COMPANY LAW

LW3CO
Dr. Bolanle Adebola

Dr Bolanle Adebola 1
Recap: Lecture 1
• Introduction to the Module.

• Introduction to Business Forms.

• Introduction to Corporate Regulatory framework.

• Introduction to some of the Central Issues in Corporate Law:

• Types and classification of companies.
• Purpose of companies.
• Role of the regulatory framework.
• The concept of Limited Liability.
• Introduction to governance theories.

Dr Bolanle Adebola 2
 Overview of Lecture 2
• Introduction to Corporate Personality:
• Doctrine
• Incidents

• Piercing the Veil of Incorporation

• Meaning
• Principles
• Corporate Groups
• Companies and Society

Dr Bolanle Adebola 3
 This Photo by Unknown Author is licensed under CC BY-SA

CORPORATE PERSONALITY:
THE CORPORATE VEIL

Dr Bolanle Adebola 4
The Effects of Registration
CA 2006, s15 (4)
(1)On the registration of a company, the registrar of companies shall give a
certificate that the company is incorporated.

(4)The certificate is conclusive evidence that the requirements of this Act as to

registration have been complied with and that the company is duly registered
under this Act.

CA 2006, s16:
(1)The registration of a company has the following effects as from the date of
incorporation.

(2)The subscribers to the memorandum, together with such other persons as

may from time to time become members of the company, are a body corporate
by the name stated in the certificate of incorporation.

(3)That body corporate is capable of exercising all the functions of an

incorporated company.
Dr Bolanle Adebola 5
Corporate Personality: An Introduction
Salomon v Salomon & co [1897] AC 22:
• Successful sole trader; specialized in manufacturing leather boots.
• In1892, sons became interested in the business. Salomon
incorporated his business as a Limited company with 20,007
shares.

• The legal requirement for incorporation was at least 7 members:

Mr Salomon + wife + daughter + 4 Sons =7 members.
• Salomon owned 20,001 shares. Each of the other 6, owned one
share each.

• Salomon sold his business to the new corporation for almost

£39,000; £10,000 was a debt to him and secured by a floating
charge.

• Company went into liquidation shortly afterwards.

• Mr. Salomon was the principal shareholder and secured creditor.
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Corporate Personality: An Introduction
Salomon v Salomon & co [1897] AC 22:
On the HC Decision: company had conducted the business as agent for Mr
Salomon, so that he was responsible for all debts incurred in the course of
the agency for him.

House of Lords rejected this approach. Lord Herschell said ([1897] AC 22 at p

43):

In a popular sense, a company may in every case be said to carry on

business for and on behalf of its shareholders; but this certainly does not
in point of law constitute the relation of principal and agent between
them or render the shareholders liable to indemnify the company against
the debts which it incurs.

Dr Bolanle Adebola 7
Corporate Personality: An Introduction
Salomon v Salomon & co [1897] AC 22:
Court of Appeal (sub nom Broderip v Salomon [1895] 2 Ch 323 at p 333): Mr Salomon
had incorporated the company contrary to the true intent and meaning of CA 1862.
Due to Mr Salomon’s fraud, the company should be declared to have operated the
business as trustee for Mr Salomon, who should therefore indemnify the company
for all debts incurred in carrying out the trust.

The House of Lords rejected this argument. Lord Halsbury LC said, at pp 30–1:

• it seems to me impossible to dispute that once the company is legally incorporated

it must be treated like any other independent person with its rights and liabilities
appropriate to itself, and that the motives of those who took part in the promotion
of the company are absolutely irrelevant in discussing what those rights and
liabilities are.

Dr Bolanle Adebola 8
Corporate Personality: An Introduction
Salomon v Salomon & co [1897] AC 22:
• “…The company is at law a different person altogether from the
shareholders...;

• and, though it may be that after incorporation the business is

precisely the same as it was before, and the same persons are
managers, and the same hands received the profits, the company is
not in law the agent of the shareholders or trustee for them.

• Nor are the shareholders, as members, liable in any shape or form,

except to the extent and in the manner provided for by the Act…."

