrained by
separate corporate personality from providing relief in cases involving fraudulent or
unconscionable abuse of the corporate form, the common law position has arguably
never been less coherent. This is an extraordinary state of affairs, given that the
corporate veil has been gripped by controversy for well over a century. Currently,
there is no real judicial or academic consensus regarding the nature and scope of the
courts’ veil-piercing jurisdiction, or of the legal principles that may be brought into
play in order to overcome the barrier to relief that may be presented by a company’s
separate legal personality. As is widely acknowledged, a coherent analysis of separate
legal personality has long been hampered by inconsistent use of terminology to
describe successful challenges to the corporate veil (e.g. “piercing”, “lifting”,
“peeping”,1 “looking behind”,2 “skirting around”3 and “reverse-piercing”4) and the
nature of companies which are the subject of such challenges (e.g. “puppet”, “mask”,
“façade”, “device”, “cloak”, “sham” and “creature”).5 The Supreme Court decision of
Prest v Petrodel Resources Ltd,6 in which can be found the most detailed and
significant examination of this area of law by the highest appellate court since
Salomon itself, provides a microcosm of the difficulties in this area; although their
Lordships agreed that veil-piercing should be exceedingly rare, there was limited
concurrence on the fundamental questions of precisely what is meant by “piercing” or
when it should be permissible.7

Similar doctrinal challenges are presented by the significant differences of opinion as
to how veil-related cases should be classified. Traditionally, such cases *J.B.L. 560
have been classified rather haphazardly according to the reason for judicial
intervention and/or the legal mechanisms at play (e.g. “façade/sham” cases, “single

economic entity” cases and “agency” cases).8 In Prest, however, it was suggested that
there are two classes of cases involving improper exploitation of separate corporate
personality: those in which the veil is disregarded (by engagement of the “evasion
principle”); and those in which the application of ordinary legal principles (by
engagement of the “concealment principle”) facilitates the provision of appropriate
relief without disregarding the veil. Meanwhile, academic contributions have
frequently focused on the consequences of disregarding the veil, rather than the legal
mechanisms by which this is achieved. For example, it has been argued that the most
important doctrinal dichotomy is between cases in which a company is rendered liable
for its controlling shareholder’s acts and those in which shareholders are encumbered
with the company’s liabilities, the latter posing a threat to limited liability, and only
the former of which are capable of being effectuated through the engagement of
ordinary principles of law.9

Critical assessment of the state of the modern law is made more difficult still by
various deficiencies in the orthodox understanding of the long-term evolution of
judicial attitudes towards illegitimacy within the context of the corporate veil.
Although the famous Victorian House of Lords decision of Salomon v Salomon & Co
Ltd 10 is invariably still treated with reverence, 11 there are important aspects to which
scant attention has been devoted. For example, the widely held view that Salomon is
the starting point for discussions relating to separate corporate personality, and the
relative absence of critical reappraisals of precisely what was held by their Lordships
regarding improper use of the corporate form, mean that little is known about the
approach of the courts to the corporate veil in the years before Salomon, or of the
immediate impact of this seminal judgment. This restricts the capacity of
commentators to explore fresh perspectives on the development of the veil-piercing
jurisdiction in the 20th century and why the courts struggled to invoke it with any
consistency. Consequently, there is a limited context within which to evaluate, in
depth, the recent radical upheavals in this area of corporate law.

This article will seek to advance understanding of judicial attitudes towards separate
legal personality from the advent of the earliest registered companies until the present
day, with a view to rationalising the approach which should, in future, be taken in
cases involving fraudulent or unconscionable use of a company in which the court’s
ability to grant relief is impeded by the corporate veil. In order to address the
aforementioned inconsistencies of nomenclature, classification and doctrine, a novel

taxonomic framework will be advanced as a lens through which the relevant
authorities will be analysed. The first part of the article will explain and justify the
taxonomy presented here. Following on from this, there will be a chronological
reassessment, in accordance with the proposed taxonomy, of the thematic
development of judicial approaches towards improper use of the corporate *J.B.L.
561 form from the pre-Salomon period until the present day. For ease of analysis, the
chronology will be divided into four distinct periods in the evolution of the law: the
“pre-piercing era”; the “formative era”; the “primacy of veil-piercing”; and the “post-
piercing era”. Finally, the article will seek to demonstrate that the proposed taxonomy,
in light of the preceding analysis, may provide a framework for rationalisation of this
notoriously incoherent area of law.

Suggested taxonomy of cases
Piercing the corporate veil

Throughout this paper, “piercing” will be taken to mean disregarding a company’s
corporate personality.12 In light of the aforementioned over-proliferation of metaphors,
the view that “piercing” and “lifting” are synonyms will be followed, and the former
will be used in preference to the latter.13 The defining characteristic of veil-piercing is
the suspension, unfacilitated by ordinary principles of law, of the recognition of a
company as a person separate from its members (usually its controlling shareholder).
This might involve imbuing a company with characteristics or liabilities of its
controlling shareholder, or vice versa; in both instances, it is fundamentally same
thing being done. Nevertheless, it should be recognised that making a member liable
in respect of a liability incurred by the company may impinge upon limited liability,
and could potentially have especially profound policy implications. Notably, when
piercing, modern courts do not usually disregard the veil for all purposes and for an
infinite duration. Rather, the court will temporarily disregard the company’s separate
legal personality in order to justify granting a remedy against both the company and
its controlling shareholder. Recognition of the company’s separate legal personality is
implicit in the court’s order. Piercing, therefore, is usually suspensory rather than
extinctive. A final point to note is that, since Prest, it has been accepted that veil-
piercing is a course of last resort, and is only possible through operation of the
“evasion principle”, which is triggered when a company is exploited to enable its

controlling shareholder to avoid an existing legal obligation. The significance of this
development, the propriety of which was recently confirmed by the Privy Council in
Persad v Singh,14 will be considered once the evolution of the veil-piercing
jurisdiction has been examined.

”Concealment-agency/trust” cases
It will be argued here that what can conveniently be termed “concealment-agency”
cases form a distinct and problematic category of veil-related cases in which, as a
response to fraudulent or unconscionable use of the corporate form, the courts *J.B.L.
562 hold that a company is agent of its controlling shareholder.15 In a similar manner,
albeit more rarely, a company might be found to be carrying on business as trustee for
its controller. When a court finds a concealment-agency or trust relationship, it is
potentially possible to identify acts, liabilities or assets of a company as those of its
controlling shareholder, or vice versa. This process has sometimes been called
“lifting” the veil.16 It is suggested that, as piercing and lifting have so frequently been
used interchangeably, seeking to establish a distinction between the two is liable to
promote confusion.

The name given in this article to this category of cases derives from the “concealment
principle”, which was championed in obiter observations by Lord Sumption17 and
Lord Neuberger18 in the leading case of Prest.19 According to their Lordships’ analysis,
the concealment principle has nothing to do with piercing the veil. Rather, it applies
when a wrongdoer uses a company under his or her control as a vehicle for
committing some sort of wrong. In such cases, the court will not be hoodwinked.
Instead, ordinary principles of private law will be deployed for the purpose of
revealing the unlawful acts and granting appropriate remedies. Owing to the
invocation of a familiar legal mechanism to overcome the obstacle presented by the
corporate veil, concealment agency and trust cases would appear at first glance to fall
squarely within the concealment principle, and are, at least superficially, distinct from
“true” piercing cases. For example, Lord Sumption suggested in Prest that, in
furtherance of the concealment principle, a court may, when a company has been used
to conceal its controlling shareholder’s breaches of fiduciary duty, establish the
existence of an agency relationship so as to identify the company’s receipt of assets as
ministerial for its controlling shareholder.20

Lord Sumption described the concealment principle as “legally banal”.21 But
concealment-agency/trust constructions involve recognition that, because of the
manner in which it has been misused, a company is not, at least in connection with
some assets or transactions, an entity independent from its controlling shareholder.
This might be seen as a serious departure from the doctrine of separate corporate
personality and a significant disturbance of the corporate veil. One-man companies
and wholly owned subsidiaries which carry on business for entirely lawful reasons do
so for the sole benefit of their controlling shareholders. Moreover, such companies
routinely obtain assets during the course of business for the ultimate benefit of their
controllers. But companies of this nature are usually not susceptible to being declared
agent or trustee for their controllers. It appears, therefore, that concealment agency
and trusts do not arise out of total control alone, or on the basis that one legal person
is acting or receiving property for the sole benefit of another. Rather, the agency or
trust relationship seems to be generated specifically to counter improper use of the
corporate form. It is difficult to conceive how concealment-agency/trusts could apply
to scenarios involving natural persons; *J.B.L. 563 unlike one-man companies or
subsidiaries, all natural persons who conduct business or take property for the benefit
of another may potentially be found to be agents or trustees. Concealment-agency and
trusts do not, therefore, involve the ordinary application of conventional principles of
private law. Rather, it seems that the concealment agency or trust is a concept
exclusive to company law as a means by which to overcome misuse of the corporate
veil. As was recently admitted in Rush Hair v Gibson-Forbes 22:

”[W]here a person who controls a company uses that company ‘as a cloak or sham’…
the application of the ‘concealment principle’ enables the court to conclude that the
acts apparently done by the company are, in fact, acts of the person controlling it …
because the use of the company as a ‘cloak’ makes the company the agent of the
controller.” 23

Alternative avenues for relief

In cases in which a company has been used to facilitate wrongdoing, the courts may,
as an alternative to veil-piercing or establishing an agency or trust relationship
generated specifically to prevent improper use of the corporate form, engage ordinary
principles of law, as they might apply between any legally recognised persons, to
achieve the same, or roughly the same, outcome as might be achieved by veil-
piercing. In this innocuous category of cases, because the company and its controlling
shareholder are treated, for the purposes of invoking the ordinary legal principles, like
any other legally recognised persons, the availability of relief does not depend upon
establishing that the company has been used to facilitate the perpetration of any
specific wrongdoing which justifies overlooking its separate legal personality.
Accordingly, the concealment principle may operate in a manner that is “legally
banal”.

