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f the business of a company is carried on for fraudulent purposes, the court could hold any person who is knowingly a party to the fraud commits an offence and personally liable if appropriate. But this provision for fraudulent intentions requires solid and sufficient evidence to prove the existence of this mens rea (guilty mind) (Pickering, 1968). Also, when the idea of criminal offence is involved, the standard of proof needs to be beyond reasonable doubt.

In Re Darby, the defendants were the only two people receiving all the profits from the London Investment Corporation Ltd. They latter set up another company and sold a significantly overpriced quarrying licence to it. They were held guilty and need to pay the debts when the latter company went insolvent for their mens rea to perpetrate great fraud.

Moreover, the independent personality of companies incorporated under the Company Act 2006 can be disregarded by some other statutes as requires, stated by Lord Diplock (1984) in Dimbleby. For instance, to tackle the evasion of legal obligations to the creditors in “Phoenix Syndromes”, Section 216 of the Insolvency Act 1986 prohibits directors (or shadow directors) of an insolvent company in the past one year to found a new company with a related name within five years (Fletcher, 1987). InThorne, the defendant was the director of three independent companies with similar names. When two of them went insolvent, the third company borrowed from the claimant and later failed to pay back. The court held the defendant personally liable for the debt under Section 216 with a prohibited name.

CHAPTER 2 JUDICIAL EXCEPTIONS司法例外

Provided the separate legal personality is authorised by statute, judges have been cautious about the circumstances of piercing the veil and enforcing liability on the individuals behind it. Compared to statutory exceptions, common law approaches have no general doctrinebut depend on howjudgesconsider itas in some relevant impropriety with exact contrast to the essence in Salomon, concluded by LordSumption (2013) in Prest.

One of these exceptions is when the company was merely a “cloak” or “sham” to perpetrate an impropriety (Dobson, 1986). In Ben Hashem, the wife claimed two properties from her husband Ben during their matrimonial dispute. The properties were occupied by the couple but were actually held by a company inconstructive trust for the husband. The husband owned most of thecompany’s shares with the remaining interests in their children. It was held that the corporate veil is lifted not because of the issue of ownership and control, not because of the existence of third party interests, but of some relevant improprieties. According to Justice Munby (2008), corporate personality could be set aside where the company is controlled by the wrongdoer and its form is misused to conceal liability even if it was incorporated as a bona fide entity. Same principle had applied in Trustor by Sir Andrew Morritt.

The second exception here refers to thesituation stated by Lord Denning (1956) in Lazarus Estates Ltdwithan absolute expression, which is “Fraud unravels everything”. The corporate form is used dishonestly to vitiate consent therefore the transaction becomes violable ab initio and the liability goes behind the veil to those taking advantage of it. In Stone & Rolls Ltd