Dr Bolanle Adebola 9
 Corporate Personality: Implications

Macaura v . Northern Assurance Co Ltd [1925] AC 619

◦ Macura was the owner of an estate, in which he sold all the timber to the company.
◦ The shares in the company were owned by him and he had taken out insurance (in his own name).

◦ Macura claimed and the insurance company refused to honor the payout.

◦ HOL – agreed that that Macura had no right to the claim, given that he had given up his interest in it.
The timber was in the property of the company.

Note:
◦ A request to pierce the veil of incorporation, by the company.
Dr Bolanle Adebola 10
 Corporate Personality: Implications
Lee v. Lee’s Air Farming Ltd [1961] AC 12
◦ Mr Lee was a pilot who operated a crop-dusting business.
◦ He formed the corporation, Lee's Air Farming Ltd. Its main business was aerial spraying.
◦ He was the director and owned most of the shares (he held 2999 of the company's 3000 shares).
◦ He was also appointed as an employee in company articles
◦ Three hats:
◦ Maj Shareholder;
◦ Sole director;
◦ Employee of company

◦ Killed when his plane stalled and crashed.

◦ Widow claimed compensation under insurance policy (workers compensation act 1922)

Dr Bolanle Adebola 11
 Lee v. Lee’s Air Farming Ltd [1961] AC 12

◦ A company was a separate legal person, (Salomon) therefore able to enter into contract.

◦ Lord Morris:
‘There appears to be no great difficulty in holding that a man acting in one capacity can make a
contract with himself in another capacity. The company and the deceased were separate legal
entities.’

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Corporate Personality:
Incidents
• Separate legal entity
• Ease of contracting
• Company can contract with its members
• Separation of company’s assets

• Capacity to sue and being sued

• Perpetual Succession

• Others:
• Separation of ownership and control
• Transferability of shares

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On Limited Liability
Principle:
• Members are only liable to pay the amount unpaid for the company’s
shares.

• Not liable for liabilities of the company upon insolvency.

Note:
• It is the liability of the members- NOT THE COMPANY- that is limited

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 REFLECT
What are the merits of corporate personality?

Any demerits of incorporation?

Do you think of the Salomon principle/decision duly

considered the interests of other stakeholders?

What is the scope of the company’s personality?

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Dr Bolanle Adebola
 This Photo by Unknown Author is licensed under CC BY-SA

PIERCING/LIFTING
THE CORPORATE VEIL

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 Lord Neuberger in VTB Capital plc v Nutritek International Corporation [2013] UKSC 5,
[2013] 2 AC 337, at [138]:

A company should be treated as being a person by the law in the

same way as a human being. The fact that a company can only act
or think through humans does not call that point into question: it
just means that the law of agency will always potentially be in
play, but it will, at least normally, be the company, which is the
principal, not an agent.

Dr Bolanle Adebola 17
 Piercing the Corporate Veil:
Concept
Lord Sumption in Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 2
AC 415, at [8]

The separate personality and property of a company is sometimes

described as a fiction, and in a sense it is. But the fiction is the
whole foundation of English company and insolvency
law….Their separate personality and property are the basis on
which third parties are entitled to deal with them and commonly
deal with them.

Dr Bolanle Adebola 18
 Piercing the Corporate Veil:
Concept
Lord Sumption in Prest v Petrodel Resources Ltd [2013] UKSC 34,
[2013] 2 AC 415, at [16]

At its very heart, the term refers to the circumstances

in which the fundamental principle of separate
personality is disregarded, and the property,
liabilities or obligations of the company are treated as
belonging to its controller.

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Illustration: Gilford Motor Co Ltd v Horne
◦ Prior to leaving role as Managing Director of Gilford Motor Co Ltd, H covenanted
not to solicit customers from his employer after he left its employment.

◦ After leaving H set up a business and subsequently transferred to a limited co. but
his wife and an employee were the Ds and SHs.

◦ It solicited customers from H’s former employers.

The Company was a “cloak or a sham” for H.

Established to avoid a pre- existing legal liability.
An injunction was granted against him and the Company.
Dr Bolanle Adebola 20
Gencor ACP Ltd v Dalby [2000] 2 BCLC 734
Dalby was a director of ACP Group of Companies, including Gencor ACP Ltd.