For example, if a controlling shareholder of a one-man company has sought to evade
a specific performance order by transferring the subject-matter of the contract to the
company, a court might order specific performance against the shareholder in his or
her capacity as an original party to the contract, while emphasising that the controller
must do everything within his or her power to comply with the order, including
causing the company to transfer the asset in question to the other party to the
contract.24 Such a solution does not involve piercing the corporate veil, for the
shareholder’s liability springs from the ordinary rules relating to privity of contract,
and the company is not the subject-matter of any direct court order at all. Similarly,
when a one-man company has been used as a vehicle for wrongdoing, principles
relating to accessory liability may enable the company and its controlling shareholder
to be made jointly and severally liable in respect of their distinct contributions to the
wrongdoing.25 Obtaining relief through such alternative avenues has nothing
whatsoever to do with the corporate veil; indeed, referring to the *J.B.L. 564
engagement of alternative avenues as “lifting the veil” or “skirting around the veil” is,
it is suggested, rather misleading.

Various statutory provisions may also provide alternative avenues for exposing and
remedying company controllers’ wrongdoing. For example, if a financially
embarrassed individual transfers property to a company which he or she controls so as
to put it out of reach of his or her creditors, the transaction might be set aside,
pursuant to the Insolvency Act s.423, as a transaction defrauding creditors. Similarly,
a controller of a one-man company might be found personally liable, qua director, for
wrongful trading under the Insolvency Act 1986 s.214. In such instances, the
controller’s liability has nothing to do with his or her status as a shareholder. In fact,
all statutory provisions which might render a member personally liable in a capacity
other than qua member are, within the context of the corporate veil, alternative
avenues which have nothing at all to do with veil-piercing.26

The pre-piercing era—1840s to Salomon
Early judicial esteem for the separate corporate personality of registered

companies
Even before statutory limited liability was conferred upon early registered
companies,27 the courts recognised that registered insurance companies could engineer
limited liability for their members by including terms in the insurance contracts which
provided that the liability of members did not extend beyond any unpaid portion of
their shareholding.28 Sometimes, attempts were made on behalf of creditors of such
insurance companies to pursue alternative avenues in order to establish member
liability. An early and robust view of separate legal personality was taken in Re
Athenaeum Life Assurance Society.29 Here, an insurance company’s liquidator claimed
that the company had, at the time at which the claim arose, possessed sufficient assets
to pay the debts in question, but had not done so, and that this amounted to a breach of
contract or a misrepresentation by the company, so that the members should be liable
for the debts. It was held, however, that the policy-holders had contracted with the
company, so could not claim against the members. Turner LJ explained that:

”I do not see my way to hold that the shareholders can be made liable upon this
representation [by the company] … unless indeed they can be reached on the ground
of fraud; and I do not think that upon the facts before us any such case of fraud can be
maintained.” 30

This view that the veil should be resistant to all but fraud has essentially prevailed to
the present day. *J.B.L. 565

Once limited liability became widely available to registered companies,31 there were
further attempts by liquidators to establish the liability of members via alternative

avenues, usually on the ground that ostensibly fully paid shares were in fact unpaid
owing to some defect in the contract pursuant to which the company allotted the
shares to members for non-cash consideration. Such attempts rarely succeeded, for the
courts were defensive of limited liability and the concept of a company as a separate
legal entity.32 In Re Heyford, Pell’s Case,33 it was argued unsuccessfully that Mr Pell,
who had assigned his business to the company, was liable as a contributory because
unpaid shares issued in consideration of Pell’s assignment had been allotted to Pell
and his nominees in separate blocks, instead of to Pell or his nominees in a single
block, as his agreement with the company appeared to stipulate. In Re Heyford
Ironworks Co, Forbes and Judd’s Case,34 however, it was held that Pell’s nominees
were contributories. Although the nominees had taken shares in furtherance of Pell’s
agreement with the company, they were not themselves parties to Pell’s contract with
the company, and so could not be said to have contracted with the company to give
anything other than cash consideration. Forbes and Judd’s Case demonstrates that,
despite the general impermeability of the corporate veil at this time, alternative
avenues for relief could occasionally overcome limited liability.35

The entirely separate personality of subsidiaries was also acknowledged early. In
Bartholomay Brewing Co (of Rochester) v Wyatt,36 in response to the claim that an
English holding company should be liable to pay income tax on all dividends issued
by its American subsidiary, Wright J stated that:

”[W]hatever control is exercised by the English company is exercised by it as the
holder of practically all the shares in the American company; and, if that is so, the
English company cannot be properly said to carry on the business of the American
company at all. The business of a company is not carried on by its shareholders, but
by the company through its directors, although the shareholders in general meeting
have the power of general control.” 37

Perhaps the case which best illustrates the extent to which pre-Salomon courts
jealously guarded the separate identity of registered companies, even when a one-man
company was used for extremely questionable ends, is Re George Newman & Co.38
Mr Newman was engaged as surveyor of the Liberator Building Society. As part of a
widespread and infamous fraud designed to enable certain associates of the Liberator,
including Newman, to appropriate its assets,39 George Newman & Co Ltd was
incorporated, and received substantial unsecured loans from the Liberator without
ever generating any profits. Newman, who had assigned his *J.B.L. 566 business to
the company, was the beneficial owner of an overwhelming majority of shares, the
subscribers taking only a single share each.40 Newman sold certain assets to the
company at an inflated price and used company funds to refurbish his home. The
company went into liquidation with huge debts, and the liquidator claimed against
Newman in respect of his secret profits and the refurbishments. Lindley LJ stated that
it would have been “just and proper”41 to have made Newman personally liable for all
of the company’s debts, but that such a result was precluded by the Companies Act
1862, explaining that:

”It is true that this company was a small one … but its corporate capacity cannot be
ignored … An incorporated company’s assets are its property and not the property of
the shareholders for the time being … All this is familiar law … Newman and his co-
directors evidently ignored their legal position entirely. They regarded Mr. George
Newman as the company, and it never seems to have occurred to them that he and his
brothers could not do as they liked with what they regarded as [Newman’s] own
property….” 42

The court was able to establish some degree of personal liability through the
alternative avenue of rendering Newman liable on the ground that the distributions in
his favour represented unlawful distributions of Newman & Co’s capital.43 But the
bulk of Newman’s personal assets were insulated from the company’s creditors, even
though the company had been incorporated as his vehicle for defrauding the Liberator,
which was the company’s most significant creditor.

Veil-piercing and concealment agency/trusts before the House of Lords

decision in Salomon
The first and only pre-Salomon reference to veil-piercing came about in Re British
and Foreign Cork Co, Leifchild’s Case.44 Here, a company’s liquidator sought to
overcome limited liability by claiming that “the whole transaction of the formation of
this company was fraudulent, and ought to be set aside”. 45 Kindersley VC rejected this
claim on procedural grounds, and so did not venture any opinion as to the chances of

such a claim succeeding, but he did not in principle rule out extinctive veil-piercing.

A significant pre-Salomon development was the emergence of concealment-agency
cases. In Re Carey,46 Carey, a sole trader who was experiencing financial difficulties,
promoted and incorporated a one-man company47 to which he sold his business in
consideration of fully paid shares and cash (which was never paid). He was later
declared bankrupt. The company then entered voluntary liquidation. Carey’s trustee in
bankruptcy claimed that the company’s assets should be available to its creditors on
the ground that the incorporation and subsequent *J.B.L. 567 assignment of the
business amounted to “devices on the part of the bankrupt to defeat and delay his
creditors”.48 Vaughan Williams J held in favour of the creditors, explaining that the
company was Carey’s agent.49 He ruled that the company was a separate entity to the
extent that it was liable to its own genuine creditors because it was estopped from
pleading its agency to defeat their claims, but that, subject to such claims, the
company’s assets were available to Carey’s trustee in bankruptcy.

A concealment-agency relationship was also found at first instance in Salomon. Mr
Salomon incorporated Salomon & Co, using family members as subscribers. He sold
his business to the company in consideration of, inter alia, 20,000 fully paid shares
and a loan secured by floating charge. The company almost immediately encountered
financial difficulties, but continued trading. Salomon sold the debentures, and the
assignee had a receiver appointed. Liquidation followed, and the liquidator counter-
claimed against Salomon. Vaughan Williams J, as he had done in Carey, held that,
because the company was “a mere fraud”,50 it was Salomon’s agent and that Salomon
was liable for its debts.51 The Court of Appeal held that the company was Salomon’s
trustee. As trustees deal with the trust property as principals, the company was
directly liable to its creditors,52 but it was entitled to indemnity from its beneficiary
(Salomon) for liabilities incurred in the office of trusteeship. Contrary to common
belief, the Lords Justices held, citing Newman, that the separate legal personality of
one-man companies could not usually be challenged in the courts.53 Exception was
taken, however, to what was regarded as fraudulent use of the debentures within the
context of a one-man company; Salomon “caused [the debentures] to be issued to
himself”, which “pervert[ed] [the 1862 Act ’s] legitimate use … by making it an
instrument for cheating honest creditors”.54 It was well known that equity would not
permit a statute to be used as an instrument of fraud; indeed, one of Lindley LJ’s most
famous judgments concerned precisely this principle.55 It was this perceived

impropriety, and not merely manipulation of the requirements of the Act to create a
“one-man company” which, according to the Court of Appeal, generated the trust.

It can be observed that, during this era, the courts strictly upheld the notion of
separate corporate personality in virtually every case. In the years immediately
preceding the House of Lords decision in Salomon, however, certain uses of the
corporate form began to be characterised as fraudulent. The emerging judicial
response to such perceived impropriety was to impose concealment-agency or trusts.
Veil-piercing was not considered as a realistic option. *J.B.L. 568

The formative era of veil-piercing—Salomon to Gilford Motors
Salomon in the House of Lords

The House of Lords famously and unanimously allowed Salomon’s appeal. Given that
the matter had been determined by a very strong Court of Appeal, with leading
judgment given by one of the most distinguished judges and commercial jurists of the
era,56 this may seem surprising. Indeed, when the Victorian companies legislation was
enacted, it was almost certainly not the aim of Parliament to facilitate the creation of
one-man companies or, for that matter, any private companies.57 Neither did the
findings of the Davey Committee,58 which was convened in 1894 to consider proposed
legislation relating to various contemporary issues concerning company law,
including the proliferation of small private companies, indicate that the litigation
would ultimately be decided in Salomon’s favour. The Committee’s report,59 published
mere weeks after the Court of Appeal’s decision in 1895, recognised that the appellate
court’s decision would only threaten those one-man companies which were “mere
device[s] to defraud creditors”60, and that “[i]f this view be correct” (emphasis added),
there was no need for amendments to the Companies Act 1862 that would negate the
limited liability of one-man companies set up through the use of nominee
shareholders. That the Committee recommended no such amendments suggests
support for the decision of Lindley LJ and his colleagues. Notably, Lord Davey, from
whom the Committee derived its informal name, was one of the members of the
Appellate Committee which was to hear Salomon’s appeal to the Upper House.

