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, the court found the one-man company was established only to defraud banks hence its sole shareholder and director could not avoid liability through claiming the fraud is actions of the company.

However, as mentioned previously, it places heavy burden to prove the existence of such impropriety and fraud.The impropriety should not be within the threshold of general nature. And for fraud, one has to identify the intention to decline the plaintiff’s granted legal rights (Payne, 1997). Careful processes have been followed by courts to find fraud, but once established, it vitiates all associated judgments, contracts and transactions (Denning, 1956).

Thirdly, for groups of companies, judgement had been made by Lord Keith (1978) in Woolfson, which clarifies the subsidiary can be treated as separate legal entities if it is being dishonestly functioned by the parent company. Also, agency relationships may exist in a group if the internal conduct of those companies is virtually the same as one unit. 

In Smith Stone and Knigh, six criteria have been drawn to establish the agency relation, which mainly focuses on the parent and subsidiary’s profit being treated as the same;the person carrying on trade being appointed by the parent and the subsidiary being effectively and constantly governed with its trade. Whether the subsidiary is wholly owned or not does not decide the judgement as seen inEbbw Vale DC. When the parent is qualified as a principal, the actions of the subsidiary are considered to be the actions of the parent company. 

In terms of tort, lastly, the members are held liable rather than enjoying limited liability if personal advice has been provided that result in the loss.It does not apply toactivities within the member’s general function or duty so it is complex to adopt this approach. 

CONCLUSION总结

Having discussed the circumstances to lift the corporate veil, we can see that the corporate personality could encourage larger scale of capital contribution as investors are able to estimate the maximum liability but sometimes it could also be misused. Statutes including Company Act 2006, Insolvency Act 1986; Landlord and Tenant Act 1954 all have provisions to prohibit this type of abuse. Under common law approaches, there are limited situations to deprive the corporate personality in context of “sham” company, fraud, company groups, agency and tort. But judges are careful about this and do not apply principles indiscriminately. It should involve a person subject to an existing legal obligation but avoiding or frustrating those enforcements intentionally through intervening a company under his control. With respect to the spirit of the establishment of corporate personality, for and only for the purpose of removing the advantage taken using the company form, the court may impose liability to the shareholders or directors behind the veil for the actions of the company as justice so requires.

REFERENCES文献

1. CASES REFERRED
Ben Hashem v Al Shayif [2009] 1 FLR 115
Dimbleby and Sons Ltd v National Union of Journalists [1984] 1 WLR 427 
Ebbw Vale UDC v South Wales Traffic Area Licensing Authority [1951] 2 KB 366
Lazarus Estates Ltd v Beasley [1956] 1 QB 702
Phonogram Ltd v Lane [1982] QB 938
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