He diverted commissions and business opportunities of Gencor ACP Ltd to Burnstead, an offshore
company that he owned and controlled without the prior consent of Gencor ACP.

These actions breached his fiduciary duties to Gencor ACP.

Gencor ACP sought to recover the diverted profits and sums from Dalby and his offshore company

Rimer J
“the introduction into the story of such a creature company is... insufficient to prevent equity’s
eye from identifying it with Mr Dalby.”

◦ Ordered against both Mr Dalby and Burnstead.

Dr Bolanle Adebola 21
Prest v Petrodel Resources Ltd [2013]
Background
Divorce proceedings: Yasmin and Michael Prest.
Judge in Family Division awarded a lump sum in favour of Yasmin Prest, amongst other things.
Ordered 3 companies within a group owned and controlled by the husband to transfer properties held by them in
satisfaction of the said lump sum

Question:
Did the court have the power to order the transfer of 7 companies held by 3 companies within a group owned and
controlled by the husband to the wife in fulfilment of a lump sum payment awarded against the husband?

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 Does the court have the discretionary
jurisdiction to pierce the veil where the
circumstances require?

Lifting/Piercing the What is the scope of this jurisdiction?

Corporate Veil:

Key Questions What are its key principles?

How have the principles been applied in

specific circumstances: Certainty v other
values.

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 Prest v Petrodel Resources Ltd [2013]
Three possible legal bases on which the assets of the Petrodel companies might be available
to satisfy the lump sum order against the husband:
(1) It might be said that this is a case in which, exceptionally, a court is at liberty to
disregard the corporate veil in order to give effective relief.

(2) Section 24 of the Matrimonial Causes Act might be regarded as conferring a distinct
power to disregard the corporate veil in matrimonial cases.

(3) The companies might be regarded as holding the properties on trust for the husband, not
by virtue of his status as their sole shareholder and controller, but in the particular
circumstances of this case.
Dr Bolanle Adebola 24
Prest v Petrodel Resources Ltd [2013]
HC:
No general jurisdiction to pierce the veil applicable in this case but broader power available under
s24(1) Matrimonial Causes Act 1973.

CA:
The Family Division had developed “an approach to company owned assets in ancillary relief
applications which amounts almost to a separate system of legal rules unaffected by the relevant
principles of English property and company law.”
The practice… “must now cease”.

SC:
Full Bench
Discussion on Piercing the Veil Obiter but instructive.
Dr Bolanle Adebola 25
 Piercing the Corporate Veil: Jurisdiction

Lord Sumption in Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 2 AC 415, at [27]

In my view, the principle that the court may be justified in piercing

the corporate veil if a company’s separate legal personality is
being abused for the purpose of some relevant wrongdoing is well
established in the authorities…I would not for my part be willing
to explain that consensus out of existence.

[28]

The difficulty is to identify what is a relevant wrongdoing.

Dr Bolanle Adebola 26
 REFLECT

What is the scope of this jurisdiction?

◦ Lord Sumption and Lord Neuberger
◦ Lord Mance and Lord Clarke
◦ Lord Walker
◦ Rossendale Borough Council v Hurstwood Properties (A) Ltd [2021] UKSC
16, [2022] AC 690.

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Dr Bolanle Adebola
 Piercing the Corporate Veil:
Meaning
Lord Sumption in Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 2 AC 415, at [16]

“Piercing the corporate veil” is an expression rather

indiscriminately used to describe a number of
different things but that it really arises only in a limited
number of cases.

Dr Bolanle Adebola 28
 Piercing the Corporate Veil.

Lifting the corporate Veil.

Setting aside the corporate veil.

Dr Bolanle Adebola 29
Going behind the corporate veil.
 Piercing the Corporate Veil:
Meaning
Lord Sumption in Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 2 AC 415, at [28]

References to a “facade” or “sham” beg too many

questions to provide a satisfactory answer.

It seems to me that two distinct principles lie behind

these protean terms, and that much confusion has been
caused by failing to distinguish between them.

They can conveniently be called the concealment

Dr Bolanle Adebola
principle and the evasion principle. 30
 Piercing the Corporate Veil:
The Concealment Principle
Lord Sumption in Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 2 AC 415, at [28]

The concealment principle is legally banal and does not

involve piercing the corporate veil at all.