There was nevertheless an air of inevitability about their Lordships’ decision. By the
time of the Salomon litigation, one-man companies had become relatively common,
and it had largely been accepted within the legal profession that nominees could
properly be used to overcome provisions relating to the minimum permitted number
of shareholders.61 Moreover, despite Lindley LJ’s care in confining the consequences
of his judgment to schemes designed to entitle the controllers of insolvent “one-man”
companies to grasp company assets ahead of unsecured creditors, the Court of
Appeal’s decision was seen by influential commentators, including Palmer,62 and at
least one of the Law Lords,63 as a threat to the legitimacy of all small corporations. As
McQueen puts it:

”By the time Salomon ’s case was finally resolved in the House of Lords commercial
expectations in respect of the permissibility of small private *J.B.L. 569 company
registrations were so great that it is difficult to see how the matter may have been
resolved otherwise.” 64

In terms of lasting significance, it is suggested that there are two limbs to the
judgment. According to the first limb, which dealt with the question of what amounts
to improper use of the corporate form, Salomon had perpetrated no fraud; his scheme,
which was essentially an attempt to shield himself from future losses which might be
incurred though carrying on lawful business, did not amount to illegitimate
exploitation of the companies legislation, despite the grossly unequal shareholdings. It
was therefore not competent for the courts to interfere with the company’s separate
legal personality. This alone was sufficient to dispose of the appeal because the
justification for the lower courts’ findings of agency and trust had been Salomon’s
alleged abuse of the incorporation process. The first limb, and its longstanding
implications, are well known.65

The second limb of Salomon, which has not been identified in subsequent literature,
but which has nevertheless had a profound effect on the development of the law,
concerned the question of whether the proper response to fraudulent abuse of the
corporate form was to impose a concealment-agency/trust relationship. Their
Lordships overwhelmingly objected to concealment-agency because an agency
relationship could not arise out of control alone, even when there is a single individual
“entitled practically to the whole of the profits”,66 as this would make all closely
controlled companies agents,67 because impropriety or fraud do not lead to the

inference of an agency agreement,68 and on the ground that to treat the company
simultaneously as the owner of the business and Salomon’s agent created an
unanswerable paradox.69 There was also criticism of the imprecision inherent in
certain phrases which Vaughan Williams J had used, such as “alias”.70 Additionally,
doubts were expressed as to how misuse of a registered company could give rise to a
trust.71 Indeed, it was strongly suggested that, had there been impropriety or fraud on
Salomon’s part, then the proper solution would have been for the incorporation to
have been set aside.72 This is consistent with the suggestion in Leifchild’s Case that in
genuine cases of fraudulent abuse of the incorporation process, the veil should be
pierced in the most draconian manner possible by permanently obliterating the
company’s separate legal personality. Notably, nothing further was said by their
Lordships about veil-piercing; notwithstanding modern formulations of the “Salomon
principle” as prohibitive to veil-piercing, Salomon itself is not a direct authority
forbidding piercing of the type that was to cause such controversy in future cases.

Finally, nothing significant was said in Salomon about alternative avenues for relief in
similar cases; it was simply confirmed that the transaction between the company and
Salomon could not be set aside as Salomon had not deceived the *J.B.L. 570
company’s present or future members.73 It is, however, pertinent to note that, although
the Davey Report recommended no legislative tampering with limited liability as
conferred by the Companies Act 1862, it was suggested by the Committee that
insolvency legislation might be strengthened “in order to meet such cases as that of
Aron Salomon”.74 This shows recognition that the ultimate answer to cases involving
dubious use of the corporate veil might lie in the pursuit of alternative avenues for
relief.

The initial judicial response to Salomon

Although there was some initial judicial hostility (for example, in Re London Health
Electrical Ltd, Smith LJ said, of a company formed in very similar circumstances to
Salomon’s company, that “if he could, he would wind up the company and sweep it
off the face of the earth, because he was quite certain its continued existence could not
benefit a single human being”),75 the first limb of Salomon has never seriously been
threatened.76 The second limb, too, was treated as binding and of general application,
so that Salomon became a virtually impregnable bar against the imposition of

concealment-agency or trusts in any circumstances. Indeed, Salomon was frequently
cited in cases in which the courts refused to interfere with separate legal personality. 77
As veil-piercing was still virtually unknown, alternative avenues were the only means
by which to obtain relief in cases of the type under discussion here.

Re Hirth,78 a case that has wrongly been described as inconsistent with Salomon,79 is
illustrative of the state of the law at this time. Mr Hirth, a sole trader in financial
difficulties who was a defendant in another suit,80 incorporated a company and sold his
business to it in exchange for fully paid shares. He treated the company property as
his own, but was declared bankrupt. The company then went into liquidation. Hirth’s
trustee in bankruptcy cited Carey as authority that the company was Hirth’s agent and
was accordingly liable for Hirth’s debts. The Court of Appeal refused to recognise any
concealment-agency because Carey was “inconsistent” with Salomon.81 Veil-piercing
was not even contemplated, even though Hirth’s scheme was described by Lindley LJ
as “a juggle and a fraud”.82 Instead, relief was granted via an alternative avenue. The
sale of the business to the company was held to be a fraudulent conveyance and an act
of bankruptcy within the meaning of the Bankruptcy Act 1883 s.4(1)(b).83 It is notable
that the Court of Appeal, *J.B.L. 571 despite Lindley LJ’s continuing dislike of the
harshness of Salomon,84 did not try to distinguish Salomon, even though, unlike in
Salomon, limited liability was not threatened and Hirth was seeking to evade existing
obligations.

The assumption of an inherent veil-piercing jurisdiction

The assumption of an inherent veil-piercing jurisdiction was an inevitable
consequence of the straitjacket imposed by the second limb of Salomon; the courts
had effectively been disarmed to the extent that, if no alternative avenues for relief
could be engaged, there was no obvious recourse at common law even in cases in
which a company was used by its controller as an engine of fraud. Far from
foreclosing the possibility of veil-piercing, Salomon was instrumental in setting the
courts on the path towards claiming an inherent jurisdiction to pierce the veil. The
beginning of this process can be seen in Re Darby.85 Here, the wrongdoers, in
furtherance of a fraudulent scheme, caused a company that they controlled to
incorporate a second company. The latter then purchased an asset from the first
company at an overvalue, and the wrongdoers took a share of the proceeds. The
second company went into liquidation. The liquidator claimed that the wrongdoers
were liable for having profited from their promotion of the second company. The
court held in favour of the liquidator, notwithstanding the wrongdoers’ Salomon -
based defence that they had not, as a matter of law, promoted the second company.
Philimore J, however, seemed unsure as to whether they had “made that profit either
directly [a conclusion reachable only through piercing] or through the agency of the
[first company]”.86 His equivocation is unsurprising. Even though this was a case in
which a company was used to cover a blatant fraud, the second limb of Salomon was
generally accepted as having prohibited concealment-agency, and no piercing
jurisdiction had yet been established. Nevertheless, Darby is significant as the first
case in which the veil may have been pierced.

Even after Darby, there was no real acceptance of any inherent jurisdiction to pierce
the veil to counter impropriety.87 In Rainham Chemical Works Ltd v Belvedere Fish
Guano Co Ltd,88 Lord Buckmaster stated that “[a] company … which is duly
incorporated, cannot be disregarded on the ground that it is a sham”.89 But it was only
a matter of time until a dilemma similar to that in Darby reached a higher appellate
court. When this came to pass, in Gilford Motor Co Ltd v Horne,90 the Court of Appeal
decisively claimed a suspensory veil-piercing jurisdiction. *J.B.L. 572 Mr Horne,
while employed by Gilford Motors, entered into a restraint of trade covenant. He later
left the employment of Gilford and set up a company through nominees. He caused
the company to solicit Gilford’s customers in defiance of the covenant. Gilford sought
an injunction on the ground that “Horne, and the company as his agent”91 had
breached the covenant. The Court of Appeal issued the injunction against Horne and
the company.

Despite the wording used in the plaintiff’s claim, the Lords Justices conspicuously
avoided describing the company as Horne’s agent. Rather, a somewhat vaguely
expressed principle was borrowed from obiter comments in the pre-Salomon case of
Smith v Hancock,92 whereby if the ostensible ownership of an unincorporated business
was “a mere cloak or sham”93 intended to enable the real owner to evade his
obligations, then the court could “grant the plaintiff relief accordingly”.94 In Gilford,
this principle was taken as meaning that the courts could simply disregard the legal
ownership of the business. Significantly, no attempt was made in Gilford to lay down
the precise circumstances in which it was appropriate to categorise a company as a

“cloak or sham”. The court’s inherent veil-piercing jurisdiction was, from the outset,
ill defined.

The primacy of veil-piercing—Gilford Motors to Prest
Inconsistent exercise of the veil-piercing jurisdiction

Gilford established a veil-piercing jurisdiction that could be invoked when a company
was a sham or façade, used as a vehicle or cover for unconscionable conduct. The
courts pierced the veil on this ground in a small number of cases analogous to Gilford,
and also in “façade” cases beyond the scope of Gilford.95 For example, in Trustor v
Smallbone (No.2),96 the controller of a one-man company orchestrated the transfer of
assets directly to the one-man company from the accounts of the claimant company,
of which he was managing director. The controller was held personally liable for his
one-man company’s knowing receipt of those assets.97 Trustor has been described as
an example of a company being made liable in respect of its controller’s liabilities (in
furtherance of an argument that concealment-agency can be imposed in such cases).98
In fact, Trustor is notable as a rare example of a shareholder being made liable in
respect of a liability incurred by the company.

The courts also notoriously sought to expand the ambit of the piercing jurisdiction to
scenarios outside of the façade/sham exception. Examples include veil-piercing within
corporate groups on the ground that such companies operate as a single *J.B.L. 573
economic unit,99 and veil-piercing to satisfy the demands of justice.100 Although these
grounds for veil-piercing quickly foundered under the weight of judicial
conservatism,101 the Court of Appeal has in this millennium pierced the veil for
justice’s sake in order to establish that a solicitor owed fiduciary duties not just to the
subsidiary that had instructed him, but also to the parent company of the subsidiary’s
parent company.102 On the whole, however, the courts seem to have been especially
reluctant to pierce the corporate veil in cases involving corporate groups; indeed, this
has apparently never been done as a response to improper use by a holding company
of its subsidiary.

The veil has also been pierced without justification being provided. As is often
acknowledged, this has been done in family law cases concerning applications for
ancillary relief.103 It is less often acknowledged that it has also been done within a
commercial context. For example, in Shell International Trading Co Ltd v Tikhonov,104
Jack J held, simply, and with no further explanation, that the corporate veil could not
prevent the defendant, a senior employee of Shell, from being held liable in personam
to account in respect of bribes received directly by a company which he controlled.

The persistent effect of the second limb of Salomon is evidenced by the total absence,
between Salomon and Prest, of any veil-related cases that were resolved on the basis
of a concealment-agency relationship, and there is only one case in this context which
featured an impropriety-generated trust.105 The introduction of the inherent veil-
piercing jurisdiction certainly addressed the lacuna created by the second limb.
Nevertheless, the absence of clearly delineated limits to the Gilford principle, and the
propensity of courts to piece the veil in cases dehors the ambit of Gilford, ensured that
the veil-piercing jurisdiction was, during this period, regularly exercised in an
arbitrary manner. It should, however, be acknowledged that, although the piercing
jurisdiction has occasionally been used to identify an asset or a right of a company as
that of its member,106 and even to imbue a member with a specific liability of the
company,107 the courts have never pierced the corporate veil to make a member liable
for the company’s general debts.

Alternative avenues for relief during the primacy of veil-piercing

There are a few cases in which, even though the piercing jurisdiction could potentially
have been invoked, the court elected to pursue alternative avenues for relief. Coles v
Samuel Smith Old Brewery (Tadcaster) 108 deserves to be better *J.B.L. 574 known, as
it is a rare example of a case concerning a corporate group which could now fall
within the evasion principle. A holding company sought to evade an unregistered
option to purchase, which it had granted to the claimant, by selling the encumbered
land to its subsidiary at an undervalue. The Court of Appeal held that veil-piercing
was unnecessary, instead ordering specific performance against the holding company,
which was “plainly in a position to procure [the subsidiary] to complete the
contract”.109 An ingenious alternative avenue for relief was espoused in Trustor AB v
Smallbone (No.3).110 In contrast to the veil-piercing approach taken in Trustor (No.2),
Scott VC, in Trustor (No.3), in reference to the same facts, suggested111 that the one-
man company had taken the funds in question as constructive trustee for the claimant
company, and that the one-man company’s subsequent dissipations amounted to
breaches of this constructive trust. Smallbone’s liability could therefore be established
on the ground that he had dishonestly assisted in these breaches. Accessorial liability
for breach of trust or fiduciary obligations has, in a similar manner, provided relief in
other cases in which the courts refused to pierce the veil.112

The “post-piercing” era? Prest onwards
The Prest v Petrodel Resources case

Prest heralded a new era in respect of judicial treatment of the corporate veil. The
case concerned an application for ancillary relief by Mrs Prest. The Supreme Court
held that some estates in land that were registered in the name of certain one-man
companies controlled by Mr Prest were, for the purposes of the Matrimonial Causes
Act 1973 s.24, assets to which Mr Prest was “entitled”. Mrs Prest had argued that, in
order to reach this result, it was necessary and justifiable to pierce the corporate veil
of the companies. The Supreme Court unanimously refused to pierce the veil, instead
holding that the companies held the land on resulting trusts for Mr Prest. These
resulting trusts provide an excellent example of the application of an alternative
avenue for relief. Although there was no illegitimacy in the husband arranging for the
company to be registered proprietor of the disputed properties, he later relied on
separate legal personality to conceal his ownership of the properties. The trust,
however, arose not in response to any improper use of the corporate form, but
pursuant to ordinary principles of resulting trusts as they might have applied between
any two natural persons.

Notwithstanding that the veil was not pierced in Prest, their Lordships, to the end of
providing doctrinal coherence and restricting future use of eye-catching but ultimately
meaningless metaphors to justify piercing the veil, seized the opportunity *J.B.L. 575
to analyse the position and future of veil-piercing in English law. In light of the
preceding historical analysis, it can be seen that many of these obiter observations are
extraordinary. Their Lordships agreed that, although the courts should retain an
inherent veil-piercing jurisdiction, this should only be exercised extremely rarely, and
never when the same result could be achieved through the application of general
principles of private law.113 As can be seen from the scarcity of cases concerning
alternative avenues for relief or concealment-agency or trusts, and the relative
abundance of veil-piercing cases, this represents a complete reversal of the approach
that has been taken ever since Gilford.

Perhaps the most revolutionary aspect of Prest lies in the inception of the evasion and
concealment principles. According to Lord Sumption and Lord Neuberger,114 the
“evasion principle” provides the sole justification for veil-piercing, but can only ever
be invoked to establish a company’s liability when its controller has abused the
corporate form by manipulating the company so as to facilitate evasion an existing
legal obligation. All other cases concerning perceived abuse of the corporate form
should fall within the concealment principle, which, to reiterate, relies on the
invocation of ordinary principles of law to establish liability. It was emphasised that
cases categorised in this article as concerning concealment-agency or trusts were
within the ambit of the concealment principle. Indeed, the Supreme Court positively
advocated the use of the concealment-agency device (and, to a lesser extent, trusts) in
cases concerning misuse of the corporate veil. For example, it was strongly suggested
that cases such as Trustor should have been resolved on the basis that the one-man
company was “agent or nominee” of the controlling shareholder.115 Lord Neuberger
even contended that, in Gilford, the company should have been treated as its
controller’s agent.116 This response to veil-related wrongdoing is far closer to that
espoused by Vaughan Williams J in Carey and Salomon and Lindley LJ in Salomon
than to the stance taken between Salomon and Prest. While not all of their Lordships
lent their unequivocal support to the notion that existing cases can be shoehorned into
the evasion or concealment principles, or that the scope of the inherent veil-piercing
jurisdiction should be quite so narrow,117 decisions since Prest show that the
evasion/concealment dichotomy has been firmly accepted, albeit not applied
coherently.

The current judicial approach

It seems that the radical approach taken in Prest has neither introduced doctrinal
coherence nor checked the profligate use of metaphors to justify ignoring the
corporate veil. In Pennyfeathers Ltd v Pennyfeathers Co Ltd,118 the wrongdoers, who
were directors of the claimant company, set up the defendant company and caused it
to take a corporate opportunity in breach of their fiduciary duties owed to the claimant
company. The defendant company’s shares were held by a trustee *J.B.L. 576
company on an express trust for the wrongdoers. King J seemingly applied the
evasion principle to hold that the defendant company’s assets (as opposed to merely
its shares) were subject to the express trust. Accordingly, the defendant company held
the profits arising from the corporate opportunity subject to the same constructive
trust in favour of the claimant company that would have applied against the
wrongdoers had they taken the profits directly. This is odd, because the evasion
principle as conceived by Lord Sumption should seemingly apply only when it is not
possible for the case to be resolved by imposing a trust or other established legal
mechanism. The same failure to distinguish accurately between evasion and
concealment was evident in Wood v Baker,119 in which the evasion principle was held
to justify the conclusion that certain one-man companies were “agents and
nominees”120 of their controlling shareholder.121

Another recently occurring anomaly has been the invocation of the concealment
principle by imposing what have the appearance of concealment-agency relationships
without any real justification for why such an agency relationship arose. In Clegg v
Pache,122 for example, it was accepted that a one-man company which had directly
taken corporate opportunities in breach of its controller’s fiduciary duties was “a mere
cloak, or alter ego”123 of its controller. No further justification was provided.124 This
unsatisfactory approach has also been followed in criminal cases concerning
confiscation proceedings. In R. v Sale,125 concealment-agency was seemingly used to
justify a confiscation order against the profits of a one-man company.126 The
company’s controller had been convicted of criminal offences relating to contracts
that he had illegally obtained for the company.127 The Court of Appeal held that the
evasion principle could not, on the facts, apply, but that, applying the concealment
principle, it could be held that “the activities of both the defendant and the company
are so interlinked as to be indivisible”.128 In very similar circumstances, in R. v
McDowell,129 a company’s controller was treated as its “alter ego”.130 Contrarily, in
Persad v Singh 131 the Privy Council refused to accept that a one-man company which
had taken a lease was a “front” or “alias” 132 of its controller. The Board thus rejected
the landlord’s claim against the controller for breaches of the leasehold covenants,
even though the controller had, in reality, caused the breaches, negotiations for the
lease had been between the landlord and the controller with no mention of the
company, and the company had been incorporated to act as tenant the day after the
controller had signed the lease in its name. *J.B.L. 577

Meanwhile, an interesting alternative avenue for relief was accepted in Bataillon v
Shone.133 Here, the statutory definition of a transaction defrauding creditors which had
been “entered into”134 by a bankrupt was interpreted by the court as including
transactions made by a one-man company that the bankrupt controlled. The courts
have, within the context of corporate groups, long claimed the ability to hold that
particular statutory provisions or contracts which appear applicable only to one
company within a group can properly be interpreted, in line with ordinary principles
of construction, as applying to other companies within the group.135 Although in none
of the authorities on this point was a holding company engaged in a scheme to gain an
unconscionable commercial advantage, it seems that, in Bataillon, similar principles
of interpretation were readily invoked as a means by which to counter dubious use of
a one-man company while leaving the veil untouched.

Rationalising the law

The authorities relating to the corporate veil are characterised by an almost complete
lack of appreciation of the profoundly different concepts of veil-piercing,
concealment-agency/trusts, and obtaining relief through alternative avenues. The
extent to which this is a prime indicator of the doctrinal inconsistency can be
summarised by considering judicial treatment of three fact patterns which have arisen
repeatedly in the authorities:
Scenario I:
a controller of a company incurs a contractual obligation, which is enforceable
by injunction or is specifically enforceable, and then seeks to evade the obligation by
causing the company to act inconsistently with the obligation or by selling the subject
matter of the contract to the company. It has been held that such cases should be
resolved by piercing the veil,136 concealment-agency137 and through alternative avenues
for relief.138
Scenario II:
a controller of a company transfers assets into, or purchases assets in, the name
of the company for the purpose of evading freezing orders, impending court orders or

the consequences of insolvency. There are numerous authorities advocating the

resolution of these cases through concealment agency or trusts,139 alternative avenues140
and trusts arising in consequence of veil-piercing. *J.B.L. 578 141
Scenario III:
a controller of a one-man company seeks to disguise a breach of his or her
fiduciary duties owed to a third party by using the company as a vehicle for receiving
directly the fruits of the breach. It has been proposed or held that, in such cases, relief
should be obtained through veil-piercing,142 imposing concealment-agency or trusts,143
alternative avenues144 and trusts arising pursuant to the evasion principle.145
It is submitted that consistency of approach could be attained if the courts were to
adopt a simple formula in cases of the kind under discussion here. First, a court
should seek to provide relief through alternative avenues. Only in the extremely
unlikely event that this is not fruitful, and subject to significant caveats discussed
below, should an impropriety-generated trust even be considered. Veil-piercing should
only ever be contemplated as an absolute last resort, while concealment-agency
should be altogether disregarded. This hierarchy can be justified if this article’s
proposed taxonomy is re-examined.