It is that the interposition of a company or perhaps several

companies so as to conceal the identity of the real actors will
not deter the courts from identifying them, assuming that their
identity is legally relevant.

In these cases, the court is not disregarding the “facade”, but

only looking behind it to discover the facts which the corporate
Dr Bolanle Adebola 31
structure is concealing.
 The Concealment Principle: Illustration
Gencor ACP Ltd v Dalby [2000] 2 BCLC 734 Lord Sumption’s Analysis: [31]:
[Rimer J] considered that he was piercing the corporate veil, but I do not think that he was.

The correct analysis of the situation was that the court refused to be deterred by the legal personality of the
company from finding the true facts about its legal relationship with Mr Dalby.

His findings about Mr Dalby’s relationship with the company and his analysis of the legal consequences show that
both Mr Dalby and Burnstead were independently liable to account to ACP, even on the footing that they were
distinct legal persons. It held that the nature of their dealings gave rise to ordinary equitable claims against both.

This is in reality the concealment principle.

Dr Bolanle Adebola 32
 Piercing the Corporate Veil:
The Evasion Principle
Lord Sumption in Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 2 AC 415, at [28]

The evasion principle is different.

It is that the court may disregard the corporate veil if there is a
legal right against the person in control of it which exists
independently of the company’s involvement, and a company is
interposed so that the separate legal personality of the company
will defeat the right or frustrate its enforcement.

Dr Bolanle Adebola 33
 The Evasion Principle: Illustration

Gilford Motor Co Ltd v Horne: Lord Sumption’s Analysis [31]:

As against Mr Horne, the injunction was granted on the concealment principle.

Lord Hanworth MR said, at pp 961-962, that the company was a “mere cloak or sham” because the
business was really being carried on by Mr Horne. Because the restrictive covenant prevented Mr
Horne from competing with his former employers whether as principal or as agent for another, it did
not matter whether the business belonged to him or to JM Horne & Co Ltd provided that he was
carrying it on. The only relevance of the interposition of the company was to maintain the
pretence that it was being carried on by others.

Dr Bolanle Adebola 34
 The Evasion Principle: Illustration
Lord Sumption’s Analysis [31]:
Lord Hanworth did not explain why the injunction should issue against the company, but I think it is clear
from … Lawrence and Romer LJJ…that they were applying the evasion principle.

Lawrence LJ…based his view entirely on Mr Horne’s evasive motive for forming the company. This
showed that it was “a mere channel used by the defendant Horne for the purpose of enabling him, for his
own benefit, to obtain the advantage of the customers of the plaintiff company, and that therefore the
defendant company ought to be restrained as well as the defendant Horne.”

In other words, the company was restrained in order to ensure that Horne was deprived of the benefit
which he might otherwise have derived from the separate legal personality of the company.

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 DISCUSS
Lifting the veil (in concealment cases ) involves looking behind the company
to see who the real players are, where their identity is legally relevant.

Piercing the veil (in evasion cases) means breaching the veil to prevent
avoidance of liability or frustration of enforcement by the “real actors”.

◦ How distinct are these two classifications?

◦ Is the distinction relevant?

◦ Has the classification, in your view, clarified the law?

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Dr Bolanle Adebola
 The Evasion Principle: Scope
Applied only where there is both control and impropriety (by controller).
 Lindsay v O’Loughnane [2010] EWHC 529 (QB), [2012] BCC 153.
 Persad v Singh [2017] UKPC 32, [2017] BCC 779

Possible only if there is no other remedy available to the claimant.

 Lord Sumption: If it is not necessary to pierce, then it is not appropriate to do so.
Lord Neuberger: when all other, more conventional remedies have proved to be of no assistance.

Limited operation with limited consequences

 VTB Capital plc v Nutritek International Corp [2013] 1 BCLC 179, aff’g [2012] 2 BCLC 437.
 La Générale des Carrières et des Mines v FG Hemisphere Associates LLC [2013] 1 All ER 409, PC.

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 The Evasion Principle: Motive
On purpose of incorporation and the evasion:
 Ben Hashem v Ali Shayif [2009] 1 FLR 115
 VTB Capital plc [2012] 2 BCLC 437

Note:
The focus is on the dishonest use of the company for an evasive purpose.
Hence, the motive behind the use of the company must be a deliberate evasion of obligations or liabilities of X or
the deliberate frustration of enforcement measures against the wrongdoer.
 Persad v Singh [2017] UKPC 32, [2017] BCC 779
 VTB Capital plc v Nutritek International Corp [2012] 2 BCLC 437

Dr Bolanle Adebola 38
 The Evasion Principle: Control
Direct or Indirect control of the company by the wrongdoer:
 Pennyfeathers Ltd v Pennyfeathers Property Co Ltd [2013] EWHC 3530 (Ch)

What happens where there are unconnected shareholders?

 Ben Hashem v Shayif [2008] EWHC 2380 (Fam), [2009] 1 FLR 115

Dr Bolanle Adebola 39
The Evasion Principle: Available Alternative Remedies?
◦ Remedy in statute?
◦ ss213/214 Insolvency Act 1986
◦ Ss15/15A Company Directors’ Disqualification Act 1986

◦ Remedies in Tort
◦ See Chandler v Cape plc
◦ No duty of care to employees of subsidiary co by virtue of being a parent co
◦ BUT Parent Co may be found to have assumed a DUTY of care towards its subsidiary in some aspects, such as health and
safety
◦ Found liable not on basis of piercing BUT on basis of being an economic entity with its subsidiary, undertaking an obligation
to the employees.

◦ Exceptional Agency
◦ Must arise from circumstances OTHER than control of the company by ownership of the shares.
◦ Requires a detailed examination of the facts to see if relationship of principal and agent
◦ Remember argument rejected in Adams v Cape Food Industries plc

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Dr Bolanle Adebola
 REFLECT
How did Lord Sumption apply the concealment and evasion
principles to the other cases?

To what extent did the other judges agree with that

classification?
◦ Lord Neuberger?
◦ Lady Hale?

41
Dr Bolanle Adebola
 This Photo by Unknown Author is licensed under CC BY-SA

PIERCING/LIFTING THE CORPORATE

VEIL:
THE CORPORATE GROUP
Dr Bolanle Adebola 42
Piercing the Corporate Veil: Corporate Groups

The Albazero [1977] AC 774, 807: Roskill LJ:

It is a fundamental principle of English Law long established and now unchallengeable by judicial
decision … that each company in a group of companies … is a separate legal entity possessed of
separate legal rights and liabilities so that the rights of one company in a group cannot be exercised by
another company in that group even though the ultimate benefit of the exercise of those rights would
enure beneficially to the same person or corporate body irrespective of the person or body in whom
those rights were vested in law.

Adams v Cape Industries PLC, Slade LJ:

There is no general principle that all companies in a group of companies are to be regarded as one. On
the contrary, the fundamental principle is that ‘each company in a group of companies (a relatively
modern concept) is a separate legal entity possessed of separate legal rights and liabilities.

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Dr Bolanle Adebola
Piercing the Corporate Veil: Corporate Groups
Re Southard Ltd [1979] 3 All ER 556.
A parent company may spawn a number of subsidiary companies, all controlled directly or indirectly by the
shareholders of the parent company. If one of the subsidiary companies, to change the metaphor, turns out
to be the runt of the litter and declines into insolvency to the dismay of the creditors, the parent company
and other subsidiary companies may prosper to the joy of the shareholders without any liability for the
debts of the insolvent subsidiary.

Dr Bolanle Adebola 44
Piercing the Corporate Veil: Corporate Groups
Corporate Groups in Company Law:
◦ Company law treats the Corporate Group as a series of INDIVIDUAL companies.
◦ Wholly owned subsidiaries of a company will not be treated as one.
◦ Each has its own separate legal personality, owns assets and is liable for its own debts.
◦ Adams v Cape Industries plc [1990] Ch 433
◦ Bank of Tokyo Ltd v Karoon [1987] AC 45
◦ The Albazero [1977] AC 774

Corporate Groups in Other Areas of Law:

◦ May be treated as a single economic entity:
◦ Public disclosure laws which require groups companies to prepare accounts compiled on a group basis.
◦ Tax
◦ EU Competition Law

Dr Bolanle Adebola 45
Adams v Cape Industries PLC[1990] Ch 433
◦ Complicated set of facts!
◦ Parent company incorporated in the UK was one of the largest asbestos companies in the world. Their asbestos products were
widely used in construction and were at the heart of the mesothelioma epidemic in several countries, as well as being responsible
for other asbestos diseases such as lung cancer, asbestosis and pleural thickening.