Veil-piercing revisited
It should be acknowledged that one of the main policy objections to veil-piercing
would seem to be far less significant than is commonly assumed. In the 152 years
since veil-piecing was first contemplated judicially in Leifchild’s Case,146 there is no
case in which the veil has been pierced to make a member liable for the company’s
general debts. Indeed, there are few if any records of counsel attempting to persuade a
court to do so,147 and only occasionally has the veil been pierced to make a member
liable even in respect of a specific liability incurred by the company at the member’s
instigation.148 It seems unlikely that the retention of even a wide-ranging veil-piercing
jurisdiction would pose any credible future threat to the concept of limited liability.

Nevertheless, veil-piercing remains fundamentally undesirable. The piercing
jurisdiction has never been exercised with anywhere near the level of consistency that
is desirable even in an equitable doctrine, and the rebranding of veil-piercing under
the guise of the evasion principle has not bucked this unfortunate trend. Moreover, the

charge that veil-piercing either offends the doctrine of parliamentary sovereignty by

interfering with a legal personality bestowed by Parliament or, at the very least, shears
through one of the common law’s most firmly entrenched *J.B.L. 579 doctrines, is
difficult to answer.149 Perhaps paradoxically, the more draconian extinctive veil-
piercing proposed in Salomon and Leifchild, which would involve undoing an
incorporation, is more easily reconcilable with parliamentary sovereignty; as Lord
Sumption conceded in Prest, it is well established that the presence of fraud can
render certain transactions and legal mechanisms “voidable ab initio”.150 But
suspensory veil-piercing is truly dependent upon the court ignoring separate legal
personality so as to render a legal person chargeable in respect of a liability of another
legal person. In this respect, it involves nothing short of suspension of legal reality.

Concealment-agency/trusts revisited
Because concealment-agency and trusts, like veil-piercing, involve a departure from
the treatment of the assets, property or liabilities of company and controlling
shareholder as totally separate, the objections of law and policy may be similar.
Moreover, notwithstanding the recent renaissance of concealment-agency, the courts
have yet to explain satisfactorily the justification for imposing agency relationships of
this type. If concealment-agency arises in response to fraud or impropriety (as seems
to be the case, otherwise the independence of all one-man companies or wholly
owned subsidiaries would be threatened), this would amount to a use of agency in a
manner and for reasons not found anywhere outside of cases concerning the corporate
veil, with all of the risks of judicial incertitude which arise when legal principles are
applied outside their conventional context. Indeed, it is at least arguable that in
scenarios that would once have been resolved under the façade/sham head of piercing,
modern courts are simply using agency (or “alter ego”) as a byword for veil-piercing.

The trust might be a more promising vehicle for tackling misuse of the corporate veil.
The imposition of certain types of trusts has long been regarded as a proper response
to fraud151 and, in the years since Salomon, the constructive trust has evolved
considerably as a tool to counter unconscionable behaviour. For example, the courts
may be able, through the deployment of principles relating to common intention
constructive trusts, to effectuate the concealment principle within the normal confines
of equity.152 Moreover, it is arguable that, as a response to unconscionable or
fraudulent use of the corporate form, imposing a trust is neither unconstitutional nor
offensive to any common law doctrines and is thus theoretically preferable to veil-
piercing. Parallels may be drawn with the jurisprudence surrounding the
enforceability of orally agreed trusts, the enforceability of which would appear to be
affected by statutory formality requirements.153 In appropriate circumstances, such
trusts will be enforced on the basis that equity will not permit a statute to be used as
an instrument of fraud. It is sometimes suggested that, in such cases, the trusts are
enforced as express trusts, the statutory formality *J.B.L. 580 requirements simply
being disregarded on the ground of fraud.154 This is essentially akin to disregarding a
company’s separate corporate personality to prevent fraud. It is generally accepted,
however, that it is preferable from a constitutional standpoint for these trusts to be
regarded as constructive trusts arising for the prevention of fraud or unconscionability,
for this latter solution, while producing the same result, does not impugn the doctrine
of parliamentary sovereignty by giving effect to parol express trusts in the face of
unequivocal statutory provisions.155 By analogy, in cases of the fraudulent use of
companies, the doctrine of parliamentary sovereignty would be preserved, and the
interests of doctrinal coherence between different branches of the private law served,
if the courts were to seek to impose constructive trusts in preference to piercing the
corporate veil.

There are, however, criticisms that can be levelled at the use of trusts for such
purposes. Although the law of trusts (or indeed agency) has never been successfully
used to negate limited liability, unchecked judicial use of trusts could potentially
promote arbitrariness in much the same way as could the widespread use of
concealment-agency or veil-piercing. In short, trust law is virtually untested as an
engine for resolving cases involving misuse of the corporate form, and there is no
guarantee that the courts would follow a doctrine-based route in future cases.

Alternative avenues revisited

It is evident that in virtually all (if not all) instances in which the courts have
sanctioned veil-piercing, or used concealment-agency or trusts, to combat
impropriety, particularly within the common scenarios considered above, appropriate
remedies could have been obtained through alternative avenues. This approach has
many advantages. It is entirely dependent upon the company being recognised as an
entity separate from its controlling shareholders, and is thus incapable of threatening
parliamentary sovereignty or the concept of separate legal personality. Moreover, it
does not subvert the second limb of Salomon, and it bypasses the dangers associated
with the indiscriminate use of agency, or the novel use of trusts, to counter misuse of
the corporate form.

Unlike veil-piercing or concealment agency/trusts, increased judicial recognition and
deployment of alternative avenues for relief is unlikely to bestow upon the courts any
sweeping discretion which might be applied in an arbitrary fashion. This is because
the principles which may be invoked have been drawn from ordinary doctrines of
private law, the invocation of which has nothing to do with the corporate veil. It is
also notable that because the alternative remedies arise independently of whether and
how separate corporate personality has been abused, the alternative avenues
advocated in this article avoid altogether the perhaps intractable question of what
precisely should amount to illegitimate use of a company. Significantly, although
alternative avenues have been used to provide relief while sidestepping limited
liability in specific cases since the mid-19th century, there is no evidence that this
approach poses any generalised threat to the institution of limited liability. In short,
for the resolution of cases within Scenarios *J.B.L. 581 I, II and III, relief obtained
through alternative avenues has provoked far less controversy and inconsistency, and
is far less vulnerable to conceptual criticisms, than the deployment, to the same end,
of veil-piercing or concealment agency/trusts, whilst at the same time achieving
comparable results.

It should also be recalled that, while the courts have never been persuaded to pierce
the veil within a corporate group to remedy improper use of a subsidiary, relief has
been obtained through an alternative avenue when a holding company used its
subsidiary to evade an existing obligation.156 Notably, other principles of private law
have on occasion been invoked, albeit not in cases concerning deliberate misuse, to
make a holding company liable for what superficially seems to be a liability exclusive
to its subsidiary.157 There seems to be no reason why such principles ought not to be
invoked on the exact same grounds when there has been alleged misuse of a group
structure, as was done in Bataillon within the context of a one-man company.
Accordingly, alternative avenues should prove especially adept at providing relief
within the context of corporate groups in a manner that has eluded those seeking to
persuade the courts to pierce the veil or acknowledge dubious agency relationships

It is also notable that the range of alternative avenues for relief in insolvency cases has
increased significantly since the early judicial discussions of separate corporate
identity. That these insolvency related avenues are predominantly statutory in origin
would, one suspects, have met with the Davey Committee’s approval.158 In particular,
the introduction of liability for wrongful trading159 has greatly enhanced the potential
for controllers of one-man companies to be made liable in their capacity as directors.
Indeed, it is probable that liability in historical cases such as Newman and even
Salomon itself could nowadays be established on this basis. Therefore, it is suggested
that the modern law is especially suited to the advancement of alternative avenues for
relief in veil-related cases involving misuse of the corporate form. *J.B.L. 582

Conclusion
One of the most striking findings presented here is the sheer length of time during
which the courts have respected the doctrine of separate corporate personality and
refused to undermine limited liability. This suggests that fears about potential negative
economic implications of veil-piercing are unfounded, and shows that the first limb of
Salomon was the culmination of a long line of robust judicial affirmations of the
distinct legal personality of registered companies. The second limb of Salomon
arguably had an even greater impact than the first, leaving the law with no obvious
means, at a time when piercing was essentially unknown, by which to address
unconscionable use of the corporate form. The eventual adoption by the courts of an
inherent jurisdiction to pierce the veil was an ineluctable consequence of Salomon;
rather than inhibiting veil-piercing, Salomon encouraged it, albeit indirectly. With no
clearly delineated principles or precedents to provide guidance, it is perhaps
unsurprising that the piercing jurisdiction has been applied haphazardly.

Analysis of the evolution of judicial treatment of the corporate veil reveals the extent
to which the law has taken a radical turn in recent years. The move towards
concealment-agency and trusts at the expense of veil-piercing represents a total
rejection of the second limb of Salomon and a return to the approach towards the
corporate veil that was developing immediately prior to the decision of the House of
Lords in Salomon. The rather confused manner in which the courts have applied the
evasion and concealment principles may be attributable to the fact that there are
virtually no post-Salomon precedents from which the courts may obtain guidance
relating to the use of agency or trusts to counter misuse of the corporate form, as well
as to the Supreme Court’s failure in Prest to address the longstanding doctrinal
difficulties in using agency as a response to such impropriety.

Not all of the recent developments are unwelcome. Fundamental to the evasion and
concealment principles is a recognition of the conceptual dichotomy between
disregarding the veil without invoking any recognised legal principles and engaging
legal principles to facilitate the provision of relief without disregarding the veil. The
questionable constitutionality of the suspensory veil-piercing jurisdiction, coupled
with the notorious and persistent failure of the courts to apply it with any degree of
consistency, justify the view taken in Prest that piercing should become obsolete, save
for in the highly unlikely event that a company is incorporated for a fraudulent
purpose beyond the reach of conventional legal principles or statutory provisions.
Even in these vanishingly rare instances, it is arguable that extinctive piercing should
be preferred to suspensory piercing.