◦ Cape Pls had mining interests in South Africa, as well as factories in the UK. The subsidiaries mined the asbestos in SA and
shipped it to the US for marking through subsidiaries structured to minimize the presence of the Parent Company for tax and other
potential liability issues.

◦ The claimants were former employees who became ill asbestos-related illness as a result of their employment. They sued Cape
and its subsidiaries in the UK. Cape argued that there was no jurisdiction to hear the case. It was still found to have breached its
duty of care to said employees.

◦ The tort creditors sought to enforce their judgment in the UK.

◦ Under UK Conflict of Laws, Cape had to either submit to jurisdiction in the US or be present. Was Cape PLC present through its
US subsidiary? That would require piercing the veil to treat both companies as one.

◦ HC held not. CA upheld.

Dr Bolanle Adebola 46
Adams v Cape Industries PLC: Key Arguments
Argument 1: The Cape Group was a Single Economic Unit:
There is no general principle that all companies in a group of companies are to be regarded as one. On the
contrary, the fundamental principle is that ‘each company in a group of companies (a relatively modern concept) is
a separate legal entity possessed of separate legal rights and liabilities.’

Save in cases which turn on the wording of particular statutes or contracts, the court is not free to disregard the
principle of Salomon v Salomon & Co Ltd merely because it considers that justice so requires.

Our law, for better or worse, recognises the creation of subsidiary companies, which though in one sense the
creatures of their parent companies, will nevertheless under the general law fall to be treated as separate legal
entities with all the rights and liabilities which would normally attach to separate legal entities

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Dr Bolanle Adebola
Adams v Cape Industries PLC: Key Arguments
Argument 2: The subsidiaries were a façade:

“We do not accept…the court is entitled to lift the corporate veil against a defendant company which is the
member of a corporate group merely because the corporate structure has been used to ensure the legal
liability….of particular future activities in the group will fall on another member of the group rather than
the defendant company.”

“Cape….was in law entitled to organise the group’s affairs in that manner and…. To expect that the court
would apply the principle in Salomon……in the ordinary way”

Dr Bolanle Adebola 48
Adams v Cape Industries PLC: Key Arguments

Argument 3: The subsidiaries were agents for Cape

Was the subsidiary Cape’s agent acting within its actual or ostensible authority?
If so the actions of the subsidiary bind the parent.
It was found the subsidiaries were independent businesses, free from day-to-day control of the
parent.

Dr Bolanle Adebola 49
Piercing the Corporate Veil: Corporate Groups
A parent company is not responsible for the debts of its subsidiary.
◦ Voluntary Creditors
◦ Stronger/Sophisticated Creditors:
◦ Due Diligence
◦ Guarantees/Cross-Guarantees
◦ Security

◦ Weaker/Less Sophisticated Creditors:

◦ Due Diligence
◦ Letters of Comfort
◦ Quasi-security

◦ Involuntary Creditors

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Dr Bolanle Adebola
Corporate Groups and Other Stakeholders:
Involuntary Creditors
◦ Who are involuntary creditors?
◦ Is the application of the Salomon principle to involuntary creditors fair?
◦ Recall lecture 1:
◦ Limited scope of company law
◦ Alternatives:
◦ Insurance law.
◦ Tort?
◦ Transnational and Multinational Companies:
◦ Does the courts have jurisdiction?
◦ Is there a real issue to be heard?