It is submitted, however, that for the attainment of coherence and consistency, the
concept of the concealment principle requires significant refinement. The most
formidable bar to the attainment of doctrinal clarity in scenarios involving the misuse
of separate corporate personality would seem to be presented by the widespread lack
of recognition of cases involving alternative avenues for relief as a category of
authorities distinct from concealment agency and trusts. A future proliferation of
concealment-agency cases would be most unlikely to establish a principled approach.
Furthermore, untrammelled judicial use of the concealment-agency construction is
susceptible to the charge that it amounts to veil-piercing masquerading as the
concealment principle. A trust-based response *J.B.L. 583 to the illegitimate
exploitation of corporate personality seems preferable to veil-piercing. The
compatibility of a trust-based approach with parliamentary sovereignty can be
supported by drawing parallels with equity’s general approach to the use of statutory
formality requirements in furtherance of fraudulent designs. Nevertheless, the use of
trusts to counter unconscionability in veil-related cases is untested, and promises no
guarantee of conceptual or practical judicial consistency.

As is shown by the cases relating to Scenarios I to III, above, virtually all cases in
which the veil has ever been pierced as a response to impropriety, or in which a
concealment-agency or trust has been imposed, could have been resolved through
alternative avenues. Since well before Salomon, a range of common law principles
had been used to obtain relief in veil-related cases without any need for veil-piercing,
and a range of statutory provisions permits Parliament-sanctioned relief to be obtained
in an increasing variety of circumstances. Application of these common law principles
and statutory provisions generally does not depend upon the exercise of wide judicial
discretion. Moreover, because these alternative avenues for relief are not concerned
with identifying acts, liabilities or assets of a company as those of its controller, or
vice versa, this approach does not threaten to erode the doctrine of separate legal
personality. It is suggested, therefore, that consideration of the range of alternative
avenues for relief should become the primary means to which the courts turn in order
to resolve veil-related cases involving fraudulent or unconscionable use of the
corporate form.

Gregory Allan

Footnotes
1 On “peeping”, see S.
Ottolenghi, “From Peeping
behind the Corporate Veil to
Ignoring it Completely”
(1990) 53 M.L.R. 338.
2 Prest v Petrodel Resources Ltd

[2013] UKSC 34; [2013] 2
A.C. 415 at [28], per Lord
Sumption.
3 See W. Day, “Skirting around

the issue: the corporate veil
after Prest v Petrodel” [2014]
L.M.C.L.Q. 269.
4 See E. Mujuh, “Piercing the

corporate veil: where is the
reverse gear?” (2017) 133
M.L.R. 322, 323.

5 See VTB v Capital Plc v

Nutritek International Corp
[2013] UKSC 5 [124]; [2013]
2 A.C. 337 at [124], per Lord
Neuberger.
6 Prest v Petrodel [2013] UKSC

34; [2013] 2 A.C. 415.
7 See Prest [2013] UKSC 34,

[2013] 2 A.C. 415 at [16], per
Lord Sumption; at [98]–[99],
per Lord Mance; at [106] per
Lord Walker; at [60], per Lord
Neuberger; at [91]–[92], per
Baroness Hale and Lord
Wilson.
8 e.g. Gower’s Principles of

Modern Company Law, 6th
edn, edited by P.L. Davies,
(London: Sweet & Maxwell,
1997), pp.165–173.
9 See Mujuh, “Piercing the

corporate veil” (2017) 133
M.L.R. 322, 323. See also
Prest [2013] UKSC 34;
[2013] 2 A.C. 415 at [91]–
[92], per Baroness Hale and
Lord Wilson.
10 Salomon v Salomon & Co Ltd

[1897] A.C. 22 HL.
11 For example, see generally

[2013] 2 A.C. 415. See also
Persad v Singh [2017] UKPC
32; [2017] B.C.C. 779 at [20]
per Lord Neuberger
(delivering the Board’s
opinion).
12 This was the most popular

view in Prest [2013] UKSC
34; [2013] 2 A.C. 415. See, for
example at [16], per Lord
Sumption; at [98]–[99], per
Lord Mance; at [60], per Lord
Neuberger; cf. at [106], per
Lord Walker. A somewhat
more restrictive view of
piercing was taken by
Baroness Hale and Lord
Wilson at [91]–[92].

13 ”Piercing” was, for example,

predominantly used by counsel
and their Lordships in both
VTB Capital [2013] UKSC 5;
[2013] 2 A.C. 337 and Prest
[2013] UKSC 34; [2013] 2
A.C. 415. cf. Gower Principles
of Modern Company Law, 10th
edn, edited by P.L. Davies and
S. Worthington (London:
Sweet & Maxwell, 2016),
Ch.8, where “lifting” is used in
preference to “piercing”.
14 Persad v Singh [2017] UKPC

32; [2017] B.C.C. 779 at [17]
per Lord Neuberger
opinion).
15 This process has sometimes

been called “lifting” the veil
(see Mujuh, “Piercing the
corporate veil” (2017) 133
M.L.R. 322, 323), although
this use of terminology has
little widespread support.
16 Mujuh, “Piercing the corporate

veil” (2017) 133 M.L.R. 322,
323. See also Prest [2013]
UKSC 34; [2013] 2 A.C. 415
at [60,] per Lord Neuberger.
17 Prest [2013] UKSC 34;

[2013] 2 A.C. 415 at [27]–
[35].
18 Prest [2013] UKSC 34;

[2013] 2 A.C. 415 at [60]–
[74].
19 For more detailed analysis of

Prest, see fnn.113–117 and
accompanying text below.
20 Prest [2013] UKSC 34;

[2013] 2 A.C. 415 at [31]–
[33], per Lord Sumption.
21 Prest [2013] UKSC 34;

[2013] 2 A.C. 415 at [28].
22 Rush Hair v Gibson-Forbes

[2016] EWHC 2589 (QB);
[2017] I.R.L.R. 48.

23 Rush Hair [2016] EWHC

2589 (QB); [2017] I.R.L.R. 48
at [40], per Chamberlain QC
sitting as High Court Judge.
24 See, for example, Coles v

Samuel Smith Old Brewery
(Tadcaster) [2007] EWCA Civ
1461; [2008] 2 E.G.L.R. 159.
25 See, for example, Trustor AB v

Smallbone (No.3) (2000)
Unreported (2000) CA, O.T., at
[97], per Scott VC.
26 Other examples include

liability for premature trading
(Companies Act 2006 ss.761 –
767) and liability relating to
transactions at an undervalue
and preferences (Insolvency
Act 1986 ss.238 and 239).
27 The first registered companies

were created by the Joint
Stock Companies Act 1844.
Statutory limited liability for
registered companies was
conferred by the Limited
Liability Act 1855.
28 Halket v Merchant Traders’

Ship, Loan and Assurance Co
(1849) 13 Q. B. 960 Ct of
Queen’s Bench. As regards
other companies, see Re Sea,
Fire and Life Assurance Policy
(1854) 43 E.R. 951; 3 De G.M.
& G. 459.
29 Re Athenaeum Life Assurance

Society (1859) 44 E.R. 1423; 3
De G. & J. 660.
30 Re Athenaeum Life Assurance

Society (1859) 44 E.R. 1423 at
[671], per Turner LJ.
31 See the Limited Liability Act

1855.
32 e.g. Re Baglan Hall Colliery

Co (1870) L.R. 5 Ch. App.
346.
33 Re Heyford, Pell’s Case (1869)

L.R. 5 Ch. App. 11.
34 Re Heyford Ironworks Co,

Forbes and Judd’s Case
(1870) L.R. 5 Ch. App. 270.
35 For an example of a similar

case, see Re South Blackpool
Hotel Co, Migotti’s Case
(1867) L.R. 4 Eq. 238 (Ct of
Chancery).
36 Bartholomay Brewing Co (of

Rochester) v Wyatt [1893] 2
Q.B. 499 QBD.
37 Bartholomay Brewing Co
[1893] 2 Q.B. 499 at 516, per
Wright J. Cave J agreed, at
517–518.
38 Re George Newman & Co

[1895] 1 Ch. 674 CA.
39 See Re Liberator Permanent

Benefit Building Society, The
Times, 15 June 1894, p.13; Re
George Newman & Co (Ltd),
The Times, 22 December 1984,
p.3; Re Liberator Permanent
Benefit Building Society (Ltd),
Ex p. H G Wright, the Late
Solicitor of the Society (Lately
Convicted of Felony), The
Times, 10 February 1984, p.7.
40 See Re George Newman & Co

[1895] 1 Ch. 674 at 677; Re
George Newman & Co (Ltd),
The Times, 22 December 1984,
p.3.

[1895] 1 Ch. 674 at 685, per
Lindley LJ, delivering the
judgment of the Court of
Appeal.

[1895] 1 Ch. 674 at 685.

[1895] 1 Ch. 674 at 685.
44 Re British and Foreign Cork

Co, Leifchild’s Case (1865–66)
L.R. 1 Eq. 231 (Ct of

Chancery).
45 Re British and Foreign Cork

Co (1865–66) L.R. 1 Eq. 231
at 237, per Kindersley VC.
46 Re Carey [1895] 2 Q.B. 624

QBD.
47 Friends and relatives were

subscribers.
48 Re Carey [1895] 2 Q.B. 624 at

625.
49 i.e. “merely another form that

he has assumed”: Re Carey
[1895] 2 Q.B. 624 at 626.
50 Broderip v Salomon [1893] 2

Ch. 323 CA at 331.

Ch. 323 at 330.
52 So the paradox raised by

Vaughan Williams J in Carey
in respect of the company’s
liabilities to its own creditors
was avoided.

Ch. 323 at 338. He emphasised
that most such companies
would be “quite unaffected”
by the Court of Appeal’s
decision.

Ch. 323 at 339.
55 Rochefocuald v Boustead
[1897] 1 Ch. 196.
56 For example, The Times, 12

December 1921, p.10,
described Lord Lindley (as he
had by then become) thus: “a
great lawyer and a great judge
– indeed he will take rank
among the greatest of the
Victorian Age”.
57 This much was admitted in

Salomon [1897] A.C. 22 at 54,
per Lord Davey.

58 The Companies Acts

(Amendment Committee).
59 Board of Trade, Report of the

Departmental Committee
Appointed by the Board of
Trade to Inquire What
Amendments are Necessary in
the Acts Relating to Joint
Stock Companies Incorporated
with Limited Liability under
the Companies Acts, 1862 to
1890 (C (2nd series) 7779,
1895).
60 Board of Trade, Report of the

Departmental Committee
(1895), para.14.
61 See generally, R. McQueen,

“Salomon” (1999) 27 Federal
Law Review 181.
62 Francis B. Palmer was “upset”

at the Court of Appeal’s
decision. A similar position
was taken in an anonymous
case note in (1895) 3 Law
Quarterly Review 212. All of
this is clear from P. Ireland,
“The Rise of the Limited
Liability Company” (1984) 12
International Journal of the
Sociology of Law 239, 254.
Note that Palmer’s famous
treatise, Palmer’s Company
Law, is still in production
today.
63 Salomon [1897] A.C. 22 at

43–44, per Lord Herschell.
64 McQueen, “Life without

Salomon” (1999) 27 Federal
Law Review 181, 201.
65 See, for example, Prest [2013]

UKSC 34; [2013] 2 A.C. 415
at [16], per Lord Sumption; at
[66], per Lord Neuberger.
66 Salomon [1897] A.C. 22 at 54,

per Lord McNaghten. See also
at 43, per Lord Herschell.
67 Salomon [1897] A.C. 22 at 50,

per Lord McNaghten.

68 Salomon [1897] A.C. 22 at

56–57, per Lord Davey.
69 Salomon [1897] A.C. 22 at 31,

per Lord Halsbury.
70 Salomon [1897] A.C. 22 at 35,

per Lord Watson; at 42, per
Lord Herschell; at 56, per Lord
Davey.
71 Salomon [1897] A.C. 22 at 43,

per Lord Herschell; at 56–57,
per Lord Davey.
72 Salomon [1897] A.C. 22 at 38,

per Lord Watson; at 43, per
Lord Herschell; at 56–57, per
Lord Davey.
73 Salomon [1897] A.C. 22 at 33,

per Lord Halsbury; at 37, per
Lord Watson; at 47, per Lord
Herschell; at 57, per Lord
Davey. See also the
observations of Lord
Neuberger in Persad [2017]
UKPC 32; [2017] B.C.C. 779
at [20].
74 Board of Trade, Davey

Committee Report (1895),
para.16.
75 The Times, 15 February 1897,

p.13.
76 See, especially, Adams v Cape

Industries Plc [1990] Ch. 433
CA (Civ Div).
77 See Gramophone and

Typewriter v Stanley [1906] 2
K.B. 856 KBD; Kodak Ltd v
Clark [1903] 1 K.B. 505 CA;
Re Faisey [1923] 2 Ch. 1 CA.
78 Re Hirth [1899] 1 Q.B. 612

CA.
79 E. Lim, “Of Landmark and

Leading Cases: Salomon’s
Challenge” (2014) 41 J.L.S.
523, 543.
80 Re Hirth [1899] 1 Q.B. 612 at

612, per Lindley LJ.
81 Re Hirth [1899] 1 Q.B. 612 at

82 Re Hirth [1899] 1 Q.B. 612 at

83 Under ss.43 and 44 of the

Bankruptcy Act 1883, property
available to the trustee in
bankruptcy included property
belonging to the bankrupt at
the time of the act of
bankruptcy. For a similar
example involving a
fraudulent transaction, see Re
Faisey [1923] 2 Ch. 1.
84 Lord Lindley’s continuing

dislike of Salomon is
evidenced by his letter to The
Times (The Times, 1 May
1915, p.9) in which he
criticised the Court of Appeal’s
decision in Daimler Co Ltd v
Continental Tyre and Rubber
Co (Great Britain) Ltd [1915]
1 K.B. 893 CA by lamenting
that “the real truth … is
obscured and apt to be lost
sight of by talking of a person
with a corporate name”.
85 Re Darby [1911] 1 K.B. 95

KBD.
86 Re Darby [1911] 1 K.B. 95 at

103.
87 Note that, in 1916, the House

of Lords recognised the
possibility of common law
veil-piercing, albeit not in a
case concerning illegitimate
use of a company, in Daimler
Co Ltd v Continental Tyre and
Rubber Co (Great Britain) Ltd
[1916] 2 A.C. 307 HL. The
question was whether an
English company whose
shareholders were virtually all
enemy aliens could sue in the
English courts during a time of
war for a debt owed by another
English company. Although a
majority in the House of Lords

recognised in principle the

possibility of piercing the veil
so that the company could be
regarded as an enemy alien on
the grounds of its controllers’
nationalities, there was
ultimately no need to pierce
the veil as the desired decision
was reached on the alternative
ground that the company’s
decision to sue had been taken
by its secretary, who had had
insufficient authority to cause
the company to litigate.
88 Rainham Chemical Works Ltd

v Belvedere Fish Guano Co
Ltd [1921] 2 A.C. 465 HL.
89 Rainham Chemical Works

[1921] 2 A.C. 465.
90 Gilford Motor Co Ltd v Horne

[1933] Ch. 935 CA.
91 Gilford Motor Co Ltd [1933]

Ch. 935 at 956.
92 Smith v Hancock [1894] 2 Ch.

377 CA.

377 at 384, per Lindley LJ.

377 at 384.
95 e.g. Gencor APC Ltd v Dalby

[2000] 2 B.C.L.C 734 Ch D;
Kensington International Ltd v
Congo [2005] EWHC 2684
(Comm), [2006] 2 B.C.L.C.
296. See also S. Griffin,
“Disturbing Corporate
Personality to Remedy a
Fraudulent Incorporation – An
Analysis of the Piercing
Principle” (2015) 66 N.I.L.Q.
321.
96 Trustor v Smallbone (No.2)

[2001] 1 W.L.R. 1177 Ch D.
97 In this unusual case, the

claimant company was
registered in a foreign
jurisdiction, and it was not

possible for an English court

to hold Smallbone liable
directly for breach of his
directors’ duties.
98 Mujuh, “Piercing the corporate

veil” (2017) 133 M.L.R. 322,
323.
99 See, for example, Littlewoods

Mail Order Stores Ltd v Inland
Revenue Commissioners
[1969] 1 W.L.R. 1241 CA (Civ
Div) at 1254, per Lord
Denning MR.
100 See, for example,

Wallersteiner v Moir [1974] 1
W.L.R. 991 CA (Civ Div);
Creasey v Breachwood Motors
[1992] B.C.C. 638 QBD.
101 See Adams v Cape Industries

[1990] 1 Ch. 433; Ord v
Belhaven Pubs Ltd [1998] 2
B.C.L.C. 447 CA (Civ Div).
102 Ratiu v Conway [2005] EWCA

Civ 1302; [2006] 1 All E.R.
571 at [188], per Sedley LJ.
103 See e.g. Green v Green [1993]

1 F.L.R. 326 (Fam). See also,
for example, the statement of
Patten LJ in Prest v Petrodel
Resources [2012] EWCA Civ
135; [2013] 2 W.L.R. 5557 at
[161].
104 Shell International Trading Co

Ltd v Tikhonov [2010] EWHC
1399 (QB).
105 Anglo-German Breweries Ltd

(In Liquidation) v Chelsea
Corp Inc [2012] EWHC 1481
(Ch); [2012] 2 B.C.L.C. 632.
There are a small number of
cases in which agency
relationships or trusts arose
other than in response to
wrongdoing. See Smith, Stone
and Knight v Birmingham
Corporation [1939] 4 All E.R.
116 (Ch); Revlon Inc v Cripps
& Lee Ltd [1980] F.S.R. 85 CA
(Civ Div).

106 Ratiu v Conway [2005] EWCA

Civ 1302; [2006] 1 All E.R.
571.
107 Trustor v Smallbone (No.2)

[2001] 1 W.L.R. 1177 (Ch).
108 Coles v Samuel Smith Old

Brewery (Tadcaster) [2007]
EWCA Civ 1461; [2008] 2
E.G.L.R. 159.
109 Coles v Samuel Smith [2007]

EWCA Civ 1461; [2008] 2
E.G.L.R. 159 at [19], per
Rimer LJ.
110 AB v Smallbone (No.3)

unreported 2000 CA (Civ Div).
111 AB v Smallbone (No.3)

unreported 2000 CA (Civ Div),
OT at [97]. Scott VC delivered
the Court of Appeal’s decision.
The appeal related to a
summary judgment, and the
personal liability of Smallbone
was not in issue. Scott VC
nevertheless ventured an
opinion on this point.
Smallbone’s liability was
subsequently established on
the ground of veil-piercing in
Trustor (No.2) [2001] 1 W.L.R.
1177 (Ch).
112 e.g. Law Society of England

and Wales v Habitable
Concepts Ltd [2010] EWHC
1449 (Ch); Comax Secure
Business Services Ltd v Wilson
[2001] All E.R. (D) 222 (QB).
For detailed analysis of the
feasibility and merits of
resolving cases such as Trustor
using principles deriving from
constructive trusts, knowing
receipt and dishonest
assistance, see G. Allan and S.
Griffin, “Corporate
Personality: Utilising Trust
Law to Invoke the Application
of the Concealment Principle”
(2018) 38 L.S. 1.
113 This approach was strongly

advocated by Munby J in Ben

Hashem v Ali Shayif [2009] 1
F.L.R. 115. Munby J’s
reasoning evidently influenced
the judgments in Prest —see,
for example [2013] UKSC 34;
[2013] 2 A.C. 415 at [62], per
Lord Neuberger.
114 Prest [2013] UKSC 34;

[2013] 2 A.C. 415 at [27]–
[35]; at [60]–[74].
115 Prest [2013] UKSC 34;

[2013] 2 A.C. 415 at [33], per
Lord Sumption.
116 Prest [2013] UKSC 34;

[2013] 2 A.C. 415 at [71].
117 Prest [2013] UKSC 34;

[2013] 2 A.C. 415 at [99]–
[100], per Lord Mance; at
[103], per Lord Clarke; at [91],
per Baroness Hale, with whom
Lord Wilson agreed; at [106],
per Lord Walker.
118 Pennyfeathers Ltd v

Pennyfeathers Co Ltd [2013]
EWHC 3530 (Ch).
119 Wood v Baker [2015] EWHC

2536 (Ch); [2015] B.P.I.R.
1524.
120 Wood v Baker [2015] EWHC

2536 (Ch); [2015] B.P.I.R.
1524 at [32], per Hodge QC
sitting as High Court Judge.
121 See also JSC BTA Bank v

Solodchenko [2015] EWHC
3680 (Comm) QBD, in which
it was held that the evasion
principle could cause a trust to
arise.
122 Clegg v Pache [2017] EWCA

Civ 256.
123 Clegg v Pache [2017] EWCA

Civ 256 at [17], per Briggs LJ.
124 For a similar case, see Airbus

Operations Ltd v Withey
[2014] EWHC 1126 (QB).