Dr Bolanle Adebola 51
Corporate Groups and Other Stakeholders:
Involuntary Creditors
Lungowe v Vedanta Resources plc [2019] UKSC 20, [2020] AC 1045
Zambian citizens brought an action against an English parent company regarding damage caused by the
copper mining operations of the company’s Zambian subsidiary.
The lower courts held that the English courts did have jurisdiction and the matter should proceed to trial.
The Supreme Court dismissed an appeal against the jurisdiction finding
Lord Briggs gave considerable guidance on the issue of the duty of care [49]
Whether a parent company owes such a duty of care ‘depends on the extent to which, and the way in
which, the parent availed itself of the opportunity to take over, intervene in, control, supervise or
advise the management of the relevant operations (including land use) of the subsidiary.

Dr Bolanle Adebola 52
Corporate Groups and Other Stakeholders:
Involuntary Creditors
HRH Okpabi v Royal Dutch Shell plc [2021] UKSC 3, [2021] 1 WLR 1294
◦ Nigerian claimants wished to sue Royal Dutch Shell (RDS) for breach of a duty of care with respect to
environmental damage caused by an RDS operating subsidiary (SPDC) in Nigeria.
◦ RDS is the ultimate holding company of the Shell group of more than 1,000 companies and it is incorporated
in England. It has no employees, engages in no operations, has no assets or licences, and provides no
services.
◦ SPDC is a specialist operating company in Nigeria and its shares are held indirectly by RDS through various
other Shell companies.
◦ The jurisdictional issue was whether a cause of action lay in England against RDS.

Dr Bolanle Adebola 53
HRH Okpabi v Royal Dutch Shell plc
[2021] UKSC 3, [2021] 1 WLR 1294

HC and CA:
◦ No arguable case that RDS owed a duty of care with respect to the operations of SPDC and therefore
no jurisdiction.
◦ The majority in the Court of Appeal, Sales LJ dissenting.

SC:
◦ Unanimously overruled the Court of Appeal.
◦ Endorsed Lungowe v Vedanta Resources plc [2019] UKSC 20, [2020] AC 1045
◦ There was a real issue to be tried. The matter remitted to the lower court.
◦ The Court of Appeal had failed to determine the matter through an application of the ordinary, general,
principles of the law of tort. It should have considered whether a duty arises by examining the extent to
which, and the ways in which, the parent company availed itself of the opportunity to take over,
intervene in, control, supervise, or advise the management of the relevant operations of the subsidiary.
Dr Bolanle Adebola 54
POST PREST DOCTRINE A New Approach?
  R v Sale [2014]

 Wood v Baker [2015]

 R v Boyle Transport (Northern Oreland) Ltd [2016]

 Persad v Singh [2017]

 Akhmedova v Akhmedova [2018]

 Rossendale Borough Council v Hurstwood Properties Ltd

[2019]

Dr Bolanle Adebola 56
 REFLECT
Doctrinal Issues:
◦ What is its relationship between Limited Liability and Corporate Personality?
◦ Is the principle in Salomon well and truly still intact?
◦ Is the doctrine on Corporate Veil Piercing clear?

Develop an Understanding:
◦ What do the judges say?
◦ Study the main case law to extract key principles.
◦ Distinguish main cases from additional cases.
◦ What do the commentators say?
◦ Read Books and Articles e.g listed in the student-led preparation.

Scholarship:
◦ Make notes of the key arguments.
◦ What are the key themes?
◦ Can you group them?
◦ Compare and Contrast the groups. 57
Dr Bolanle Adebola
◦ What is your opinion of these themes?
The Veil, Group Companies and Society
On Cape and Asbestos
◦ Emily Dugan, ‘Asbestos: A Shameful Legacy’ (Independent, November 22, 2009)
◦ ASBESTOS: The lies that killed (YouTube)

On PFAs:
◦ Nathaniel Rich, The Lawyer Who Became DuPont’s Worst Nightmare (New York Times, Jan 6, 2016)
◦ Movie: Dark Waters

Today: Opioids and Medication: The Sackler Family and Purdue Pharma Deal
◦ Patrick Keefe, The Family that Built an Empire of Pain (The NewYorker, October 23, 2017)
◦ The Painkiller (Limited Series) Netflix
◦ The Pharmacist (Limited Series) Netflix
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 Lecture 3

◦ The Corporate Constitution

◦ Articles of Association.
◦ Shareholder Agreements.

This Photo by Unknown Author is licensed under CC BY-NC-ND

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 QUESTIONS

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