125 R. v Sale [2013] EWCA Crim

1306; [2014] 1 W.L.R. 663.
126 The case concerned the

application of the Proceeds of
Crime Act 2002 s.76.
127 See R. v Sale [2013] EWCA

Crim 1306; [2014] 1 W.L.R.
663. The case concerned the
application of the Proceeds of
Crime Act 2002 s.76.
128 R. v Sale [2013] EWCA Crim

1306; [2014] 1 W.L.R. 663 at
[40] per Treacey LJ.
129 R. v McDowell [2015] EWCA

Crim 173; [2015] Crim. L.R.
623.
130 R. v McDowell [2015] EWCA

Crim 173; [2015] Crim. L.R.
623 at [55], per Pitchford LJ.

32; [2017] B.C.C. 779.

32; [2017] B.C.C. 779 at [21]
per Lord Neuberger
opinion).
133 Bataillon v Shone [2016]

EWHC 1174 (QB); [2016]
B.P.I.R. 829.
134 See Insolvency Act 1986

s.423.
135 Harold Holdsworth & Co

(Wakefield) Ltd v Caddies
[1955] 1 W.L.R. 352 HL;
Meyer v Scottish Cooperative
Wholesale Society Ltd.[1959]
A.C. 324 HL; Beckett
Investment Management
Group Ltd v Hall [2007]
EWCA Civ 613; [2007]
I.R.L.R 1539. Also, see Day,
“Skirting around the issue”
[2014] L.M.C.L.Q. 269, 271–
274.
136 Gilford [1933] Ch. 935 CA;

Jones v Lipman [1962] 1

W.L.R. 832 (Ch); Locke
(Albert) (1940) v Winsford
Urban DC (1973) 71 L.G.R.
308.
137 Gilford [1933] Ch. 935, as

analysed by Lord Neuberger in
[2013] 2 A.C. 415 at [71].
138 Coles [2007] EWCA Civ 1461;

[2008] 2 E.G.L.R. 159; Jones
[1962] 1 W.L.R. 832 (Ch), as
analysed by Lord Neuberger in
[2013] 2 A.C. 415 at [71]. See
also Elliot v Pierson [1948]
Ch. 452.
139 Carey [1895] 2 Q.B. 624.
140 Hirth [1899] 1 Q.B. 612;

Fasey [1923] 2 Ch. 1;
Bataillon [2016] EWHC 1174
(QB), [2016] B.P.I.R. 829.
141 Chelsea [2012] EWHC 1481

(Ch), 2012] 2 B.C.L.C. 632;
JST BTA Bank v Solodchenko
[2015] EWHC 3680 (Comm).
142 Trustor (No.2) [2001] 1 W.L.R.

1177 (Ch); Gencor [2000] 2
B.C.L.C. 734; Shell [2010]
EWHC 1399 (QB); Darby
[1911] 1 K.B. 95.
143 Trustor (No.2) [2001] 1 W.L.R.

1177 (Ch) and Gencor [2000]
2 B.C.L.C. 734, as analysed by
Lord Sumption in Prest [2013]
UKSC 34; [2013] 2 A.C. 415
at [33]; Airbus [2014] EWHC
1126 (QB); Clegg v Pache
[2017] EWCA Civ 256.
144 Trustor (No.3) (2000)

unreported (CA); Law Society
[2010] EWHC 1449 (Ch);
Comax Secure Business
Services. v Wilson [2001] All
E.R. (D) 222.
145 Pennyfeathers [2013] EWHC

3530 (Ch).

146 Leifchild’s Case (1865) L.R. 1

Eq. 231.
147 Even in Adams [1990] 1 Ch.

433, the issue for the English
court was whether, for the
purposes of enforcing in an
English court a foreign
judgment, a subsidiary’s
presence in the foreign
jurisdiction could render its
holding company present. It
was not an attempt to persuade
an English court to make a
holding company liable in
English law for its subsidiary’s
debts.
148 Trustor (No.2) [2001] 1 W.L.R.

1177 (Ch).
149 See Lord Neuberger’s

observation on this in Prest
[2013] UKSC 34; [2013] 2
A.C. 415 at [66]. See also
Dimbleby and Sons Ltd v
National Union of Journalists
[1984] 1 W.L.R. 427 HL at
435, per Lord Diplock.
150 Prest [2013] UKSC 34;

[2013] 2 A.C. 415 at [18].
151 See generally L.A. Sheridan,

Fraud in Equity (London:
Pitman, 1957).
152 See M v M [2013] EWHC

2534 (Fam); [2014] 1 F.L.R.
439.
153 In particular, Law of Property

Act 1925 s.53(1)(b); Wills Act
1837 s.9. Key cases include
Rochefoucauld v Boustead
[1897] 1 Ch. 196; Blackwell v
Blackwell [1929] A.C. 318.
154 e.g. W. Swadling, “The Nature

of the Trust in Rochefoucauld
v Boustead” in C. Mitchell
(ed.), Constructive and
Resulting Trusts (Oxford:
Oxford University Press,
2009), p.68.
155 e.g. G. Allan, “Once a fraud,

forever a fraud: the time-

honoured doctrine of parol
agreement trusts” (2014) 34
L.S. 419.
156 Coles [2007] EWCA Civ 1461;

[2008] 2 E.G.L.R. 159. For an
argument that, in cases in
which the evasion principle is
triggered, a unique and novel
species of constructive trust is
generated, see Allan and
Griffin, “Corporate
Personality” (2018) 38 L.S. 1.
Whilst it is still accepted by
the author of this J.B.L. article
that the “evasion trust” that is
analysed and advocated in the
L.S. article is an entirely
justifiable and doctrinally
sound legal construction, and
that the “evasion trust” may
provide the best explanation as
to what the courts are doing in
instances in which invocation
of the evasion principle causes
the controller of a company to
be recognised as beneficial
owner of property held in the
company’s name, the views of
the author of this article have
evolved somewhat since the
“Corporate Personality” article
was written. The conclusions
reached in this article
demonstrate that it is difficult
to conceive of cases
potentially involving the
evasion principle (and by
extension the evasion trust)
which cannot be resolved
through the pursuit of
alternative avenues for relief. I
would like to emphasise that,
in respect of the comments in
this footnote which relate to
the L.S. article, I do not speak
for Professor Stephen Griffin
(my co-author for the L.S.
article).
157 In respect of the construction

of contracts and specific
statutory provisions, see
Harold Holdsworth [1955] 1
W.L.R. 352; [1959] A.C. 324;
Beckett [2007] EWCA Civ

613; [2007] I.R.L.R 1539.

Also, see Day, “Skirting
around the issue” [2014]
L.M.C.L.Q. 269. In respect of
a holding company incurring
tortious liability for
negligence, see Chandler v
Cape [2012] EWCA Civ 525;
[2012] 1 W.L.R 3111. In
Chandler, the claimant, who
had contracted asbestosis
while in the employment of a
subsidiary of the defendant
company, successfully claimed
in negligence against the
defendant company. It was
held that, according to the
ordinary rules relating to
tortious liability in negligence,
the holding company had, in
its own right, and
independently of any liability
of the subsidiary, assumed
(and breached) a duty of care
to the claimant. Although there
was no evidence of any
unconscionability on the part
of the holding company, there
seems no reason why, even if
some sort of fraud or
unconscionability had been
alleged, the case could not
have been resolved on the
same basis.
158 See above fn.75 and

accompanying text.
159 Insolvency Act 1986 s.214.

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To pierce or not to pierce?

A doctrinal reappraisal of judicial

responses to improper exploitation of the corporate form

Jurisdiction: United Kingdom

Date: 6 December 2021 at 10:09 am

Delivered By: Keith Gompertz

Client ID: NOCLIENTID

Comment: Journal of Business Law: article on Prest.

© 2021 Thomson Reuters.

For educational use only

Suggested taxonomy of cases

The pre-piercing era—1840s to Salomon

The formative era of veil-piercing—Salomon to Gilford Motors

The primacy of veil-piercing—Gilford Motors to Prest

The “post-piercing” era? Prest onwards

Rationalising the law

J.B.L. 2018, 7, 559-583

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*J.B.L. 559 Introduction

© 2021 Thomson Reuters. 3

aforementioned inconsistencies of nomenclature, classification and doctrine, a novel

Suggested taxonomy of cases

Piercing the corporate veil

“evasion principle”, which is triggered when a company is exploited to enable its

ministerial for its controlling shareholder.20

Alternative avenues for relief

The pre-piercing era—1840s to Salomon

Early judicial esteem for the separate corporate personality of registered

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Veil-piercing and concealment agency/trusts before the House of Lords

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famous judgments concerned precisely this principle.55 It was this perceived

The formative era of veil-piercing—Salomon to Gilford Motors

Salomon in the House of Lords

controlled companies agents,67 because impropriety or fraud do not lead to the

The initial judicial response to Salomon

so that Salomon became a virtually impregnable bar against the imposition of

The assumption of an inherent veil-piercing jurisdiction

the precise circumstances in which it was appropriate to categorise a company as a

The primacy of veil-piercing—Gilford Motors to Prest

Inconsistent exercise of the veil-piercing jurisdiction

Alternative avenues for relief during the primacy of veil-piercing

The “post-piercing” era? Prest onwards

The Prest v Petrodel Resources case

The current judicial approach

Rationalising the law

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the consequences of insolvency. There are numerous authorities advocating the

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charge that veil-piercing either offends the doctrine of parliamentary sovereignty by

Alternative avenues revisited

2 Prest v Petrodel Resources Ltd

3 See W. Day, “Skirting around

4 See E. Mujuh, “Piercing the

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5 See VTB v Capital Plc v

6 Prest v Petrodel [2013] UKSC

7 See Prest [2013] UKSC 34,

8 e.g. Gower’s Principles of

9 See Mujuh, “Piercing the

10 Salomon v Salomon & Co Ltd

11 For example, see generally

12 This was the most popular